The marine insurance market turned itself around last year and began to make progress towards a more profitable and leaner environment. However, the impact of this and continuing trade turbulence will mean higher costs for owners, which has important implications for shipowners’ vessel operating costs, of which insurance makes up as much as 10%.

This year’s protection and indemnity (P&I) renewals tended to shy away from a general increase and instead Clubs ranged their renewals from zero to 7.5%, driven by their own levels of reserves and individual reading of their members needs in the coming year. The IG P&I market retains healthy reserves, although these fell by over $300m last year and there is a concern that the ongoing frequency of large pool claims may develop into higher costs in coming years. Combined with significant global trade uncertainty and a seemingly entrenched sanctions environment, there can be little doubt that a disruptive twelve months lies ahead.

On the surface the P&I sector is making balanced judgements on risk but underneath there will be pressure on owner costs dependent on the position of the Club. An emerging strategy amongst some Clubs is to avoid a general increase but at the same time make additional unbudgeted calls. This can only result in higher costs for specific owners and differentiation in resulting insurance opex. Drewry expects this trend to persist for at least the next two years.

Generally shipowners with high claims records have seen their premiums rise while the rest have enjoyed “as is” renewals, and the selective approach of Clubs combined with their own underlying view of the coming environment has led to selective increases, as shown in Figure 1.

There has been very little churn between the Clubs, with release calls largely in line with previous years. And pooling and reinsurance rates remain the same as for 2019/20.