Swedish Club reports 99% average combined ratio over 10 years

In Swedish Club’s just released Annual Report for 2019, the Club noted that it had averaged a 99% combined ration over the past 10 years. Then, Swedish Club’s P&I business totalled 26m gt. A decade later this had almost doubled to 50m gt. The marine side has seen growth from 1,400 vessels to nearly 3,500 vessels today. The Club’s free reserves have doubled. It said that “the Club has a clear strategy, it is all about steering carefully and offering stability in an unpredictable world”.

For 2019 the operating result was a gain of $24.6m. Free reserves stood at $228.4m.

The combined ratio for 2019 was 106%.

Including charterers’ liability gross tonnage reached 80m gt.

There were more than 6,000 entered vessels for all classes.

  2019 2018 2017
Calls & Premiums 157.4 146.1 153.3
Reinsurance Premiums -39.2 -34.9 -35.8
Net Claims Incurred -101.3 -86.6 -98.1
Investment Result 32.2 -5.9 27.7
Operating Result 24.6 -5.2 22.2
P&I Discount   – 5% 4%
Loss Ratio 86% 78% 83%
Expense Ratio 21% 21% 21%
Combined Ratio 106% 99% 104%
Free Reserves (year end) 228.4 203.8 213.5
  2020 2019 2018 2017 2016
P&I insurance incl. charterers’ liability, 20th Feb 2,247 1,913 1,890 1,674 1,633
Gross tonnage 86 76 75 74 71
FD&D Insurance, 20 February, number of vessels 1,526 1,198 1,140 841 895
MARINE H&M INSURANCE INCL. OSVS, 1 JANUARY
Number of Vessels 3,534 2,779 2,606 2,996 3,034
Insurance Value ($m) 98,691 77,175 76,460 92,960 97,575
Of which club as insured ($m) 11,819 8,451 8,227 10,495 11,094
US$m 2019 2018 2017 2016 2015
Gross earned premiums 157.4 146.1 153.3 167.3 180.4
Earned premiums, f.o.a. 118.2 111.2 117.5 130.5 142.9
Inv inc from non-tech a/c 4.5 5.2 5.1 4.7 4.8
Claims, f.o.a. -101.3 -86.6 -98.1 -103.0 -115.2
Refunds and P&I discounts -4.4 -3.4
Net op exps -24.4 -23.9 -24.8 -25.4 -25.8
Bal on tech a/c -3.0 1.5 -3.7 6.8 6.8
Balance on non-tech a/c 27.7 -11.1 22.6 5.0 -9.9
Pre-tax result 24.6 -9.6 18.8 11.8 -3.1
Loss ratio 86% 78% 83% 79% 81%
Expense ratio 21% 21% 21% 19% 18%
Combined ratio 106% 99% 104% 98% 99%
Average Expense Ratio 13.2% 13.8% 13.4% 13.3% 13.3%

The Club’s return on investment for 2019 was 9.7%, in line with its benchmark.

The investment portfolio is split into approximately 20% equities and 80% interest-bearing instruments, a similar allocation to that of other P&I clubs.

The Club said that the strong investment performance served to balance the 106% combined ratio result for the year. In “difficult market conditions characterized by soft pricing and adverse claims outcome”, the Club’s underwriting showed a loss of $3m. Looking ahead, the Club anticipated a continued improvement in pricing conditions.

Referring to the decision by the Club to introduce a 5% increase in P&I rates, managing director Lars Rhodin said that “anyone studying what has been happening in the P&I liability market over the past four or five years would fully understand the rationale for this adjustment. We have had four years in a row with 0% increase and that has mainly been possible because of the very good safety performance from our members. But during those years we have seen claims inflation of 2.5% a year and an escalating cost of incidents within the International Group, of which we must cover our share.”

Rhodin said that longer-term trends included; increased government intervention, sanctions, the impact of social media, political sensitivities and zero casualty tolerance. “We are also seeing more emphasis on fines and punishment rather than compensatory regimes. Another unfortunate way forward for shipping, leading as it might to different rules all over the world, is when countries disregard international rules and may not honour conventions that they have signed up to,” he said.

https://www.swedishclub.com/news/club-news/the-swedish-clubs-annual-report-2019-now-available