Standard Club, which is managed by Charles Taylor & co Ltd, has proposed to its members that London, UK-based Strike Club should become a part of The Standard Club group.
The Strike Club consists of the Shipowners’ Mutual Strike Insurance Association Europe (a Luxembourg company), The Shipowners’ Mutual Strike Association (Bermuda) Ltd and The Shipowners’ Mutual Strike Insurance Association (Bermuda) Ltd.
The Strike Club provides delay insurance to ship owners and operators and has been operators for more than 60 years. It is a small specialist mutual governed by a board of shipowner members.
The Strike Club Board said that, in order to best serve its members and to continue to provide them with cost-effective delay insurance at a time of increasing capital and regulatory requirements, and to help it improve underwriting performance, it has decided that its best interests would be served by forming a partnership with The Standard Club.
Under the proposal The Strike Club would:
• become part of The Standard Club
• continue to operate as member-controlled dedicated mutual delay insurer
• offer the same mutual delay insurance as it does currently (Class I, and II and III of The Strike Club cover)
• operate under The Strike Club brand, but within The Standard Club
• continue to be supervised by the current Strike Club board, which would become a Strike Club committee of The Standard Club, subject to overall governance by The Standard Club board
• bring its assets and liabilities into The Standard Club
• benefit from The Standard Club’s S&P rating
• benefit from reduced costs through economies of scale
The Standard Club will create a new Strike class in each of the Standard companies, into which The Strike Club business will transfer. There would need to be minor member-approved changes to The Standard Club’s byelaws and to the articles of the subsidiary companies (Standard UK, Asia, Ireland and Re) to give effect to this. The Strike Club proposes to amend its own articles to pass control to Standard. Regulatory approvals would also need to be obtained for the changes proposed.
The transaction is expected to take place on February 20th 2019. There would then be a transition period during which The Strike Club’s Luxembourg insurance company would continue to be the insurer, pending transfer of the insurances to Standard Club entities at the following renewal.
While both The Standard Club and The Strike Club are managed by companies within the Charles Taylor, the two clubs currently have separate operational management teams.
The board said it believed that the proposal:
• reinforced The Standard Club’s existing strategy of providing a wide range of covers
• introduced approximately 200 new members to The Standard Club
• further diversified the club’s underwriting portfolio and risk profile
• strengthened The Standard Club’s finances (Strike Club’s assets “exceed its liabilities by a satisfactory margin”)
• increased capital efficiency: (the Strike Club business improved solvency capital ratios).
• provided the opportunity for synergies, greater efficiencies and cost savings in governance, management, underwriting and reinsurance.
The Standard Club accepted that The Strike Club had suffered underwriting losses in some recent years, but said that the club had a strategy to restructure and improve underwriting, and this would be achieved more easily within The Standard Club.
Other risks included that restructuring could reduce the scale of the business; historic claims reserves might prove to be insufficient (although claims were short-tail and there had been robust actuarial analysis); regulatory and tax issues might impact the transfer of funds from the existing Strike companies; cost savings might be less than expected; and there could be greater than expected transaction costs and complications.
However, the Standard Club board said that it was satisfied that these risks could be managed and mitigated and were outweighed by the benefits.
The Strike Club’s:
• current premium income was about $23.5m
• available balance sheet funds as at January 31st 2018 was $49m
• outstanding claims and other liabilities as of January 31st 2018 were $25.5m
• free reserves on January 31st 2018 were $23.5m
• free reserves exceeded current notional required solvency capital by $11m.
Owing to a number of large claims in the first half of 2018, the projection for the 2018/19 financial year was for an overall deficit of $4m. Free reserves were likely to fall to $19.5m by 31st January 2019, but Standard Club said that this still provided an adequate level of solvency.
Approval to the necessary changes to the Byelaws and Articles will be sought at Extraordinary General Meetings of members. It is proposed to hold EGMs of members of The Standard Club, Standard UK and Standard Asia on November 29th in Dublin. Meeting notices will be sent to members shortly.