H1 CR of 105.9% “broadly in line with expectations” says Shipowners’ Club

Shipowners Club recorded a combined ratio of 105.9% for the first half of the year (to June 30th), which it said was “broadly in line with expectations”.

The overall gain on the portfolio for the first half of 2019 was $32.8m, helping the Club to an overall first-half gain of $26.4m. Net assets rose to $330.2m, from $303.8m at the end of 2018.

The Club said that it had seen “encouraging” premium movement and member numbers at the half-year point.

CEO Simon Swallow said that it was encouraging to witness the support from the Club’s global membership, and the many professional brokers with whom we work, despite the levels of competition and alternative options that are available”.

The Club said that, while it strongly believed that the tide was turning, the impact of the soft insurance market was still prevalent. Despite some improvement on the 2018 half year result, an underwriting deficit of $ 5.7m was recorded. “This can largely be attributed to continued difficult trading conditions as well as the ongoing cost of claims”, the club said, noting that “as a not for profit mutual insurer we must prepare for such challenges by building reserves, so that we can respond to these events and strive to avoid passing on unbudgeted additional premiums to our membership”.

Total vessels stood at 32,630 and total tonnage at 25.6m, reflecting the mutual’s focus on the smaller-size ship sector. The number of members was 7,802.

Interim Consolidated Income and Expenditure Account Six months to 30 June 2019 (unaudited) $’000 Six months to 30 June 2018 (unaudited) $’000 Year to 31 December 2018 (audited) $’000
Gross premium earned 108,176 110,345 224,267
Outward reinsurance premiums (12,214) (14,429) (29,270)
Net premiums 95,962 95,916 194,997
Ultimate claims net of reinsurance (76,360) (76,994) (151,038)
Acquisition costs (14,516) (15,000) (30,761)
Administration expenses (10,754) (10,090) (21,395)
Total operating expenses (25,270) (25,090) (52,156)
Underwriting account balance (5,668) (6,168) (8,197)
Investment return net of charges 32,764 (13,658) (28,754)
Taxation (195) (209) (714)
Other expenses (490) (57) (236)
Result for the period 26,411 (20,092) (37,901)
Combined Ratio 105.9% 106.4% 104.2%

Claims:

Both the London and Singapore offices of Shipowners’ Club reported a marginal reduction in claims frequency. The overall claims quantum position deteriorated when compared with 2018. Despite the majority of claims quantum bands improving, (no claims were reported at all in the $5m-$7m band), the overall position was negatively impacted by a single fortuitous claim in the highest band of $7m-plus.

This claim occurred at the very start of the financial year on January 13th when one of the Club’s entered vessels, a self-propelled pipe laying vessel (Star Centurion (IMO 9241712)), was hit by chemical/oil products tanker MT Antea (IMO 9250153) whilst at anchor within Indonesian territorial waters. The severity of the collision caused the Star Centurion to capsize and sink to 28 metres below sea level. (IMN, January 15th 2019).

The Club said that this casualty had incurred significant costs and, whilst the Club anticipated making significant recoveries, it said that its “estimating ethos” did not reflect any such recoveries at the half year stage.

2002-built, Vanuatu-flagged, 27,082 gt Star Centurion is owned by Trevaskis Ltd care of manager Vallianz Offshore Marine Pte Ltd of Singapore. This was reported to be effectively a management for the Development Bank of Singapore (DBS), which had repossessed the vessel some time ago.

The Club also noted that on May 29th a Member’s passenger cruise vessel, Viking Sigyn, made contact with excursion boat Hableany on the Danube river. The collision caused the Hableany to capsize and sink, “resulting in a very significant and tragic loss of life”. The Club said that it was “continuing to work to resolve this claim, the costs of which are as yet not fully estimated”.

Underwriting:

Reported income for the half year was down on the same period last year, largely due to the cancellation of one significant offshore account for non-payment of premium post year end 2018.

The Club said that the imposition of sanctions continued to impact the Club’s business in a number of trading regions.

The Club said that, in common with the other IG Clubs, it was looking into investing in technological solutions for greater monitoring of vessel operations to mitigate the risk of secondary sanctions impacting the Club.

Premium income on a policy year basis improved relative to 2018, a consequence of new Member growth and increased activity in the offshore sector. The latter had resulted in an uptake of extensions to cover for contractual, specialist operations and extended towage risks.

The Club said that it was continuing to receive high levels of new enquiries on business placed in fixed premium commercial P&I facilities.

Looking ahead, the Club said that much of its focus remained on developing IT solutions to improve speed and efficiency of service. It said that a robotic functionality had been developed which was being used to process entries onto its underwriting systems and for automatic filing of correspondence.

In relation to the renewal for policy year 2020 the Club said that it would “assess carefully the Club’s underwriting and claims position and consider whether a general increase will be required” when the board met in November.

https://www.shipownersclub.com/media/2019/09/The-Shipowners-Club-Half-Year-Report-2019.pdf