The International Group of P&I Clubs (International Group or IG) collectively reported a record high level of free reserves in 2023/24 driven by high investment returns, mainly due to the reversal of prior year unrealised losses on fixed income portfolios. The IG clubs continued to benefit from a more favourable interest rate environment in 2024/25, according to AM Best. Beinsure analyzed report and highlighted the key points.
Four clubs announced substantial premium returns/rebates ahead of the February 2025 renewal, allowing their members to benefit from the clubs’ strong bottom-line performances.
The P&I segment is dominated by the members of the International Group of P&I Clubs, which collectively insure approximately 90% of the world’s ocean-going tonnage.
The International Group consists of 12 members, following the merger, in February 2023, of the North of England Protecting and Indemnity Association (North P&I) and The Standard Club to create the NorthStandard club (see Marine Insurers Face Rising Claims & Planning Rate Hikes for 2025).
Higher investment returns in 2024/25 will be partly offset by an increase in pool claims, following two years of relatively low claims for the 12 clubs. As a result, the combined technical performance of the International Group (IG) clubs is expected to decline. Under the IG pooling arrangement, clubs share claims exceeding $10 mn.
Most P&I clubs have announced general premium increases
Most P&I clubs have announced general premium increases ahead of the February 20, 2025, renewal to maintain price adequacy and offset rising claims costs. This marks the sixth consecutive year of general increases.
6 clubs plan to raise mutual P&I premium rates by 5%, two by 7%, and three by 7.5%, 6.5%, and 4%. These increases are referred to as general increases, minimum target adjustments, target increases, or internal targets.
The Shipowners’ Mutual Protection & Indemnity Association is the only club not applying a general increase.
Further rate adjustments are expected at subsequent renewals to maintain underwriting discipline. AM Best considers the continuation of general increases to be necessary to maintain price adequacy in view of the expected deterioration in underwriting results in 2024/2025 due to the notable increase in large claims frequency and severity, according to Global Marine Insurance Market Review.
P&I Clubs – Financial Performance of the International Group
P&I Clubs – Loss, Expense and Combined Ratios of the International Group
Member-specific pricing adjustments also occur alongside general increases. Recent renewals have focused more on individual loss records and risk exposures, with deductibles used to manage risk.
Some clubs combined general increases with premium returns/rebates to strike a balance between rate adequacy and returns for members given the clubs’ high capital positions.
One of the clubs applying a capital distribution for members renewing at 20 February 2025 is Britannia Steam Ship Insurance Association (Britannia), which also announced the highest target increase at 7.5% minimum, with an additional 2.5% target from remedial actions.
Sliding Technical Results
The International Group reported an underwriting profit of $143 mn for the 2023/24 financial year based on the combined accounts of the principal clubs. This reflected a steady result compared with the previous year (surplus of $152 mn). On the same basis, the combined ratio was stable at 97% from 96%, according to AM Best data.
The combined ratios of the individual clubs varied between 83% and 110.5% in 2023/2024, with four clubs reporting technical losses, although these were moderate in most cases. Call income increased by approximately 8%,
in line with the prior year, mainly driven by the general increases applied by the clubs during the 2023/24 renewal (see about Shipping Safety & Key Risks for Marine & Cargo Insurance). This increase in call income was accompanied by an increase in net claims incurred of approximately 7% and an increase in net operating expenses of around 19%, which explains the stagnation in underwriting results. Net claims incurred remained above the five-year average.
P&I Clubs – Net Incurred Claims
AM Best expects underwriting performance to decline in 2024/25 based on data published by clubs throughout 2024. Current-year claims have exceeded expectations for most clubs due to an increase in large claims, including pool claims.
The number of large claims varies annually, creating volatile loss trends. From 2017/2018 to 2021/2022, pool claims remained high, followed by a sharp decline in 2022/2023 and 2023/2024.
However, claims have risen again in 2024/2025. The most significant event was the “Dali” casualty in Baltimore in March 2024, also known as the “Baltimore Bridge strike,” which could be the most expensive marine casualty on record. Other incidents have also contributed to pool claims, according to club reports.
The collapse of the Francis Scott Key Bridge near the Port of Baltimore, Maryland is expected to drive up to $4 bn in insured losses, with reinsurers set to bear the bulk of the claim amid concerns it could become the largest ever marine loss.
After the Dali container ship collided with one of the bridge’s support beams in the early hours of morning local time, leading to a major collapse into the Patapsco River, the port remains closed to ships as the rescue operation continues, according to Morningstar DBRS.
The value of the bridge itself could be about $1.2 bn, while there’s also been extensive damage to the container ship, which was deporting for Colombo.
This is a millions of dollars per hours question, which suggests that it could be the largest example of port blockage seen by insurers and reinsurers in recent times.
Reinsurance Challenges
International Group clubs cede about 22% of written premiums. Under the pooling arrangement, clubs mutually reinsure claims exceeding $10 mn. The group also secures general excess of loss (GXL) reinsurance in the open market, covering up to $3.1 bn. By negotiating collectively, clubs secure better reinsurance terms than they could individually.
Despite an improved global renewal environment, the International Group’s reinsurance program for 2025/26 saw a pricing increase.
However, the individual club retention and the GXL contract attachment point remain at $10 mn and $100 mn, respectively. The GXL program’s upper limit and overspill protection capacity also remain unchanged.
