London Club says premium income up 11% in 2021/22, but 14 x $1m-plus claims

London Club has released a short update on the drivers and result for the 2021/22 Financial Year and other recent developments in the Club’s business. It said that further information would be provided in the Annual Report & Financial Statements, which will be issued in the near future.

Underlying gross earned premium income in 2021/22 (excluding supplementary calls) was 11.0% higher on the prior year, attributed to a combination of rate increases and volume growth for the core mutual P&I product.

The Club reported “an exceptionally adverse claims outturn”. There were 14 members’ claims in excess of $1m. compared with an average of six such high severity cases experienced in the five prior years. In addition the cost of these claims was particularly expensive by recent historical standards.

There was also a material escalation in the number and cost of Covid-19 claims, with an almost three-fold increase in the cost of such claims. Furthermore, claims on the IG Pool continued to run at high levels, particularly so in the first half of the year.

The challenging claims environment was accompanied by an investment loss of $2.0m following an upward adjustment in fixed income yields and equity market sell-off towards the end of the year.

After including the supplementary calls, the result for the 2021/22 financial year was a surplus of $10.4m, increasing the Club’s free reserves to $164.0m. The combined ratio was 92.4%. Excluding the supplementary calls set in October 2021, the operating result would have been a deficit of $65.8m and a combined ratio of 155.2%.

At the February 2022 Renewal, while the raising of supplementary calls strengthened the Club’s capital position, it also underlined the importance of other measures to improve technical performance. Therefore the February 2022 renewal strategy involved “a tailored approach to individual Members, focusing on loss records and risk profiles – and the sufficiency of rating and deductible levels”.

This focus meant that there were some cases where the Club declined to offer renewal terms, and that there were some where terms could not be agreed. The Club said however that “there was strong support from the vast majority of Members that were offered terms and, as a result, the Club moved into the current P&I year supported by important improvements to the rating and risk profile of the Membership base”.