Protection and indemnity (P&I) premiums are likely to rise by as much as 10% in 2007, according to Aon.
Aon's P&I Midterm Review 2006 indicates that legislative, social and fiscal changes will cause a hike in premiums.
Social and legislative drivers include:
• Legislation is not only affecting shipowners in the oil sector, but also other sectors, including cruise ships
• Shipowners' liabilities are increasing as a result of legislation limiting oil discharges
• Shipowners may potentially be held liable for oil pollution.
Regulatory drivers include:
• FSA solvency requirements regarding transparency have heightened future risks.
Fiscal drivers include:
• P&I clubs have become more adept at handling their investment returns, claims and reinsurance costs
• Future damage modeling leading to higher reinsurance tariffs for the cruise sector.
Stephen Hawke, executive director of Aon Marine and chairman of Aon PLF, comments: “Since we accurately predicted the 0-12.5% rate increases of the 2006 renewal, the overall solvency of the clubs is very high. But lurking on the horizon are the dark clouds of greater levels of legislation which will have the inevitable result of increasing liabilities and therefore the potential for claims. In days gone by, the clubs would have seen if the impending storm could be weathered before taking any financial change of course. Nowadays, the highly regulated clubs must take preventative action in advance.
“Going forward, as a decrease in social legislation is unlikely, we foresee increased risk for shipowners and greater risk transfer for the clubs continuing, suggesting that clubs will increase rates for the next two renewals up to and including February 2009.”
