Providing our Members with exceptional claims service is at the heart of everything we do.
The 2015 policy year was a good claims year for the Club. The total cost of notified claims after 12 months is one of the lowest of the last decade. Overall the number of claims notified to the Club in respect of the 2015 policy year has fallen in comparison with previous policy years.
The number of large claims has a significant impact on the overall cost of the policy year, but very few claims in 2015 have exceeded $1 million.
The prudently reserved prior policy years have developed favourably over the last twelve months. This has allowed a reduction in claims provision without decreasing the overall confidence in the strength of the reserves. This reduction has contributed to an exceptional year for the Club with a reported combined ratio of 92%
After twelve months, the total cost of the 2015 policy year is 25% lower than the average of the last ten years and nearly 40% lower than the most expensive year over that period.
The year was also notable for the exceptionally low cost of casualty claims. These claims tend to relate to larger incidents and therefore the total cost of casualty claims is more volatile than other categories.
The number of claims notified to the Club has continued to fall across all categories of claim. Numerous factors influence the frequency of claims including the state of the global economy and particularly the dry cargo market, improved risk management, the average age of the fleet and increases in individual fleet deductibles. The number of claims brought to the Club today is just over half that of the peak during the shipping boom of 2007 and 2008.
Between the 2009 policy year and the 2012 policy year, the average cost of each claim was increasing at a faster rate than the decline in claims frequency. The total cost of claims has therefore been rising. However, since 2012 the reduction in claims frequency has been greater than the underlying inflation in claims. Despite this, the average cost of each attritional claim is inflating at over 4% each year and today the average cost is over 40% more expensive than a decade ago. The average premium rate per ton has reduced by 11% over the same period.
Although the number of large claims notified to the Club is low, the impact of these claims on our Members and on the Club is considerable. In aggregate, these claims can represent up to half of the total claims cost of any given year. Large claims are more random and therefore less predictable than attritional claims. It is principally the large claims that bring volatility to the claims cost of the policy year.