DGS Marine, a global P&I management provider and exclusive manager for the British European and Overseas P&I facility, has announced a 15% premium growth following the completion of P&I renewals on 20th February 2015.
This increase, which brings DGS Marine’s premium income to $36million, marks further significant growth and development in the fixed premium P&I market as ship owners and operators look to reduce their operational expenditure and secure greater control over the costs of P&I cover.
The number of vessels entered into the BE&O P&I facility increased by nearly 25% from 1,500 to 1,950 vessels. The total tonnage of these vessels rose from 3.8million tonnes to 4.8 million tonnes. DGS Marine also reported an increase in free reserves to $119million and a 4% reduction in reported claims.
A significant number of owners have moved their vessels from the International Group of P&I Clubs to the BE&O P&I facility, managed by DGS Marine in this latest round of P&I renewals. The diverse fleet covered by the BE&O P&I facility comprises 40% tankers, 24% bulkers and 23% general cargo, as well as a substantial number of container vessels, tugs and barges.
David Skinner, BE&O P&I Group Managing Director, said: “In today’s shipping markets, despite falling oil prices, cost control and financial transparency are still more important than ever for ship owners. They require as much certainty as possible over all costs in order to plan ahead and manage their cash flow. Owners cannot afford to take it on blind faith that they are getting the best deal on their insurance and the mutual model offered by the IG Clubs provides neither transparency nor cost control. For this reason, more and more owners are looking for alternatives that allow them to better control their insurance costs, such as fixed premium cover.”
DGS Marine also believes that many more owners are attracted by the lower costs available from fixed premium providers, but are prevented from moving from their mutual P&I providers by prohibitively high release calls: “This has been a challenging renewal period for all P&I providers, with owners understandably pursuing the best price that they can, given the financial pressure that all shipping companies continue to face. Owners that have been with us for more than three years have been eligible for our Continuity Credits scheme, which offers a discount on premiums, dependent on their individual claims records. We have also seen a number of owners move their vessels to us from the IG Group because of the lower costs and greater certainty that we can offer, as well as the benefits of being assessed on their own claims record, rather than the situation whereby the tug owner finds himself contributing to the claims of the large tanker owner. Indeed, there are many more owners that would love to move, but are prevented from doing so by release calls that can be 30-40% of their annual premium.”
A further important factor in DGS Marine’s premium growth is its commitment to providing smaller owners with a level of service that meets the highest standards.
Mr Skinner said: “A high quality service remains incredibly important. Our Assureds want to know that we will be there to support them whenever and wherever the need arises, whatever the nature of the claim and no matter how big or small the challenge that they face. We have also increased the cover limit that we are now able to provide and can now offer up to $1billion of cover, if required by our customers and their charterers.”
Fixed premium P&I provides ship owners with an insurance premium figure at the outset when they purchase the policy. This represents the full and final insurance cost for the length of the policy with no deviation and no retrospective premium calls. When it comes to the renewal process, the key determining factor is an assessment of the owner’s individual claims record, unlike the International Group system where rate increases are spread uniformly, which can significantly impact the profitability of smaller ship owners and operators.