Increase take-up following 2014 P&I renewals as ship owners look to cut operating costs and control insurance spend
DGS Marine, a global P&I (protection and indemnity) management provider, and exclusive manager for the British European and Overseas (BE&O) P&I facility, announced 19% premium growth following the completion of P&I renewals on February 20, 2014. This marks a significant growth in the fixed premium P&I market as ship owners and operators look to reduce their operational costs, the company said.
BE&O has seen a significant global increase in its business, including a 22% premium growth in the Middle East and a 35% increase in the Far East, especially in China, Indonesia, Malaysia and Vietnam. BE&O P&I also recorded solid 16% growth in North Africa, Russian and European markets. According to DGS Marine, this is due to the year-on-year rate rises from the International Group of P&I Clubs, combined with the challenges of current shipping market conditions, which is placing significant pressure on the balance sheets of shipping companies. As a result, an increasing number are turning to the fixed premium P&I market to give them greater certainty and control over their insurance costs.
David Skinner, BE&O P&I Group Managing Director, said: “Ship owners want to reduce their operating costs and take more control of how much they spend on their insurance cover. The continued profitable growth of BE&O P&I is a demonstration of the success of our long-term diversification strategy, which includes both geographical and product-portfolio expansion. We are committed to offering innovative marine insurance products that meet the needs of our Assureds. The fixed premium market continues to grow rapidly as owners recognize the downsides of mutuality. Smaller owners need to de-risk their operations as much as possible and fixed premium P&I facilitates this by providing them with real assurance and transparency over what they will be paying throughout the course of the cover.”
Fixed premium P&I provides ship owners with an insurance premium figure at the outset when they purchase the policy. This represents the full and final insurance cost for the length of the policy with no deviation. When it comes to the renewal process, the key determining factor is an assessment of the owner’s individual claims record, unlike the International Group system where rate increases are spread uniformly, which can significantly impact the profitability of smaller ship owners and operators.
DGS Marine believes that the key component for success for fixed premium P&I providers is the ability to provide smaller owners with a level of service that ensures quality, as well as transparency. David Skinner continued, “There is considerable divergence in the quality of the offering in the fixed premium market. P&I providers at the top end of the fixed premium market will always try and assist their Assureds, even when it comes to posting security for a ‘gray’ claim, whereas at the bottom end of the market, a certain number of P&I fixed premium providers or quasi-consortiums will wash their hands of the matter and leave the Owners on their own, or try to avoid the claim. By contrast, at BE&O we have always maintained a complete focus on quality and working in partnership with our Assureds to help them overcome their challenges, no matter how big or small the issues are."
BE&O P&I recorded 19% premium income growth on the P&I business during the 2013/14 P&I policy year, which was above the company's strategic growth plan, while at the same time following its strict disciplined underwriting philosophy that has been the key success factor for the facility for many years.
David Skinner added, "BE&O is becoming a sector-leader in terms of operating performance and we are dedicated to maintaining this position as we grow. In addition to unmatched service, we want to continue to offer our Assureds first-class security."
BE&O P&I Assureds are in a unique position in that they have already received PDF copies of policy documentation, giving them contract certainty on the first day of the new policy term.