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%
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.