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Passenger ship owners face 125% rate hike for excess of loss reinsurance renewal

Passenger ship owners face 125% rate hike for excess of loss reinsurance renewal

Passenger ship owners have been hit with rate increases of over 125% per gross ton after the International Group of P&I Clubs announced the renewal of its excess of loss reinsurance contract.

For the 2013/14 policy year, passenger vessels will have to pay US$3.1493 per gt, an increase of 125.08% year-on-year, and the highest percentage increase across all shipping sectors. Tanker owners will pay between 15-16% per gt higher rates and dry cargo owners almost 39% more than in 2012/13.

In a circular to members, Steamship Mutual, one of the 13 members of IG, stated that as a result of very significant major casualties, including Costa Concordia, upward adjustment has been made to the rates with a much increased allocation to passenger vessels. These increases represent the largest in recent years despite increased risk retention by the Group Clubs.

Steamship Mutual noted the 2011/12 policy year ‘produced the first and third largest ever claims on the IG reinsurance programme resulting in a very significant exposure to the Group's reinsurers.’ It said the exposure together with increased cost of major casualties, and in particular wreck removal, ‘has led the Group’s reinsurers to seek significant rises in the renewal premium for the 2013/14 policy year.’

Hugo Wynn-Williams, chairman of the IG Reinsurance Sub-Committee, reported that after a period of years when the favourable claims history and exposure to the Group reinsurance programme had enabled reinsurance rates to be reduced year-on-year, the inevitable consequence of the significant claims on the 2011/12 policy year was a substantial readjustment in reinsurers pricing. But through the use of the Group captive Hydra, it has been possible to mitigate the full extent of the increased reinsurance cost to shipowners entered in the Group clubs.

The 13 principal underwriting member clubs of the International Group of P&I Clubs, based mainly in the UK, US, Japan, Sweden and Norway, among them provide liability cover for approximately 90% of the world’s ocean-going tonnage.

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