FIXED versus MUTUAL
P&I Cubs, formed from mutual associations of shipowners, are often the traditional route used by shipowners to find protection and indemnity insurance for their vessels. But while P&I clubs often offer competitive prices, do they really provide you with the cover that you are looking for, or could a fixed premium underwriter give you more for your money – particularly if you are a shipowner with a smaller tonnage vessel? Before you make any decisions, it is worth thinking about the following points:
- Financial security and supplementary costs
- Policy limit
- Quality of service
Financial security and supplementary costs
A P&I Club relies on members for its funding, and it can only meet claims as long as members continue to pay. Even when P&I Clubs join together to form an International Group, the fact remains that all International Groups taken together can only produce a premium volume of about USD 2.5 bn each year. The only way to raise extra money quickly is for each individual P&I Club to request extra financial support from its members, but there is no guarantee that members will pay these supplements. Similarly, if the P&I Club goes into run-off, there is no guarantee that outstanding payment claims will be met.
In contrast, commercial insurance companies may have annual revenues of USD 900 bn or more, with the assets of the company itself providing security against the payment of its outstanding claims. Even if the P&I business within a wider insurance company goes into run-off, it is likely that the rest of the company will continue functioning, so your claim is far more likely to be honoured. Moreover, at RaetsMarine, we tailor our policy and costs according to your individual situation, and our agreed premium for the policy year is fixed and final, so you will never be asked to pay any supplementary calls.
While all International Group Clubs offer a policy limit of USD 4.25 bn, reinsurance cover is often only for USD 2.03 bn. This may expose all shipowners within the International Group to a large financial gap, or ‘overspill’ – an unnecessary risk for smaller shipowners, who are never likely to make such high claims in the first place. Because RaetsMarine tailors all policies individually, we will never leave you exposed to this kind of risk.
Quality of service
Because P&I Clubs are mutual organisations run by shipowners, it is often the case that International Group Clubs pay more attention to the largest, mainstream, owners. As a result, smaller shipowners can often feel rather neglected. At RaetsMarine, we cater especially for shipowners who own cargo vessels of 40,000 GT or less, which can be insured safely at lower risks, as well as for non-cargo carrying vessels, such as fishing vessels, tugs, pontoons and other specialised craft. As a result, we can offer particular expertise to shipowners who fall into these categories and we believe we can easily match – or even exceed – the service provided by P&I Clubs.
P&I Clubs often claim an advantage over insurance companies because they have a long tradition of putting up Letters of Guarantee to secure the release of arrested ships. While it is true that P&I Clubs have offered these services for a long time, at RaetsMarine we believe that fixed-premium underwriters are well placed to provide exactly the same service. We are fully equipped to meet any demands for guarantees – and we can also draw on our considerable practical experience to offer any additional advice and support.