Key financial indicators
2010 general increase
The premium rating of all UK P&I Club Members (mutual and fixed) will be increased by five per cent from 20th February, plus any increase in the cost of the International Group reinsurance premium for 2010 for the mutual Members.
The UK Club Board recognises it is imperative that the mutual premium level in 2010 is set with minimal reliance on investment income.
2008 supplementary premium decision maintained
Unlike the preceding two policy years, the 2008 year has not been impacted heavily by International Pool claims. However, it is now anticipated that the Club will incur a higher level of retained claims than any other year in the current decade. The Club has decided to maintain the supplementary premium at its original estimate of 20 per cent.
The Club’s supplementary premium on open policy years was an essential response to overall deficits from 2006 to 2008 that presented an unacceptable threat to its reserves and future financial health.
In 2007, in the light of the claims experience, the Club changed its policy so that the rate of release call reflects the relative maturity of the year's development, as is common in other clubs. The release call for 2008 is set at 30 per cent of mutual premium, i.e the supplementary premium due plus 10 per cent, plus any outstanding instalments of mutual premium. That for 2010 is set at 25 per cent of mutual premium plus any outstanding instalments.
Investment performance & policy
The investment return for the year to the end of August 2009 was 6.85 per cent, equivalent to $65 million.
The strength of investment income is partly due to the decision of the UK Club in March 2009 to increase its holdings in equities. Investment return is performing better than expected due to that increased weighting in equities at a time when the equity markets rallied; and a positive effect from currency translation. At the end of August, the Club’s exposure to equities represented 11 per cent of the total investment portfolio.
Free reserves and capital
At 18th August, the Club’s total capital stood at approximately $368 million, an increase of $34 million from the year ending at 20th February 2009 of $333 million.
Standard & Poor’s
The Club’s current Standard & Poor’s rating is A- (Stable Outlook).
2009 and beyond
Forecasting the level of claims for coming policy years is challenging and requires assessment of individual Member profiles and records, trends in legislation, shipping markets and macroeconomic factors affecting shipping.
The 2009 policy year is showing signs of lower levels of claims due to the downturn in the world economy and its effect on shipping markets. The six-month period between February and August 2009 has experienced an overall improvement in claims reserves.
The cost of the past 25 policy years for the UK Club, without inflation, has been subject to cyclical patterns. Looking to 2010 and beyond, key factors such as reduction in ton-miles and ship utilisation set against a large newbuildings delivery book complicates any projection. However, the past cyclical movement downward during shipping recessions may not be repeated.
Dino Caroussis, chairman of the UK P&I Club, said:
“The Club is pleased to report that the claims pressures and market wide investment losses that strained the Club this time last year have shown early signs of respite, with claims trending downward and investments producing significantly improved returns.
“The strong investment results of around seven per cent for the first half of this year in part reflect the decision of the Board at their January meeting to moderately increase the investment risk by returning to the equity markets which we had exited in October 2007. The Board remains optimistic that the second half of the year will allow the Club to build further on this solid base.
“The deteriorating claims picture we saw last year across the 2006, 2007 and 2008 policy years has now stabilised with the 2008 policy year showing a modest improvement from our forecast. This has been largely due to a more favourable result from other clubs’ pool claims which hit the UK Club particularly hard in 2006 and 2007 when compared to our own claims.
“The three years on which the Club levied supplementary premiums would now be showing substantial deficits without the benefit of these premiums. The Board is determined to put the Club’s finances in the strongest possible position going forward and will levy the supplementary premium for 2008 at the previously estimated and budgeted level of 20 per cent. The effect of the supplementary premiums thus collected will be to effectively eliminate the combined deficits on all three years.
“Having restored the Club’s capital and resources through the measures already taken, it would be foolhardy to allow premium levels to fall to a point where deficits are again likely. The Club has announced a five per cent general increase for 2010. A more modest level than in previous years reflects both the premium ratings achieved in the recent past and our belief that subdued shipping markets will, in the short term at least, produce subdued claims levels. This offers some optimism for the Club although, unfortunately, at a time of depressed activity for some segments of our membership.”
For further information:
The Club provides a detailed explanation of how key categories of claims perform in its “October 2009 Review” published this week. Copies can be downloaded from the UK Club website www.ukpandi.com or obtained from the press contacts listed below.
A photograph of UK Club Chairman, Dino Caroussis can be downloaded from www.dunelmpr.co.uk/UKP&I-Photogallery-NEW.htm
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
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 P&I Club has no outside shareholders and no financial links with other organisations. Since its establishment in 1869 the Club exists solely for the benefit of its Members. The Club's structure as a mutual insurance association enables it to be uniquely responsive to the changing needs of its assureds and allows it to provide superior service, attention and coverage to those Members.
The UK P&I Club is directed by the Members themselves. Overall control of the Club lies with the Directors, who are elected by the Club’s 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 current industry issues affecting the P&I world. They resolve specific claims which may not fall clearly within the cover.
In 350 ports around the world, on-the-spot help and local expertise is always available to Members and to the masters of their ships, from the Club's 460 correspondents. The network includes regional offices of the managers in New Jersey and Hong Kong as well as London. The office in New Jersey handles claims arising in the US east coast and Canada, while the offices in San Francisco cover part of North and Central America, Mexico and the Caribbean. These offices support the many claims handled by other US correspondents. The managers have offices in Piraeus, Tokyo (a branch owned by the Club), Beijing, Shanghai (both representative offices) and Singapore.
The Thomas Miller Group manages a number of world-leading mutual insurance organisations (clubs) providing insurance for shipping, transport and professional indemnity risks.
Thomas Miller manages captive insurance companies in the Isle of Man and Bermuda; provides risk management consultancy services; and (through its regulated specialist subsidiaries) delivers a full investment management service to mutual clubs, captives and other clients.
Previously a group of partnerships, the firm incorporated in 1999 and is now owned and controlled by its employees. Thomas Miller employs over 550 worldwide.