Podcast: P&I renewals go to the wire
Midday on February 20 has been key for marine insurance for 200 years
As this year’s P&I renewals draw to a close, Lloyd’s List spoke to marine insurance insiders about what has been driving this year’s negotiations and why the deals have been closer to the February 20 noon deadline than usual
Lloyd’s List’s Victorian shipping forebears designated noon on February 20 each year as the notional time and date at which Baltic ports became ice-free and that has given birth to one of the great traditions of marine insurance.
Two centuries later, the deadline still marks the hard cut-off point by which the vast majority of shipowners must have in place cover for liability in everything from collisions and spills to seafarer injuries and deaths.
Without protection and indemnity (P&I) policies, ships cannot trade. No state wants uninsured vessels transiting its territorial waters and no port will admit them without the guarantee costs will be met if things go badly wrong.
For around 90% of the world fleet, P&I cover is provided by one of 13 P&I clubs, as these not-for-profit mutual monoline insurers are known.
Through their trade association, the International Group, and an elaborate scheme of retentions, pooling, captives and reinsurance almost beyond mortal ken, this ensures cover can run as high as $2bn and beyond in the worst cases for very modest cost.
The workload of renewing policies cannot be evenly spread throughout the year, even for the sake of an easy life. But even so, each contract has to be concluded within the established time limit.
That leaves us with the renewal round. While a few straightforward deals get signed off towards the back end of each calendar year, things only really get going after everybody has recovered from the December festive break. Sometimes negotiations go right to the wire.
This year, the process has seen multiple complications, as we hear in this week’s edition of the podcast. Progress has been unusually tardy, for reasons that are discussed.
Clubs have had to contend with booked but unrealised investment losses thanks to turbulence on the financial markets, which has led to downgrades from rating agencies.
Then there is the sensitive matter of pricing. P&I clubs are not for profit, but they do have to bring in sufficient premiums to keep the show on the road.
This year is the fourth successive year of substantial premium hikes, with a 10% going rate. Unsurprisingly, some owners have been reluctant to cough up.
To add to the complexities, two of the 13 International Group affiliates – North and Standard – are due to merge. When? Well, noon on February 20. That has seen some major boxship players split their fleet to avoid over-reliance on the combined entity.
Our podcast guests are two brokers and two club chief executives. The former are Stephen Hawke, managing director of PL Ferrari & Co, and Alex Vullo, executive director of Gallagher. The latter are Andrew Cutler of Britannia and Jonathan Andrews of Steamship, who takes over from his predecessor, Stephen Martin, on… you have guessed it, February 20.
The Lloyd’s List Shipping Podcast provides a weekly briefing on the stories shaping shipping, with top industry guests and expert analysis. Listen to the archive here.