At their board meeting on October 22, the directors of the Steamship Mutual reviewed the club’s open policy years, as well as claims in earlier years, and considered the premium ratings required for the 2014 policy year.
On the basis of owned claims reported to date, the overall value of claims for the current policy year is expected to be high, continuing the trend of recent years. It was noted that the total value of claims in the layer up to $250,000 is marginally below last year, with 15% fewer claims being offset by a 10% increase in the average cost of claims, the value of claims estimated in excess of $250,000, net of applicable reinsurance, is 20% higher than last year reflecting a significant increase in the number of higher value claims.
With six claims notified to date, the incurred experience on the International Group Pool suggests that full year Pool claims costs will also reflect a higher trend in recent years.
A claims development review carried out by the club continued to demonstrate the normal pattern of releases from prior year claim reserves. The full year forecast is for prior year movements as a whole to be in line with, or exceed expectations set by the board.
In the third quarter markets adjusted to the prospect of withdrawal of monetary support in the US. Global government bond yields continued to rise and investment values recovered from the sell-off in the previous quarter. The trust transferred its holdings in U.S. Treasuries and mortgage backed bonds to funds of short term Treasury bills, thereby significantly reducing interest rate risk in the portfolio. Combined with the trust, the association has achieved a modest positive return for the year to date.
The directors considered the outlook for the association’s underwriting performance, and the adverse impact upon that performance of claims over the last three policy years. Whilst acknowledging that the economic downturn continues to affect some members, they concluded that premium levels should nevertheless be increased by 10% across all entries and for all categories of business, with minimum deductibles for all P&I entries of $7,500 for crew claims, and $15,000 for all claims other than crew and cargo, the latter remaining at $5,000.
Records will be assessed in the usual way, with particular attention to adverse claims performance and increasing exposure. Any adjustments in the costs of the international group reinsurance program, whether up or down, will be passed on to members.
The directors decided that the release calls on the 2011/12 and 2012/13 years will be maintained at 5% and 10% respectively and that the release calls for the current year and 2014/15 will be set at 25%.
Gary Rynsard, Steamship Mutual CEO, commented, “Given the continuing difficulties in the freight market the board has only after most careful deliberation concluded that the increase in overall cost of claims necessitates an increase in premiums. The board also believes that an increase in members’ risk retention by way of a small increase in deductibles would be of benefit both to the club and ultimately the members themselves.”