West of England Club has announced that it will be imposing a 15% general increase in Class 1 (P&I) and Class 2 (FD&D) for the coming policy year 2022/23. For non-mutual covers in both classes there will be no generally announced increase, but rates on policies would rise.
Deductibles will also rise.
Group CEO Tom Bowsher told members that the weak rating environment had persisted and the Club had continued to be disciplined in its approach to new business. The Club’s current mutual entry of 107m GT meant the combined owned, chartered and fixed tonnage was broadly unchanged from the total at February 20th 2021.
Bowsher said that the Club’s underlying claims experience in general had met or exceeded expectations. However, there had been an escalation in Covid-related claims, particularly since the advent of the Delta variant, which had necessitated the Board having to increase the expected claims cost for Members’ claims for the current Policy Year.
He also noted that, while the frequency of notified claims to the International Group Pool had not exceeded expectations, the marked increase in the severity of those claims continued to be “a significant issue for the industry, and the incurred cost at the six month point far exceeds the preceding year which has already been reported at a historically high level”.
As a consequence of these factors the Club’s combined ratio, while expected to improve on last year, was again expected to exceed 100%.
Bowsher said that the Board had maintained its long-standing investment strategy. The financial investment return was currently +1.3% at $10m. However, he said that future investment return prospects were low. While investment income was forecast to remain positive at year-end, it would not be sufficient to cover the Club’s technical deficit. As a result, the Free Reserve was forecast to fall at the end of the current policy year on February 20th 2022.
There have been no supplementary budget calls in either Class 1 or Class 2.
For 2022/23 policy year the following will be applied:
- For Class 1 (P&I) entries a 15% standard surcharge has been set to apply to all mutual premium rates.
- For Members whose records are adverse, de-risking action will be taken where necessary and rates and terms will be increased and adjusted as appropriate to reflect record and/or risk exposure.
- No change will be made to the Rules Deductible for Class 1 entries. However all other deductibles will be increased by 15% and a minimum increase of $2,500 will be applied.
- An estimated total mutual call to be payable in 5 equal instalments, each of 20% of the total mutual call. Four instalments shall be paid during the policy year with the fifth in August the following year. A release call of 15% shall apply.
- In addition to the 15% standard surcharge, rates will be adjusted to reflect any changes in the cost of the International Group reinsurance programme, whether up or down.
- For Class 2 (FD&D) entries a 15% standard surcharge has been set to apply to all mutual premium rates.
- For Class 2 entries no change will be made to the one fourth deductible formula.
- As with Class 1, an estimated total mutual call to be payable in 5 equal instalments, each of 20% of the total mutual call. Four instalments shall be paid during the policy year with the fifth in August the following year. A release call of 15% shall apply.
The Club said that, for non-mutual covers, reinsurance costs associated with these classes of business had increased significantly in recent years across the entire industry. Indications were that they were expected to increase further into 2022/23. The Board has not set a standard surcharge, but rates and terms will be increased and adjusted as appropriate to reflect the increased reinsurance cost, Member’s record and/or risk exposure.
For charterers and fixed premium rates, no change will be made to current practice; premium shall be payable in up to four equal instalments during the Policy Year.
A further Notice to Members will be issued later in the autumn to detail any changes in the Group reinsurance rates, scope of cover and limits.