There are clear signals from some Group Clubs that they need rates to increase, according to the just-released Tysers P&I Report 2019.
The international insurance and reinsurance brokers said that “so far as we can tell at this early stage we believe the position is currently”:
Likely to call or need a general increase
- American Club
- London Club
- UK Club
- West of England
Unlikely to require a general increase
- Japan Club
May follow the market trend
- Steamship Mutual
- Swedish Club
Not included above is Skuld, which since 2011 has a stated policy of not calling general increases, with renewals based on “individual assessment and Members’ records”.
Tysers said that, given the possible split shown above, it wondered whether other clubs this renewal might follow the Skuld strategy and seek increases without any official headline figure.
Tysers felt that all Clubs, with the possible exception of London Club, could get through another renewal with no general increase and rely on surplus reserves in the event of a poor claims’ or investment year. But the broker accepted that this was not going to happen.
“We expect to see a spread of general increases between 0% and 7.5%, and will confirm the position in our usual December Update”, said Tysers.
The broker said that it was fair to say that the P&I market was “somewhat confused and divided at the moment, indeed “all at sea” in our view sums it up quite well”. Overall the International Group lost close to $300m last year, although (see yesterday’s comment from AJ Gallagher) this figure included more than $90m of premium returns and cash distributions.
Free reserves remained at $5.3bn, a figure described by Tysers as “enormous” – the equivalent to $4.19 per owned GT, down from to $4.53 last year, but at the same level as 2015/16.
Although Tysers felt that the Group remained in a solid financial position, it noted that many Clubs felt that premium rates had dropped to unhealthy levels.
“In particular, UK, West and Standard are adamant rates must rise while others such as Gard and Britannia appear quite content with the current state of play”.
Tysers noted that the concern of many Clubs was not with attritional claims, which generally appeared to be stable but with what some felt was a clear emerging trend of an increased frequency of large claims.
In 2018/19, 18 Pool claims totalling $306m had been notified as of February 20th, well ahead of the previous four years.
Standard and West suffered four each, while Gard suffered three. Tysers understood that eight further claims had since been notified, pushing the total estimate as at 20th August 2019 to more than $425m (including the 7.5% Individual Club Retention now borne by the Club suffering the claim within the $50m-$100m layer of the Pool.
At the moment the current total was the highest since 2013.
Since then the first half of 2019/20 had seen seven Pool claims, estimated at $87m gross of the ICR.
Group Clubs totals
|Year||Owned GT||Free Reserves (US$)||Reserves per GT|
Release Calls as at September 2019
|Policy Year||American||Britannia||Gard||Japan||London||North||Shipowners||Skuld||Standard||SSM||Swedish||UK||West of England|
Japan reports its Release Calls as a percentage of Advance Call. In order to be consistent with other Clubs, all Tysers figures are expressed as a percentage of estimated total premium.
IMN will be covering other parts of the Tysers report over the coming days.