.png)
Very early indications, based on informal discussions with individual Clubs suggest that overall market premium increase might be in the 2.5 to 3% range (and if changes in terms, typically higher owner retentions, are factored in then from 3 to 3.5%).
In due course we will be giving a fuller analysis once each club has announced formally their individual renewal results. But we do raise a concern that with a 24/25 year likely to produce a very high quantum of Pool Claims (high value claims in excess of $10m.) a number of clubs will still be posting underwriting losses and consequently Combined Ratios above 100%.
This comes from our position as global brokers to 750 clients operating nearly 7,000 ships, all of whose coverage and pricing has been successfully concluded.
The context to the renewal was dominated by two factors:
1. The consequences of the “Baltimore Bridge” catastrophe and the impact on the collective International Group Reinsurance programme. The pricing is allocated by vessel type and for many owners that tariff rate has a substantial bearing on the overall cost, once it has been absorbed into the total pricing. At early stages in the renewal process of the Group contract many commentators were anticipating an overall increase of between 15 and 20%
2. The clubs needing to ensure that their individual underwriting performance (the Combined Ratio) targets 100%. Although Combined Ratios have been improving generally, for some clubs there is still work to be done. Further the Rating Agency, Standard and Poor’s, looks unfavorably on any subsidizing of annual underwriting losses with investment income.
Those clubs that operate a General Increase applicable to all members settled in the 5% range, with clubs adopting a member by member renewal approach looking for a similar uplift in their total renewal premium.
The Group Reinsurance contract was renewed at an overall increase of around 10%, much lower than originally anticipated, but with the container vessel tariff getting the bulk of the uplift at 23.6% with other vessel categories in the low single digits. Absent the penalizing of the container sector (reflective of the Baltimore Bridge tragedy involving a container vessel “Dali”) this was a successful outcome for which the IG Reinsurance Sub-Committee and their brokers deserve praise.
The renewal was slow, in our experience, and marked by many renewal proposals being delivered late in the process. A number of clubs were particularly egregious in this respect. Coupled with owners waiting on the Reinsurance pricing (which was announced just prior to Christmas) for many accounts renewal negotiations only started in earnest in mid January.
Why does this matter? With renewal comes the issuing of the multiple documentation that all ships are required to be able to operate internationally (the so called “tickets to trade). Then there are the formal Certificates of Entry and Premium Invoices. The log jam caused by a relatively slow renewal leaves owners desperate for documentation from clubs dealing with similar demands from across their membership. Lockton P.L. Ferrari individually check over 10,000 such documents each renewal.
A random selection of sound bites from the clubs in the immediate aftermath suggested that the renewal was variously “very slow”, “unremarkable” and “frustrating”.
Similar sentiments were shared by most of our 130 colleagues around the world at Lockton P.L. Ferrari.
For more, please contact Pippa Atkins.
