UK P&I Club said Friday that financial year 2016/17 had been “another strong year for the Club”. Although it had received notification of “a small number of large claims” towards the end of the year, which “turned what might have been a repeat of the low claims year of 2015 into a more average claims year”, the Club’s “decent underwriting result and strong performance within the investment markets” (4.5% return) kept it in surplus. Claims inflation was steady at 4%.
The combined ratio for the financial year was 104% excluding currency gains, reduced to 100% by a positive FX effect. UK Club said that this was “within the Club’s acceptable target range”. The loss ratio rose to 90.0%, from 77.6%.
Chairman Alan Olivier said that the total cost of notified claims over the first 12 months of the 2016 policy year was 4% lower than the average of the previous five years. He noted that 2016 was also a year of very few major casualties for the industry as a whole. For the Club, this still further reduced its percentage contribution to Pool claims.
Olivier observed that among the 12 larger casualties ($0.5m plus) were four collisions involving fishing vessels. He said that there was “sufficient anecdotal evidence” from other IG Clubs to suggest that there was “a wider problem involving navigation close to fishing vessels”. Three of the fishing vessels were Chinese and all the collisions involved fatalities on those vessels.
Over the first 12 months of the 2016 policy year the Club was notified of 36 x $0.5m-plus claims, in line with the average over the previous 10 policy years.
However, because the large claims in the 2016 policy year were more than 15% higher than the average of recent years, in order to cap its exposure to an unusually heavy year of large claims, the Club has purchased reinsurance to put a ceiling on the cost of those claims. “This cover will protect the Club should the largest claims on the 2016 policy year deteriorate further”, the Club said. It further noted that the
Club had revised the structure of the programme for the 2017 policy year. “The new structure brings enhanced cover with increased capital benefit and at a reduced premium”, the Club said.
UK P&I said that its target was “to provide insurance at cost” and said that the average combined ratio over the last seven financial years of 100% demonstrated that this target has been met consistently.
It said that capital efficiency and consistent underwriting performance enabled the Board to discount the 2015 policy year mutual premium by 3% — the third time that the Club has been able to return money over the past five years — bringing the total amount returned to more than $25m.
Free reserves as of February 20th 2017 were $458.4m with a further $99.4m held in hybrid capital. https://www.ukpandi.com/fileadmin/uploads/uk-pi/Documents/2017/2017_ROTY/2017_ROTY__Web_v2.pdf