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[TradeWinds] Loss of Hanjin tonnage has limited impact  
administrator 17-07-03 18:07  

Loss of Hanjin tonnage has limited impact

The bankruptcy of the Hanjin shipping group led to the loss of more than 80 vessels of several million gross tons (gt) from the Korea Shipowners’ Mutual Protection & Indemnity Association (KPIC) but the club still managed to increase its free reserve by $2m to $43m last year.

Hanjin played a significant role in the establishment of KPIC and was a founder member but most of their ships had crew only-cover, so this reduced the impact of the insolvency.

Four months into the current protection-and-indemnity (P&I) year "A"-rated KPIC has seen some erosion of tonnage, which is down to 22 million gt from 24 million gt last year but the number of entered vessels has grown from 1,049 to 1,088.

The reduction in tonnage is almost entirely due to Korean owners scaling back by selling ships.

Premium income is, however, $1m up at $31m and the combined ratio, a key measure of underwriting performance, improved to a quite profitable 83% from 88%. Lower is better when it comes to combined ratios with figures of 100% indicating break-even.

Foreign members account for about 10% of KPIC’s premium income, with the most important sources of overseas business being Singapore followed by Indonesia, China and Vietnam.

KPIC was established in 2000 a year after Korea passed enabling legislation, the Shipowners’ Mutual Protection and Indemnity Act.

“Our market share in Korea in terms of premium is about 17%. We are now 17 years old so we should be bigger but we cannot sacrifice risk selection for growth,” said KPIC’s top manager, Bay Moon.

“Growth is very important but not easy to get. We’re trying to be attractive to shipowners by giving quality care and service."

According to Moon, most of the 220 members of KPIC now get full P&I cover from the club, with this accounting for about 90% of premium income.

But the largest best-known Korean shipping groups are members of both KPIC and International Group clubs.

The Shipowners’ Mutual Protection and Indemnity Act restricts KPIC to only writing P&I business but an amendment to the law is in the legislative machinery and would allow the club to write any type of shipowner-focused product, so hull or war cover but not cargo insurance.

Moon says it is “very likely” the act will be amended.

The US House of Representatives proposed sanctioning North Korea’s little-known marine insurer the Korea Shipowners’ Protection and Indemnity Association earlier this year but, despite the similarity of name, there has been no impact on KPIC.


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