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[TradeWinds] Korea P&I Club seeks alliances  
administrator 17-07-03 10:11  

Korea P&I Club seeks alliances

Large bulker collaboration on the agenda as top executives visit London

 

The Korea Shipowners’ Mutual Protection & Indemnity Association (KPIC) is seeking new alliances as it becomes a more anchored part of the marine insurance market.

It is aiming to expand opportunities through collaborations both overseas and in its home market as it looks for growth that will bring economies of scale.

KPIC has also begun to think about the possibility of applying to join the International Group, the 13 club cartel that dominates the market for protection-and-indemnity (P&I) cover.

Executives from the Seoul-based club have been in London this week, with one of the items on their agenda an interest in establishing a collaboration covering larger bulk carriers with a group club.

They had meetings with half a dozen of the clubs lined up, although any outcome is still some way in the distance.

Although crew-only cover was an important part of KPIC cover for many years, it has increasingly been providing the full P&I cover package for large vessels up to the capesize range.

An attraction of large bulkers is that they generally have straightforward port to port trading patterns so are seen as a better risk than vessels undertaking more complicated voyages.

“We think growth is very important and to get sustainable growth we need to go for larger vessels,” KPIC’s top manager, Bay Moon, tells TradeWinds.

KPIC already has a collaboration with the Standard Club, covering vessels up to 10,000 gross tons (gt), but moving up to larger ships potentially takes it into troubled waters.

There has been preliminary contact with some of the potential partners and KPIC needs only one club to agree.

But any deal would have to be given the green light by the International Group, with each club having a veto, so this is a big hurdle to overcome.

“We don’t know the reaction of other clubs. We have to find out,” said Moon cautiously.

The China P&I Club (CPIC) has a long-standing collaboration with five group members: the UK, North of England, Steamship Mutual, Skuld and Swedish clubs, with a sixth, Gard, believed to have recently joined.

The addition of Gard appeared to be non-controversial and was nodded through.

There are also other collaborations  such as the Standard Club’s long-standing TS21 partnership, with Tokio Marine and Nichido Fire Insurance, followed by Skuld having a developing relationship with Mitsui Sumitomo.

So it appears that deals with national P&I clubs and commercial insurance companies are potentially acceptable to the International Group. Moon, therefore, sees no logical reason a deal with KPIC should be black balled.

“Our collaboration should not be objected to by anyone. Discouraging affiliation with the Korea P&I Club is not acceptable,” he added.

“According to the [International Group] pooling agreement, there are 27 requirements to apply for membership. Out of that I think we can comply with 26 of the requirements. The exception is that there should be a five years mutual premium record,” noted Moon.

“We’re now a fixed premium club but if we changed that, five years later we could apply for membership,” he added.

So is KPIC interested in joining the group?

“We are interested but we have not started to talk about the possibility of a change from fixed premiums,” he replied.

In the meantime, KPIC remains very keen to participate in the International Group technical sub-committees, arguing this would benefit maritime safety and efforts to safeguard the environment.

“We are very different from other fixed premium players. We are a mutual P&I club,” he added.

So what will the International Group make of KPIC’s membership ambitions?

On the plus side it is a genuine shipowner mutual, and from an important maritime country that enjoys the support of most of Korea’s shipping industry and the government.

So there is a good argument that it should qualify for membership, with any rejection potentially seen as an attempt to protect the commercial position of the established clubs.

At home, KPIC is trying to develop a strategic partnership with the Korea Shipping Association (KSA), which runs P&I and hull insurance schemes for locally trading ferries and cargoships.

KSA was the P&I insurer of the 6,586-gt passenger ferry Sewol (built 1994), which sank three years ago with the loss of more than 300 lives, mostly school children.

The two organisations are talking but there is no agreement as yet. The prize from KPIC’s position is that KSA members operate more than 4,000 vessels of 9.4 million gt.

Moon says he is not contemplating a merger or acquisition but members of both organisations would have to approve co-operation in terms of claims handling, reinsurance or anything else that materialises.

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