At its meeting in New York on 20th November, the American Clubâ€™s board resolved to levy a general premium increase of 2.5% for P&I cover, but no increase in the cost of FD and D for the 2016 policy year.
The clubâ€™s board also reviewed release call requirements for open policy years, significantly reducing the margins for 2013 and 2014, and undertaking to revisit the 2015 figure in the first half of 2016.
In reaching these decisions, the Board took account of the Clubâ€™s recent performance against a background of the overall economic climate, the outlook for the freight and investment markets and the implications of emerging trends within the P&I environment.
In a circular released to its members, the American Club said that, over the last twelve months, the â€œchurn effectâ€ (the term applied to the reduction of premium volume as older, higher-rated vessels are replaced by newer, lower-rated ships) had had a more subdued impact upon revenue than was the case from 2012 through 2014. Indeed, the average net rate per ton for the Clubâ€™s P&I entries was only 2% lower than it had been twelve months earlier, despite unrelenting pressure on premium pricing over that time. The Club also remarked that claims development for the 2015 policy year had been favorable to date as to both retained losses and those covered by the International Groupâ€™s pooling arrangements for larger claims.
In commenting on these developments and the outlook for the industry in general, Joe Hughes, Chairman and CEO of the American Clubâ€™s managers, Shipowners Claims Bureau, Inc., said:
â€œPrice increases, however modest, are never welcome, particularly at a time when the freight markets continue to struggle. Nevertheless, the board remains resolute in its commitment to consolidate the financial standing of the American Club, particularly in light of the progress it has made in recent years.
Let us hope that the outlook for shipping will improve as the global economy expands in 2016 and beyond. However, apart from the tanker sector and certain other specialist trades, the freight markets have yet to experience any sustained growth.
As to the prospects for P&I generally, pressure on premium pricing is likely to continue, given the difficulties facing shipowners at large. On the claims front, the severity of attritional losses will probably increase, even if their frequency continues to diminish, while the size and volatility of large claims are unlikely to abate,â€ Hughes concluded.