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 final club:
The West of England Shipowners Mutual Insurance Association (Luxembourg)
Standard & Poor’s Rating A-
Tysers referred to 2018/19 as “another testing year for West”, citing a combined ratio of 114% (2017/18: 116%) that increased the three-year average to 106%, from 96% the previous year. The underwriting loss was $26m. Free reserves reduced from $308.5m to $306.4m.
An investment return of $24m (3.9%) reduced the overall loss for the year to $2m, but Tysers observed that about half of this return was the net benefit to the balance sheet of the sale of the Club’s London property on the south side of Tower Bridge and the move to rented offices in the heart of the City of London. Gallagher said that the Club sold its London offices at a profit of approximately $10m, inclusive of exchange differences. Gallagher also observed that, whilst this would result in a short-term boost to investment earnings, there would be “a resultant increase in premises costs within overheads in future years”.
Owned tonnage grew by just over 2m to 92.8m gt, with chartered tonnage stable at 30m gt.
Chairman Francis Sarre reported good controlled growth in the Club’s fixed premium small vessel business, with specialist staff recruited to develop this side of the portfolio.
As Tysers observed, West’s problem was not attritional claims under $500,000, which were running in line with or even better than expected. Even claims up to $5m, while naturally showing more volatility were not the problem but, as was the case with most other group clubs, in the past two years the Club had been hit with a number of large losses over $5m. The average incidence of such claims for the period 2011 -2016 was less than two per annum, but the Club suffered seven in 2017 and five in 2018. Four of the 2018 claims were particularly severe and hit the Pool.
West of England might have been considered “ahead of the curve” in that last year the Club decided that a general increase was both necessary and desirable.
CEO Tom Bowsher has said that “premiums across the market have been reduced to a level where it is difficult to foresee operating results being positive in the short-term”.
Gallagher noted that In 2017/18 the club had suffered from a disproportionate incidence of large claims which had caused its incurred claims figure to jump by 36% to $169m. This had halted the recent revival in their underwriting returns and led to a $28m underwriting loss. “One might have expected that claims would fall back to less painful levels in 2018/ 19, since large losses are random – but in this case lightning does strike twice”, said Gallagher, noting that claims stayed at the $169m level in 2018/ 19 and that a similar $26m underwriting loss ensued.
With effect from the 2020 – 21 renewal, the cost of the international group reinsurance programme will be recharged to Members as part of their mutual premium, in line with the other 12 IGA Members. Previously it has been charged as a separate, non-mutual, element of the premium.
Tonnage by vessel type (Tysers)
Tonnage by vessel type (Gallagher)
Tonnage By Area (Tysers)
Tonnage by area (Gallagher)
|Net Claims (incurred)||169,668||169,143||123,772||118,072||136,280|
|Net Underwriting Result||(26,026)||(28,234)||23,217||30,149||4,549|
|Gross Outstanding Claims||567,069||577,660||602,525||601,699||598,825|
|Average Expense Ratio||14.68%||14.75%||15.15%||15.50%||14.86%|
All figures $’000