Japan seeks 10% general increase in P&I and FD&D

Japan Club has announced that it will be seeking a 10% general increase for P&I and FD&D classes at the 2023 renewal next February.

Charterers’ entries will also go up by an average of 10%, depending on individual claims experience.

Naiko (coastal) class entries will be individually assessed, with an aim for a total increase in premium income of 15%.

No changes to standard deductibles have been proposed.

Japan Club will move to a mutual premium basis of calling , giving members three payment options:

  1. Everything upfront
  2. In two instalments, 75% at inception and 25% on November 20th the following year
  3. Four equal instalments at inception, in May and August, and then the final 25% in November the following year.

The Club said that it had steadily improved its capital by increasing the reserve from year to year since the IG first introduced new criteria for its membership in terms of S&P credit ratings. However, the Club noted that its rating had been downgraded to “BBB: outlook: stable” due to a significant decrease in the reserve, a result of the underwriting deficit last fiscal year.

Since the International Group’s threshold for its membership is “BBB- outlook : stable” and higher, the Club said that there was “no imminent concern about the soundness required of the Association’s operations”, while adding that “nevertheless, the Association should stabilize and strengthen the financial ground urgently to avoid further downgrading”.

For claims received by the Association in the 2022 policy year to date, just one pool claim has occurred. “However, as the claims amount of owner’s entries incurred in past years, especially 2020 and 2021, have increased, the loss record has become worse; 2020 policy year has deteriorated to 122.0% and 2021 policy to 190.3%.”

For Naiko class, although no large claim had occurred so far this policy year, reinsurance premium had increased significantly because of a claim last year, which became the Association’s largest-ever loss. Japan Club warned that “this makes the income and expenditure situation very severe”.

For owners’ entries this means as follows:

Policy Year Original Est supp call Paid Supp Call Decision Release Call
2020 40% 40% The Managerial Committee is authorised to decide to levy an unbudgeted supplementary call up to 25% (the decision will be made in February 2023). 30%
2021 40% 0% The originally-estimated supplementary call of 40% due for payment by 31 January 2023. Further, the Managerial Committee is authorised to decide to levy an unbudgeted supplementary call up to 25% (the decision will be made in February 2023). 30%(*)
2022 40% The position remains unchanged. 45%

*This release call means after the originally-estimated supplementary call of 40% has been paid.

The Association has decided to aim to maintain the reserve of ¥25bn (approx $200m) by developing the financial stability plan for 2022. The plan sets goals to recover the reserve that had decreased last year and to maintain and perhaps even upgrade the S&P rating.

Finally, there had to be a capital increase fo Jqapan’s cell at Hydra.

Hydra Insurance Co Ltd is the captive reinsurance vehicle established in Bermuda by the International Group. During Q2 this fiscal year the capital adequacy of Hydra Japan Cell, the protection cell for Japan’s account within Hydra, fell below the minimum capital requirement set by Hydra. The Board has therefore approved the increase of capital in Hydra Japan Cell by $17m by 20th February 2023, to meet the requirement.