London P&I Club Announces Supplementary Call to Strengthen Finances
[By:London P&I Club]
The London P&I Club has announced that it is raising supplementary calls on the 2019/20, 2020/21 and 2021/22 P&I policy years. These calls – details of which are provided in a Circular and Financial Review issued to Members – represent an unusual step for the Club. The last time it took such action was in 2008 during the global financial crisis.
Chairman of the London P&I Club Board of Directors, John M Lyras explains:
‘’The raising of the supplementary calls follows the Club’s experience of particularly adverse trading conditions and underwriting deficits on its mutual P&I business for the last two policy years and a very high level of claims in the current year. The main cause of the deficits were an increase in the cost of claims from our mutual members and from members of other clubs via the IG Pool, during a period when a soft market saw rates reduce to very low levels indeed. Although rates strengthened in the current year there is another elevated claims outturn with a high frequency of Covid-19 claims being a particular factor. The average severity of claims on the Pool was also unusually high at the half year stage and included one brought by the Club.
These challenges were and are offset to some degree by positive investment performance and the Club remains in compliance with regulatory capital requirements. However, the impact on free reserves and regulatory capital is such that the Board has decided that this action now needs to be taken. The supplementary calls raised will strengthen the capital position in line with the Board’s risk appetite’’.
Ian Gooch, CEO of the Club’s managers continues:
“The supplementary calls will restore and strengthen the Club’s finances - but other action is clearly required to preserve and secure the position as we move forward. The reduction of the discrepancy between P&I premiums and claims, focusing on a sustainable underwriting strategy backed by increased discipline around risk selection, pricing and conditions of cover is an example of where we will be making changes. Other examples involve the targeted growth of the Club’s other existing, new and evolving lines of business and ancillary covers. There is also scope for change and efficiencies in the way we work, how and where – lessons have also been learnt from the conditions imposed by the pandemic about how we operate the Club, which we expect to feed into a more flexible and agile approach across the business. The Club is taking a comprehensive approach to building sustainability and resilience into its overall business and these measures will enable us to continue to deliver reliable, robust performance and a first class service for Members”.
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