Claims

Claims overview

In the first half of the 2011 policy year, claims levels remained low, due to the depressed shipping market and the consequent reduced frequency of claims. Currently, the claims experience on the 2011 year is looking to be similar to the 2009 policy year.

However, it is still early in this year’s development and the ultimate outcome could yet change significantly depending on claims experience in the second half of the policy year. Should the claims development  continue in the same way for the second half of the year, then it will be the Club’s best year for claims for a decade. Cargo claims for the first six months of 2011 policy year were 76 per cent by number compared to 2008; injury claims were 67 per cent by number for the same period compared with 2008.

Past policy years

Back years have shown an improving trend, especially 2008, 2009 and 2010. At the half year stage, it has been possible to release $25 million from the claims reserves while maintaining the same level of reserving
confidence. The Club’s strong margins mean that it should be capable of weathering an unexpected  deterioration in claims on past years without affecting free reserves. 

Underlying claims inflation

Underlying claims inflation has been a feature running at about 5 per cent each year, with some categories of claim inflating at rates of up to 15 per cent. While the shipping market remains depressed, it is expected that the total cost of claims will be lower than previous years, due to the reduced frequency of claims. It is difficult to predict when shipping will recover and it is possible that some sectors or areas of the world may come out of recession earlier than others with a consequent rise in claims.

Illness

Illness claims have proved to be the stand out category of claim in terms of improvement across a number of policy years. A number of larger claims have seen a better than expected outcome as well as  improvement in the smaller attritional claims, which has seen net notified claims numbers trending downwards over the past few years.

Pool

After the run of very heavy Pool claims in 2004, 2006 and 2007 at the peak of the shipping market, the level of claims coming through into the Pool has abated significantly. Although 2008 showed a high level of retained claims, this was not matched by a high level of Pool claims.

Conversely, in 2009 and 2010 the largest claims on the Pool were UK Club claims, at a time when the Club’s retained claims were significantly reduced. This underlines the essentially random nature of Pool claims.

The overall cost of Pool claims to the Club over 2008, 2009 and 2010 policy years remains within  expectations and has been capped by the purchase of reinsurance protection by the Club. The Club’s credit balance on the Pool currently stands at $68 million.