A.M. Best Co. has released a briefing addressing the marine protection and indemnity (P&I) market, which indicates that the” insurers operating in the P&I market went into the February 2011 renewal period in a good financial position.”
“Reported balance sheets at year-end 2009/10 revealed that the free reserves of most clubs had been restored to pre-2008 levels, boosted by strong investment earnings and revenue from unbudgeted supplementary calls. With the market expected to report solid earnings for the 2010/11 financial year, this balance sheet strength is likely to have been maintained.”
Best described the “next 24 months” as a “testing period for the P&I clubs. As a whole, the sector is much better placed than it was two years ago to face regulatory challenges and the prospect of a less favorable claims environment. Balance sheets have been rebuilt, there are signs of better underwriting discipline, and exposure to investment risk has been reduced.
“However, the marked variance in the performance and financial strength of individual clubs is expected to grow over the next few years, as some clubs struggle to compete in a more demanding regulatory environment. This could lead to consolidation within the P&I market among clubs with weaker financial profiles, although cultural differences will remain a significant barrier to mergers.”
Source: A.M. Best
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