Shipowners’ Club is to apply a 5% general increase in premiums for all covers for 2020, inclusive of any adjustment for reinsurance premiums.
The Club said that, although the Club had a policy of underwriting to a breakeven position, for the past two years the Club had utilized its “strong capital position” in order to subsidize its underwriting position. “Therefore, the Club has returned capital to Members by providing insurance at below cost”. Shipowners’ said that this approach could not be sustained indefinitely, hence the need for a rise next year.
The Club has reported a first-half combined ratio of 105.9%, with an underwriting deficit of $5.7m. It said that this represented a deficit marginally higher than budgeted, and was a result of an increased number of claims in both 2018 and 2019, compared with 2016 and 2017.
The 2019 position had been impacted by two claims in excess of $5m, and also an increase in claims activity in the claims band $500,000 to $5m.
The number of pool claims had continued at a higher level than in 2016 and 2017. The Club therefore anticipated that the underwriting deficit reported at the half year stage will continue for the 2019 year.
The return on investment for the year to date was higher than expected, with an overall gain of $32.8m being recorded at the end of June 2019. There was an investment loss for 2018 of $28.8m. Unlike most P&I mutuals, the Shipowners’ Club financial year starts on January 1st. This meant that, because of stock exchange volatility, it missed out in 2018/19 on the equity recovery from January 1st to February 20th 2019. That will be booked to this year’s figures.
The Club said that for 2020 it expected to see continued growth in Member numbers, vessels entered and total tonnage, “building on the encouraging organic growth and also the new enquiries that the Club has so far experienced during 2019”.
Claims were broadly expected to be in line with 2019. It said that “whilst volatility in larger claims remains, the overall cost of lower value claims remains similar year on year with risk management, newer vessels and our ongoing focus on quality offsetting other inflationary factors. Claims frequency continues to fall year on year but the cost of the same claims today are higher than they were when the Club last asked for a general increase in premium.”
Historically the Club has not applied across the board increases in deductibles. It said that this policy would continue for 2020, but that “a thorough review of all applicable deductible levels will be undertaken as part of the renewal process and increases may be requested where deductibles do not reflect either the frequency or quantum of claims”.