Protection and indemnity (P&I) clubs have built up record reserves of $6.8 billion, but shipowners could still face another round of premium increases in 2027 as underwriting losses continue to eat into earnings.
Lockton's 2026 P&I Market Report forecasts average general increases of 5% at the next renewal, despite strong investment returns and more stable claims across the 12 clubs in the International Group of P&I Clubs.
The forecast is broadly in line with Gallagher Specialty's September market review, which expects increases of 2.5% to 5%. However, actual renewal costs could vary depending on shipowners' claims experience, deductibles and reinsurance charges.
Lockton found that the International Group's average combined ratio improved to 102.5% in 2025/26, from 104.9% a year earlier. While this points to more stable claims, clubs are still paying out more in claims and expenses than they collect in premiums.
The clubs recorded a combined underwriting loss of $177 million for the year, bringing their total losses over the past three years to $331 million.
Strong investment returns have helped offset these losses. Clubs earned average returns of 8%, or approximately $95 million per club, in 2025/26, bringing total investment returns across the group to $2.63 billion over three years.
These gains have helped strengthen club finances, with Gallagher estimating that combined free reserves reached $6.8 billion. However, Lockton warned that weaker investment markets could leave clubs more exposed to underwriting losses, particularly as credit rating agencies place greater emphasis on underwriting performance.
While stronger reserves may give clubs more room to negotiate pricing, continued losses and higher reinsurance costs could limit that flexibility.
Reinsurance charges are already moving in different directions. Under the International Group's 2026/27 arrangements, allocated rates increased 15% for fully cellular container vessels but fell 5% for dry cargo vessels. These changes apply to reinsurance charges rather than overall P&I premiums, but show how costs can vary by vessel type.
The 2024 MV Dali bridge collision in Baltimore could add further pressure. Claims are reserved at more than $2.8 billion and have reached the International Group's collective overspill reinsurance layer. Lockton expects the incident to affect excess-of-loss reinsurance negotiations for 2027.
Gary Field, chief commercial officer at Lockton P.L. Ferrari, said geopolitical developments and reinsurance pressures would continue to influence renewal negotiations.
"Our 2026 P&I Market Report shows that geopolitics is now a dominant factor in marine insurance markets. Whether through exposure to conflict, sanctions disruption, investment market instability, or reinsurance costs, global events are shaping market economics. While the International Group clubs enter 2027 in a position of relative stability, shipowners should expect geopolitics and reinsurance pressures to play a role in renewal negotiations over the coming year,” Field said.
For Asia-Pacific shipowners operating between Asia and Europe, conflicts along major shipping routes have led to changes in war-risk coverage, including cancellation notices, revised exclusions and expanded high-risk areas.
The move toward voyage-specific war-risk underwriting has also made insurance costs more dependent on shipping routes and operating conditions. Although separate from standard P&I insurance, these changes can increase shipowners' overall insurance expenses.
Sung Wook Han, regional head of marine for Asia at Lockton, said these risks would remain important as shipowners prepare for the next renewal.
“As shipowners across Asia approach the 2027 renewal season, reinsurance costs, war risk developments and evolving regulatory requirements will remain key considerations. Strong investment returns should not distract from risk management, operational resilience and long-term insurance planning, making early engagement with brokers and insurers important."
With claims broadly within budget so far, attention is turning to the impact of winter losses and upcoming reinsurance negotiations. These could determine how much flexibility clubs have over pricing when shipowners renew their cover in 2027.
