Japan P&I Club sees tonnage drop amid further rate rises in 1.4 renewals

7.5% rate increase for ocean-going vessels and a 10% increase for Naiko Class mark consecutive hikes for fifth and third year respectively.

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Japan pi club sees tonnage drop amid further rate rises in 1 4 renewals
Japan pi club sees tonnage drop amid further rate rises in 1 4 renewals
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Japan pi club sees tonnage drop amid further rate rises in 1 4 renewals

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(Re)in Summary

• Japan P&I Club reports a fourth consecutive year of tonnage decline for the policy year commencing 20 Feb 2024.
• Tonnage it covers is 85.6m (2023: 87.8m) for ocean-going vessels and 2.5m (2023: 2.6m) for coastal vessels.
• 1.4 renewals saw a 7.5% rate increase for ocean-going owners and 10% for coastal, which marks fifth consecutive year of rate increases for ocean-going vessels and third for coastal.
• Rate hikes are in response to inflationary pressures on claims costs and high reinsurance costs, the Club said.

Amid an increase in rates during the 1.4 renewals, data from the Japan Protection & Indemnity (P&I) Club shows a fourth consecutive year of tonnage decline.

In an announcement, the Club said that during the 1.4 renewals, rates for ocean-going owners’ entries rose by 7.5%, and Naiko Class entries, covering Japanese coastal vessels, saw a 10% increase. The Club attributed these rate hikes to challenges in the business environment and the need to restore underwriting balance.

The rate rises mark the fifth consecutive year of price hikes for ocean-going owners and the third for Naiko Class.

As of 20 February 2024, when the policy year began, the Japan P&I Club reported that it has 1,929 ocean-going vessels at 85.6 million tons and 1,673 coastal vessels at 2.5 million tons under its coverage

That compares with 87.8 million tons of ocean-going vessels and 2.6 million tons for coastal vessels in 2023 and continues a declining tonnage trend for the fourth year in a row.

The decision to raise rates comes after a period of financial recovery for the Club, partly due to a 25% unbudgeted supplementary call for the 2020 and 2021 policy years for ocean-going owners’ entries.

The Club also highlighted the challenges of maintaining underwriting balance amidst ongoing inflationary pressures on claims costs and high reinsurance costs.

“Despite these circumstances, most of our Members have renewed their contracts with the Association, and we are deeply grateful for their renewal,” the Club said in a statement.

However, it also acknowledged the loss of some contracts alongside the acquisition of new members in both the ocean-going and coastal vessel categories.

Broader concerns

The rate adjustments reflect a broader trend where the International Group of P&I Clubs (IG) are grappling with price pressures, including rising claims costs due to inflation and the need to maintain financial stability.

The Clubs also facing additional financial burdens after the collapse of a Baltimore bridge on Tuesday following a collision by Dali, a Singapore-flagged container ship insured by Britannia P&I.

The bulk of the claims, estimated to be in the billions of dollars, are expected to be absorbed by approximately 80 reinsurers.

Nonetheless, due to an agreement among the International Group of P&I Clubs to share claims exceeding US$10m, individual Clubs are likely to help bear the cost up to the US$100m attachment point for the GXL contract.

The event is also expected to prompt closer scrutiny of IG’s GXL contract, which has the potential to result in increased reinsurance rates.

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