P&I clubs (Protection and Indemnity) are facing new challenges that could lead to increased premiums next year. Reports suggest that rising costs of major incidents will likely force these clubs to raise their premiums by up to 7.5%, although their free reserves continue to grow.
Strong Financial Position of P&I Clubs
The International Group (IG) is well-capitalized, with total free reserves among 12 clubs reaching $6.8 billion. Reinsurance and accumulation of reserves help them defend against severe claims, including incidents as significant as the Dali accident. However, new risks such as conflicts, sanctions, and potential unauthorized risks from shadow fleets have created uncertainty in the market.
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Financial Performance of Clubs
The financial performance of major clubs in the International Group is very strong. The Gard club, with over 25% market share and free reserves exceeding $1.7 billion, leads these clubs. According to reports, this club has enough investment income to return premiums to its members. Additionally, the Japanese P&I club achieved a combined ratio of 70% last year, marking their fourth consecutive year of strong financial performance.
However, predicting unpredictable claims in a challenging operational environment is likely to lead to rate increases, even though clubs currently have large reserves of savings. Many of these clubs still have work to achieve a combined ratio of around 100%, and in a situation where claims volatility and rising costs of serious incidents continue, this task can be difficult.
Reports indicate that for the years 2025 and 2026, the target rate increase has been between 5% and 8%, and this trend is expected to continue. Given the current conditions and existing challenges, it seems that P&I clubs must seek to maintain balance in underwriting.
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