Ships must have their mutual insurance arrangements in place by noon on February 20th of each year or risk interruptions to trade. However, this year’s negotiations have gone right to the wire, with more complex discussions than usual as the 13 P&I Club members of the International Group have sought a fourth year of significant increases, averaging around 10%.
Renewals ran later than usual this season and some deals were only agreed with hours to spare. However, new contracts were already running behind through the early weeks of the year, partly as a result of the timing of Chinese New Year as well as owners waiting for details of the International Group’s latest reinsurance programme.
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The backdrop has been much more complicated than usual. Three successive years of high pool claims – of more than $10m – and higher reinsurance rates are just two of the factors with which P&I Club managers have been contending of late.
As Stephen Hawke, managing director of PL Ferrari & Co, a P&I broker, noted in a Lloyd’s List podcast, other factors include “the state of the world” – turbulence in the financial markets, downgrades by credit rating agencies, war in Ukraine and Covid.
A further complication this year has been the merger of the North of England and Standard P&I Clubs. As of noon London time yesterday, the merged entity is now one single legal group, NorthStandard. Several major container lines, which traditionally like to spread risk between clubs, partly for prudent risk management but also as a negotiating ploy, are thought to have been moving significant numbers of ships around to keep their risks strategically split.
Although there has been a relatively low level of major claims over the last policy year, there is still concern amongst P&I insurers about certain industry-specific trends. These include containership fires, container terminal and gantry crane damage from large boxship allisions, lithium-ion battery fires, and containers lost overboard as a result of heavy weather and parametric rolling.
