American Club sees creeping extension of shipowner liabilities

 The American Club said Wednesday it is seeking a 5 percent increase in all classes of premium (mutual and fixed-premium) for both protection and indemnity P&I and freight, demurrage and defense insurance for the 2012 policy year that starts on Feb. 20, 2012.
   The club said there is no expectation of any unbudgeted supplementary calls for any open year, but that its directors ordered the levying of a 25 percent supplementary call, as originally forecast, for 2011, for both mutual P&I and FD&D entries. The release call for the year will remain at 25 percent over and above the supplementary call.
   The insurer said Standard and Poors had raised its counterparty credit and financial strength rating on the American Club from BB to BB+, with a stable outlook. S&P noted the club’s statutory surplus had grown significantly, from $48.2 million to $71.4 million, from year-end 2009 to year-end 2010.
   Joe Hughes, chairman and chief executive officer of Shipowners Claims Bureau Inc., the manager of the American Club, noted freight markets continue to languish and “the current imbalance between supply and demand appears unlikely to experience a positive readjustment any time soon. Thus, shipping industry earnings are unlikely to rise significantly over the short term.”
   “However, depending on the extent to which the global economy avoids a further downturn and continues to expand, however modestly, over the next two years, there is hope that prospects will improve for 2013 and beyond.”
   The club said the that as of mid November, the tonnage of ships for which it issues P&I insurance has grown 6 percent to 17 million gross tons while tonnage of for FD&D insurance is at about 11 million gross tons.
   As to the outlook,Hughes says the club’s positive experience over the last several months is to be welcomed and is reflected in the S&P rating upgrade.
   “However, and as was noted a year ago, higher claims volumes may well begin to reassert themselves over the medium to longer term,” he said because of growing systemic risk implied by the continuing expansion of the world merchant fleet coupled with increasing ship utilization and rising commodity prices. Mr Hughes also notes that levels of investment earnings will remain uncertain.
   “Accordingly, the need to ensure the appropriate pricing of risk as the basis for self-sustaining results at the operating level will continue to assume great importance over the years ahead,” he said.
   He also said unrelenting hostility of the political, regulatory and judicial environments will continue to assert a baleful influence on future P&I exposures. “These adverse circumstances will be compounded by the creeping extension of levels of shipowner liability under existing conventions and those likely to come into effect in the future,” he said.