London Club reserves retreat from all-time high

London P&I Club recorded an operating deficit of $25.8m for policy year 2018/19, falling from its all-time high of $194.6m on February 20th 2018 to $168.8m 12 months later.

Gross revenues increased 1.9% year-on-year to $103.7m, while net earned premiums were up 3.3% year on year to $84.0m, both driven entirely by volume growth. The Club said that premium rates across all product lines had once again fallen over the course of the year.

Net incurred claims costs of $104.0m were 24% higher than in 2017/18 and 46% higher than the average for the three preceding years. The Association incurred two claims costly enough to enter the Pool in the 2018/19 policy year.

Unusually the financial year was also adversely impacted by deteriorating claims experience in older policy years. This mix of claims activity – a moderately expensive current policy year and post-expiry deterioration in what had initially been a benign earlier claims year – did not afford the Club the same level of reinsurance protection as would have been the case if the full financial year claims cost had been attributable to a single policy year.

The Club recorded an investment return of 3.0%. After additionally recognizing a $1.3m FX translation loss on its UK property asset, investment contributed $8.2m to the financial year operating result.

Tonnage growth of 3.5m gt – more than 7% – was recorded in policy year 2018/19. There was also growth in the Association’s other covers for Charterers and the Owners of smaller ships.

On the Charterers’ side, this included business from seven new Assureds, while the Owners’ fixed premium cover attracted 14 new Assureds.

London Club’s combined entered tonnage increased to more than 60m gt as of February 20th 2019. The Club said that premium levels had remained under considerable pressure. “While reductions in average rates over recent prior years had been agreed in tandem with a benign claims environment, the Association’s experience in 2018/19, coupled to indicators of strains on underwriting performances across the P&I market generally, signal that adjustments to current rating levels will be required before long”, London Club said.

London’s ship type by tonnage comprises 54% bulk carriers, 23% tankers, 17% containers, and 6% others (gas carriers and general cargo 3% each). Its geographical distribution is 52% southern Europe, 33% Asia, 12% northern Europe, 3% Americas.

https://www.londonpandi.com/media/2472/londonpi-annual-report-2019-final-web-version.pdf