Ten of the 13 mutual insurance companies' marine protection and damages clubs that are part of the International Group of P&I Clubs will increase prices at the upcoming renewal for shipowners for the 2021-22 policy year, the rating agency A.M. Best Co. Inc. said Tuesday in a report.
The general increases, ranging from 5% to 10%, are "modest" given the insurance loss expected in 2020-21 and slightly over the previous year, Best said in the report.
General interest rate hikes were attributed to the erosion of premiums to an unsustainable level, an increase in the cost of pool receivables and financial market volatility, the report said.
As mutual insurers working for the benefit of their members, the 1
“Due to the COVID-19 pandemic, commercial conditions for shipowners are even more challenging than in previous years, and with the current high level of free reserves across the international group, a higher level of general premium increases can be difficult for clubs to motivate its members, ”Best said in the report.
Three P&I Clubs – Gard (P&I) Bermuda Ltd., UK-based The Britannia Steam Ship Insurance Association Ltd. and Norway-based Assuranceforeningen Skuld – do not apply a general increase this year in line with their usual practice, says Best.
Instead, premium interest rates apply and the terms will be adjusted based on member-specific information.
International Group reported a deficit of $ 400 million for the fiscal year 2019-2020 including premium rebates and based on the 13 main clubs' combined accounts, Best said. The combination ratio deteriorated to 114% from 110% the previous year.
Claims increased by 7% during 2019-2020, after a 5% increase last year and were higher than the five-year average, said Best. 19659002] The increasing size of ships, an upward trend in the company's liability limitations and technical advances that enable the removal of deep – sea wrecks are among the factors driving up claims costs, according to the report.
For 2020-2021, Best expects clubs to return another total warranty loss.
The cost of pooled receivables was record high in the first half, with additional receivables in the second half, Best said.
"Year to day, pool damage costs appear to be higher than 2019-2020, which was already an expensive year for the pool," said Best.
Although the COVID-19 pandemic has not been a major driver of pool losses, clubs reported attritional passenger and crew requirements related to the pandemic and three COVID-19 related claims the report says.
The pandemic may also have had an indirect impact because the lack of experienced employees and higher levels of fatigue and stress, caused by a decrease in crew rotation and rest periods, "may have led to an increase in claims caused by crew failure," said Best. .
More news about insurance and risk management about the coronavirus crisis here .