Japan Club sees reserves decline after another tough claims year

Japan Club has reported a ¥407m post-tax deficit for its financial year to March 31st 2022. Shizuo Takahashi, Director General, said that business year 2021/22 was affected by the ongoing Covid-19 pandemic and the situation in Ukraine.

A 10% increase was applied at the 2022 renewal in February to both Naiko Class entries (Japanese coastal vessels) and ocean-going owners’ entries, Charterers’ entries, and FD&D (5% for Naiko Class harbour tugs).

As a result, although the registered tonnage decreased, the Club succeeded in increasing premium income, from ¥19.9bn for the year to March 31st 2021 to ¥22.1bn for the year to March 31st 2022. Net premiums written for the financial year 2021 increased by ¥1.84bn from the previous year to ¥16.81bn.

Takahashi said that most of the lost contracts at renewal were vessels with “constantly bad loss records” which were not renewed because the Club asked for higher premiums. He said that losing such clients would result in an improved loss record for the club.

On the other hand, Japan Club had an accident which Takahashi said “caused the highest claims payments in the Association’s Naiko Class history”, which also incurred additional payments towards reinsurance.

For the ocean-going class, claims payments related to Covid-19 increased significantly. These additional costs also increased from the previous year because of the depreciation of the yen against the US dollar.

The post-tax deficit saw as a result a decrease in the Club’s reserves as a result of a large withdrawal of the catastrophe reserve due to the deterioration in loss ratios. The credit rating of the Association has been downgraded by Standard & Poor’s to BBB (Outlook Stable).

Takahashi said that the Club expected claims payments in 2022 to return to an “average level” because the number of Covid-19-related claims declined rapidly during the second half of 2021.

Takahashi said that Japan Club would focus on achieving stable profitability in 2022 and to restore the Club’s credit rating “by increasing the registered tonnage and enhancing the financial base as well as promoting the measures including digitalization for the medium and long term growth of the Association”.

The number of claims from ocean-going vessels received declined to 2,263 from 3,673 the previous year. However, the combined ratio including currency movements was 157.3% (133.6% excluding FX movements). This was up from 111.9% in 2021 (107.5% excluding FX movements).

The depreciation of the yen generated an FX gain to ¥2.28bn and overall investment income increased by ¥70m from the previous year to ¥3.39bn.

Net claims paid in 2021 increased by ¥4.39bn from the previous year to ¥17.64bn.

Entered tonnage by type:

Bulk carriers 51.9%
Container ships 15.4%
Tankers 13.9%
Car carriers 8.7%
LPG, LNG tankers 6.4%
General Cargo Ships 2.2%
Others 1.5%

At the end of the 2021 financial year (31 March 2022), there were 3,860 vessels entered, comprised of 2,076 for owners’ entries and 1,784 for Naiko Class entries. The total amount of entered tonnage was 93.1m gt, consisting of 90.5m gt for owners’ entries and 2.6m gt for Naiko Class entries.

Claims trends

The Club said that the number of claims for ocean-going vessels received 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 50% of claims, although recent years showed a decreasing trend. The next most frequent category was crew claims, which accounted for 30%, with an increasing trend. Casualties such as collision, stranding, sinking, fire, and oil pollution accounted for 2%.

Although the proportion of the number of casualty claims was small, the insurance cost for each case was high and accounted for 26% of the total Paid and Reserve for the five years. Most of the claims exceeding $10m were related to casualty claims, a factor which significantly affected the loss record.

Although there have been no significant differences in the number of Naiko Class claims received in recent years, the number of claims has decreased since the 2019 policy year.

Pier claims were the most frequent, accounting for 43% of the total claims during the past five years. The annual average number of casualty claims was 19, or as low as 7% of the total claims of that period. However, these accounted for 27% of the total Paid and Reserve.

By currency, dollar assets decreased by $43.8m, but the decrease in yen assets was limited to ¥1,654m. Yen assets benefited from an FX decline, from ¥110.71/$ in the previous year to ¥122.39/$.

Income and expenditure

Year ended March 31st 2022 JPY millions JPY millions
Calls and premiums written 22,141 19,864
Reinsurance ceded 5,328 4,888
NPW 16,813 14,976
Total operating income 18,517 18,207
Claims Paid(28,001) (23,326)  
Reinsurance recovered 10,365 10,084
Net claims paid(17,636) (13,242)  
Total op costs & exps (17,916) (14,471)
Ordinary surplus 601 3,736
Surplus/Deficit post-tax (407) 2,691