At its Board Meeting on December 7th Swedish Club announced a zero percent general increase in P&I — the third year in succession that this has been the case.
The management on December 8th said that the Club’s overall claims frequency had increased during the past two years, while average claim costs remained fairly stable on an overall basis.
After a benign 2016/2017, the Club said that the 2017/2018 policy year seemed to have resumed an earlier long-term trend of costlier large claims for the International Group (IG). Underlying estimated claims inflation was running just below 3% per annum. The frequency of claims in excess of $500,000, as well as the average cost of such claims, had increased for the 2016/2017 and 2017/2018 policy years.
The Club said that IG excess reinsurance negotiations were ongoing and that either a small increase or an “as expiry” renewal was expected.
The Club said that for this year it expected to come in at slightly over the Club’s targeted combined ratio of 100 %. It was budgeting for a balanced result for policy year 2018/2019.
Growth rate had been as expected and gross tonnage had reached 49.1m gt, with an additional 25.8m gt of Charterers’ entries.
The 0% General Increase would be subject to changes in Group reinsurance costs. Cargo and Crew deductibles would both be increased by $1,000.
The Club said that the rationale behind a 0% general increase for the third consecutive year was to give members the benefit of a good investment year and a fairly good claims year, although claims trends for most segments were on the rise, including the IG pool. “We should however be mindful that claims inflation runs just below 3% and that the Club’s premium is affected by “churn”. Individual members’ claims records and risk exposure will be considered in the renewal process”, the Club said.
For IG pool claims Swedish Club observed that, while policy year 2016/2017 had seemed to develop towards a less challenging pool year compared with previous policy years, the 2017/2018 policy year appeared to have resumed the long-term trend of costlier large claims for IG. After a benign beginning of the year, a number of pool claims had since been reported which had deteriorated the result. In addition, the policy year 2015/2016 had also continued to deteriorate during 2017. The Club said that so far it had one claim pool claim during policy year 2017/2018, that being the Chang Hang Tan Suo, which grounded off Guangzhou, China, and had a current reserve of $17.5m.
The Club’s vessel portfolio had continued to grow for 2017/2018, despite a loss of tonnage at renewals. GT had increased by more than 5% since the start of the current policy year on February 20th, and by 2.7% in the past 12 months.
The limit of liability for Oil Pollution would be $1bn. For P&I Excess War Risk Cover, the limit would be $500m, while for war liabilities arising from BioChem etc, the limit would be $30m. For passenger and seaman risks, the limit would be $3bn, with a sub-limit of $2bn for passenger claims only.
Members will be allowed up to 50 % premium returns for vessels laid up in a safe port for more than 30 consecutive days, if the vessel has only watchmen and no cargo on board. No premium return would be granted for vessels less than 500gt, or for tugs, barges or passenger ships/ferries in coastal trade.
The current position of the open years as decided by the board in December 2017 was:
|Year||Status||Estimated Supplementary Call||Estimated Release Call|
Charterers’ Limited Liability Cover
For 2018/2019 the Association would also be offering limited cover for Charterers, including Charterers’ Liability to Hull. The overall maximum would be arrangable up to $750m for any claim or occurrence.
Freight Demurrage & Defence Insurance 2018/2019
The Club reported a “positive performance” for the first nine months 2017 and announced no general increase of the FD&D premium.
The Club insures 969 vessels (38.0m gt) for FD&D risks, up 13% year on year. As of November 2017, the Club said that it was assisting its members in 639 legal disputes of which 334 occurred in 2017. Of the 639 cases, 16 claims had a reserve in excess of $100,000, none of which occurred in 2017 and two occurred in 2016. These 16 claims represented about 2.5% of the total number of claims but 46% of the Club’s total claims cost.
The Club said that from these figures, which had not changed significantly from 2016, the following conclusions could be drawn:
- It generally took several years for large claims to develop
- Some few large claims accounted for almost half of the Club’s claim cost
- The number of claims per vessel was stable or down
The Club said that it had entered into a cooperation with International Maritime Bureau, a division of International Chamber of Commerce, which would enable the Club’s FD&D members to check prospective business partners against a comprehensive fraud and malpractice database.
The Club noted that there had never been a supplementary call in FD&D since it began providing FD&D coverage in 1984. The general increases the last five years have been:
For 2018/19 the Club decided:
- To levy no general increase on estimated total call
- Maintain the minimum base deductible at $12,000
- Maintain the deductible of 25 % on costs in excess of $250,000 but allow for flexibility and impose different levels as appropriate
- To offer FD&D cover with a limit of either $5m or $10m
- To adjust individual members premium based on records, exposure and utilisation of the Club’s resources
- To set the estimated release call for 2018/2019 at 5% Limit of Cover
The current position of the open years was:
|Year||Status||Estimated Supplementary Call||Release Call|