Baltimore bridge collapse hits P&I segment at earnings turning point
The cargo ship collision that brought down the Francis Scott Key bridge in Baltimore hits the P&I mutual shipowner clubs just at a turning point on earnings that had held out hopes of an eventual pause in a renewal rate hike spree now spanning five consecutive years.
Going into the February 2024 renewals, the industry had moved to its first technical profit since f2016/17.
The marine mutual segment had likewise only recently put paid to the 10-year payout of a $1 billion claim from the Costa Concordia cruise ship, which gave the P&I industry its last biggest when it struck the rocks off the Italian coast in January 2012. That incident killed 32, sent the captain to a sixteen-year prison sentence and resulted in the complete scrapping of the ship.
“As most of the clubs have reached price adequacy and financial results are also improving, there should be less need for substantial rate adjustments in subsequent renewals,” analysts at AM Best had stated in their latest segment update ahead of the February P&I renewals.
For the February 2024 renewal exercise, the 12 P&I clubs associated in the Internatinoal Group of P&I Clubs likely achieved an increase of about 3% in cash terms and 4.5% when adjusted for changes in individual retentions, all “slightly” below the targeted 5% ahead of renewal, Filippo Fabbri, MD and CEO of Lockton's P&I broker unit P.L. Ferrari, had said of the renewal.
Fabbri called out the exceptional nature of the 2024 renewals as “the first for some years where most clubs did not mandate their general increase but were prepared to negotiate around individual client’s records”.
Only inflation and credit ratings pressure were lingering upwards rate drivers, Fabbri had claimed. In contrast, pool claims shared amongst member clubs “remain at an average level”, attritional claims were called "consistent and predictable" and the reinsurance market seemed “supportive,” Fabbri wrote for Lockton's H1 2024 London Market outlook.
Those positive loss trends had even contributed to a “moderate” decrease in reinsurance costs for the International Group’s XoL programme at the 2024 renewals, AM Best analysts had noted.
The International Group of P&I Clubs, whose financial results consolidate those of its 12 constituent members, had returned to its first technical profit since f2016/17 at $152 million in the 2022/23 fiscal year, analysts at AM Best had noted in their last review of the segment. That put the combined ratio down to 95% from a four-year range spanning 107 to 117%. Investment results had tarnished that shift to an underwriting profit, but were expected to s swing back to sizeable profits for the coming fiscal year.
“For 2023/24, AM Best expects underwriting performance to be in line with 2022/23, with most of the clubs likely to achieve around breakeven combined ratios,” AM Best analysts had still said hopefully in early February.
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