West of England announces 7.5% general increase, rise in P&I deductible

West of England Club has said that, with claims increasing across the industry, and premium levels being eroded to levels that were no longer sustainable, it would be introducing a 7.5% standard charge for policy year 2021/22.

The Club noted at its meeting on October 21st that support from both new and existing Members meant that the Club’s mutual entry had grown to 103m gt, increasing the combined owned, chartered and fixed tonnage to 145m GT.

It said that higher cost claims continued to be an issue across the industry, with the International Group Pool losses also at an historically high level in 2020. This followed similarly high incurred cost years in 2018 and 2019. CEO Tom Bowsher said that as a result of this the Club’s combined ratio was again expected to be over 100%, with the Free Reserve forecast to fall at February 20th 2021.

West said that financial markets this year had been “exceptionally volatile”, but noted that the Club’s prudent investment strategy had protected it against the worst of the adverse movements in Equity and Credit markets. The investment return for the year to date was currently +2.6% ($19m). Investment income was forecast to remain positive at year-end, but the Club warned that the negative impact of Covid-19 on global markets, as well as geopolitical risks might trigger more volatility.

The release calls for Class 1 (P&I) will be:

2018/19 – Release call maintained at 0% of estimated total mutual call

2019/20 – Release call maintained at 7.5% of the estimated total mutual call

2020/21 – Release call maintained at 15% of the estimated total mutual call

The release calls for Class 2 (FD&D) will be:

2017/18– Release calls maintained at 0% of the advance call

2018/19 – Release calls maintained at 0% of the estimated total mutual call

2019/20 – Release call maintained to 7.5% of the estimated total mutual call

2020/21 – Release call maintained at 15% of the estimated total mutual call

Class 1 (P&I) and Class 2 (FD&D) Renewals for  2021/2022 will take into account the fact that premium insufficiency over the past three years had been subsidised by investment returns. The Board noted that this level of investment return had been underpinned by a significant reduction in US interest rates, which would not be repeatable.

While the Club’s capital position remained “very strong” and in excess of the AAA level as set by S&P, the Board instructed the Managers as follows:

For Class 1 (P&I) entries a 7.5% 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.

The Rules Deductible for Class 1 entries will be increased from $13,000 to $14,000, and where individual deductibles are below this level, they will be increased by $2,500.

As is usual, 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 7.5% standard surcharge has also been set to apply to all mutual premium rates.

For Class 2 entries no change will be made to the one fourth deductible formula.

The club said that reinsurance costs associated with Class 1 (P&I) and Class 2 (FD&D) Non-Mutual Covers business had increased significantly over the past 12 – 24 months across the entire industry.

Accordingly, while the Board had not set a standard surcharge, the Club said that rates and terms would 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 premium is payable in up to four equal instalments during the policy year.

https://www.westpandi.com/Publications/Notice-to-Members/2020-2021/CLASS-1-(P-I)-AND-CLASS-2-(FD-D)-POLICY-YEAR-BALAN