UK Club announces 5% general increase for 2010
October 30 2009 - 3:00AM
UK Regulatory
TIDM51EN
RNS Number : 6312B
United Kingdom Mutual Steam Ship As
30 October 2009
UK P&I Club announces 5 per cent general increase for 2010
30 October 2009
Key financial indicators
* 2010 policy year general increase of 5 per cent
* 2008 supplementary call of 20 per cent levied as estimated
* S&P rating is "A- (stable outlook)"
* Free reserve and capital to 18th September 2009 totalled $368 million, an
increase of $34 million from the 2008 year end.
* Investment return of 6.85 per cent equal to $65 million
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 Club Board recognizes 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 Group Pool claims. However, it is now anticipated to
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.
Release calls
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 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 the 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 the 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 that 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.
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)
Martin Rowland
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 its 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. The managers
have offices in Piraeus, Tokyo (a branch owned by the Club), Beijing, Shanghai
(both representative offices) and Singapore.
Thomas Miller
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 people
worldwide.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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