Grande America, Golden Ray, push North CR to 125.8% for 2019/20

North of England Club has defined itself as “resilient in the face of large claims” after two major casualties pushed the combined ratio to above 125% for policy year 2019/20.

North’s premium income grew slightly to $347m along with market share, although CEO Paul Jennings said that concerted action was needed to correct a three-year hiatus in premium increases. Free reserves fell by $19.5m to $444m, the level it was at two years earlier.

Jennings said that “two unusually large claims in close succession have led to a one-off combined ratio figure in 2019/20, but North’s underlying business remains strong, resilient and healthy”.

Member retention maintained at 99% and a record level of tonnage was insured.

Rising claims based on greater market share and weak pricing were factors in the underlying 108% combined ratio, which North noted was closely aligned with its International Group counterparts. However, North’s exposure on the Grande America and Golden Ray casualties helped push the figure to 125.8%. North observed that the claims were amongst the largest ever handled by North and, at potentially over $400m, Golden Ray could be among the biggest in IG history.

“The overall result clearly demonstrates the P&I industry’s volatility and sensitivity to large claims,” said Pratap Shirke, Chairman of North. “While it is unusual for two such large claims to fall in so short a time, it is simply the job of the P&I club to protect its Members. Effectively managing these casualties in partnership with local authorities and international experts demonstrates North’s commitment to keeping Member interests central in everything that it does.”

A return on investments of 6.4% earned $64.5m net of fees, although reduced corporate bond yields through 2019/20 saw this offset by a $16m increase in the pension scheme deficit. North said that its asset strategy was proving robust in the face of the volatility caused by Covid-19. North CFO Ed Davies said that “at April 30th our position showed losses below 2% of the portfolio; this is comfortable in an extraordinary market”.

CEO Paul Jennings noted that owned tonnage surpassed 160m gt for the first time in 2019/20. Including charterers, North’s entered fleet grew by 20m gt to exceed 230m gt. “In the last year, North insured more tonnage than ever before, continued to diversify our income base to enable Members to trade with confidence and strengthened our team; and we are now supporting Members through the Covid-19 pandemic”, he said.

Income Statement ($m) 2019/20 2018/19 2017/18 2016/17 2015/16
Premium income 346.6 345.0 387.6 429.5 489.8
Underwriting result (68.3) (13.1) (8.0) 11.0 87.4
Investment result and foreign exchange 64.5 29.5 28.6 21.0 (12.8)
FX (3.8) 16.4 20.6 32.0 74.6
Movement in pension scheme deficit (16.1) (3.8) 2.1 (30.2) 18.2
Revaluation of land and buildings 0.7 (2.9) 0.6 (2.5)
Increase/(decrease) in free reserve (19.2) 12.6 19.8 2.4 90.3

Ship type

Bulk carriers 39%
Tankers 26%
Container ships 23%
Others 12%
Tonnage 2016 2017 2018 2019 2020
Owned 131 140 142 147 160
Chartered 54 50 53 60 70