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Results show increased financial strength for UK P&I Club - 7 May 2010
Results show increased financial strength for UK P&I Club
7 May 2010
Results show increased financial strength for UK P&I Club
UK P&I Club has successfully weathered the storms of the last 18 months and looks to the financial and regulatory future with confidence. The Club’s results for the year ended February 20th 2010 were reported to the board in Genoa last week.
- Free reserves and capital increased to $409 million from $334 million
- Investment return over 8%
- Policy year deficits of 2006 and 2007 effectively eliminated
- General increase for Club members in 2010 levied at 5%, lower than previous years
- Confidence and loyalty to the Club remain high; 1.5 million gross tons of new entries have joined in the past three months
- Increased claims retention - the threshold for Pooling claims with International Group clubs - raised to $8 million each claim
- New comprehensive reinsurance programme to protect against single major losses and adverse aggregation of claims at Club and Pool level
- Club well prepared for Solvency 2
- Strong focus on risk management and corporate governance
- Maintenance of S&P A- (Stable outlook) rating with strong capitalization and very strong capital adequacy.
Dino Caroussis, Chairman of the UK P&I Club, commented:
“The UK Club moved closer to underwriting breakeven and continued to rebuild its capital position over the last year despite continuing uncertainty in the world economy and a tougher regulatory background. With a new and comprehensive reinsurance programme and robust financial models to ensure the requisite levels of capital, the Club is facing the future with confidence.”
Supplementary premium and investment boost
Free reserves and capital at 20th February 2010 increased by $75 million to $409 million ($334 million at 20th February 2009)
The Board's decision last October to levy the supplementary premium on the 2008 policy year at 20 per cent, as estimated has removed the deficits across the policy years of 2006, 2007 and 2008. The surplus generated on 2008 effectively eliminated the remaining deficits on the two earlier policy years.
A positive investment return of more than 8 per cent – equivalent to $79 million - further strengthened the Club’s financial position.
By increasing its equity weighting from 3 per cent to 15 per cent, reducing its cash position and investing in government backed securities, the Club added considerable value to its portfolio in 2009.
The Club is currently rated A- (stable outlook) by Standard & Poor’s. According to the rating agency, the Club’s strong capitalisation is supported by very strong capital adequacy. Progress towards underwriting breakeven and achieving a full A rating are key financial targets.
In the 2009 policy year, claims reduced significantly in most categories when compared with 2008 policy year. Levels have begun to show the expected reduction stemming from the slowdown in most world shipping markets.
Net notified claims on the 2009 year after 12 months were lower by $26.9 million or 14 per cent, compared to 2008; and by $47.8 million or 23 per cent, compared to 2007. Despite an increase in the final quarter, the net ultimate claims projection for 2009 (both retained and Pool) is lower than for the three previous heavy claims years of 2006 - 2008.
Facing regulation with confidence
Solvency 2 regulations will require insurers to hold higher levels of capital, backed by comprehensive risk management processes. This is clear from consultation papers and quantitative impact studies, in which the UK Club has participated. While the International Group has made some progress in discussing the structure and calibration of capital models with regulatory authorities, each club must face the challenge of ensuring that its own capital assessment and risk management remain appropriate for its size and complexity. The UK Club is well placed to meet this challenge, with robust financial models, increased capital and a new reinsurance programme.
New comprehensive Pool reinsurance
As past years have shown, claims levels are difficult to predict in advance of any policy year. After an extensive review of reinsurance protection for its own claims, the Club has put in place for the 2010 policy year a more comprehensive reinsurance programme than ever before. It is designed to protect the Club against single major losses and an adverse aggregation of claims, within Club retention and at Pool levels. It should reduce claims volatility substantially, restraining the Club’s combined ratio - the percentage of premiums an insurer pays out in claims and expenses--- while having a beneficial effect on the capital requirements of regulators and rating agencies.
Notes to editors:
UK P&I Club
The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited is generally known as the UK P&I Club. As a mutual association, the UK Club has no outside shareholders and no financial links with other organisations. Since its establishment in 1869, the Club has existed solely for the benefit of its members. Its structure as a mutual insurance association enables it to respond to the changing needs of its assureds and allows it to provide superior service, attention and coverage.
The UK P&I Club is directed by the members. Overall control lies with the directors, elected by the members from amongst themselves. The directors normally meet four times a year to formulate policy on calls, the scope of cover, finance, underwriting and claims matters, reinsurance and issues affecting the P&I world. They resolve specific claims which may not fall clearly within the cover.
Thomas Miller, the Club’s managers, are organised to respond promptly to requests for assistance and to provide informed advice and help with members' claims. Individual support goes far beyond that normally provided by a commercial insurer.
The UK Club’s size and the scale of the managers' operations has enabled the latter to develop specialist skills and expertise seldom seen in marine P&I.
In 350 ports around the world, on-the-spot help and local expertise is always available to members and the masters of their ships from the Club's 460 correspondents and claims handling services and advice from the network of offices and branches in London, Piraeus, New Jersey, San Francisco, Hong Kong, Singapore, Tokyo, Beijing and Shanghai.
The Thomas Miller Group manages a number of world-leading mutual insurance organisations or “clubs,” providing insurance for shipping, transport and professional indemnity risks; and captive insurance companies in the Isle of Man and Bermuda. Thomas Miller provides risk management consultancy services and, through its regulated specialist subsidiaries, delivers a full investment management service to mutual clubs, captives and other clients. The firm incorporated in 1999 and is owned and controlled by its 550 employees worldwide.
For further information :
Thomas Miller P&I Ltd
Hugo Wynn-Williams/Nick Whitear
Tel: +44 (0) 20 7283 4646
Smithfield Consultants Ltd – (Financial Press Enquiries)
John Kiely / Will Swan
Tel: +44 (0) 207 360 4900
Dunelm Public Relations - (Trade Press Enquiries)
Tel: +44 (0) 20 7345 5232