American club raises premiums by 20%

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

29 Nov 2007

Meeting in Shanghai, the directors of the American P&I Club have decided to seek a general increase of 20% on total annual premium for the new policy year. However, the directors emphasised that individual claims records and vessel factors will allow flexibility for adjustment up or down.They also warned that any additional and disproportionate cost of the International Group’s reinsurance arrangements, or similar cost of the club’s reinsurance of its retention under the Pooling Agreement, will be an additional surcharge to estimated total premium. The release call has been set at 25%.In a statement after the meeting, Joe Hughes, chief executive of managers Shipowners Claims Bureau Inc., said the board was aware that price increases were never welcome, but was committed to maintain sensible premium development, particularly in view of the club’s insurance rating and its continuing fulfilment of statutory requirements.He noted that some tough action taken over the recent past to improve the club’s collective risk profile had been of benefit to the overall loss ratio, and the club’s current entries continued to perform better than its historical membership.The club’s statistics showed that the average incident cost of a dry bulk cargo claim in 2003 was about $15,500. This rose to $32,750 in 2004, eased a little to $31,400 in 2005, but went up to $45,350 in 2006. The upward trend continued.The club also noted that “a randomness of claims inflation appears to be at work.” For instance, the average cost of a claim for stowaways was just over $6,000 per person per incident in 2006. For 2007 this had increased to nearly $10,000.