A new venture aimed at easing premium flow for the often hard-pressed international marine market and its clients has been launched in London.
Major insurers are reported to have confirmed that they will support what is said to be the first premium finance scheme in the sector. It is managed by a new independent company, Insurance Premium Finance Ltd (IPFL).
The company has secured a line of credit from a leading international bank to underpin premium finance for such covers as Hull and Machinery, and Protection and Indemnity, for ship operators. The financing also extends to cargo owners and charterers, and others taking out insurances in the marine market.
The fresh approach allows insurers to receive their premiums “up front” while enabling their clients to spread the payment of premiums over several instalments, in either US dollars, Euros or Sterling.
The facility will be available to assureds paying at least $75,000, or the equivalent in the other currencies, for their annual marine insurance premiums.
Neil Barlow, Director of IPFL, said: “At present, domestic insurance business such as household or motor can be the subject of premium finance and the premiums can be paid over several instalments. Similarly, for commercial insurance placed within the same market as the country of origin, premium finance can be arranged.
“Our research showed financing of premiums has until now been unavailable for cross-border transactions. For example, a Greek shipowner arranging cover in the global marine insurance market in US dollars would not be able to obtain finance to spread the cost of the insurances over multiple instalments, other than using the existing limited facilities granted by the insurance companies themselves.”
Most marine insurance premiums are paid on a deferred basis. This allows for the premium due at inception to be spread over, typically, two or four instalments. Insurers often allow 60 days credit for each instalment. In cases where four deferred instalments are allowed, this means that insurers will not receive their full annual premium until the 11th month of the policy period.
Insurers would welcome receipt of their full annual premium within 60 days of inception of the policy, and, for European insurers, this would also assist in meeting the capital requirements of Solvency II by 2012.
