North of England P&I club directors decide on 17.5% premium rise

25 Nov 2008

Shipowner directors of the ‘A' rated, 90 million GT North of England P&I club have decided on an overall general premium increase for protection and indemnity (P&I) cover in 2009/10 of 17.5%. P&I deductibles will increase by 10% and premiums for freight, demurrage and defence (FD&D) cover will rise by 20%.

According to chairman Albert Engelsman of Dutch shipping group Wagenborg, ‘The board considers the increases are vital to continue the club's progress toward its key objective of a technical underwriting balance, without reliance on investment income, and also to deliver financial stability, without recourse to supplementary premiums or funding.'

Managing director Rodney Eccleston says even though the club has for many years successfully adopted a cautious financial approach, which has been apparent from the continued solid financial performance and stable financial rating, the club has not been immune from the effects of the extremely difficult global financial conditions of recent months.

‘We have progressively reduced our equity exposure over the past 15 months, from 38% to zero, such that our investments are now 48.8% in cash, 48.5% in bonds and 2.7% in an absolute return fund,' says Eccleston. ‘While these actions have insulated the club from the extremes of the current financial turmoil, there has still been a reduction in the value of the club's investments, and this will translate into a material reduction in the club's free reserves at 20 February 2009.'

‘In view of the defensive investment strategy adopted by the club, there will inevitably be a reduction in anticipated investment income for the next few years and, as a result, the general P&I increase will be applied in two parts,' says Eccleston. ‘The 17.5% overall rise thus consists of a fixed 10% increase directly attributable to the anticipated reduction in future investment income and the additional costs of providing increasing levels of cover, plus a 7.5% increase dependent on the record and exposure of individual members.'

North of England's directors also decided P&I deductible levels should increase by 10% and by a minimum of US $2500. Premiums will be collected in four instalments during the policy year on 1 April, 1 June, 1 September and 1 December 2009.

The directors also agreed to raise FD&D rates by 20% for 2009/10 due to the significant increase in the number of FD&D claims and disputes in the difficult economic and trading environment. Minimum FD&D deductibles will increase to US$ 7500.

‘Longer term, the directors are aware that a recession and reduction in world trade could actually lead to a reduction in claims activity,' says Eccleston. ‘However, the board does not believe it would be prudent to make allowance for reduced claims costs until there is clear evidence this is happening.'

North of England currently insures some 350 member groups from around the world, with a total P&I entry of 3750 vessels of 90 million GT (65 million GT owned and 25 million GT chartered). Around 1500 ships are also entered for FD&D cover with the club's large and experienced defence team. The club is based in Newcastle-upon-Tyne, UK with regional offices in Hong Kong, Piraeus and Singapore.

North of England P&I Association, press release