More ships doesn’t translate into P&I premium decrease

Ship owners accustomed to double-digit increases in their protection and indemnity premiums over the past five years may be disappointed if they are expecting an improvement in their 2007 renewal terms, a Lloyd’s broker says.
HSBC Insurance Brokers, a P&I specialist, says an optimistic shipping industry may be hoping for lower premiums based on the strength of the current newbuilding boom.
But 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, according to 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 similarly-sized old ship on its eventual disposal.”
The influx of larger numbers of new ships may also have a disproportionately negative influence on P&I, HSBC says. “More ships must inevitably mean more claims, and it is understood that pool claims for 2006 have already reached US100 million, which exceeds the figure at the same time two years previously,” the company notes in a press release.