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 Shipowners Mutual Protection & Indemnity Insurance Association (Luxembourg).
Managers: The Shipowners’ Protection Ltd.
|Standard & Poor’s Rating||A|
Shipowners’ Club reported a loss of $37.9m for 2018, due mainly to an investment loss of just under $30m. Tysers observed that this was “a massive but not entirely unexpected turnaround from last year’s superb investment return of $46m”.
After eight consecutive years under 100%, the net combined ratio rose to 104%, equating to an underwriting loss of $8m. Free reserves fell by $38m to just under $304m.
Tysers said that the results did not, in its view, raise any cause for alarm. The five-year average combined ratio was 98.9%, while the 2018 figure of 104% compared “very favourably with most other Clubs and the International Group average of 111%”.
Free reserves remained healthy, and a member retention rate of 99% and an increase of 7% in entered tonnage to 27.3m gt, due mainly to growth in the yacht, dry cargo and fishing sectors, confirmed that the Club was “admirably fending off the reducing competition of the fixed market”, said Tysers.
Gallagher observed that on the equity investment side those clubs such as Shipowners’ Club that report on a January to December basis hit the worst of the equity dip, missing out on a considerable recovery between January 1st and February 20th this year.
“Indeed, its half-year figures to June 2019 show a positive investment return of $33m and free reserves up to $330m”, observed Tysers.
Incurred claims were up 20% to $96m, although frequency was down 7%. This trend of reduced frequency but higher values was most apparent in claims over $1m, particularly those involving wreck removal in remote areas and subject to the increased intervention of local authorities.
The largest claim, which resulted in the Club’s only Pool claim in 2018, involved the capsize of a jack up barge in the South China Sea. Despite the high value of the barge, the remote location of the loss and the consequent increased cost of salvage efforts resulted in the barge becoming a constructive total loss, leaving the Club with what Tysers described as “an expensive wreck removal” and SCOPIC exposure.
The cost of claims under $1m remained stable. However, the Club did report two noteworthy trends, those being an increase in claims firstly for damage to subsea cables and secondly for damage to coral reefs.
Overall, retained claims rose from $136m to $151m, while the increase in earned premium (net of reinsurance) from $186m to $195m was, said CEO Simon Swallow, clear evidence of a change to a hard market.
Gallagher noted that, being solely in the smaller ship market, the Club had always faced more competition from the fixed premium market than do the other IGA Clubs. The broker noted that recent years had seen a surplus of capacity in this sector chasing too little business, and a resultant downward pressure on rates to what the Club has described as unsustainable levels.
In 2018 and 2019 consolidation had taken place amongst the Club’s competition and Lloyd’s, which backed several of the competitive facilities, had become more focussed on profitability and rating. Gallagher said that this had resulted in an increase in business enquiries for the Club.
In May 2018 the Club took a 33% stake in the share capital of its IT service provider, Jumar Solutions.
Vessel type by number of vessels (Tysers)
Vessel Type by Geography (Gallagher)
|Net Claims (incurred)||151,038||136,165||149,087||136,060||145,493|
|Net Underwriting Result||(8,197)||1,761||2,802||3,247||11,438|
|Gross Outstanding Claims||440,348||425,420||433,441||474,576||390,177|
|Average Expense Ratio||24%||22%||22%||21%||20%|
2016 covers the shortened period of 20th February 2015 to 31st December 2015
All figures $’000