HSBC: P&I Clubs Must Improve Underwriting Performance

Thursday, January 02, 2003
Inferior underwriting results and inadequate or even negative investment income continue to haunt P&I clubs, says Lloyd's broker and P&I specialist HSBC Insurance Brokers in its Protection & Indemnity Review 2003. HSBC says the market environment for the traditional February renewal will be hard. "Realistically," it notes, "there is some way to go before the clubs move back into an underwriting surplus, or even underwriting balance."

HSBC says the clubs relied too heavily on investment income made during the long bull markets of the 1990s which, rather than being regarded as a bonus and employed to bolster free reserves, was instead used to subsidise new underwriting business. It adds that the clubs were more assiduous in their quest to attract new business or tonnage at the expense of existing and established members, whose money had been used to earn the healthy investment returns in the first place. Nigel Russell, Managing Director of the Marine Division of HSBC Insurance Brokers, concludes, "The plain and simple fact is that the clubs must improve underwriting performance. They must also bolster free reserves, and cannot rely on investment income."

HSBC also predicts that, if there is a serious stand-off between the International Group of P&I Clubs and the lead underwriters of the Group reinsurance contract, it is quite probable that the pool limit will be increased from its current level of $30m. "Even the smaller clubs should be able to withstand an increase in pool limit, even if it were to be doubled," says the broker. "The smaller clubs would find it far harder to withstand a significant increase in retention. Only four clubs do not buy separate reinsurance to protect their retention of $5m, and these four are amongst the strongest in financial terms. All the smaller clubs buy reinsurance to protect their retention. This low level of reinsurance is costly and is likely to be more costly and harder to buy in the immediate future. A significant increase in retention could be detrimental, especially to those clubs with a lower capital base."

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter April 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

Offshore

Shipping Industry Flying On The Dragon’s Back

As the many Greek players in the shipping industry know well, the legend of Icarus tells us the dangers of flying too high. Merchant vessel earnings eventually

Subsea 7 Profits Dip in Q1

Subsea 7 S.A. announced its financial results for the first quarter ending March 31, 2016, reporting revenues of $746 million, down 37 percent from the prior year period.

Sembcorp Profit Halved as Clients Defer Projects

Revenue falls 30 pct; order book at S$9.7 billion. Singapore rig-builder Sembcorp Marine's quarterly profit halved as customers deferred projects, and it faces

Finance

ExxonMobil 1Q Profits Plunge 63%

Highlights   * Earnings of $1.8 billion decreased 63 percent from the first quarter of 2015.   * Earnings per share were $0.43 assuming dilution.   * Cash

Shipping, Key Ingredient of EU’s Africa Agenda

The African economy has become one of the most promising global growth markets. Shipping is taking care of the largest part of international trade and in Africa

Ocean Economy Set to Double in Size by 2030

The world’s oceans must be managed well to ensure the potential of an “ocean economy” that was worth US $ 1.5 trillion in 2010.   "Calculations based on the

 
 
Maritime Security Maritime Standards Naval Architecture Navigation Offshore Oil Pod Propulsion Port Authority Salvage Ship Electronics Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.0889 sec (11 req/sec)