The performance of the 2012 and 2013 policy years indicates claims have resumed their upward trend.
After 2011, which was an exceptionally good year, 2012 showed an increase in claims values, even though the frequency of claims continued to reflect the impact of recessionary pressures on shipping. At the year end it was clear that 2012 had seen an increase in the larger claims and in particular, in the number of Pool claims. The current policy year is, at six months development, one of the most expensive claims years of any out of the last 15 years. This is being driven once again by an increase in the number of large claims, although in contrast to 2012 most of the claims are within the Club retention.
The breakdown of the notified claims by risk type (Figure 2) shows the impact of the Pool and cargo claims on 2012 and the Club’s own exposure to casualty claims in 2013. In contrast to the high Pool costs for the 2012 policy year after six months, in 2013 the Pool is relatively subdued so far.
Although it is early in the 2013 policy year, the frequency of large claims in the first six months, particularly those over $3 million, has been greater than in any other recent year. The total cost of notified large claims (those over $0.5million) for the current policy year is more than 25 per cent higher than any year in the previous fifteen and represents 63 per cent of the total claims cost for the period despite being only one per cent of the total claims by number.
Attritional claims correlate closely with world trade and the levels of shipping activity. In 2009 there was a significant reduction in the number of claims following the macroeconomic downturn. Subsequently, the number of claims, which fell by nearly 30 per cent, has remained low.
The total cost of claims fell markedly in 2009 and 2010 as a result of the reduction in frequency. However since then the cost has started to rise.
Despite continuing lower claims frequency the most recent 2012 and 2013 policy years look likely to have a similar cost to the 2006 policy year, which was just before the claims peak in 2007 and 2008.
If recovering markets prompt a swift return to the higher numbers of claims experienced before the economic downturn, the impact will be compounded by the new higher cost per claim observed over the last three years and the gap between premium and claims will continue to grow.