P&I market faces renewed claims pressure – report

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Industry observers in Insurance are monitoring emerging trends closely. By Paul Lucas
The global Protection & Indemnity (P&I) insurance market has entered a new phase of volatility, with Gallagher Specialty’s 2025 Pre-Renewal Review highlighting a sharp rise in claims, continued underwriting deficits, and record-high free reserves – setting the stage for a complex 2026 renewal season. After two years of near-breakeven underwriting, the 2024-25 financial year saw a return to deficit, with the market’s combined ratio climbing to just under 110%.

According to reports that the pure P&I policy year combined ratio reached nearly 120%. The primary driver was a 21% surge in incurred claims, up from US$3.08 billion to US$3.73 billion, attributed to what is expected to be the worst pool year on record and elevated claims within club retentions. Evidence suggests that the spike in large, volatile claims has reignited concerns that higher pool losses may be becoming the new normal.

Despite the technical losses, strong investment returns helped offset the impact. Clubs reported an average investment return of +5% for 2024-25, with free reserves reaching a new record of US$5.94 billion. The overall result for the year was a positive US$313 million, even as underwriting performance registered a US$353 million loss. Data shows that the market’s reliance on investment gains to balance underwriting deficits remains a key theme, but Gallagher warns that current investment market highs may not be sustainable into 2026.

Evidence suggests that looking ahead, Gallagher notes that while some clubs are suggesting general increases (GIs) of 5% to 10% for 2026, the broker believes this may be optimistic given the current climate. The expectation is for a range of 5% to 7.5% for most clubs, with some capital returns possible for the strongest performers. Sources indicate that the report suggests that, despite record free reserves, the need to bring technical underwriting back into balance will keep upward pressure on rates, but the market could soften relative to 2025 if investment performance holds and claims moderate. The reinsurance outlook for 2026 is uncertain, with two major pool claims (Dali and X-Press Pearl) expected to result in P&I losses exceeding US$1 billion.

Sources indicate that while the overall reinsurance renewal is expected to be flat, modest adjustments are likely for certain vessel categories. Gallagher notes that reinsurance costs – now over US$1 billion in premium – continue to be passed on to members, and in some years have exceeded the general increase itself, especially for container operators. The report highlights significant divergence in club performance.

Gard remains one of the few clubs to post a five-year underwriting surplus, supported by diversified operations, while Britannia and Steamship have made substantial capital distributions despite technical losses. The American and Japan Clubs were among the few to see claims fall in 2024-25, while others, including London, Britannia, and NorthStandard, saw sharp deteriorations. Gallagher observes that the churn effect – older, higher-rated tonnage leaving the market – has slowed, but the expected influx of newbuildings in 2026 and 2027 could suppress average premium rates.

The gap between targeted and achieved premium increases has widened, with clubs often trading premium for higher deductibles or other coverage amendments. Diversification remains a key strategy for many clubs, particularly in Scandinavia, where marine and energy (M&E) business now accounts for a significant share of premium income. Data shows that the market average solvency coverage remains strong, with basic own funds at 182% of the Solvency Capital Requirement (SCR) as of 2025. Evidence suggests that gallagher concludes that while the P&I market remains well-capitalised, the sector faces ongoing headwinds from claims volatility, the risk of investment market correction, and persistent technical deficits.

According to reports that the broker expects general increases to remain a feature of the 2026 renewal, but warns that any increases above the expected range may be viewed as negative outliers by shipowners. The report also stresses the importance of a multi-year view and robust strategy to navigate the current cycle. As the market prepares for the 2026 renewal, the interplay between claims, investment returns, and reinsurance costs will be critical in determining the direction of rates and the overall health of the P&I sector.

As the situation continues to develop, industry participants in Insurance will likely monitor outcomes closely.

— Based on reporting from insurancebusinessmag.com

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