The London P&I Club completed
its 2001/2002 financial year in a healthy position, with free reserves of more than $80m. In levying its supplementary call for the year in line with original estimates, the Club has also
maintained the stability of its supplementary calls for ten successive
The year was a difficult one for marine mutual liability underwriters. P&I
premiums, however, hardened in the wake of the marked increase in earlier
years' claims and a deterioration in the performance of investment markets.
In its Annual Review for 2002, the London Club confirms
that it achieved its
general premium increase target of 27.5 per cent across its entire
membership. And it pays tribute to its membership by pointing out that, at
year-end, the premiums reported due from them were below $500,000 - even
less than the previous year when the debtors/premium ratio was already the
lowest of any International Group club. The Club, pointing out that "this is
a useful measure of the quality of membership", notes that, alone among
clubs, virtually the whole of its premium is collected by year-end.
During the course of the policy year, a total of 91 vessels, aggregating
more than 4m gross tons, was entered into the Club for P&I risks. Of these,
48 were newbuildings. This serves to improve even further the Club's
impressive fleet age profile, in which more than forty per cent of entered
vessels are shown to be less than ten years old. The Club has the largest
average ship size in the International Group.
After the sale or disposal by members of mostly older and non-viable
tonnage, the Club's total entered tonnage for the year across all classes of
business was largely unchanged from the previous year at 31.5m gt.
Following the unusually high level of claims experienced in the 2000/2001
policy year, 2001/02 reverted to a more moderate level. In line with its
customary practice, the Club has adopted a very conservative reserve for
"incurred but not reported" (IBNR) claims in 2001/02, but the current level
of paid and outstanding claims for the year is running at a level some
twenty per cent less than for the previous year.
Commenting on the pressures facing the P&I industry in the past two years,
John M Lyras, Chairman of the London Club, writes in the Annual Review, "The
outstanding investment returns and low claims experienced in the 1990s
strengthened the Club sufficiently to withstand the strain, and the free
reserves remain substantial."
Paul Hinton, Chief Executive of A Bilbrough & Co, managers of the London
Club, concludes, "For the first time in living memory, the Club is having to
increase premiums largely because of depressed investment returns. Likewise,
this is the first occasion in recent history that our members are having to
find the funds to pay sharply increasing premiums at a time when freight
rates are low, so their resources are already stretched. It is in the
discussion and resolution of such issues that the value of leadership of the
Club's shipowner Committee in the decision-making process again becomes
apparent. Their insight into our members' circumstances and into how they
might react to the different possible courses of action represents a
valuable mechanism by which our system of mutuality is regulated."
"Regulatory requirements are causing clubs to review the constitution of
their boards and committees. But it is noticeable that there is no sign of
any appetite for more than the most minor change. That presumably represents
an implicit consensus as to the value of such overwhelming shipowner
representation and a commitment to maintain what is a quintessential part of
the traditional club structure."