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UK P&I Club capital reaches record high
Club is now back in a position of considerable financial strength
The UK P&I Club has built on the success of last year delivering an increase in capital and free reserves of $68 million to an all-time high of $478 million. The Club’s results for the year ended 20th February 2011 were reported to the Board in Seoul this week.
- Total assets $1.6 billion
- The free reserve capital ratio, at 159 per cent (151 per cent in 2010), one of the strongest ratios in the International Group.
- Capital and free reserves of over $4.50 per gross tons
- Combined ratio of 98%
- Free reserves and capital increased to $478 million from $409 million
- Investment return of over 6.2%, achieving nearly $70 million investment return
- Improved forecast for 2008 & 2009 policy years, and cautious optimism for 2010 as number of claims continue to abate
- Long term increase in the average cost of P&I claims continues (2000: $17,000 - 2010: $29,100)
- Membership quality – nearly 65% of entered ships less ten years old
- Club well prepared for Solvency 2
- Strong focus on risk management and corporate governance
- Maintenance of S&P rating: A- (Stable outlook)
- Very strong capital adequacy, comfortably in AA range of S&P capital model
Dino Caroussis, Chairman of the UK P&I Club, commented:
“We have achieved our goal of balanced underwriting so that all the $69 million investment return of the year is transferred to the reserves. The Club’s $478 million free reserves and capital are the highest they have ever been, our Members can be confident that the process of rebuilding the Club’s reserves has been successful. The Club is back in a position of considerable financial strength from which to meet the challenges of the future.”
Balanced underwriting and boost to capital & free reserves
Free reserves and capital at 20th February 2011 increased by over $68 million to $478 million ($409 million at 20th February 2010).
The Club now has $1.6 billion in total assets, and a free reserve and capital ratio of 159% on a consistent and prudent approach to reserving. The Club’s financial strength is now one of the strongest in the International Group.
The positive investment return of more than six per cent – equivalent to nearly $70 million – further strengthening the Club’s financial position.
A combined ratio of 98 per cent, reflecting both improved underwriting discipline and prudent claims reserving, was key to this surplus.
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 which falls comfortably within the AA range of S&P’s capital model. A full A rating remains a key financial target for the Club.
Positive trend in claims
The reducing trend in the number of claims evident in the 2009 policy year has continued into the 2010 year, particularly at the attritional level of sub $0.5 million claims. The outlook for such attritional claims is likely to be benign in the future as there is now strong evidence of a link between the number of such claims and the performance of international shipping markets.
Positive developments in the claims for 2008 and 2009 policy years have reduced the forecast final figures for both those years.
Although the number of claims has fallen recently, the average cost per claims continues its long term upward trend almost doubling from $17,800 in 2000 to $29,100 in 2010.
The Club has also renewed its own comprehensive reinsurance programme. This programme is designed to protect the Club against not only single major losses but also materially adverse aggregation of claims at lower levels both within the Club retentions and at Pool level.
Benefits of underwriting discipline
Improved loss ratios, a reduction in the average age of the Club’s fleet of insured ships and sustained levels of both owned and chartered ships yielded a favourable underwriting year for the Club. After the February 2011 renewal, 65 per cent of the total fleet of owned ships in the Club were less than ten years old, a third of the total are less than five years old.
Quality of membership remains a priority for the Club which declined to quote terms during the year on more than 5 million gross tons of shipping which did not meet its standards. For existing entries, the Club continues to work with Members identifying best practices and sharing loss prevention experience. Its ship inspectors directly implemented that policy by visiting 350 entered ships during the course of the year.
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
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Tel: +44 (0) 20 7345 5232