Shipowners face premium increases likely to average around 7.5% next year against a background of declining investment income, according to the latest annual report on P&I Clubs published by Tysers.

In its 2013 report published today [Monday 7 October], the leading independent international Lloyd’s broker stated that the 2013 renewal had been “one of the most difficult ever” with the Clubs’ perceived need for premium rises conflicting violently with shipowners’ desperate need to cut costs.

It noted that last year, general increases varied between 5% to 16.5% with 7.5% being the most popular. Martin Hubbard, director of Tysers’ marine division, said:

“We would anticipate increases in the range of 2.5% to 12.5% with an average of 7.5%, and there will inevitably be another substantial increase in reinsurance costs as the ‘Costa Concordia’ reserve has risen from US$684million last year to US1.2 billion.”

P&I Clubs would argue, he said, that increases similar to last year were needed on the basis that investment returns will be lower and combined ratios were generally more than 100%, because of the continued effect of ‘churn’ and the increasing cost of large casualties.

The 2013 Report stated that it would be the bigger P&I Clubs who would be generally best equipped to meet the challenges face over the years ahead. The major issues they and others face include: increased administration expenses, including the cost of regulatory compliance and IT costs; the perceived importance of an ‘A ‘ rating; pressure on Clubs to hold “massive free reserves”; and increasing claim values, particularly for serious casualties.

Tysers’ noted that during the past year there had been a significant reduction in piracy attacks in the Gulf of Aden/ Indian Ocean – due mainly to the use of armed guards on ships – although piracy activity had increased substantially in the Gulf of Guinea, West Africa, where attacks have proven more violent in nature.

The P&I report is an invaluable document for shipowners, providing a comprehensive review of the P&I market with details and commentary on each Club and its finances. A follow-up report will be published in December this year when all P&I Clubs have announced their renewal increases for 2014.