Tysers and Gallagher individual club summaries: Japan Club

In the recently published reports on the Group P&I scene, brokers Gallagher and Tysers both issued commentaries on the individual Group Clubs. IMN has, for the purposes of brevity, to report the two brokers’ commentaries into a series of articles, one per club. In alphabetical order, we come to:

The Japan Ship Owners’ Mutual Protection & Indemnity Association          Self-managed.

Gross Tonnage

Owned 95,500,000
Chartered 13,700,000
Standard & Poor’s Rating BBB+

Free reserves

2019 237,876,000
2018 226,524,000
2017 208,423,000
2016 187,130,000
2015 172,369,000

Tysers noted that the new chairman, Yukikazu Myochin, was likely very pleased to be able to report on a good year for the Club. Tysers said that the positives included S&P maintaining its BBB+ rating while improving its outlook from stable to positive.

A 95% combined ratio and a 1.49% investment return produced an overall surplus of $11m, pushing free reserves up in dollar terms from $226.5m to almost $238m.

In local currency terms the free reserves grew by close to 10% to ¥26,410m.

Over the past five years, free reserves per owned GT improved from $1.85 to $2.49. Tysers said that this was still low compared to the International Group average of $4.19, but was moving towards acceptable levels, “especially when bearing in mind the very mutual approach of the Club and the reduced supplementary calls in 2014, 2015 and 2016”.

Owned tonnage, including the Naiko coastal class grew from 93.6m to 95.5m gt. There was a 13% rise in chartered tonnage to 13.7m gt.

The Club said that it was not seeing any clear sign of any upward trend in retained claims, but its contribution to Pool claims rose in 2018 to $15m, compared with an average of $9.5m for the previous four years.

The Club suffered one claim in 2018 in excess of $10m.

Both the new Chairman and the Director General, Hiroshi Sugiura, have said that, following a review of all services, the Club was “going back to basics” – an Association created by shipowners for shipowners, so as to be the Members’ first-choice Club.

Tysers observed that “it does appear that the Club is feeling the pressure of so many other Clubs now having a local presence in Japan, and with major Japanese shipowners having multiple-Club entries it must keep improving and simply cannot afford to fail on service or otherwise”.

Gallagher said that Japan Club’s numbers had to be considered in light of the significant effect that the Japanese Yen : US Dollar exchange rate has had on them in the past few years.

Whilst at the end of 2017/18 (March 31st for the Club’s financial year) the dollar was at Yen 111.0 compared to a rate 12 months prior to this of Yen 106.0 to the dollar.

Gallagher said that the Yen/$ currency volatility had a tendency to distort the policy year data in particular where, in dollar terms, premium income and claims incurred can fluctuate significantly year on year although in Japanese Yen terms this apparent trend would disappear.

The 2016/ 17 policy year has now been closed, with only 30% of the 40% deferred call having been made, benefitting Members by some $13.8m.

In August 2019, the Club announced a revised call structure to be effective for policy year 2020 to 2021.

Tonnage by vessel type (Tysers)

Bulk Carriers 53%
Tankers 21%
Container ships 14%
Car carriers 8%
General Cargo/Other 4%

Tonnage by vessel type (Gallagher)

Bulker 53%
Tanker/Gas Carrier 21%
Container/General Cargo 16%
Other 10%
Year 2019 2018 2017 2016 2015
Calls/Premium 194,384 214,241 221,126 226,280 233,096
Reinsurance Cost 42,351 50,681 49,132 59,229 55,257
Net Claims (incurred) 123,140 121,533 122,604 125,416 155,635
Operating Expenses 25,739 26,536 25,441 25,556 21,488
Net Underwriting Result 3,154 14,164 23,949 16,079 716
Gross Outstanding Claims 435,842 398,057 367,501 371,395 347,216
Total Assets 643,569 645,160 626,834 584,276 557,348
Average Expense Ratio 6.52% 6.21% 5.46% 5.18% 5.25%
Solvency Margin 1.48 1.62 1.71 1.57 1.61
Reserves/GT Ratio $2.49 $2.42 $2.28 $2.03 $1.85

All figures $’000