Oct 18, 2011- The premium rating of all UK P&I Club Members will be increased by three per cent from 20th February 2012. This was agreed by the UK Club’s Directors at their meeting in Athens on 17th October.
This decision was taken in response to continuing underlying claims inflation. Although the frequency of claims had reduced significantly in 2009, 2010 and 2011, the average cost per claim has continued to increase over this period.
At 20th August, the UK Club’s total capital stood at $486 million, an $8 million improvement on the position since 20th February 2011 ($478 million). This further increase in the Club’s capital base has been achieved whilst maintaining a consistent and prudent approach to claims reserving.
Investment return for the half year to 20th August was $14.5 million, equivalent to a 1.8 per cent return. The Club reduced portfolio risk in September reducing equities to 9 per cent of the portfolio and increasing fixed interest holdings to 72 per cent. Ninety-nine per cent of all bonds invested in by the Club are A grade or better.
The Club is expecting to see its combined ratio below 100 per cent for the current year.
Speaking at the evening reception for UK Club Members after the Board meeting,
Chairman Dino Caroussis explained their decision on the general increase:
“We were determined to strike a balance between ensuring our premium does not fall behind claims inflation while at the same time doing all we could to limit the impact of the increase on our shipowner members. Although we have been fortunate to enjoy lower claims numbers, there is still an average inflation on P&I claims of around 5 per cent. This underlying inflation will quickly manifest itself in our claims costs once the frequency picks up again, as it surely will one day. Taking all of this into account we set the general increase for 2012 at 3 per cent.
Mr Caroussis continued, “This strengthening of our financial position has been largely brought about by a reduction in the number of claims, driven mainly by the drop in world trade. But we have also been able to contribute to that reduction by careful management of our risks.”
Mr Caroussis also commented on the UK Club’s financial standing, “Free reserves have been rebuilt. Last year these stood at $478 million. Today, those reserves have grown to $486 million. The Club’s capital adequacy as measured by S&P’s capital model is now in the AAA range and we have free reserves of $4.50 per ton.”
The Club continues to make significant and substantial progress in its preparations for the implementation of the new Solvency 2 regime. It has been reviewing its corporate structure and has identified that a reduction in the number of regulated entities would permit more efficient management of the Club’s solvency capital requirements as well as reduced compliance costs and streamlined governance. The Club Managers will be providing more details shortly by way of a dedicated area on the Club’s website.
