Tysers and Gallagher individual club summaries: Standard 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 Standard Club

Managers:    Charles Taylor & Co (Bermuda)

Gross Tonnage

Owned 130,000,000
Chartered 25,000,000

Free reserves

2019 434,700,000
2018 461,500,000
2017 430,500,000
2016 390,100,000
2015 380,300,000
Standard & Poor’s Rating A

Tysers noted that it was Standard Club’s non-P&I business that dominated its figures this year.

The Club cited a combined ratio of 100%. However, this excluded the losses of the now closed Lloyd’s Syndicate 1884 (estimated by Tysers at $50m) and the 5% P&I premium returns of 2016 and 2017. Tysers understood the combined ratio including these two factors to be in the region of 113%.

The Club saw an underwriting loss of $49m across all business, partially compensated for by an investment return of $4m (2.2%).

The Club incorporated the Strike Club at the start of the policy year on February 20th, having previously managed it as a separate entity. This added $19m to the balance sheet, so limiting the drop in free reserves from $462m to $435m.

During the year the Club established a facility for Chinese owners with the local insurer Ping An, following on similar agreements with the Korean P&I Club.

P&I owned tonnage reduced by 2m to 130m gt; chartered tonnage experienced a similar reduction. Tysers said that Standard Club attributed this to its strict underwriting policy rather than members leaving of their own free will.

Chairman Cesare d’Amico gave a clear warning that the marine market was turning. Claims in 2018 returned to levels last seen in 2013 and d’Amico said that he was convinced the benign claims environment of the past few years was definitely over and that premiums would have to rise.

The Club said that it was experiencing claims inflation of 4% per annum. It suffered four Pool claims in 2018, more than twice the expected norm. For the 2018/19 financial year net incurred claims rose by nearly $42m to $274m (2017/18 $232m, 2016/17 $201m).

The Club’s operating costs rose from $46m to $81m. For the P&I class the five-year Average Expense Ratio rose from 12.5% to 12.78%. Tysers said it understood that most of the increase in 2018 was due to the inclusion of the Lloyd’s Syndicate’s current and run-off costs and brokerage.

Gallagher said that the entirety of the Club’s 2018/ 19 underwriting loss was generated by the syndicate (including provisions for future run off costs) whilst the rest of the book performed at break even level.

The broker observed that the impact of the poor performance of the syndicate was magnified by the fact that the Club was responsible for 86% of the capacity in the syndicate’s final year. The run off will be carried out by club managers Charles Taylor.

The Club has activated its Irish Brexit contingency company, and all its non UK EU/ EEA business was renewed into this company for 2019/20. This represented some 40% of global call income.

In September the directors of Charles Taylor plc unanimously recommended that their shareholders accept a deal which will in effect privatize the company.

The deal is to be backed by private equity company Lovell Minnick and the acquisition price represents a 34% uplift in the share value. Gallagher said that Standard Club was understood to hold a significant minority stake in Charles Taylor plc.

Tonnage by vessel type (Tysers)

Tankers 31%
Cargo/Container 30%
Bulkers 24%
Offshore 12%
Passenger/Ferries 2%
Other 1%

Tonnage by Entered Vessel (Gallagher)

Tanker/Gas Carrier 31%
Container/General Cargo 30%
Bulker 24%
Offshore 12%
Passenger/Ferry 2%
Other 1%

Tonnage by Area (Tysers)

Europe 52%
Asia 27%
ROW 10%
Canada 6%
USA 5%

Tonnage by Geographical Area (Gallagher)

Europe 57%
Asia-Pacific 27%
Americas 11%
ROW 5%
Year          2019 2018 2017 2016 2015
Calls/Premium 386,400 334,300 338,800 354,300 354,000
Reinsurance Cost 80,700 80,800 77,000 90,100 92,000
Net Claims (incurred) 274,100 232,300 200,800 206,900 233,800
Operating Expenses 81,100 45,700 43,500 39,600 28,600
Net Underwriting Result (49,500) (24,500) 17,500 17,700 (400)
Gross Outstanding Claims 883,600 967,900 971,100 976,000 1,000,400
Total Assets 1,466,300 1,538,400 1,477,100 1,426,400 1,449,600
Average Expense Ratio 12.78% 12.50% 12.40% 12.20% 11.40%
Solvency Margin 1.66 1.59 1.52 1.46 1.45
Reserves/GT Ratio $3.34 $3.50 $3.42 $3.36 $3.40

All figures $’000