Tysers and Gallagher individual club summaries: London 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:

London Steamship Owners Mutual Insurance Association Ltd

Managers     A Bilbrough & Co Ltd

Gross Tonnage

Owned 51,100,000
Chartered 16,000,000

Free reserves

2019 168,843,000
2018 194,642,000
2017 188,012,000
2016 160,707,000
2015 157,414,000
Standard & Poor’s Rating BBB

Tysers noted that Chairman John Lyras had reported a challenging year for the Club, with increased claims and continued downward pressure on premium levels, These resulted in an underwriting loss of nearly $34m and a combined ratio of 140%, the highest in the International Group by some margin.

Investment returns of 3% reduced the loss by $8m. Free reserves fell from $195m to $169m, equivalent to what Tysers termed “a still reasonable” $3.30 per gt, down from $4.29 per gt 12 months earlier.

Net incurred claims for the financial year totalled $104m, up 24% year on year, and 46% higher than the average of the three preceding years.

There were two claims on the Pool in 2018/19, one involving the grounding of a container ship and consequent pollution by bunkers, the other relating to a bulk carrier which hit a riverside berth.

Gross premium income rose by $2m to nearly $104m, down to an increase in mutual tonnage of 7%. Premium rates across all business lines continued to fall. Mutual owned tonnage grew by over 3m gt to 48.6m gt. Fixed small tonnage of 2.5m brought total owned tonnage stands to just over 51m gt.

Both chartered business and the Club’s fixed premium facility for small owned vessels saw growth during the year with 21 new accounts. Tysers said that this was not surprising as London Club offered “competitive pricing on these lines”.

Tysers said it had come away with the impression that the Club was willing to give generous discounts on existing rates when faced with the threat of losing business, but warned that this was “not a practice the Club can afford to continue.

Tysers predicted that London Club “should certainly announce a general increase in 2020”, opining that the Club had to adopt a disciplined underwriting approach “as results need to improve quickly”.

Gallagher noted that London Club’s technical underwriting result had continued to deteriorate at a constant rate – about $15m for the third consecutive year. Gallagher said that this represented “a disturbing trend, which, if continued into 2019/ 20 would start to pressurize its investment income and capital base”.

Gallagher noted that since 2015/16 financial year claims incurred had risen by 73% during which period premiums had fallen 6%, from $110.1m to $103.7m.

Tonnage by vessel type (Tysers)

Bulkers 54%
LNG/LPG & Tankers 26%
Container ships 17%
Cargo 3%

Tonnage by vessel type (Gallagher)

Bulker 54%
Tanker/Gas Carrier 26%
Container/General Cargo 20%

Tonnage by geographical area (Tysers)

Southern Europe 52%
Far East 33%
Northern Europe 12%
Americas 3%

Tonnage by Geographical area (Gallagher)

Europe 64%
Asia-Pacific 33%
Americas 3%
Year 2019 2018 2017 2016 2015
Calls/Premium 103,660 101,728 102,891 110,072 111,290
Reinsurance Cost 19,671 20,393 20,181 22,670 24,445
Net Claims (incurred) 104,019 83,902 69,472 60,129 104,277
Operating Expenses 13,644 12,655 11,542 11,954 12,483
Net Underwriting Result 33,674 (15,222) 1,696 15,319 (29,915)
Gross Outstanding Claims 326,160 298,144 298,867 332,037 346,993
Total Assets 511,570 512,840 501,916 505,479 517,374
Average Expense Ratio 10.30% 9.68% 9.51% 9.52% 8.78%
Solvency Margin 1.53 1.72 1.68 1.52 1.49
Reserves/GT Ratio $3.30 $4.29 $4.28 $3.62 $3.59

All figures $’000.