LONDON (18 February, 2011): With a continued improvement in claims trends, and a restored investment performance, ship-owners face the prospect of a benign Protection and Indemnity (P&I) renewal at 20th February 2011, according to Aon Risk Solutions, the global risk management business of Aon Corporation (NYSE: AON).

General Increases, the starting point for renewal negotiations, range between zero and 10 percent, which is in stark contrast to two years ago when owners faced General Increases in the 10 to 29 percent range. In an unprecedented move in recent times, four out of the 13 International Group (IG) Clubs called for a nil general increase, compared to a market average of 3.07% for the 2011 renewal.

Steve Griffiths, director of Aon Risk Solutions’ marine team comments: “The latter part of the last decade were a very trying time for the P&I clubs, with the implications of placing an ever increasing emphasis on investment returns coming home to roost at renewal time. It does seem, though, that the 2011 renewal is the calm after the storm, with improved claims trends helping many clubs to achieve a relatively flat renewal.”

If clubs achieve their targets, approximately US$91 million of additional premium will enter the P&I system on 20 February, 2011. Reflecting improved market conditions, this is significantly down on the previous two renewals, where the market was inflated by an additional US$485 million in 2009 and US$159 million in 2010.

The IG Excess of Loss Reinsurance contract has been renewed with an increase in the attachment point to US$60million from the current level of US$50 million per claim. This has the effect of stretching the pool from the individual club retention of US$8million to US$60 million. Consequently, the upper limit of the reinsurance contract has increased by US$10 million to US$2,060 million.

When taking into account the increase in tonnage insured by the IG, the reinsurance contract saw a modest reduction in premium, equivalent to about 5%. Consequently, individual rates have been reduced in the range of between 4.09% and 8.40% depending upon the category of vessel. In the majority of cases, clubs have automatically passed these reductions onto their members. However, in some cases clubs resisted attempting to retain the savings for their own account, a position which is clearly unacceptable given that in a rising reinsurance market, clubs are quick to pass on the additional cost.

Griffiths continued: “The 2011 renewal season also saw EU enquiry into the IG non competition arrangements gather momentum. Club managers faced a new challenge, as the commission’s fact finding teams requested information from each club relating to fleet movement within the IG system, dating back over a 10 year period. The EU and IG are due to meet in March to review the findings, and although it is likely to take some time before a final landing is reached, the ‘easy money’ is on the IG being maneuvered into lowering release calls in an attempt to assist competition.”

- Ends -

Media Contact:
David Skapinker
+44.(0)20.7505.7478
david.skapinker@aon.co.uk

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Aon Corporation (NYSE: AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human resources solutions and outsourcing. Through its more than 59,000 colleagues worldwide, Aon unites to deliver distinctive client value via innovative and effective risk management and workforce productivity solutions. Aon's industry-leading global resources and technical expertise are delivered locally in over 120 countries. Named the world's best broker by Euromoney magazine's 2008, 2009 and 2010 Insurance Survey, Aon also ranked highest on Business Insurance's listing of the world's insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues in 2008 and 2009. A.M. Best deemed Aon the number one insurance broker based on revenues in 2007, 2008 and 2009, and Aon was voted best insurance intermediary 2007-2010, best reinsurance intermediary 2006-2010, best captives manager 2009-2010, and best employee benefits consulting firm 2007-2009 by the readers of Business Insurance. Visit http://www.aon.com for more information on Aon and  http://www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United.