UK Club has said that it will target an overall 7.5% premium increase at the forthcoming renewal, but that ” given the variation in premium adequacy across the membership, the Board have decided that a general increase is not appropriate”.
It has proposed instead to “target an overall 7.5% premium increase by approaching each Member’s renewal in a fair manner based upon the risk that they bring to the Club”.
For the 2020 policy year UK’s standard deductible will increase from $12,000 to $15,000 per event, including fees and expenses.
The Club noted that it retained more than $500m in free reserves and that it’s a (stable) rating had been reaffirmed by S&P and had been extended to UKNV, the Club’s newly established insurer for European risks.
However, UK Club said that premium rates were no longer sufficient to cover the cost of claims and expenses. It noted that members had “benefited from significantly reduced rates across the P&I sector over recent years” and this had led to an underwriting deficit being announced by the Club at the end of last year.
UK Club said that this mirrored the experience of the P&I market as a whole, which last year reported its first deficit for more than a decade.
The Club said that the number of attritional claims had continued to fall and that this had mitigated the impact of the underlying claims inflation, which continued to run at roughly 4% a year.
While the attritional claims picture was stable, the Club said that it remained exposed to the more volatile larger claims – typically those costing more than $2m. Last year six such claims above the average expected added $40m to the overall claims cost. For the policy year to date, UK Club said that the overall cost of claims for the current policy year was developing in line with the previous year.
As premium rates had declined further at the last renewal, the Club warned that this meant that the combined ratio reported for 2019/20 “may be higher than the 114% announced last year”, while adding that much would depend on the Club’s large claims experience during the second half of the year.
Over the first six months of the policy year strong returns from the Club’s investment portfolio had covered the underwriting deficit. “However, relying on investment return to cover underwriting deficit is unsustainable over time and action is required now to restore underwriting balance”, said UK Club.
Finally, for open policy years there will be no supplementary premium.
For 2017 policy year and 2018 policy year the release call is set at 5%.
For 2019 policy year the release call is set at 10% of mutual premium plus any outstanding instalments of mutual premium.
For the 2020 policy year the release call is set at 15% of mutual premium plus any outstanding instalments of mutual premium.