The increase in the cost of the IG’s reinsurance programme was slightly above 10% at the 2025 renewal. The reinsurance rate varies by vessel category, with the highest percentage increase applied to FCC (fully cellular containerships) vessels. The increase in price follows an active pool claim year, including the Baltimore bridge incident.
P&I Clubs – Investment Split
Several years may be required to determine the full cost of the claim. However, a $100 mn-plus settlement has already been paid to the US Department of Justice to cover costs related to clearing the channel. Losses above this amount should be covered by the panel of reinsurers.
IG reinsurance renewal costs are typically fully passed on to shipowners
AM Best notes that increases in IG reinsurance renewal costs are typically fully passed on to shipowners through a specific levy on top of P&I premiums.
The GXL programme continues to provide free and unlimited reinstatements for most risks. The exception is pandemic and cyber risks where free and unlimited reinstatements are provided on the first layer only ($650 mn excess of $100 mn).
Above that, the programme includes two towers of separated aggregated cover for pandemic and cyber claims up to $2.1 bn. The clubs will pool any losses that exceed this annual aggregate limit.
Individual clubs continue to purchase their own reinsurance protection to cover claims below their $10 mn retention. The level of protection purchased depends on each club’s risk appetite and is influenced by the size of its capital base and its ability to absorb large losses.
Positive Investment Results to drive performance in 2025/2026
AM Best notes that P&I clubs tend to have a higher appetite for investment risk than other non-life commercial insurers, with members taking a long-term approach to investment earnings. Many seem willing to tolerate year-on-year volatility.
Overall, the proportion of investments allocated to equities (including mutual funds) is fairly stable, standing at approximately 15% at year-end February 2024.
Investment strategies differ across the International Group. For instance, the investment portfolio of Japan Ship Owners’ Mutual P&I Association (Japan P&I Club) consists almost entirely of cash and fixed-income securities, while the other clubs’ allocation to equities varies between 8% and 31% at year-end February 2024. Britannia has the highest allocation at 31%.
Investment returns in 2023/2024 were sizeable for the International Group.
- This drove the combined result for the International Group to a profit before tax of $1.18 bn.
- Technical profits of $143 mn were significantly supplemented by non-technical profits of $1.03 bn.
The main driver of these results was the reversal of prior year unrealised losses on fixed income portfolios.
P&I Clubs – Free Reserves of the International Group
AM Best believes that the large majority of the clubs will continue to report significant investment income in 2024/2025 driven by the good performance of financial markets.
Going forward, investment income is expected to continue to contribute materially to the clubs’ bottom lines due to healthy yields on their fixed income portfolio. Although rates have declined, they remain higher than the rates on most of the older maturing bond issuances in the clubs’ portfolios.
However, volatility could arise driven by the club’s relatively high exposure to equities or from fluctuations in the market value of fixed income investments, as experienced in 2022.
P&I Clubs – Free Reserves by Club
The clubs’ free reserves increased by 17% during 2023/2024, reflecting the large investment returns reported by most clubs during the year. Free reserves reached a new record high in February 2024, exceeding by 3% the prior record level reported in 2020/2021.
For fiscal year 2024/2025, AM Best expects the clubs to report further growth of free reserves, driven by strong investment results. Risk-adjusted capitalisation is expected to improve, with capital buffers increasing for most clubs.
Regulatory solvency levels remain strong for most clubs. At a group level, ten clubs report a solvency capital requirement (SCR) ratio under Solvency II.
At the end of the 2023/2024 fiscal year, SCR coverage ratios for these clubs varied from 171% to 338%, with six clubs reporting a ratio above 200%. Most of the clubs saw an increase in the coverage ratio compared to the prior year.
FAQs on P&I Clubs’ Financial Performance and Market Trends
The record free reserves resulted from strong investment returns, mainly due to the reversal of prior year unrealized losses on fixed-income portfolios. A favorable interest rate environment in 2024/25 continued to support these gains.
Most clubs have announced general premium increases to maintain price adequacy and offset rising claims costs. Six clubs plan to raise rates by 5%, two by 7%, and three by 7.5%, 6.5%, and 4%. The Shipowners’ Mutual Protection & Indemnity Association is the only club not applying a general increase.
Higher investment returns in 2024/25 will be partly offset by increased pool claims after two years of relatively low claims. This is expected to weaken the overall technical performance of the International Group.
The Baltimore Bridge strike in March 2024 could become the most expensive marine casualty ever, with insured losses estimated at up to $4 bn. Reinsurers will bear most of the costs, but the incident has already influenced higher reinsurance pricing.
Despite an improved global renewal environment, the IG’s reinsurance costs rose by slightly over 10% for 2025/26. The biggest increases were applied to fully cellular containerships (FCC), reflecting an active pool claim year, including the Baltimore incident.
Investment income remains a key driver of profitability. In 2023/24, technical profits of $143 mn were supplemented by $1.03 bn in non-technical profits, resulting in a pre-tax profit of $1.18 bn. Strong fixed-income returns are expected to continue supporting free reserves in 2024/25.
Free reserves increased by 17% in 2023/24 and are expected to grow further in 2024/25 due to strong investment results. Risk-adjusted capitalization is projected to improve, with capital buffers rising for most clubs. Ten clubs under Solvency II reported solvency capital requirement (SCR) ratios between 171% and 338%, with six exceeding 200%.
