Marine insurance costs to climb

Marine insurance costs to climb

Protection and indemnity premiums are set to increase by 15 to 20 percent during the February 2004 renewal period due to a recent surge in dry cargo claims, a marine insurance executive says.

Rodney Eccleston , joint managing director of the North of England P&I Club, said increases were likely to be even higher than expected.

Eccleston said that there has been a noticeable increase in the frequency of large protection and indemnity claims - those over $500,000 - in recent months, primarily due to the huge surge in freight income, particularly in the dry cargo sector. "This is a common trend, with a high incidence of claims often following closely on a period of high freight volumes," he said. "However, it inevitably puts more pressure on P&I insurance costs."

He said that many shipowners were already facing above-inflation premium hikes to prevent further erosion of protection and indemnity club free reserves. The top International Group clubs suffered an overall underwriting loss of $338 million in the 2002-03 policy year, equivalent to 24 percent of premium income. Even after allocation of investment income, the deficit for the top nine clubs was $254 million, he pointed out.

Greek office manager Tony Allen said the North of England club increased its free reserve at the last renewal from $89 million to $100 million, in line with tonnage growth. However, he added, the current surge in cargo claims will inevitably have an adverse affect on next year's premiums.

The North of England club insures a fleet of 45 million gross tons, with 2,600 ships entered by about 400 members from around the world.