S&P Global gives the long-established P&I insurer Britannia a warning shot across the bow. Its credit rating is downgraded due to high loss ratios.
In the run-up to the upcoming P&I policy renewals, the rating agency S&P Global has raised its finger and lowered the credit rating of the fourth-largest P&I club.
The credit rating was lowered from A (outlook negative) to A- (stable) with negative effects on the club’s refinancing costs. S&P Global justifies its decision with continuing technical losses.
Contrary to previous forecasts, Britannia will probably not be able to return to profitability in its core business of marine liability insurance in the next twelve to 24 months. For the current P&I year, which ends on February 20th 2025, the rating watchdogs do not even expect the club to achieve a result “close to break-even”. With its performance, it is lagging behind competitors that have an A rating.
An “unsatisfactory” for Britannia
The P&I Club thus receives an “unsatisfactory” for its efforts to date to stabilise the earnings situation. The Management Board has already announced the largest price increase of all the clubs in the International Group for the renewal of P&I cover in February. Premiums for members, including shipping companies such as Hapag-Lloyd, are to rise by at least 7.5%.
CEO Andrew Cutler describes the rating downgrade by S&P Global as a “disappointment” in a circular to members. He emphasises that the decision to increase premiums in the coming year has set the right course for underwriting.
At the same time, the club has announced that it will reimburse members 12% of the premium for the current year – despite the technical deficit. This planned payout is mentioned by S&P Global, but not evaluated further.
Cutler refers to an investment income of US$68m in the year to date. As things stand, this is sufficient to compensate for the technical deficit. Britannia intends to return to profitability in underwriting within a “reasonable period of time”. However, members should not be overburdened in the process. (mph)
