Global marine P&I sector risk is intermediate: S&P

12-02-2016

Industry and country risk for the global marine protection and indemnity (P&I) insurance sector has been labelled as intermediate by Standard & Poor’s (S&P) in its insurance industry and country risk assessment (IICRA).

The firm said its assessment reflects the risks that P&I insurers operating in the global marketplace typically face.

“We base our assessment on our view of low country risk and moderate industry risk. For comparison, property/casualty (P/C) insurance markets with intermediate assessments include the US Japan, the UK, and Brazil, as well as the global P/C reinsurance and global trade credit sectors,” said S&P.

“We also apply this assessment to certain insurers writing non-P&I marine business, since we view them as having a similar risk profile to global P&I insurers.”

One of the main strengths of the global marine P&I sector, according to S&P is the existence of the International Group (IG) of clubs that provides the sector with a high  barrier to entry.

A weakening of the IG's position in the marine market is likely to result in S&P revising its view of industry risk and change its overall view of industry and country risk to moderate, said the firm.

S&P said its assessment of low country risk is based on an approximation of the weighted average country risk scores for the major countries where the sector's participants operate. This reflects the fact that P&I insurers' exposures are heavily weighted to developed markets, most of which present low country risk.

“We believe the domicile of a P&I insurer has relatively little impact on the aggregate industry and country risks it faces and therefore we do not differentiate by domicile,” it said.

S&P said its assessment of moderate industry risk for the global P&I insurance sector reflects its view of five industry-related factors.

“We see profitability (measured by return on equity and free reserves) and product risk as negative, market growth prospects and the institutional framework as neutral, and barriers to entry as positive,” added the firm.

“A change in our assessment of one individual subfactor over 2016-2018 could lead us to revise our view of industry risk.”

Standard & Poor's, Bermuda, North America

Bermuda Re