How have strong investment returns boosted P&I clubs?

It should reduce the likelihood of Unbudgeted Supplementary Calls.

The protection and indemnity (P&I) market results were strong, with most reporting combined ratios below 100%, according to Stephen Rudman, head of Marine, Asia for Aon.

Significant investment returns bolstered free reserves, bringing them back to levels last seen several years ago. Gard, NorthStandard, and Steamship Mutual were amongst the clubs that recorded notable increases in reserves.

Despite positive financial figures, some major clubs posted underwriting losses, even in a relatively low claims environment. 

This may lead to varied strategies in the future, with certain clubs focusing on improving underwriting performance, whilst others may adopt a more lenient approach. The last renewal saw single-digit inflationary increases, which should help further strengthen underwriting results.

The 2025 policy year began positively in terms of claims, although recent casualties highlight the ongoing volatility in the market. Rudman noted that whilst there may not be an immediate need for premium increases, factors such as ‘churn’—the turnover of members—will not significantly impact the overall figures.

Regarding the DALI incident, Rudman emphasised that whilst the potential cost remains uncertain, it is unlikely to have a substantial impact on the solvency of the Britannia P&I Club or other clubs in the International Group. 

However, if the event affects the International Group Reinsurance (IGRI) cost, any increase could be passed on to members based on gross tonnage.

Looking ahead to the next renewal, Rudman pointed out that strong investment returns and a low claims environment should reduce the likelihood of Unbudgeted Supplementary Calls from smaller clubs. 

Meanwhile, larger clubs have returned premiums to their members, with Skuld recently announcing a $10m return. This has led to discussions about whether other clubs should follow suit, especially in light of NorthStandard’s merger.

On diversification, Rudman stated that it has generally benefited P&I clubs, particularly those involved in commercial fixed premium P&I, including offshore and energy sectors. 

However, Hull & Machinery (H&M) diversification remains less clear, with some clubs struggling to deliver profits in a softening H&M market. Nevertheless, both diversified and non-diversified clubs have reported strong performance, with Steamship Mutual standing out for its focus on P&I whilst maintaining a diverse portfolio within mutual P&I lines.