UK Club has decided to implement a 10% general increase for policy year 2021-22. It said that the decline in attritional claims, combined with the growing cost of large claims, rendered loss records less reliable as an indicator of future risk. “Even those Members operating without claims in recent years remain exposed to the unexpected large losses. It is the large and often random claims that are not covered by existing premium rates and therefore an increase in rates of 10% is necessary across the Membership”, the club said.
The Club reported that it remained financially strong, with free reserves in excess of $500m. S&P recently affirmed UK Club’s ‘A’ rating, albeit (as with many clubs) with a negative outlook on the basis of premium adequacy.
However, the Club noted that premium was no longer sufficient to cover the cost of claims and expenses. It said that there had been rate declines across the market over several years.
The Club said that the 10% general increase was intended to correct the underwriting deficit. As is normally the case, Members with adverse records would have to anticipate higher increases.
The standard deductible will remain unchanged at $15,000 per event, including fees and expenses.
The Club said that the Covid-19 pandemic had brought an increased but manageable level of additional claims, substantial investment market volatility and fresh operational challenges including, for many Members, hardship for many crew on board.
Over the first six months of the policy year UK Club reported that the number of attritional claims (those below $500,000) had continued to fall. This had mitigated the impact of the underlying claims inflation, which continued to run at approximately 4% year on year.
The Club said that it remained exposed to the more volatile larger claims (typically those costing more than $2m) and Pool claims (more than $10m).
Repeating the observations of all other clubs that to date have reported H1 figures, UK Club said that the Pool had been particularly active, with the 2020 policy year pool could prove one of the most expensive in history.
It said that UK Club’s contribution to claims arising through the Pool in policy year H1 was about three times greater than over the comparable period in recent years.
Only two of the claims notified to the Pool in the 2020 policy year could be linked directly to the Covid-19 pandemic. “Even if these two claims were excluded, the underlying trend over recent years suggests an increasing cost of very large claims within the P&I market”, said the Club.
On the investment side, UK Club said that over the first six months of the current year, global investment markets suffered the largest decline since the financial crisis, but rallied strongly during late spring to recover fully. However, it warned that investment returns could not be relied upon to subsidize underwriting deficits in future years.
For the 2021 policy year, the release call is set at 20% of mutual premium plus any outstanding instalments of mutual premium. The mutual premium for 2021 will be payable in four instalments.
- 2018 policy year:
- There is no supplementary premium estimated for this policy year. The release call is set at 5%.
- 2019 policy year:
- There is no supplementary premium estimated for this policy year. The release call is set at 10%.
- 2020 policy year:
- There is no supplementary premium estimated for this policy year. The release call is set at 15% of mutual premium plus any outstanding instalments of mutual premium.