Britannia books $37m gain and growth in tonnage for 2020-21

P&I Club Britannia has recorded a post-tax net income of $36.97m for policy year 2020-21, down from $56.4m the previous year. Calls & Premiums declined half a per cent to $200.1m, while net claims incurred rose to $118.3m, from $111.7m the previous year.

The club said that the impact of churn and lower premiums on Class 6 business drove an overall year-on-year reduction. Reinsurance costs were higher, mainly the result of higher premiums payable in respect of the Group’s chartered programme and the covers provided by Boudicca Insurance Co Ltd.

The club also warned that within the International Group structure, “material reinsurance cost increases are expected for the 2022/23 renewal”.

Twenty claims currently expected to cost more than $1m were reported, with an aggregate estimate of $63.4m. This was similar to the prior policy year, which also saw 20 claims reported, with an aggregate cost of $69.5m.

The largest of the cases in 2020/21 involved a VLOC running aground off the coast of Brazil, incurring significant SCOPIC and wreck removal costs and cargo liabilities.

This presumably refers to VLOC Stellar Banner (IMO 9726803), which ran aground off the Brazilian coast shortly after leaving Brazil-based miner Vale’s Ponta da Madeira Maritime Terminal on February 24th 2020. In June 2020 it was towed out to sea and scuttled.

(2016-built, Marshall Islands-flagged, 151,596 gt Stellar Banner is owned by VP-12 Shipping Inc care of manager Polaris Shipping Co Ltd of Seoul, South Korea. It was entered with Britannia on behalf of VP-12 Shipping Inc.)

Three other large cases each involved a significant number of containers being damaged or lost overboard during heavy weather.

Britannia noted that claims incurred in the Pool during 2020/21 were significantly higher, with the 12-month incurred figure at a record level of $677m from the ground up and $478.1m to the pool, against $355.4m in 2019/20. In total, 22 claims had been reported, up from 18 the previous year.

The largest claim stemmed from the Wakashio (IMO 9337119), entered with Japan Club,  which grounded off Mauritius on July 25th 2020.

Both retention and Pool claims in prior policy years showed improvement, following the Group’s usual pattern of claims development. This allowed the release of $72.5m from the claims provisions held in respect of those years, which helped to offset the higher provisions necessary against the 2020/21 Pool position.

As of February 20th 2021 the total number of claims notified in respect of the 2020/21 policy year was 4,872, compared to 4,175 claims notified at the same time in the 2019/20 policy year. The total number of attritional claims has remained relatively consistent since 2016/17, when 4,783 were reported. This represented a significant drop in the number of claims when compared to policy years before 2016/17. Britannia said that this reduction reflected the fact that many Members had moved to higher and combined deductibles.

There were 139 claims associated with the Covid-19 pandemic notified during the 2020/21 policy year, resulting mainly from crew illness, medical repatriations and ship diversions, with an estimated total cost of $6.9m.

Investment income fell to $58.97m, from $61.87m in 2019. Free reserves rose to $449.1m, from $422.1m 12 months earlier (there was a capital distribution to members of $10m in October 2020). The Group also retains the benefit of its reinsurance contract with Boudicca insurance Co Ltd. Surplus assets there rose to $177.8m, from $172.3m 12 months earlier.

Owned entered tonnage grew to 125.2m gt, from 117.5m gt 12 months earlier. Chartered entered tonnage grew to 53.5m gt, from 45.0m gt at the same time last year.

At renewal on February 20th 2021, Britannia said that seven new members joined. Owned tonnage was up following the renewal as a result of these new members and additions to existing fleets. Renewal saw 99 new ships entered by 18 existing members.

European fleets (excluding Scandinavia) now make up 33.4% of the Group’s owned tonnage, with Scandinavia at 13.7%. Asia now represents 46.8%, with entries from Japan (17.9%), South Korea (11.5%) and Taiwan (7.3%) making up the largest share of Asian tonnage by country.

Chairman Anthony Firmin said that 2020 would be remembered as the Covid pandemic year, “hopefully the only one”.

Britannia termed the results “satisfactory”, but note that the underwriting result was negative, with the cost of claims significantly in excess of net premiums. “This level of imbalance between premiums earned and claims incurred is unsustainable, even for a mutually owned business, if we wish to avoid scrutiny from regulators and rating agencies in the future”, the Club said. The investment performance resulted in an overall surplus for the year after tax of just under $37.0m.

$000s To Feb 2021 To Feb 2020 To Feb 2019
calls and premiums 200,086 201,185 204,415
net claims incurred (118,257) (111,667) (119,599)
investment income 58,970 61,868 (2,643)
net operating expenses (32,520) (31,891) (28,649)
net income after taxation 36,967 56,427 (9,296)
free reserves* 449,055 422,088 390,661
net loss ratio 90.77% 79.89% 83.79%
IG average expense ratio 11.66% 11.50% 10.90%

*The Group also retains the benefit of its reinsurance contract with Boudicca insurance Co Ltd