Willis report praises P&I comeback while noting record claims frequency
Willis has warned that record claims levels and a continuing gap in the performance of individual protection and indemnity (P&I) clubs could present challenges for the market in 2011 despite good underwriting results in 2009/2010.
Investment income in the protection and indemnity (P&I) insurance market bounced back to $680m in 2009/10 after record losses cost the market $840m in 2008/09, according to a report from Willis.
The Willis P&I Market Review 2010/11 analysed the overall results of the International Group. The group arranges the collective insurance and reinsurance for 13 P&I clubs which provide liability cover for their shipowner and charterer members.
Willis said that underwriters almost broke even across the entire P&I market with an overall underwriting deficit of only 1% for the 2009/10 financial year. This result was achieved against the highest levels of claims in the market’s history, with a 12.5% increase in total incurred claims on 2008/09.
Ben Abraham, head of Willis' P&I division, said: “After one of the worst years on record the P&I market made a spectacular comeback in 2009/10 with total assets and free reserves representing all time record highs for the International Group. In contrast to this positive news, claims are similarly at an all-time high, worryingly not due to a surge in very large claims, but to the increasing cost of more routine claims.”
The Willis report noted that the variance in performance between individual clubs also continues to be marked, with the largest individual club having an underwriting surplus of 7% in contrast to the worst deficit which was reported at 23%.
Abraham said: “While two thirds of clubs in the market are performing close to balance, a minority of clubs still have some way to go to break even. Imminent widespread unbudgeted calls are unlikely, but the underperforming clubs are inevitably more vulnerable to fluctuations in claims or investment performance.”
