12 May 2016 Insurance

UK P&I Club maintains stable capital position

The UK P&I Club (The Club), a provider shipping protection and indemnity insurance, has reported that its capital position maintained stable for 2015, despite difficult investment markets.

Its 2015/2016 combined ratio was 92 percent, below the firm’s average combined ratio of 100 percent over past six years.
The Club’s free reserves remain stable at $547 million and its Standard & Poor’s rating remained at full A (stable).

During 2015, Club added net 4 million gross tons of mutual business. Mutual-owned tonnage now totals 135 million gross tons also and combined mutual-owned and chartered tonnage was up 6.8 percent in the year to over 235 million gross tons.

The Club also said the cost of claims in 2015 was one of the lowest for a decade and the claims profile was very similar to that of 2011, which was one of the best claims years on record.

“Two key features have contributed to this result: a lower number of expensive casualty claims and the reduced number of claims overall,” it said. “Our continuing good fortune in avoiding the larger casualty claims also means that our overall credit balance on the Pool is now just under $140 million."

The Club said that the low cost of claims was good news for its members as it means that it will pay reduced contributions to our share of pool claims.

“At the same time, we cannot be complacent: the average cost of each additional claim is inflating at over 4 percent a year and a small increase in the number of claims together with a handful of large casualty claims could result in a poor claims year,” it added.

Alan Olivier, chairman of the UK P&I Club, said: “2015 has proved to be another good year for the Club culminating with a very positive renewal. On the financial side, we ended the year with a small surplus despite a loss from our investment portfolio. This positive result in a poor year for the investment markets can be attributed to our disciplined approach to underwriting.

“The combined ratio for the financial year was 92 percent; a very creditable result in the prevailing soft market conditions. This year’s result means that the Club will have delivered an underwriting result at or close to our target breakeven 100 percent combined ratio for the past six years."

He added: “Consistent underwriting results have helped to build our capital reserves and I was delighted that once again we were able to reflect our continuing strong financial performance by reducing our premium requirement last year. In October, we reduced the final premium instalment of the 2014 year by 10 percent, an overall reduction of 2.5 percent on that year’s premium. As I said in my statement two years ago, if the circumstances allow - particularly in the event of another strong underwriting year, I would hope that it would be possible to make further returns in the future."

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