Aon Risk Solutions, the global risk management business of Aon plc, has published its 2013 P&I Review, which “predicts P&I clubs’ general increases at the 2014 renewal of between 5 percent and 15 percent.”
Aon said much of the increase is “due to a challenging underwriting environment, a need for clubs to demonstrate ongoing financial stability in the face of ever increasing scrutiny from rating agencies, and sustaining the stringent capital requirements imposed on them by financial regulators.”
Aon’s annual P&I Review offers clients a comprehensive overview of current market conditions including: top-line information on the 13 mutual clubs, historical analysis on the sector’s performance and a market forecast on what clients may expect at the next renewals.
Aon said the Review “highlights that only modest investment returns ranging from 2.5 percent to 7.8 percent were achieved across the 13 International Group P&I clubs for 2012/2013. Most clubs’ technical underwriting remained loss making with the claims environment remained challenging.”
Aon also noted that “with clubs’ combined ratios ranging from 95 percent to 123 percent for the 2012/2013 policy year, P&I club boards, especially those of clubs that feature at the higher end of this range, will find it rather more difficult to agree to provide any of the ‘concessions’ offered at the 2013 P&I renewal, when deciding on their club’s requirements for the 2014 P&I renewal.”
Simon Schnorr, Executive Director and Head of P&I, Aon Marine Practice, said “Our data demonstrates that the P&I market continues to face considerable challenges. A lack of profitable underwriting, coupled with adverse claim conditions and the stringent solvency requirements faced by P&I clubs, means that we expect pressures to raise premium rates at the 2014 P&I renewal.
“This may also extend to the renewal of the International Group reinsurance, However, following the sizable increase applied in 2013, we would hope mitigating any increase will be at the forefront of the of the International Group’s mind when negotiating with their reinsurance underwriters especially as the shipping community continue to face economic headwinds.”
He also indicated that “Aon’s Marine team has extensive experience in the P&I market and understand the challenges our clients are facing. With a recovery unlikely for this year, it continues to be crucial that we engage closely with our clients to ensure they have access to the best solutions available.”
Source: Aon plc