The Club has continued to increase mutual tonnage since renewal, with 122.5 million GT on risk.
The net growth results from a relatively high turnover of tonnage with 6.4 million GT coming on risk and 4.1 million GT going off risk through sales and scrapping. In welcoming new entries and new Members, the Club strives for the highest quality membership and does not sacrifice standards for growth’s sake. The Club remains vigilant and to date in 2013 has declined to quote for just over 7.5 million GT, the highest yearly rate in a decade.
Over the last two years, many Members have renewed their fleets so reducing the age profile of the Club to its youngest for several decades. Market rates on newbuildings tend to be more competitive than older tonnage. The younger age profile has reduced premium per ton for the Club as a whole – the so-called “churn effect” - therefore general premium levels need to increase based on claims experience or as a vessel ages.
For many Members, subdued earnings and a lingering shipping recession remain an unwelcome fact of life. However, as was said in last year’s October Review, the Club needs to keep premiums moving forward in line with the actual claims experience and to address underlying claims inflation, as well as a future pick up in claims frequency from what have been record low levels. If premiums were to stand still now, substantial premium corrections would be required when claims frequency return to more normal levels as shipping markets recover. In essence, the choice is between relatively modest premium increases in the short term or more substantial and painful increases in future. The Board does not view the latter option as being in the best long-term interests of Members or the Club. Nor, in an environment of rising claims costs and volatile investments, can the Club rely on investment income to resolve deficiencies in underwriting performance. It therefore remains important that the Club maintains its underwriting in balance.