UK Club sees balance rise in policy year 2020, although net earned premiums decline

UK Club has published its group solvency and financial condition report for the year ended February 20th 2020 – a detailed look at the club’s financial situation.

For Solvency Capital Requirements (SCR) purposes the total eligible own funds stood at $714.4m (2019: $629.9m). Eligible own funds cover the SCR of $329.4m (2019: $303.0m) with a capital adequacy ratio of 216.9% (2019: 207.9%). The Minimum Capital Requirement is $70.1m (2019: $55.3m) leading to an MCR capital adequacy ratio of 784.5% (2019: 865.3%).

Total net earned premium income decreased by $12.9m, to $244.7m.

For the year to date UK Club noted that Covid-19 emerged in December 2019, and was classified as a global pandemic in March 2020. With the year-end date being February 20th, 2020, it was expected to have a very limited impact on the technical provisions. The investment portfolio fell by 5% to the end of March as investment markets reacted to the implications of Covid-19. However by the end of June the portfolio had returned to being in line with the year-end position.

Recent underwriting performance:

Amounts in $000 2020 2019
GPE 305,037 322,398
Outward reins prem. (60,386) (64,860)
NEP 244,651 257,538
Inv income 106,414 9,279
Total income 351,806 266,900
Amounts in $000 2020 2019
Net claims (280,771) (240,633)
Change in provision 29,064 (10,308)
Net claims (251,707) (250,941)
Net operating exp (43,724) (43,654)
Total Exp (295,431) (294,595)
Balance on technical account 56,375 (27,695)

Claims costs were broadly in line with expectations for the 2019/20 policy year, but the Club did experience some unusually late claims deterioration on prior policy years. This is in contrast to the previous year which saw very good prior year claims experience but an expensive 2018/19 policy year.

Giving further details on the impact of Covid-19 on the group, UK Club said that the Club had seen an increase in the number of illness claims but, at this very early stage, the amounts were not material and it was very difficult to determine what the final outcome would be. COVID-19 was having a negative impact on world trade and shipping volumes based on historical experience. The Club said that it “might expect a corresponding reduction in claims activity” but it was too early to ascertain eventual outcomes.

Operational risk had increased as a result of Covid-19 “as key staff may be either directly or indirectly affected by the virus. Furthermore, working remotely may increase cyber risks due to greater reliance on electronic communication”, the club warned.