Most clubs in the International Group (IG) of Protection and Indemnity (P&I) Clubs announced general premium increases for February 2025 renewals, marking the sixth consecutive year of rate hikes, as rising pool claims, geopolitical disruptions and historic marine casualties strain underwriting performance.
The majority of IG clubs will implement increases ranging from 4% to 7.5%, with six clubs opting for a 5% hike and two imposing 7%. Three other clubs have announced varying increases of 7.5%, 6.5%, and 4%. Only the Shipowners’ Mutual Protection & Indemnity Association abstained.
These adjustments follow a surge in large claims, including the Baltimore Bridge collapse in March and the Hafnia Nile tanker collision, compounded by an uptick in pool claim frequency and severity.
Rising claims costs are likely to offset the strong investment returns and favourable interest rate environments seen in 2024/25, after two years of relatively benign claims across the 12 clubs, said AM Best in a report published Tuesday (Feb 18).
The Baltimore bridge collapse, caused by the collision of the Dali (IMO: 9697428) with the Francis Scott Key Bridge, could escalate into the costliest marine insurance loss in history, with claims potentially reaching billions, the ratings agency warned.
While full liability payouts may take years to materialise, IG P&I Clubs have already paid a US$100m settlement to the U.S. Department of Justice for initial channel-clearing costs. Losses exceeding this threshold will fall to reinsurers under the IG’s general excess of loss (GXL) program, which attaches at US$100m per claim.
The Baltimore disaster, alongside Turkey’s Kocaeli port crash and the Hafnia Nile (IMO: 9766217) tanker collision, resulted in a surge in pooled claims that drove the IG to secure its reinsurance renewal at sharply higher rates this year, the rating agency noted.
Despite retaining key terms of its GXL reinsurance contract – including a US$10m per-club retention, a US$100m attachment point, and an unchanged US$3.1bn upper limit – the IG secured the renewal with overall price increases. These costs will be passed to shipowners via a supplemental levy atop standard P&I insurance premiums, AM Best stated.
The ratings agency warned further rate hikes may be required at future renewals to counter deteriorating underwriting results, citing a sharp rise in the frequency and severity of large claims. While investment returns have provided partial relief, they are insufficient to offset mounting pressures.
IG clubs collectively reported record free reserves of US$5.65bn in 2023/24, 3% above prior highs in 2020/21, the rating agency noted. Clubs are also expected to report further growth in their free reserves, AM Best said, with risk-adjusted capitalisation expected to improve and capital buffers increasing for most clubs.
Maintaining stringent technical pricing is still a top priority for the IG of P&I Clubs, which reported a combined ratio of 97% for 2023/24, indicating relatively tight technical margins.
Rate increases also reflected broader operational challenges, as clubs’ expense ratio climbed to 21.9% in 2023/24, up two percentage points from 2022/23 and well above the 17% recorded a decade earlier, according to AM Best data.
Geopolitical tensions have added to market pressures. Prolonged rerouting of vessels around Africa’s Cape of Good Hope – a workaround for the Middle East and Ukraine conflicts – raises risks of delays, crew fatigue and accident-related claims.
The industry also faces structural threats: “shadow fleets” of uninsured vessels tied to sanctioned nations and fragmentation of global trade routes could disrupt markets in the near term, said IUMI president Frédéric Denèfle last year.
Cyber risks loom large, too. While the IG’s reinsurance program covers most certificated risks like cyberattacks and pandemics up to US$750m, catastrophic scenarios involving simultaneous large-scale breaches would force the 12 clubs to pool losses – exposing them to severe, if improbable, financial blows.
