A developing trend in the number and quantum of higher value claims has led the smaller tonnage specialist the Shipowners’ Club to announce a general increase in premiums of 5% from 20th February 2013.
In its half-yearly report published today, Shipowners highlights the continuing growth in the Club. This is a reflection of fleet growth and the purchase of extended cover by existing Members, and the addition of new Members throughout the six month period. Despite there being no general increase for the current year, earned premiums for the period are up by 4.4% compared with 2011 and entered tonnage is up by a similar percentage (4.3%).
This growth has been carefully controlled and the performance for the period has remained strong with an underwriting surplus of USD 9.8 million representing a combined ratio of 90%.
The Club’s investment strategy is providing satisfactory results with both bond and equity portfolio returns ahead of expectations and a total return on investments of USD 6.1 million. This has contributed to an overall surplus for the six months of USD 15.6 million, increasing free reserves to USD 250.4 million.
However, a trend which began in 2011 is evolving more strongly in 2012. Once fully developed, it is anticipated that the 2011 claims position will show a 10% increase in the cost of claims per ton as compared to 2010. This trend has continued through the first half of the current year with claims in the higher value range (USD 1 million to USD 5 million) increasing significantly in frequency against the same period in 2011.
This pattern of claims makes it necessary to impose a general increase of 5% on premiums at the next renewal to ensure that the Club’s strong operating performance continues in 2013.
Commenting on these results, Shipowners’ Chief Executive, Charles Hume said, “While we are happy to see the continued growth in the Club as indicated by increases in both earned income and tonnage, we must also react to the trend of rising claims. In addition to our own retained claims we must anticipate an increase in the cost of our reinsurance programme and the Directors have therefore decided that there should be a 5% increase in premiums, which will include any additional reinsurance cost.
“We appreciate that operating conditions remain difficult for many of our Members but we must ensure that the Club’s premium income and claims remain in balance. We are confident that our Members will recognise the importance of maintaining the Club’s financial security into the future,” concluded Hume.