It is hardly news that the much hoped-for recovery of the shipping sector remained elusive, said Jardine Lloyd Thompson at the start of its 2017 report on the P&I Group Clubs. They noted the comment from Rod Jones in his retiring chairman’s statement, when introducing Standard Club’s Annual Report and Financial Statements 2017; “we are all too well aware that the global shipping industry has been under severe pressure since the financial crisis of 2008”.
JLT said that, as Jones indicated, there continued to be no clear signs that pressure on the shipping industry was abating in any sustained and general way.
“It seems that whenever a particular sector shows a glimmer of recovery, as has happened from time to time, the abundance of capital still available to the industry in various forms quickly steps in to restore the unfavourable imbalance, and the rally peters out” said JLT, saying that, without wanting to appear to gloomy, it saw few signs this scenario would change.
“The inevitable consequence of this prolonged delay in supply side correction is that shipowners and operators must redouble their focus on costs”, said JLT. The broker said that a brief study of Moore Stephens’ OpCost report (www.opcostonline.com) gave insurance costs some context. Insurance premiums for all vessel classes make up but a fraction of crew costs, with the human factor according to OpCost being by far the largest non-finance item in a vessel’s operating budget.
However, JLT warned that, perhaps because insurance could seem slightly ephemeral in nature – not a discretionary purchase but, even so, without perhaps a clear and obvious return for the money spent (absent a claim) – it attracted considerable attention and resentment, with more of this attention being focused currently on Protection and Indemnity (P&I).
JLT said that, of the two main marine insurance cost items, Hull & Machinery (H&M) was recognized by most JLT clients to be offering solid value for money, with rates having cratered in recent years and with no obvious signs – rather like the shipping markets themselves – of any likely near-term change in that trend.
One factor that had driven down the H&M market down was low claims frequency and cost, probably the result of lower shipping activity due to the shipping downturn. P&I claims had followed the same pattern, but not P&I rates, which had remained roughly flat over the past five years or so, even while H&M rates tumbled.
JLT said that why this has been so, whether it was reasonable that it should continue and, if not, what could be done about it was the subject of its 2017 report.
Over the weeks leading up to Christmas IMN will be summarizing the key responses to JLT’s wide-ranging list of questions to each of the Group Clubs.
JLT revealed that “we now know that some club managers were initially reluctant to engage with us in this exercise; in fact our questionnaire was raised by at least one senior club manager with the IG as a forum as something to be treated with extreme caution. In the end, though, we do have a complete set of answers and, along with what we can’t help regarding as a fair degree of “party line” towing, there are some interesting and revealing insights and observations.”
https://insurancemarinenews.com/insurance-marine-news/time-repair-roof-sun-shining-says-jlt/
