In its 2017 report on the P&I Clubs, broker Jardine Lloyd Thompson asked all of the clubs a list of questions. Here are the responses of Skuld, Standard Club and Steamship Underwriting Association to one of those questions. Tomorrow IMN will be printing the responses of the remaining P&I Clubs to this question.
Q: Many of our clients would rather see P&I rates reduced upfront rather than excess capital returned or call instalments discounted or waived later in the day. We understand that clubs aim to offer long-term stability but, with club surpluses at today’s record levels, is there not a case for saying that P&I rates overall could be reduced by a margin that would be beneficial to club members without risking the stability of club finances?
Skuld said that premiums should be fair, reasonable and competitive. Skuld said that it aimed to offer such rates, while remaining always able to deliver a combined ratio below 100% for the total business. The insurer said that, rather than overcharging and failing to call the full premium, Skuld’s strategy was to provide returns in the form of credits to members. This occurred when sufficient surplus was gained through alternative income, such as from Skuld’s commercial products, or in unexpectedly benign claims years.
Standard Club said that it aimed to write to breakeven underwriting and priced its business accordingly. If results subsequently proved to be better than expected this might lead to a return of call, as was the case in 2016/17, but the club did not aim to write at a loss, as this would increase the risk that reserves would be eroded, and potentially reduce the level of financial security the club provided. “We believe that most members prefer the stability of the current system and would prefer to see money returned later, rather than face the risk of unbudgeted supplementary calls if club finances become stretched”, Standard said.
Steamship said that it had always been the case that, if records improved, rates would reduce. “Sound underwriting is at the core of what we do.” The Club said that a combined ratio of less than 100% on a rolling three-year basis remained a strategic objective set by the board. One critical issue was estimating the likely exposure going forward. “Given the recent benign claims experience it is tempting to hope that this will continue. History suggests that such periods do not last forever and hence a degree of caution is perhaps sensible”, the club concluded.