19th October 2022
In March of this year, Standard P&I Club (‘Standard’) and the North of England (‘North’) (both of whichare P&I mutuals and members of the International Group (‘IG’)) issued a historic announcement: theirintention to merge to form NorthStandard P&I Club (‘NorthStandard’). The merger was overwhelminglyapproved by the membership of both Clubs in May 2022. We call this historic because, to the collectiveknowledge of P.L. Ferrari (‘PLF’), there has never been a merger or acquisition of a P&I Club where oneof the parties was not in distress or held a significantly different market share or product offering. Here,both Clubs are of considerable size, on solid financial footing and have a similar portfolio of bothmembers and product offerings. This merger is being proposed because both Clubs believe that theP&I model is changing and as increasingly complex claims continue to challenge performance acrossthe entire sector, scale is becoming increasingly important to ensure financial stability and resilience.
While much has been said in the press and within the P&I broking community about this historic event(both positive and negative), very little has been said about the mechanics of this merger from theperspective of the shipowner members of each Club. That being the case, we at PLF believe we areuniquely positioned, as the world’s largest and oldest independent P&I broker, to try and present someanswers to these niggling questions and shed some light on this exciting (and possibly mysterious)consolidation.
We do not take a position on whether the formation of NorthStandard, or further Club consolidation, is agood thing or a bad thing for the industry: the ultimate decision makers on consolidation are the P&IClub shipowner boards of directors and the shipowners themselves. We, as brokers who serve our shipowner clients, trust their judgment; our shipowner clients know better than anyone whether in their bestinterest to look at Club consolidation – and, if so, with whom. We do, however, anticipate that, with theapproval of this merger by the North’s and Standard’s respective memberships in the Spring of 2022and the continuing challenges faced by IG Clubs and the wider P&I market, as a whole, we can expectto see further, serious discussions about consolidation among IG Clubs going forward.
With that said, we hope that the below FAQs assist our clients and members of the IG as we navigatethrough the 2023 renewals.
North Standard Merger: FAQs
QUESTION: Is this a merger, acquisition, or newClub?
ANSWER: This is a merger of equals. No one Club is taking over the other. The goal is tocreate a combined Club, NorthStandard. The merger will not result in a new Club. Rather, NorthStandard, as agreed bythe IG, will be as if the North and Standard Club were always merged.Accordingly, existing members in both clubs will not be deemed ‘free’ businessand the rules of the International Group Agreement (‘IGA’) will continue to apply.
QUESTION: When will the merger be complete?
ANSWER: All key regulatory and competition approvals have been successfully obtainedahead of the original target date. From a legal perspective, the merger isexpected to be complete on February 20, 2023.
QUESTION: If a member of North or Standard wishto leave their Club at the February 20,2023 renewal, will they have to payrelease calls?
ANSWER: Yes; current IGA rules apply and release calls will be set as per the usual rulesand process. A link to our newsletter detailing types of premium calls can befound here: https://www.plferrari.com/newsletter-details/9256/
QUESTION: If I am a member of one of themerging Clubs, who will handle their2023/24 renewal?
ANSWER: Terms will be provided separately by each Club to their respective members andthe renewal will be handled in the same way as any other renewal. P&I policieswill be renewed separately for the policy year at February 20, 2023 even if theClubs will no longer be legally independent as of that date. An integratedunderwriting process will be in place for the February 20, 2024 renewal.
QUESTION: What if I have ships entered in bothClubs?
ANSWER: See above. Terms will be provided separately by each Club for the relevantbusiness and the member will continue to have policies / certificates etc. issuedby each Club during the 2023/24 policy year.
QUESTION: If I have ships entered with both Northand Standard and choose tointroduce another IG P&I Club fromFebruary 20, 2023, how would thatwork?
ANSWER: Again, this would follow normal procedure under the IGA. Members retain thechoice to introduce other Clubs as they always have under the existing processand rules.
QUESTION: Are the two merging Clubs permittedto collaborate on the 2023/24renewal? If so, will there becollaboration?
ANSWER: Until legal completion of the merger, both clubs are obligated to continueoperating as separate entities. Should members with existing entries in bothClubs provide each Club with permission to share underwriting information, eachClub will be able to consider these for the purpose of their renewal terms andlook at how their respective renewal terms can be best aligned; however, eachClub will undertake its own renewal negotiations with the member or theirrespective broker and will ultimately make its own decision on the final terms.
QUESTION: Can we expect to see a rebalancingof rates in 2024/25 so they would beconsistent across the fleet?
ANSWER: PLF has been advised that no decision has been made at this point, but theexpectation is that the underwriting teams will be integrated for the 2024/25renewal and so we would expect that rebalancing will play a role there where itmakes sense to do so.
QUESTION: Can we expect to see a change inNorthStandard’s risk appetite orcollective underwriting philosophy in2024/25?
ANSWER: PLF has been advised that NorthStandard will take the same prudent approachto underwriting as both Clubs already do. While a P&I Club’s underwriting riskappetite evolves over time in response to claims experience and marketconditions, we anticipate that with NorthStandard’s size and scale (the combinedClub will be the largest IG Club by poolable tonnage and premium), we may seemore flexibility and commerciality in their approach to underwriting.
QUESTION: How will day-to-day account handlingbe managed during the 2023/24policy year?
ANSWER: PLF has been advised that day to day handling of each member will continueuninterrupted with a continued focus on excellent service.
QUESTION: What should NorthStandardmembers anticipate for the 2024/25renewal?
ANSWER: As noted above, an integrated underwriting process is expected to be in placefor the 2024/25 renewal. As such, we expect to see current members of eachClub renewed into a single combined Club with documentation reflecting this.
QUESTION: If I have recently moved mymembership from / to Standard orNorth, how will my record be affectedby the merger?
ANSWER: Movement of vessels between the Clubs prior to February 20, 2023 will not beretrospectively affected in any way by the merger. For example, if a fleet wasmoved from North to Standard at the February 20, 2019 renewal, only theStandard loss record will be considered by NorthStandard during subsequentrenewals.
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P.L. FERRARI & CO. S.r.l.
P.L.Ferrari – A Member of the Lockton Group of Companies
This newsletter is intended solely as an overview of the marine market and does not constitute any form of advice. It is based on sources believed to be accurate at the time of printing andwe cannot be held liable for the omission of any information within the newsletter.