UK P&I Club Announces 5% General Increase for 2011

2011 General Increase
The premium rating of all UK P&I Club Members will be increased by five per cent from 20th February 2011. This was agreed by the UK Club’s Directors at their meeting in Shanghai on 18th October.

The decision was taken in the light of the underlying inflationary increases in claims. Much of the recent improved claims performance has come from lower claims numbers not lower claims values. The average cost per claim has continued to increase over this period. Past experience of claims and shipping cycles shows that claims escalate much faster than retail inflation when the world economy begins to recover.

Free Reserves and Capital
At the beginning of October, the UK Club’s total capital stood at $419 million, a $10 million improvement on the position since 20th February 2010. This increase in the Club’s capital base is encouraging and has been achieved whilst maintaining a consistent and prudent approach to claims reserving.

Investment Performance & Policy
Investment return for the half year to 20th August was $17 million, equivalent to a 1.6 per cent return and in line with the forecast annual return of four per cent. Since the half year markets have been very buoyant in September and early October enhancing this return significantly.

The present distribution of assets is approximately 77 per cent in cash and fixed interest, 15 per cent in equities and 8 per cent in absolute return funds.

Combined Ratio
The Club’s combined ratios for the 2008 and 2009 policy years were 105 per cent and 102 per cent respectively.

Standard & Poor’s
The Club’s current Standard & Poor’s rating is A- (Stable Outlook).

Looking forward
Chairman Dino Caroussis has been encouraged by a “continuing improvement to our restored financial position” over the first six months of the financial year 2010/11, boosted by improvements in the claims on the 2008 and 2009 policy years, in particular.

“This has provided us with a welcome addition to our capital and enabled us to make releases from our reserves.

“It is too early to be confident about the 2010 outcome but experience to date has been similar to 2009. Nevertheless, we must make sure we have adequate reserves if claims obligations turn out to be greater than anticipated.

“Looking ahead, the broad claims picture is one of lower numbers not lower values with average claims costs continuing to increase,” continued Mr. Caroussis. “The modest five per cent figure allows for the effects of claims inflation. However, claims may increase more rapidly if market conditions improve further.

“The new Solvency 2 regime in Europe will require the Club to maintain a stronger capital position than the current regulatory regime requires. It involves more than just capital requirements since it focuses on the entire risk management of the organisation, including governance arrangements. Directors and managers have worked very closely together in addressing what needs to be done and have made very satisfactory progress.”

Key financial indicators

Free reserves and capital increased to $419 million at 20th August 2010
Improving overall claims position, particularly on 2009 and 2008 policy years
Claims reserve release of $34 million at half year, whilst maintaining the same level of reserving confidence
Current investment income in line with forecast annual return of four per cent
Combined ratio for 2009 policy year of 102 per cent
S&P rating: A- (stable outlook)

For further information:
The Club provides a detailed explanation of claims performance in its October 2010 Review, published this week. Copies can be found here.

Press Release