West P&I Club reports increased combined ratio during “challenging year”

West Of England P&I Club has reported a combined ratio of 139.8% for 2020 during a year which it said was “marked by a greater number of higher severity losses, both within the Club’s own retention and on the Pool”.

After a period of improving performance the Club’s operating result reflected an increased claims experience and lower investment return than in 2019.

Year 2021 2020 2019 2018 2017
CR (%) 139.8 107.2 114.4 116.0 87.2

The investment return was again positive, returning $33.3m, equal to 4.6%. West said that the strategic allocation served the Club well during the extreme market volatility in March 2020.

Year 2021 2020 2019 2018 2017
Inv Ret (%) 4.6 6.5 3.9 4.8 1.0

For Class One (P&I) Members’ Claims, the Club said that the incurred cost at 12 months was higher than any preceding year at the 12-month point. Attritional claims were greater than budgeted due to the cost of Covid-related claims, which exceeded $12m.

Compounding this, the Club’s own large loss experience was worse than expected, with four claims notified to the IG Pool.

West CEO Tom Bowsher said that the ongoing Covid pandemic had meant a challenging year for the Club on all fronts, especially in respect of investment markets and claims. “It has of course also been a difficult period for our Members – especially with regard to their crews – and for the Club’s staff but we are pleased to note that service levels have been maintained throughout”, he said.

He said that there was a continued, market-wide underrating of tonnage relative to risk; Increased contributions towards record levels of high value claims in the International Group Pool, with Policy Year 2020 tracking above Policy Years 2018 and 2019, which were already the highest for a number of years at equivalent points;

West’s own Members’ claims performed poorly, particularly the severity of large losses.

Covid-specific claims came to more than $10m. There were also general difficulties in claims-handling that were caused by the effects of the pandemic.

Free Reserves fell to $291.1m.

The Club noted that it continued to meet its objective of maintaining capital in excess of the AAA rating on S&P capital model, and that this was reflected in the Club’s continued financial strength rating of A-.

The Club said that, despite the challenges of the last 12 months, West remained “well-positioned to emerge strongly from these unprecedented times, especially in light of a successful renewal that saw premium increases broadly in line with the general surcharge set by the Board”.

There was a strategic de-risking of certain underperforming fleets, representing some 7.5m gt.

Policy Years and Release Calls

P&I – Class 1

  • 2018/19 – Closed in surplus without further call
  • 2019/20 – Release call reduced to 0% of the estimated total mutual call
  • 2020/21 – Release call maintained at 15% of the estimated total mutual call
  • 2021/22 – Release call maintained at 15% of the estimated total mutual call

For FD&D the only differences are:

  • 2017/18 – Closed in surplus without further call
  • 2018/19 – Release call maintained at 0% of the estimated mutual call

The Club said that significant progress was made in addressing the underwriting deficit at this year’s renewal. West also achieved premium increases in line with the general surcharge set by the Board, which had become necessary after years of premium erosion.

Bowsher concluded that “this has been an extremely difficult year for our Members and the Club alike and the pandemic has imposed some unique strains on the industry. However, our staff have responded magnificently in maintaining our very high service levels despite these challenging market conditions. I am also pleased that West’s strong capital base and positive investment performance mean that we are well placed to continue supporting our Members as we hopefully begin to return to normality.”

The Report and Accounts 2021 will be published in the coming months, at which point IMN will take a more forensic look at the numbers.