Premiums across the marine protection & indemnity market will have to increase in the absence of any short-term recovery in investment markets. That is the conclusion reached by leading Lloyd's broker and P&I specialist HSBC Insurance Brokers in its Protection & Indemnity Review 2002. The HSBC review says, "The clubs have witnessed a general downturn in investment income. Inevitably, this has eroded free reserves. In the case of some clubs, this has made little impact, but others are now facing potential difficulty, and some have taken the decision to post unbudgeted supplementary calls. "One thing for certain is that premiums have to increase across the market as a whole, especially since there are few signs that investment markets will recover significantly in the short term. Free reserves will inevitably be eroded further." Nigel Russell, a director of the marine division of HSBC Insurance Brokers, says, "The P&I market has witnessed much change in recent years. It is likely that this change will continue. The fixed premium market has declined, and we now see fewer participants, often concentrating in specialist areas of shipping. P&I has seen a sharp fall in rates over a period of seven years. Technical underwriting has been producing losses for the vast majority of clubs for some time now. Reliance on investment income from reserves as a sole source of positive income has made some clubs more vulnerable than others. "On a stand-alone basis, the P&I market is hardening. General premium increases range from twenty to thirty per cent. The cost of reinsurance will increase, and almost all the International Group clubs have reserved the right to pass on the costs of reinsurance increases for the policy year beginning February 20, 2002." The HSBC reviews concludes, "International insurance and reinsurance markets are hardening. Following the September 11 tragedies in the US, which are estimated to cost insurers in the region of $60 billion, the situation facing the insurance industry has worsened. The impact on insurance and reinsurance markets will be far-reaching. Increased reinsurance costs and a reduction in reinsurance capacity will affect the P&I clubs."