American Club reports “positive” 2021 P&I renewal

Reporting on its renewal for policy year 2021-22, American Club has said that both mutual and fixed premium sectors had seen increases in revenue, while American Hellenic Hull had strengthened its balance sheet and key financial indicators, with “pricing power” persisting.

Year-on-year, the annualized income for Club’s mutual P&I business increased by 8% as of February 20th. Year-on-year P&I tonnage increased by 5%, reaching 18m gt.

Premium attributable to renewing P&I entries for 2021 saw an increase in cash terms of approximately 5%, a rise in line with the increase ordered by the Board last November. Taking into account increases in deductibles, in some cases significant, and changes to other insurance conditions, the overall premium increase, as if expiring terms had applied, was closer to 7.5%.

Revenue for Freight, Demurrage and Defense (FD&D) business increased by more than 10% year on year. Taking into account growth in the Club’s charterers’ business, total income on renewal was projected to be about 8% higher for 2021 compared with 2020.

FD&D entries moved substantially higher in tonnage terms, increasing by nearly 14%, to 12.2m gt.

Investment returns for 2020 were 5.4%. “Although not as high as the previous year’s earnings, this was nonetheless a creditable result in view of the market uncertainties which characterized the period”, the Club said.

Retained claims for 2020 were emerging more favourably than those for 2019. The latter year experienced several unusually large exposures below the pooling threshold, but has been able to take some benefit from reinsurance protection as a hedge against further deterioration. Pool claims for 2020 were developing in an above-trend direction in a manner similar to the experience of 2018 and 2019. Although the American Club, once again, had no claim on the Pool for its own account during the year, nor has had since 2016, its contributions to pooling continue to form a significant part of the Club’s overall claims exposure, the Club said.

The American Club’s fixed premium brand, Eagle Ocean Marine (EOM), continued to make progress into the beginning of 2021. Premium for the 2020/21 policy period to date was about 10% over the figure for the previous year at the same point, and was forecast to exceed $16.5m in total for the current facility year, a new high.

Aimed at the operators of smaller vessels in local and regional trades, with a substantial footprint in Asia, EOM continued to be “a steady contributor to the American Club’s mutual membership, enjoying a cumulative combined ratio of about 75% since inception”, the Club said, adding that “as the fixed premium P&I space continues to undergo transition and realignment, the attraction of EOM as a haven of stability”.

At its meeting, conducted virtually from New York last week, the Board of the American Club noted that, despite challenging business conditions, the Club had enjoyed a solid performance over the 2021 P&I renewal season.

American Hellenic Hull, the Club’s hull and war risks underwriting subsidiary, continued to enhance its market position. Preliminary results for the financial year to December 31st 2020 indicated a small loss for the year, similar to that for 2019. However, against a background of robust premium pricing, the insurer’s balance sheet strengthened at year-end, net assets (equity) increasing by 29% year on year.

There were also improvements in several other key ratios at year-end 2020, including the insurer’s solvency capital requirement (SCR), which was 130%.

The Club said that American Hellenic Hull’s performance gained yet further momentum into the early part of the current year, with vessels insured, underwriting income, operating profitability and balance sheet strength all maintaining “an encouraging upward trajectory”.

Joe Hughes, Chairman and CEO of Club Managers SCB Inc said that “although uncertain business conditions prevail in both the shipping and insurance sectors, the American Club’s recent experience has been encouraging. The 2021 renewal of the Club’s mutual P&I and FD&D portfolios proceeded in a positive direction, while both EOM and American Hellenic Hull have performed with credit over recent months.” Hughes added that “although we live in challenging times, my colleagues and I are certain that the difficulties of the present will generate opportunities for the future. These opportunities will be found across the increasingly broad marine insurance landscape which the American Club, by virtue of its diversified capabilities, is richly equipped to develop over the years to come.”