UK P&I Club has had its rating revised from ‘A’ (Negative) to ‘A-‘ (Stable) by rating agency S&P Global.
UK Club said that the rating remains in the ‘A’ range, “a measure regarded as healthy within the insurance sector”, and noted that the Club’s financial position remained strong. The Club said that it continued to meet comfortably all its regulatory capital requirements, and that it exceeded S&P’s own ‘AAA’ capital benchmark. The Club had free reserves of $534m as at August 20th 2021.
Nevertheless, the downgrade will undoubtedly be a disappointment. Other Group Clubs sitting on a negative outlook will be awaiting S&P’s actions with trepidation, as it has been clear for some time that factors within the sector were the problem, rather than issues with individual clubs.
UK Club said that the P&I sector’s unsustainable premium rates led to an average combined ratio across the sector of over 120% last year. “The market now faces increasing Pool claims and reinsurance costs as well as a steady flow of Covid-19 claims. As such, rates across the sector will need to increase accordingly”, the Club said.
Andrew Taylor, CEO of Thomas Miller P&I said that “we are naturally disappointed S&P has taken this step to revise our rating at this time. The estimated cost of Pool claims is the largest in history; this, coupled with premium levels that have failed to keep up with rising claims, has resulted in this change of rating from S&P. The whole P&I sector has been hit by the same factors. The resulting increases in combined ratios have placed pressure on ratings across the sector and resulted in the majority of the IG Clubs being placed on negative outlook.”
Taylor observed that UK Club remained very strong financially, which had enabled it to take a measured approach to addressing inadequate premium rates. “The combined ratio of 115% for the first half of 2021 was in line with the Club’s plan and the Club remains in a strong competitive position”, he said.