The combined ratio at London Club reached 136.8% in 2020-21, resulting in a $20.3m deficit leaving the policy year-end free reserves at $153.6m. The technical result was mitigated by a 5.3% return on invested assets.
Club managers A Bilbrough & Co Ltd said that further information would be provided in the Annual Report & Financial Statements, which would be issued in the near future.
The Club said that its products for charterers and the owners’ of smaller ships had recorded positive underwriting results, but that the Club had experienced “a challenging year” on the mutual side of the business.
Claims on the International Group Pool were high and included deterioration in the cost of the already expensive prior years in 2018/19 and 2019/20. The retained claims experience included an increase in higher frequency claims, with Covid-19 playing a part. The Club noted that claims costs had now increased in five consecutive years, to the point that in 2020/21 they were twice the level of five years ago.
The Club said that, “despite the pressure of what was undoubtedly a tough year the financial position remains secure and in full compliance with regulatory solvency requirements”. However it said that the result was “considerably outside of the Board’s risk appetite, even in a challenging claims environment”.
The Club noted that this year’s renewal strategy involved “a determined focus on rating and deductible levels, including the setting of uplifted and bespoke terms for Members with challenging records”. This strategy recognized that such an approach was likely to preclude the renewal of some business. “In the event the overwhelming majority of Members understood and backed the action being taken”, the Club said, noting that this support “enabled vital progress to be made in strengthening rates, essentially in line with targets, as well as deductible levels”.
The renewal also saw the withdrawal of some business, mainly where there was insufficient alignment between rating and risk profile.
The Club said that the positive outcome of the renewal for 2021-22 was projected to lead to a material improvement in the Club’s combined ratio for the current year. “After a difficult 2020/21 the recent renewal therefore represents an important step in the right direction for the Club; although the discrepancy between rating / deductible levels and the prevailing risk environment is something which the Board is committed to addressing and on which further work is on-going”, the Club said.
The Club had been operating remotely for the past 12 months, “striving to ensure no reduction in service standards or loss of efficiency”.
The Club concluded that “as we begin to emerge into a more hopeful period, we look forward to continuing to strengthen the Club and to delivering top quality service to all our Members and Assureds”.