Released on: November 27, 2007, 10:54 pm

Press Release Author: Alexandra Lewis

Industry:

Press Release Summary: The surge in costly P&I (protection & indemnity) pool claims
in 2006 could be a sign of the times as booming shipping operations become more
expensive, according to Aon's P&I Pre-renewal Report 2007. In anticipation, P&I
clubs are already initiating increases of 10-20% in shipowners' premiums at the next
renewal.

Press Release Body: The surge in costly P&I (protection & indemnity) pool claims in
2006 could be a sign of the times as booming shipping operations become more
expensive, according to Aon's P&I Pre-renewal Report 2007. In anticipation, P&I
clubs are already initiating increases of 10-20% in shipowners' premiums at the next
renewal.

The high value of claims in 2004 - so far totalling USD280 million - were viewed as
an anomaly yet current evidence suggests that costly claims may be a feature of the
current cycle. This pattern sees 2006 claims reaching USD580 million with an
average claim value of USD18.06 million, nearly double the 2004 average at USD9.66
million.

There is already an ominous outlook for 2007, clocking up USD84 million in claims
after just six months, which beats the figures for 2006 after a similar period.
This is partly due to a more expensive operational environment, including:

*
more sophisticated and expensive ships
*
expensive cargoes
*
advances in salvage technology
*
costly yard repairs in short supply
*
environmental and personal safety legislation, the so-called 'convention creep'

There is also a reported increase in smaller attritional claims although, arguably,
these are mainly a function of the boom in shipping activity and retained by the
clubs. However, Aon's report focuses on last year's claims over USD6 million which
have impact on the entire pool.

Rather than merely calling for higher premiums, P&I clubs could react to the claims
surge by demanding increased levels of deductibles to reduce the burden of frequent,
smaller claims. More thought should be given to dual impact deductibles: a lower
'servicing deductible' to access club services on a costed basis and a higher
'reimbursement deductible' with appropriate premium discount.

On a wider basis for the future, consideration should also be given to raising the
individual club retention even higher, which has already been boosted from USD6
million to USD7 million in 2007. This in turn should further reduce pool claims.

Stephen Hawke, executive director at Aon, said: "This renewal is likely to be one of
the most interesting in recent years. It does not take a rocket scientist to be able
to predict that rates are going up. The key issue, though, is to establish the
causes behind the rises and the medium to long term prognosis. Historically, the
mutual clubs have been robust in confronting the issues of the day but there is a
real sense that the alarming rise in pool claims is not just a contemporary niggle
but rather an indicator of a modus vivendi for the future.

"Precious premium dollars need to be shifted, and shifted up and away from the
mundane and predictable and towards the less certain and volatile. The pool must be
fully prepared to cope with the rigours of a more expensive operational environment
and the evidence of 2006 would strongly suggest that the preparation needs to start
immediately."

Aon UK is ranked by A.M. Best as the number one global insurance brokerage based on
brokerage revenues and voted best insurance intermediary, offering classic car
insurance, high value home insurance, entertainment
and media liability insurance and construction insurance.


Web Site:
http://www.commercialservices.aon.co.uk/commercialservices/microsites/entertainment/


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