Gallagher’s pre-renewal review 2020 – Diversification

In Gallagher’s review of the 2019-20 policy year for the International Group Clubs, as well as a look at the performances of the clubs in the year to date, the broker noted thatwith increased diversification, most Clubs now had revenue streams arising from outside their core owners P&I activity, albeit some more than others. While it was not possible to split owned and chartered P&I premium in all cases, Gallagher said that it could reasonably estimate the impact of diversification on financial year premium income:

  P&I FD&D/War etc M&E Lloyd’s Other Total
American (net) 92,224 2,866 13,584 108,674
Britannia 193,792 7,393 201,185
Gard 442,052 313,232   755,283
Japan 180,139 2,924 183,063
London 103,401 12,774 116,175
North of England 268,438 21,218 68,461 346,567
Shipowners 224,902   224,902
Skuld * 268,745 65,265 56,700   390,760
Standard 254,400 13,900 65,100 20,100 353,500
Steamship * 281,454 27,271 308,725
Swedish 93,285 6.801 57,275 157,361
United Kingdom 305,037 305.037
West of England 209,561 12,102 221,663
Approx Split 77.85% 5.0% 11.5% 3.25% 2.40% 3,701,306

*In certain cases premium income splits are interpolated from policy year information etc. Amounts shown across two columns are not split by the respective Club.

1) Around 40% of Skuld’s policy year P&I premium income (excluding Lloyd’s) is in respect of fixed premium business, mostly their charterer’s book and a growing amount of diversified business written under Skuld corporate security;

2) 13.4% of the Japan Club premium is fixed, split approximately 70% coastal craft and 30% charterers business etc.

Gallagher noted that these figures were surprisingly consistent year on year between 2017-18 and 2019-20.

The broker said that the proportion of premium attributable to diversified operations continued to rise slowly despite the cessation of involvement in Lloyd’s and the rationalization of the SMMI portfolio, but this was primarily attributable to a parallel fall in P&I income by 3.5%.

M&E premium income has risen during the year both as a proportion of the book and in absolute terms – despite overcapacity in the sector. Results for M&E for the established players have returned to acceptable levels of underwriting profit in 2019‑20. Gallagher said that it was interesting to note that North of England was returning to the sector after a number of years away.