Lloyd’s List – Owners fear second annual double-digit protection and indemnity hike
General increases fall slighty but reinsurance rates have yet to be announced
SHIPOWNERS are disappointed that PI clubs have chosen to up premiums again and some are fearful that a similar reinsurance rate rise could leave them facing double-digit increases for the second year running, according to RFIB marine director Nigel Russell.
Mr Russell said clients were disappointed as many had expected general increases to be nominal this year, following what they saw as a “”pretty significant”” general increases for the February 2013 renewal.
Clubs also add reinsurance increases to the final premium and many members had to cope with double-digit increases to premium last year after reinsurance rates rose in the wake of casualties such as those of Costa Concordia and Rena.
Reinsurance rates for this year have yet to be announced but Mr Russell said if they increased by 5%, a shipowner with an average club general increase of 7.5% would face a 12.5% increase, possibly for the second year running.
“It is a big concern as it is not as if the freight market has significantly improved this year,” he said.
“One good thing is that the hull market is still quite soft so clients know they will not face an increase there unless their record is extremely poor.”
Mr Russell also said it was worth noting that the diversity of approach from clubs indicated a divergence of views on market trends.
However he added that experiences between clubs would differ, depending somewhat on the make-up of their membership.
Mr Russell said clubs were nevertheless trying to be sympathetic to shipowners and many had said they had wanted to lower the general increase this year to support members.
He added that the practical reality was that the total general increase across the 13 clubs adds up to a total of 95% this year, compared with 106.5% last year.
Mr Russell therefore points out that it is marginally down this year on the general increases announced for 2013.
It is also important to note that this calculation does not include Skuld, as the club does not announce a general increase for all members.
The average general increase for 2013-2014 was 8.9% whereas for 2014-2015 it is 7.9%. The average increase for the two years is 16.8%.
“It is worthy of note that only five clubs — Gard, Shipowners, Japan, Swedish and West of England — are below the average for the two years and all five of these clubs were below the average for both years,” Mr Russell said.
He said charts detailing overall general increases often do not show the whole picture: for 2013-2014 the UK Club, for instance, gave 2.5% discount to assist owners, whereas Britannia gave a 7.5% rebate on the advance call but increased the deferred call from 40% to 45%.
Mr Russell said: “It is well known that some clubs are pretty firm with brokers, whereas some clubs announce a higher general increase with a built-in measure of negotiation.”