$750m pool deficit is spectre at renewal round feast
Late Lunar New Year held up some business, but the rush for physical paperwork is no longer pressing now blue cards can be downloaded
Combined ratios could see some clubs paying out $6 for every $5 received, brokers predict
THE International Group of P&I clubs today at noon issued blue cards for 85% of the world fleet by tonnage, as the renewal round came to a close for another year.
Feedback from club senior managers and marine brokers alike suggests things have gone straightforwardly, with sufficient growth in the number of vessels seeking cover to keep everybody happy.
But the spectre at the feast will be a record-breaking pool scheme deficit heading for $750m, with 16 pool claims notified to date and the expectation of more to come.
That has led some commentators to predict combined ratios will, for many, come in far beyond the right side of the line, which is the 100% break-even point.
There seems to have been little by way of club hopping, although Greek owner Harry Vafias has switched at least some of his interests from UK Club to West of England.
There have been reports from brokers that some IG affiliates have been late sending offers out this year and some glitches do appear evident.
But the former imperative to transfer physical paperwork into the hands of owners 10 days or so in advance is no longer pressing.
Advances in IT means certificates can be downloaded, even if only finalised towards the renewal round deadline.
As reported earlier this week, the current renewal marks the fifth year in succession in which clubs have sought significant price rises.
Modal average increases came in at 7.5% in 2020, 10% in 2021, 12.5% in 2022 and 10% in 2023. The comparable figure for 2025-2026 is 5%.
Simon Peacock is chief executive of Shipowners’ Club, known by the acronym SOP, which specialises in smaller tonnage. It was alone among IG affiliates in not imposing an increase this year, and again uniquely, has absorbed the GXL levy.
Peacock said the February 20 renewal represents approximately half of SOP’s annual income, and that the renewal round has been smooth.
“We have been shown a sizeable amount of potential new business,” he added. “Our underwriting discipline is such that we will only welcome this new business into the club if it is a good mutual risk to share with existing members.”
Steamship Mutual chief commercial officer Peter Hulyer said that his club is growing at a steady pace and following a consistent underwriting strategy.
“The unusually high level of pool claims will have an impact on our results but the financial impact will be modest as compared with the overall surplus that we will report at year end. The club had an investment return of $71m after 10 months.
“We have an exceptionally high retention rate at renewal, and we are also pleased to be welcoming new members, but we do not disclose details of vessel or member movements.”
James Bean, the recently installed chief executive of the London Club, admitted that a later than usual lunar new year had slowed down negotiations for some business, but any lost ground had been recovered in the final fortnight.
Gallagher’s managing director of P&I Alex Vullo described this year’s renewal as “fairly predictable and drama-free”.
A noticeable difference from 2024 is that the better capitalised clubs are using cashbacks to offset rate rises. This trend is due to continue into 2026, given that many clubs will have done well from investment income.
Vullo predicted that at least some clubs will be reporting will be reporting combined ratios of between 105% to 120% when they publish their figures in the next few weeks.
The yardstick measures payouts and operating costs as a percentage of premium income and is a rough and ready gauge of an insurer’s underwriting performance.
A CR of 120% is equivalent to shelling out $6 for every $5 that comes through the door. As profit-sufficing mutuals, clubs can absorb such losses for a year or two, although obviously the position is ultimately unsustainable.
Underwriting losses collectively could range between $250m-275m, and perhaps a bit more, driven in part by the $103m settlement between the owners of the boxship that brought down a bridge in Baltimore last March and the US Department of Justice.
While the International Group has yet openly to confirm the Dali (IMO: 9697428) casualty has burned through into the reinsurance layer, the scale of the loss already is an open secret. The ultimate bill could come in at billions of dollars.
The prognosis for 2026 is rate rises of the same order as 2025, which is to say around 5%. This assumes continued favourable investment returns and avoidance of another Dali-level marine loss.
Despite the rocketing CRs, Vullo expects to see the collective market free reserve breaking new record highs after a good investment year for all clubs.
While it is too early to say for sure, the best guess is that investment returns reached $500m, taking the collective free reserve to $6.2bn for the first time.
