RELEASE CALL MARGINS FOR 2013 AND 2014 POLICY YEARS REDUCED: CURRENT YEAR TO BE REVIEWED IN FIRST HALF OF 2016
Premium uplift by international P&I insurer in line with current market trends
NEW YORK, NOVEMBER 23, 2015: At its meeting in New York on 20th November, the American Club’s board resolved to levy a general premium increase of 2.5% for P&I cover, but no increase in the cost of FD and D for the 2016 policy year. The club’s board also reviewed release call requirements for open policy years, significantly reducing the margins for 2013 and 2014, and undertaking to revisit the 2015 figure in the first half of 2016.
In reaching these decisions, the Board took account of the Club’s recent performance against a background of the overall economic climate, the outlook for the freight and investment markets and the implications of emerging trends within the P&I environment.
In a circular released to its members, the American Club said that, over the last twelve months, the “churn effect” (the term applied to the reduction of premium volume as older, higher-rated vessels are replaced by newer, lower-rated ships) had had a more subdued impact upon revenue than was the case from 2012 through 2014. Indeed, the average net rate per ton for the Club’s P&I entries was only 2% lower than it had been twelve months earlier, despite unrelenting pressure on premium pricing over that time. The Club also remarked that claims development for the 2015 policy year had been favorable to date as to both retained losses and those covered by the International Group’s pooling arrangements for larger claims.
In commenting on these developments and the outlook for the industry in general, Joe Hughes, Chairman and CEO of the American Club’s managers, Shipowners Claims Bureau, Inc., said:
“Price increases, however modest, are never welcome, particularly at a time when the freight markets continue to struggle. Nevertheless, the board remains resolute in its commitment to consolidate the financial standing of the American Club, particularly in light of the progress it has made in recent years.
Let us hope that the outlook for shipping will improve as the global economy expands in 2016 and beyond. However, apart from the tanker sector and certain other specialist trades, the freight markets have yet to experience any sustained growth.
As to the prospects for P&I generally, pressure on premium pricing is likely to continue, given the difficulties facing shipowners at large. On the claims front, the severity of attritional losses will probably increase, even if their frequency continues to diminish, while the size and volatility of large claims are unlikely to abate,” Hughes concluded.
ENDS
Notes to Editors
American Club Circular
Full details of the American Club’s Circular number 41/15 dated November 20, 2015 can be found here http://www.american-club.com/files/files/cir_41_15.pdf
Highlights of Circular number 40/15
- 2013 much improved by comparison with the position twelve months earlier. Release call reduced from 20% to 7.5% over and above the current estimated total premium for the year. Year expected to be closed in June 2016 in accordance with original budget.
- 2014 exhibiting a deficit, but likely to improve toward closure expected in the first half of 2017. Release call reduced from 20% to 12.5%.
- 2015 developing well within initial expectations, release call to be maintained, for the time being, at 20%, but to be reviewed during the first half of 2016.
- 2016 renewal to feature a 2.5% general increase on expiring estimated total premium for P&I entries.
- 2016 renewal to feature a zero general increase for FD&D entries.
- 2016 renewal also to feature increases in, and minimum levels of, certain deductibles, as well as of deductibles for certain P&I risks.
The American Club
American Steamship Owners Mutual Protection and Indemnity Association, Inc. (the American Club) was established in New York in 1917. It is the only mutual Protection and Indemnity Club domiciled in the entire Americas and its headquarters are in New York, USA.
The American Club has been successful in recent years in building on its US heritage to create a truly international insurer with a global reach second-to-none in the industry. Day to day management of the American Club is provided by Shipowners Claims Bureau, Inc. also headquartered in New York.
The Club is able to provide local service for its members across all time zones, communicating in eleven languages, and has subsidiary offices located in London, Piraeus, Hong Kong and Shanghai, plus a worldwide network of correspondents
The Club is a member of the International Group of P&I Clubs, a collective of thirteen mutuals which together provide Protection and Indemnity insurance for some 90% of all world shipping.
For more information, please visit the Club’s website http://www.american-club.com/
P&I Insurance
Protection and Indemnity insurance (commonly referred to as “P&I”) provides cover to shipowners and charterers against third-party liabilities encountered in their commercial operations; typical exposures include damage to cargo, pollution, death/injury or illness of passengers or crew or damage to docks and other installations
Running in parallel with a ship’s hull and machinery cover, traditional P&I cover distinguishes itself from usual forms of marine insurance by being based on the not-for-profit principle of mutuality where Members of the Club are both the insurers and the assureds.