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SPEAKER: Welcome to WTW's Global Marketplace Insights series, where our experts bring you the latest risk and insurance perspectives.
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KIM WOOD: Hello. My name is Kim Wood, and I'm an associate director in WTW's P&I team. In the next three minutes, I'm going to try to give you a condensed overview of the P&I market and the easiest place to start is last year.
0:35
So last year, as of the 20th of February 2024, we have a full set of reporting accounts from all the clubs in the international group, and they're pretty positive. The market overall looks reasonably good, with the average market combined ratio sitting at 96%, improved from 99% the previous year. The average market investment income is 6.6%, which is particularly encouraging after the investment losses seen in the previous year.
1:01
Combining the two, the positive underwriting and the positive investment results, has driven free reserves for the market up by 15%. So largely a very promising situation. It's almost the strongest the market's ever been. The highest point actually being at the end of the 2017/18 policy year. But as you can see, it's a favorable result nonetheless.
1:20
So that brings us neatly on to the current year. The event that has dominated the headlines this year has been the Dali incident. This is the container ship that hit the Baltimore bridge on the 26th of March, 2024. A tragic incident which caused the bridge to collapse, resulting in six people being killed, and with enormous consequences as a result.
1:38
From a marine perspective, there's established case law in the US that limits liability, and also limits the amount of consequential damages payable by the ship, but it's going to be an enormous claim, possibly the largest ever.
1:50
The largest ever P&I claim to date was the Costa Concordia, which struck a rock and sank in 2012, and which 10 years ago cost the industry $1.5 billion. There is a chance we may see the Dali claim also reach this 1.5 billion level.
2:04
Although the Dali claim dominates the year, the P&I market is resilient, and the claim will be paid and the market will carry on. There will be increases in reinsurance costs and in premiums, but they're not going to be something that kills the industry. It's something that is an every 10-year event, or an event that is containable within the industry.
2:22
The other thing about the current policy year is that the Dali somehow masks that there has been nine other pool claims in the first half of this year, which is marginally above the market average for the first half of the year, and is significantly higher than the last three years. So we have a higher incidence of significantly large claims in the current year.
2:40
About a third of the international group P&I clubs indicate what their results look like at the half-year point, 20th of August. And from this half year view, it looks like a picture where some clubs have had the big claims, and some clubs haven't, some have combined ratios of 110%, and some still 90% combined ratios.
2:58
Thus, as you can see, we have a very interesting renewal coming up. And if you need to know more about the renewal and what to expect, I'd recommend that you talk to your local marine client advocate, and they'll be able to fill you in on the details of that.
