High number of large claims increases Standard Club’s Combined Ratio for 2019/20

Jeremy Grose CEO of Standard Club’s managers  Charles Taylor & Co has informed members that the board of The Standard Club UK Ltd approved its financial statements at a meeting on May 15th.

For the policy year to February 20th 2020 the club recorded a breakeven or profitable underwriting results on its core P&I and defence business for the six financial years to 20 February 2019.

While the 2019/20 policy year saw a further reduction in attritional claims, the club experienced an unusually high number of large claims, including five that reached the International Group’s pool, said Gross.

This increase in large claims, coupled with the high cost of other clubs’ pool claims and the impact of reduced premium rates, led to a 126% combined ratio on the 2019/20 policy year.

The board began corrective action at the February 2020 renewal by setting a 7.5% general increase.

The Strike and Delay class, which was incorporated into the club on February 1st 2019, had a successful first year, generating a combined ratio of 95% and a surplus of $2m.

The club recorded a 9.7% investment return during the year, despite moving to a more defensive position by the year end. This offset much of the underwriting deficit and reduced the club’s net operating loss to $20m.

Gross said that “this defensive investment position has served the club well during the market turbulence arising from the global pandemic, with the investment loss since the year end currently below 1%”.

During 2019, the club concluded the sale of The Standard Club Corporate Name Ltd and its stake in the Charles Taylor Managing Agency to the Bermudian based reinsurance group Premia, bringing to an end the club’s participation in the Lloyd’s market. The cost of disposal was $21m. Standard Club now has no further exposure to losses from its former syndicate at Lloyd’s.

The club’s free reserves now stand at $393m, which Gross noted was “comfortably in excess of its regulatory, rating agency and own capital assessment requirements”.  The 2017/18 policy year was closed for all classes, with release calls for the P&I and Defence classes set at 0%, 0%, and 6% of ETP for the policy years 2018/19, 2019/20 and 2020/21. The London and War Risks classes had release calls set at 0% for all years. Gross noted that “these release calls remain amongst the lowest in the International Group and reflect the high degree of confidence the Standard group and subsidiary boards have in the financial strength of the club and future call stability”.

For the Strike & Delay Class, Standard said that more than 90% of the membership renewed their delay cover, with an overall increase of 5% on expiring rates achieved – through a combination of premium uplift and adjustment of terms.

Ten members did not renew.

At the start of the 2019/20 year, the class insured about 1,800 ships, with about 500 of those purchasing the optional extension for delay arising out of cyber events on board or ashore.

Although the group audit was still underway, the S&D class was expected to report an overall surplus.

Standard said that, at this early stage the development of the 2020/21 year was unclear, particularly in light of the global Covid-19 pandemic and its implications. The committee advised members to continue to budget for premium in accordance with the ETP figure agreed at inception. The release call has been set at 20% of ETP. Policy year 2019/20 was developing satisfactorily so far and the committee advised members to continue to budget for premium in accordance with the ETP figure agreed at inception. The release call has been set at 20% of ETP.

Policy year 2018/19 continued to mature in line with expectations and so the committee has closed the year at the ETP figure without any additional call.

https://www.standard-club.com/media/3308719/26-may-2020-standard-uk-circular-financial-position-and-open-policy-years.pdf

https://www.standard-club.com/media/3308707/26-may-2020-standard-uk-strike-and-delay-class-circular-review-of-open-policy-years.pdf