“The P&I clubs approached the renewal period with very strong balance sheets,” said Drummond. “In the run up to the renewal period, the clubs announced there would be no general increases, since they were placing their emphasis on assessing the risks that each shipowner brought to the clubs, in order to reduce costs and premiums.”
Drummond also said that the low interest rate environment continues to challenge the clubs, since they are mutuals and have not had to focus on underwriting profitability due to historically good levels of investment income to offset any underwriting deficits. However, Drummond believes that the clubs can overcome this deficiency by, “increasing or introducing minimum deductibles or increasing existing deductibles so that it reduces the level that claims can be made by the policyholders. That is tantamount to increasing rates.”
To read the Best’s Special Report, titled, “Balance Sheets of P&I Clubs Strengthened by Good Recent Performance; Pricing Under Pressure,” go to http://www3.ambest.com/bestweek/purchase.asp?record_code=259271.
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