Lloyd’s broker and P&I specialist HSBC Insurance Brokers says that shipowners accustomed to double-digit increases in their P&I premiums over the past five years may be disappointed if they are expecting an improvement in their 2007 renewal terms on the strength of the current newbuilding boom in an optimistic shipping industry.
In its Protection & Indemnity Review 2007, HSBC says that, because the increase in newbuildings is shared among most of the clubs in the International Group, the proportional share for each club is not substantial enough for individual clubs to make much use of risk-bearing economies, at least over the short term. Furthermore, explains HSBC, the owners of new ships “demand lower premiums, arguing that the club is not subjected to the same risk on a modern ship as it is on old one.”
Pointing out that club underwriters quote very competitively on new tonnage when the opportunity arises, HSBC notes, “Unfortunately, in pure monetary terms, the premium generated by a newbuilding in no way compensates for the loss of a similar size old ship on its eventual disposal.”
The influx of larger numbers of new ships may also have a disproportionately negative influence on P&I. More ships must inevitably mean more claims, and it is understood that pool claims for 2006 have already reached $100m, which exceeds the figure at the same time two years previously.
HSBC says, “Newer ships are often bigger than their predecessors. The wave of deliveries has meant that faster and more complex ships are operating in more congested waterways than has ever been the case before – this at a time when it is becoming increasingly hard to maintain the supply of experienced seafarers for even the fleet of 2003, let alone the fleet today.”