In the /25 policy year, P&I clubs reported a total insurance loss of $312 million. This reversed two years of surplus and resulted in a net insurance loss of $98 million over the last three years.
P&I claims reached their highest level in a decade, as fires and electric vehicles emerged as new challenges for shipowners. Net claims reached $3.1 billion, a 25% increase from the previous year and 16% above the five-year average. Many clubs noted that the growing threat of fires is an increasing cause of major losses.
A statement by Lockton said, “This reflects both the risks of an aging fleet and the proliferation of misdeclared or dangerous cargoes, including electric vehicles.”
Lockton also stated that inflationary pressures on materials and labor, combined with larger damages from modern port improvements, continue to increase the cost of claims.
Events related to the war, particularly in the Red Sea, the rerouting of ships via the Horn of Africa, sanctions, and costs related to customs duties have led to an increase in compensation claims. Lockton explained that longer voyages not only increase costs but also expose ships to new risks such as weather-related delays and mechanical failures.
The report noted, “In terms of crew claims, suicide remains the leading cause of death at sea.”
Pool claims are making /25 one of the worst years on record, and the actual cost could be even higher. Historically, as pool claims have significantly worsened compared to previous years, today’s figures may underrepresent the true cost. Assuming /25 claims deteriorate in line with historical trends, the total figure comes to approximately $775 million. A lack of transparency in reporting pool claims further increases uncertainty in the market.
Lockton explained that despite interest rate increases, P&I premium income is “neutral,” with client loss and higher deductibles reducing earnings. Despite an average overall increase of 5.2%, total premium income remained flat at $3.96 billion and declined due to client loss. Other potential factors include an increased willingness among members to trade rate increases for higher deductibles. This dynamic highlights the pressure on shipowners’ operating costs, as many try to manage premiums by retaining more risk themselves. Lockton’s analysis shows that client loss has reduced rates by an average of 7.4% annually over the last decade, with most of this decline exceeding the general increases.
Clubs offset some insurance losses by achieving a $711 million return on investments. With high interest rates in /25, even conservative investment portfolios generated significant gains. While central banks signal interest rate cuts throughout 2025, these exceptional returns may moderate, but a return to fixed-income markets could provide some degree of stability.
Groupwide free reserves increased by 4.81% to $5.96 billion, with some clubs returning capital to members at the 2025 renewal. While this underscores the sector’s resilience, reserves per ton—a measure used to gauge a club’s risk—remain below pre-2020 levels.
Lockton predicts that in the 2026 renewal, clubs will again make a capital return to members, albeit at a lower rate compared to 2025.
Lockton forecasts a general increase of 5-10% for the 2026 renewal. The initial view for the 2025 policy year is that claims are not as high as those seen in 2024. However, clubs will strive to balance their insurance operations and mitigate ongoing inflation.
Pippa Atkins, Manager of Lockton P.L. Ferrari, stated: “This year has shown just how fragile the balance is for P&I clubs. We saw the highest claims of the decade due to fires and geopolitical shocks, but premium income has barely changed. Investment returns have been a lifeline, but they cannot hide the structural pressures from rising costs and long-term liabilities. As we look towards the 2026 renewal, shipowners should be prepared for further rate increases. The real question is how clubs will balance the need for financial stability with the realities of an extremely competitive market.”
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