IT IS just as well the dozen marine insurers who collectively provide liability cover for 85% of the world fleet don’t have to turn a profit. This year, most of them won’t.

In an interview yesterday, Steamship Mutual chief executive Jonathan Andrews told us how this situation has come about, and why it is nothing to worry about.

SSM, as it is known, recently produced financial highlights for its most recent policy year, revealing that it is paying out $1.12 in claims and operating expenses for every dollar of premium income it garners from its shipowner members.

In plain English, it is losing money on its core activity, although the deficit will be more than made up by investment returns on the half a billion dollars or so it keeps as a financial cushion.

In a for-profit company, that kind of performance would see half a dozen randomly selected sales reps discretely subjected to cruel and unusual punishments, and shareholders seeking the decapitation of the C-suite at the subsequent AGM.

But the 12 affiliates of the International Group of P&I clubs are shareholder-free mutual entities, owned by their members. Their sole objective is to provide insurance at cost price.

While they obviously have to stay solvent over the distance, in the short term they can take claims volatility on the chin.

Hence Andrews is able to comment: “I’m feeling relatively sanguine about it, really. I don’t think there’s anything there to which we should overreact.

“We have good years, we have bad years, we rarely have a year that is bang on budget. It’s always going to have a variance around the average.”

All of the clubs will have published their financial statements by the end of next month at the latest. It is widely accepted that most, if not all, will see their P&I books in the red.

The big problem is of course the IG pool scheme, the mechanism by which they share the cost of casualties once they exceed the $10m mark.

The last publicly declared figure for pool claims in the 2024/2025 policy year is 17, and the grapevine suggests at least three or four more are in the offing.

Several of them have been real humdingers. The most obvious example is the Baltimore bridge collapse in March 2024, which has already necessitated a $100m-plus settlement with the US Department of Justice.

But others have run up massive potential bills, with some brokers proclaiming that the pool lost $750m in the 12 months to February 20.

Club chief executives such as Tom Bowsher of West of England have told Lloyd’s List that that is an overestimate. But even his best guess of somewhere in excess of $600m is quite some bill to split 12 ways.

On Thursday, we are due to interview Paul Jennings and Jeremy Grose, joint directors of NorthStandard.

Their club is the second largest in the IG and has had the bad luck to account for five of the 17 outstanding pool claims. We expect it will make for interesting reading.

David Osler
Law and marine insurance editor, Lloyd’s List