In its annual report for policy year to February 20th 2021, Japan Club’s Director General Shizuo Takahashi noted that many group clubs had increased their insurance premiums for the policy year 2021 due to deterioration of their insurance balance. Japan Club applied a general increase (GI) of 10% for ocean-going vessels. “This was because we also had some large claims, including pool claims, especially in the first half of the year, and if we were going to have more large claims, a significant deterioration in the insurance business would have been likely”, Takahashi said.
He noted that, although the GI might have been a burden on the Members, many of them “were very understanding and supportive”. He said that this was greatly appreciated by the club.
Premium income decreased “due to intensified competition”, but net premium income increased by ¥40m ¥14.98bn due to a decline in the level of reinsurance premiums.
Net claims increased by ¥2.53bn year on year to ¥13.24bn, post reinsurance recoveries. There were major claims in the first half and others as a result of the Covid-19 pandemic.
The investment account recorded a gain of ¥3.32bn, which Takahashi said was “a striking improvement on the previous year”. The investment account figures were assisted by a significant increase in income from interest and dividends and a gain on money held in trust, as well as foreign exchange gains.
Total operating revenue increased by ¥3.65bn year on year to ¥18.21bn. Total operating expenses decreased by ¥1.78bn to ¥14.47bn, due to a decrease in the contingency reserve.
The ordinary surplus increased by ¥5.43bn from the previous year, when a loss of ¥1.70bn was recorded, to ¥3.74bn. The net surplus after tax was ¥2.69bn. The reserve was ¥26.98bn after ¥1.3bn was added.
The Club has maintained its credit rating of BBB+ (outlook positive) from S&P Global Ratings.
During the course of the 2020 policy year the Association had new entries of 6.4m gt for owner’s entries and 150,000 gt for Naiko Class entries (Japanese coastal vessels).
The loss record for ocean-going vessels worsened significantly in the 2020 policy year due to the impact of two large claims exceeding $10m and Covid-19-related claims.
The Club’s book of Japanese coastal vessels had no large claim (defined as being above ¥300m) and also recorded a calmer year compared to previous policy years. There was a 10% general increase in premiums for ocean going vessels for the 2021 policy year, but there was no general increase in premiums for Naiko Class entries. At the conclusion of the 2021 renewal, the Association’s entered tonnage amounted to 94.6m gt for owners’ entries and 2.6m gt for Naiko Class entries.
Bulk carriers have constituted the majority of Japan Club’s entries for many years, but the percentages of container vessels and LPG/LNG tankers were gradually increasing.
At the end of the 2020 business year (March 31st 2021) there were 4,085 vessels entered, comprising 2,211 owners’ entries and 1,874 for Naiko Class entries.
Entered tonnage by type
|LPG, LNG tankers||6.4%|
Trend Of Claims
Japan Club said that the number of claims received had been decreasing in recent years. About 3,700 claims were received for combined ocean-going and Naiko Class in the 2020 policy year. However, paid and reserve funds within retention indicated an increasing trend in recent years towards higher per case Paid and Reserve figures. The Paid and Reserve equalled some $93m for ocean-going vessels and about ¥1bn ($10m) for the Naiko Class. During the 2020 policy year there were two incidents involving ocean-going vessels which led to claims exceeding $10m and no claims for the Naiko Class in excess of ¥300m ($3m) – in both cases the same as in 2019 policy year.
The Club said that the number of claims received for ocean-going vessels had been decreasing over the past five years. Claims for cargo damage provided the highest proportion of the total number of claims during that period, accounting for 53% of claims. The next most frequent category was crew claims, which accounted for 27%. Casualties such as collision, stranding, sinking, fire, and oil pollution accounted for just 2% of the number of claims.
However, although the proportion of the number of casualty claims was small, the insurance money for each case was high and accounted for 23% of the total of Paid and Reserve of the five years. Most of the claims exceeding $10m related to casualty claims, which was one of the factors which greatly affected the loss record.
Although there have been no significant differences in the number of claims received for Naiko Class in recent years, the 2020 policy year continued the decreasing trend in the number of claims received. Pier claims were the most frequent, accounting for 44% of the total claims during the past five years. The annual average number of casualty claims was 18, or as low as 7% of the total claims of that period. However, these accounted for 23% of the total of Paid and Reserve. Similar to the trend of Ocean-going vessels, once such an incident occurred, it greatly affected the whole loss record.
While the trend in the number of pool claims of the International Group of P&I Clubs was not rising, the amount per claim was.
In 2019 about 55% of the claims exceeded $20m per case. The contribution to the pool by Japan Club in policy year 2019 was nearly $20m. In policy year 2020 about 65% of the claims exceeded $20m per case, and several claims exceeded $50m. The contribution to the pool by the Association increased in the policy year 2020 to approximately $22m. A significant cause of large incidents in the 2019 policy year was fire and stranding cases involving car carriers. This continued into the 2020 policy year, when there had also been a trend towards fires and strandings of bulkers, and container ship casualties including collapse of stow and containers lost overboard, and damage to port facilities caused by mega container vessels.
The Association’s average expense ratio for the five years ended 20 February 2021 was 8.02%.
|Operating income||2021 (¥m)||2020 (¥m)||2021($000s)|
|Calls and premiums written||19,864||19,961||179,246|
|Reinsurance premiums ceded||4,888||5,025||44,157|
|Net premiums written||14,976||14,936||135,269|
|Total operating income||18,217||14,553||164,459|
|Operating costs and expenses|
|Reinsurance claims recovered||10,084||4,723||91,082|
|Net claims paid||13,242||10,714||119,614|
|Total operating costs and expenses||14,471||16,250||130,707|
|Ordinary surplus (deficit)||3,736||(1,697)||33,752|
|Surplus (deficit) after income taxes||2,691||(1,233)||24,307|