Clubs remain divided on consolidation

Joe Hughes
"The “invisible hand” of consumer choice would appear to sustain the current number of P&I clubs." American Club chairman, Joe Hughes

Despite the failure of the proposed merger between Britannia and the UK Club in June this year, similar moves between other members of the International Group cannot be dismissed out of hand if comments by their managers are to be given credence.

In a survey conducted by international insurance brokers JLT, International Group members were asked whether 13 Clubs was the right number.

American Club

American Club chairman Joe Hughes is firmly for the status quo.

The “invisible hand” of consumer choice would appear to sustain the current number of P&I clubs, which, at least by reference to present realities, seems to be about right. The speculation which occurs from time to time that club consolidation is somehow inevitable misunderstands the relationship, rather than transactional, nature of P&I business, the desire of the global maritime community for diversity in their P&I purchasing options and the strengths of the IG system, which provides an impeccable financial platform for all,” he said.

By contrast the industry leader in terms of volume, Gard sits firmly in the consolidation camp. The Club’s chief executive Thore Roppestad said:

“We believe that fewer, but stronger, clubs would offer shipowners potential savings in their risk transfer costs and great stability in the long term – as well as continuing to provide more than enough competition to ensure that pricing is keen and quality of service remains high.”

London Steamship

London Steamship opted for continuing levels of competition as its chief executive Ian Gooch maintained: “Shipowners welcome the choice and competition currently available, so the number shouldn’t be lower than 13.”

Meanwhile at North, global director (Underwriting) Savraj Mehta manged to cover both ends of the pitch by suggesting member sentiment may eventually be overridden by market pressure.

“Many shipowners value the wider choice that the current 13-club structure provides. Although the clubs cover the same risks via the pooling agreement, there are, of course, differences in the service provided and the approach to dealing with claims, as well as financial strategy. Ultimately, increased regulation and higher service expectations from shipowners combined with more pricing competition would logically lead to fewer, but more financially robust and flexible, clubs. These would be well placed to deal with the increasing insurance and service requirements of their members,” he declared.

Shipowners

Simon Callow, chief executive at Shipowners feels the status quo will be challenged but not in their backyard.

“There has been much rumour about the number of clubs within the IG, and I feel that consolidation at some stage is inevitable. Our board has continually debated the subject and is committed to remaining independent. Irrespective of the number of clubs, what is important is that the benefits of the IG are well articulated verbally and the clubs continue to work together in unison to provide the widest coverage to their ship-owning members looking to broaden the scope of the pooling agreement as opposed to restricting it,” he said.

Standard Club

At the Standard Club, chief executive Jeremy Grose that consolidation within the International Group offers a win-win only deferred by its difficulty to achieve.

“The club has long been an advocate of modernisation, consolidation and diversification and sees a potential of reduction from 13 IG clubs as offering efficiencies of scale, while leaving shipowners with sufficient choice and not undermining competition. Club mergers are difficult to implement, as has been amply demonstrated by the recent failure of merger talks between two major clubs, but that’s doesn’t mean it can’t be achieved, consolidation has many benefits and the awareness of these is much greater now,” he offered.

Britannia and UK Club

Finally, for anybody wondering why the merger between the UK Club and Britannia was not achieved there may be something to learn from the different reactions answers offered when questioned about the desirabilty of consolidation. While Britannia remained non committal, suggesting “there is no right number [of Clubs]”, the senior management team of UK Club stays firmly committed to the concept.

“The board of the UK Club still believes in the underlying logic and the value proposition behind consolidation in the P&I market. That value proposition,

if delivered successfully would; reduce cost, deliver capital efficiency and allow for investment in value added services.”

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