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20th FEBRUARY is the date when the ice melts in the Baltic Sea. What every year? Yes, every year! Well, not quite, but thanks to that historical link, 20th February has become the date on which most of the world's shipowners renew their P&I insurance.

P&I brokers and underwriters spend January and February working off the Christmas flab, staying sober and desperately competing with each other for business. Ironic then, you might think, that the International Group of P&I Clubs is undergoing its third competition investigation by the European Commission. But, according to the most recent P&I report from brokers Tysers, the six largest clubs in the International Group had 70% of the tonnage for 2009.

The clubs also face pressure with Solvency II regulations and rating agencies, which means they have to hold higher free reserves. Total free reserves for the International Group were up by $500m to just over $3bn after the 2009 year.

Tysers has been urging the consolidation approach among the clubs, saying that a smaller number of clubs would mean they could better withstand any challenges to the mutual system which are likely to come.

A number of senior P&I players have told us they think maintaining the status quo is unlikely this time round. You can be sure that there are informal discussions going on between CEOs right now as some clubs look forward and wonder whether they can remain independent and others see the opportunity to strengthen their positions and broaden their product offerings.

But what would be the outcome of a Commission investigation that finds against the mutual system and the IG pooling arrangement? Well, consolidation almost certainly. So, fewer clubs and less competition rather than more right? Yes, but larger more solvent clubs able to offer more products and services, you might say. And, possibly, the entry into the market of more commercial underwriters offering a wider variety of products and insured limits. So, more competition then? Well, maybe, but for �wider variety of limits' don't we really mean lower limits (and lower service levels)? And doesn't all of this mean that the International Group reinsurance contract could fall apart? And doesn't that mean that if and when shipping has its own Deepwater Horizon incident there won't be a $2.05bn reinsurance contract standing behind it? And won't that cause popular outrage and make all those politicians and journalists go red in the face? Possibly.

Be under no illusion – these are serious and challenging times for the P&I sector. Watch with interest.

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