The Japan P&I Club recorded the lowest level of claims for five years in both the ocean going and Naiko – coastal vessel – classes but rising inflation and geopolitical uncertainty prompted by ongoing conflicts in Ukraine and Gaza has prompted the association to increase member premiums.
The total number of ocean going vessel claims recorded in 2023 was 1937, a near 20% decline on the previous year’s figures and sharply lower than the five-year high of 3865 recorded in 2019, according to the Japan P&I Clubs latest annual report.
It was a similar story for Naiko class vessels, with 221 claims for coastal vessels recorded in 2023, down from a 2019 high of 280.
“The number of major loss claims which exceed the Association retention of $10m, and are thus subject to sharing with the International Group of P&I Clubs reinsurance pool, remains relatively low since last year,” said Yukio Toriyama, Director General of the P&I Club.
“Additionally, among the ships entered in the Association, there was one pool claim for ocean-going owners’ entries and one large claim of over JPY 300m for Naiko Class entries. Overall, however, the number of claims remained at a relatively low level,” Toriyama added.
The decline in ocean going vessel claims was driven by a fall in cargo damage incidents, while crew claims – which account for 38% of the total over the five year period covered by the report – also fell back to pre-Covid levels after seeing an uptick during the pandemic.
Casualty claims – including collision, stranding, and oil pollution – had high per-incident payouts, meaning they played an outsized role in terms of the economic value of losses despite only accounting for 2% of claims.
The Japan P&I Club didn’t break out the economic value of casualty claims in 2023 but its report said this segment accounted for 23% of the total payouts over the last five years. It was a similar story for pier damage.
“Pier damage claims constitute only about 5% of the total number of claims over the past five years, but they can be very expensive and thus have an impact on the overall loss record,” said the report.
Pier damage was the single most important issue with coastal vessel claims, it was the largest category in terms of number of claims in 2023 and this risk made up 41% of the total over the report’s five-year timeline.
“Additionally, while casualty claims have represented only about 17 incidents, or as low as 7% of the total claims of that period, they constitute about 28% of the total Paid and Reserve when compared to the past five years. In the 2023 policy year, although the number of claims decreased, there was one incident which exceeded JPY 300m,” said the report.
It was a positive 12 months for the P&I Club’s money managers, with asset management income increasing ‘significantly’ to JPY 8bn, including an FX gain of JPY 4.4bn from the weaker Japanese currency.
The knock-on improvement to the P&I Club’s reserves from JPY 7.9bn from the previous year to JPY 35.4bn prompted S&P Global Ratings to revise its BBB outlook to positive from stable.
Toriyama said the Japanese government’s decision in 2023 to downgrade the classification of Covid 19 to the same level as the common cold under the country’s Infectious Diseases Control Law meant domestic trends were positive for the P&I Club but the international geopolitical outlook continued to be challenging for shipping insurance.
The Director General pointed to economic sanctions being imposed in response to Russia’s invasion of Ukraine, the Israeli-Hamas conflict, attacks on commercial ships by Houthi armed groups, and the resulting avoidance of navigation through the Red Sea, as ongoing issues.
Toriyama said that despite an improved P&L for the club, high global inflation driving up claims’ costs, and in turn reinsurance premiums, combined with ongoing geopolitical risks, meant that member premiums were increased this year.
“With the business environment remaining uncertain, including the Russia-Ukraine and Israel-Hamas conflicts, we implemented a general increase of 7.5% for ocean-going owners’ entries and 10% for charterers’ entries for the 2024 policy year renewal, as well as a 10% price increase for Naiko Class entries,” he said.
Association chair, Takeshi Hashimoto, pointed to the 20% increase in greenhouse gas (GHG) emissions by the shipping sector over the last decade and said that this made the International Maritime Authority’s 2050 Net Zero aims ‘crucial’ and that the association was looking to provide cover for alternative fuel powered vessels.
“We are committed to supporting efforts in low-carbon and decarbonisation initiatives. We will actively pursue contracts for alternative fuel vessels to contribute to GHG reduction, working alongside [members] from an insurance provision standpoint,” he said
