P&I clubs size up fixed-premium opportunity (source: Lloyd’s List)

P&I clubs have a unique opportunity to grow their share of the fixed-premium marine liability market but they will have to exercise underwriting judgment to ensure the extension of their commercial offering will ultimately benefit their mutual members

The fixed-premium protection and indemnity (P&I) market is on the verge of significant change. Years of uneconomic pricing across the broader marine insurance market, in general, and in the fixed-premium P&I space in particular, have forced a realignment of the market.

Fierce price competition and some major claims are weighing heavily on the commercial fixed-premium providers. Meanwhile, some mutual P&I clubs are seeking to grow the size of their existing fixed-premium portfolios as the competing capacity fragments or withdraws from the market.

The fixed-premium P&I market is ultra-competitive, brokers say.  Besides competition among the “pure” fixed-premium facilities, all P&I clubs now offer fixed cover for smaller vessels in one form or another, often backed by club paper and full claims support.

“Clubs are keen to grow in this area, while many fixed-premium providers are under pressure to grow what, in some cases, is a very limited premium/business spread,” Martin Hubbard, director and leader of the P&I team at London market broker Tysers, says.

The clubs are financially stronger now than at any time in their history and the argument, first advanced some 10 years ago, that the high cost of the liability cover offered by P&I clubs could see more shipowners turning towards the fixed-premium market, has very little or no validity, according to Hubbard, who says pricing in the mutual P&I market has never been more competitive.

In addition, there have been some significant claims over the past few years that have caused more than a few credibility issues for some of the commercial fixed-premium P&I providers