“The outlook for the international marine protection & indemnity (P&I) industry is looking stable, with all clubs in 2010 reporting a post-tax surplus for the first time since 1998,” said a bulletin from Standard & Poor’s Ratings Services. It also noted, however, that there “are some uncertainties that will require close monitoring.”
S&P issued the bulletin to announce the release of its annual review of the international marine P&I industry entitled: “International Marine Protection And Indemnity: Is This As Good As It Gets?”
Credit analyst Peter McClean explained. “Improved capital adequacy and more-balanced underwriting performances support our opinion, and these strengths have held good since last year’s review. We have also observed significant managerial improvements–in terms of financial discipline and enterprise risk management–in the 13 clubs that comprise the International Group of P&I Clubs (IG), and which dominate the P&I industry.”
S&P said “some concerns do remain, however, around the effects of the EU’s Solvency II requirements and the outcome of the European Commission’s investigation into the IG’s exemption from the EU’s anti-trust rules.”
McClean added: “There is also the potential for churn-related pricing inadequacy, which we identified last year. This is where new-build tonnage enters the market at lower premium rates than the older more-highly-priced tonnage it is replacing. This is now becoming a reality as large numbers of new vessels come off the slipways and are entered onto the clubs’ books.”
After considering those factors, S&P said the “stable outlook reflects our view that there is presently little threat to most of the sector’s ratings over the next two years. Strengths we observed last year around capital adequacy and underwriting performance have held up and improvements in areas such as ERM indicate, in our view, sector participants’ ability and willingness to continue to strengthen their practices.
The report is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor’s public Web site by using the Ratings search box located in the left column at www.standardandpoors.com.
Source: Standard & Poor’s
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