Shipping and marine insurer North P&I is discussing a proposed merger with fellow mutual Standard Club - a move that would create one of the world's largest maritime insurance groups.
Newcastle-based North and London-based Standard Club would join to create NorthStandard with a joint premium income of £612m ($800m) and assets of £1.5bn ($2bn).
Speaking to BusinessLive, North P&I CEO Paul Jennings said he was very confident the merger would happen and noted the proposal had been enthusiastically backed by ship operating customers, or members as they are known.
Read more: Income increases at North P&I despite challenges of pandemic
If approved by the mutuals' respective members, the merger is expected to be completed by next February and would make NorthStandard a similar size to its nearest rival.
The business would have a combined 300 years of shared heritage and experience and would insure ships equivalent to 400m gross tonnage, around a fifth of the world's ocean-going vessels. It would have a combined workforce of 700.
Paul Jennings, CEO at North P&I said: “This is a real merger of equals. North and Standard Club have a shared outlook, a shared business strategy, and a strikingly similar culture, which makes this merger the natural next step in our evolution.
“There’s no doubt that the maritime industry is facing a number of challenges, from sustainability to digitalization, but by standing shoulder to shoulder, North and Standard Club are taking control of our destiny, creating one of the world’s leading and most influential P&I clubs.”
The proposal comes amid a backdrop of escalating claims costs in the maritime insurance market. North has been exposed to substantial claims arising from the Grande America and Golden Ray shipwrecks, worth an estimated £324m.
Geopolitical events including the war in Ukraine, sanctions and the residual impacts of the pandemic have also caused significant disruption in the maritime industry.
Mr Jennings said North counted a handful of Russian state fleet ships among its membership and that North continued to monitor the directive of sanctions while providing cover for lawful trade.
Speaking to BusinessLive he added: "The exciting thing about this merger is that neither company is in a distressed position where this needs to be done, so it's genuinely a merger of equals. I would say it's visionary in that sense because we know the challenges that are out there and the operating environment isn't going to get any easier and the larger scale will give us more protection from volatility.
"It also enables us to reduce costing in some of the regulatory areas where it's very expensive to run two regulated operations. We can use the capital in the business much more efficiently and we feel it puts us ahead of the curve - and change is coming very rapidly within shipping.
"The other massive part of this is having a combined workforce of more than 700 - without question the most alented group of individuals within our market.
"Standard have also got a complementary set of diversified businesses meaning they don't duplicate ours - which is great and we see plenty of opportunity to grow that side of the business and the mutual side of the business."
Mr Jennings also said that insurers' ability to subsidise operating performance through investment income has become much more uncertain in recent years and that the merger would protect against this.
The new organisation will be jointly led by Mr Jennings and Standard Club chief executive Jeremy Grose via a shared executive structure.
North will retain its headquarters on Newcastle’s Quayside, with Standard Club to remain in its London premises. Mr Jennings signalled that further jobs could be created on Tyneside in the future.
Mr Jennings added: “With a number of successful mergers in our recent history, including with Sunderland Marine in 2014, we at North have a full understanding of the range of benefits available to members from a well-planned and well-executed union.”
Jeremy Grose, chief executive of Standard Club, said: “Combining both clubs will provide greater financial resilience, efficiency and an even deeper pool of talent – in both Newcastle and London - to maintain and strengthen the focus on service excellence and close member relationships for which both clubs are renowned.”
The formal merger proposal announcement follows the approval of the proposal by the boards of both clubs and notification to principal regulatory authorities of their intention to merge.
A joint North and Standard Club working group has been appointed to evaluate how NorthStandard would maximise value for members.
The proposed merger remains subject to the approval of the full mutual membership of both clubs and of all the appropriate regulatory authorities.
