Net incurred claims increased only very marginally (0.3%) across the P&I market. Gross and net paid claims increased by inflationary levels, 2.1% and 3.8% respectively.
The following comments relate to the combined financial year results of the individual clubs in the International Group. The only club excluded from this analysis is the Swedish Club, which reports on a basis materially different from the rest of the market. As the Swedish Club represents less than 2.5% of the IG P&I market, its omission does not affect the overall analysis materially.
A stable claims year – during a period of volatility
Net incurred claims increased only very marginally (0.3%) across the P&I market. Gross and net paid claims increased by inflationary levels, 2.1% and 3.8% respectively. Contrasting with the marginal claims increases, premium charged by the combined market reduced by 5.9%. This headline figure is however somewhat misleading on its own, as six IG clubs made some form of premium rebate in 2016/17. The underlying premium reduction, excluding these mid-year premium rebates, would have been -1.6%.
Exceptional underlying underwriting result continues
While not quite repeating the record underwriting result achieved in 2015/16, the 2016/17 financial year was the second best in at least the last 25 years (excluding the contribution of unbudgeted calls). This remarkable result was achieved in spite of almost half the market rebating premiums during the financial year.
Individual club underwriting results
Only two of the 13 IG clubs reported an improvement in their financial year underwriting results, but the average combined ratio for 2016/17 is still a very impressive 93%. The underlying result is even better. If half the market had not rebated premiums in one form or other in the 2016/17 year, the underlying combined ratio for the market would have been 88%.
The main aim in the Willis analysis of club report and accounts has been consistency. Although there are still variations between the way clubs report, we try as far as possible to compare 'like with like' and to apply the same approach year after year.
We simplify and summarise certain aspects where information is available and adopt the same approach for all clubs. A glossary of terms is provided below.
The Non-International Group (Non-IG) P&I market remains very competitive with seven providers now offering limits of indemnity up to USD 1 billion, without the constraints of a full P&I Club entry. The insurers considered in our analysis are markets that provide cover for owners worldwide.
British Marine (including QBE Asia P&I) is the largest Non-IG insurer with annual premium income of USD 105 million and offering ...
Read moreCarina provides P&I cover for vessels up to 5,000 gross tons with policy limits of liability up to USD 500 million.
Read moreEagle Ocean utilises the American Club’s network of correspondents and expertise in general marine adjusting, claims handling and surveys.
Read moreReinsurance and Pooling costs represent approximately 40% of average P&I premiums paid by ship operators (although in some sectors the fixed costs can account for in excess of 85% of premiums)
Following the simplification of the IG reinsurance structure in 2017, the pattern continues in 2018. With effect from 20 February 2018, the lower pool layer ceiling/upper pool attachment point will be increased from USD 45 million to USD 50 million and the layer from USD 80 million to the excess of loss attachment point (USD 100 million) will be absorbed into the pool and merged with the upper pool layer which will attach from USD 50 million to USD 100 million with an individual club retention of 7.5% across the layer.
The negotiations of the IG reinsurance programme took place in the immediate aftermath of the various natural disasters in 2017. Despite the much improved loss record on the IG reinsurance programme the hardening of the reinsurance market was always going to make the renewal negotiations challenging.