London P&I Club reports increased free reserves for 2016/2017

THE London P&I Club has issued an advance summary of its result for the 2016/2017 financial year, ahead of the publication of its annual report. The Club recorded an overall surplus of $27.3m, increasing the free reserve to $188m. The combined ratio was 97.9 per cent. The positive technical performance was supplemented by an investment return of 8.4 per cent.

Ian Gooch, CEO of the Club’s management team comments: ‘There were various drivers behind this positive result with the claims environment – which remained benign by longer-term historic standards – being an important factor, even though it was not as favourable as the 2015/2016 year. In particular, we saw a notable reduction in retained claims in the band between $500,000 and $1m and in the level of claims falling on the International Group Pool’.

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London P&I Club reports increased free reserves

THE London P&I Club’s result for the 2015/2016 financial year produced an overall operating surplus of $3.3m, lifting the free reserve to $160.7m. This result was underpinned by a technical underwriting surplus of $15.3m, with the combined ratio standing at 82.5%.

In a circular summarising the result, the club’s management team says there was a substantially improved claims outturn following the unusually adverse experience seen in 2014/15. The club’s annual report will be released as usual in July and will contain further details of developments, including particular reductions seen in the costs of claims in the high severity and attritional retained layers, together with positive developments in the cost of older policy years. The cost of International Group Pool claims notified by other clubs, meanwhile, was in line with expectations.

For the first time since 2008/2009, the club recorded a negative return on its investments, amounting to 2.5% or $11.5m, a position which has been reversed since the year-end.

Moving into the current P&I policy year, the club, which this year celebrates its 150th anniversary, saw further steady growth from existing and new members in its owners’ entry and a year-on-year increase of about 600,000gt following the 20 February renewal. There was also growth in its charterers’ book of business, including the addition of a number of European and Far East-based operators.

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London P&I Club maintains financial strength despite impact of large claims

THE London P&I Club’s 2015 Annual Report highlights an unusual run of expensive claims in the 2014/15 policy year, with progress in other areas meaning that the free reserves stand at a healthy $157.4m.

Ian Gooch, chief executive of the club’s management team, says, “During the course of the last policy year, the club was required to respond in respect of fourteen claims in excess of $1m, two of which are expected to exceed the $9m retention level and have accordingly been notified to the International Group Pool. This was an extremely unusual experience; to put it in perspective, there has only been one other policy year in the past ten in which the number of the club’s claims in the band in excess of $1m exceeded eight at expiry.”

Ian Gooch adds, “Notwithstanding the detrimental effect of this intense claims activity, positive developments in a number of areas mitigated the overall impact, which was a small deficit of $3.2m. Churn remains a part of our operating environment, but there was further growth in the club’s premium income along with an increase in the owned and especially the charterers entries from markets including Singapore and Turkey, where we have been working to increase our profile and outreach. The club’s total combined entry is in excess of 50m gt. There was also positive investment performance involving a 5.5 percent return on the club’s invested assets and cash, augmented by a revaluation gain in the value of the London office.”

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London P&I Club reports increased free reserves

THE London P&I Club’s result for the 2013/2014 financial year produced an overall surplus of $6.6m, increasing the free reserve to $160.6m.

There was an increase in P&I claims costs within the club’s retained layers in the financial year. The club’s management team notes that this was driven by an increase in the cost of claims in the higher-severity bands, which overshadowed an encouraging outturn for claims within the lower-severity layers, particularly at the day-to-day attritional level.

There was a reduction in the level of claims involving the International Group Pool compared to the very high levels recorded for 2011/2012 and 2012/2013, although the cost remained relatively high.

In the year to 20 February 2014, the London Club recorded a return on invested assets and cash of approximately $24.4m, or 7.0 per cent, reflecting positive performance across each major asset class, in particular the equity component of the portfolio.

Over the course of the policy year there was steady growth in the entry of ships with the club, from existing as well as from new members based in countries which included China, Greece, Singapore, Turkey, and the UK.

Going into the current policy year, the club’s owned mutual entry had increased by approximately 2m gt to 43.1m gt, in addition to which the charterers’ facility continues to perform steadily.

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London P&I Club reports increased free reserves

THE London P&I Club’s result for the 2012/2013 financial year was a surplus across all classes of $9.4m, increasing the free reserve to $154m.

Claims experience over the financial year was mixed. In the retained layer there was an encouraging picture at the attritional level, involving claims up to $100,000. There was also a continued moderation of claims in excess of $1m, but there were additional indications of increasing claims cost and activity in the band between $100,000 and $1m. Meanwhile, the club’s management team notes that adverse claims experience within the International Group’s Pool layers means that 2012/13 is looking likely to prove the most expensive year on record for claims on the pooling system.

In the year to 20 February 2013, the London Club recorded a return on invested assets and cash of approximately $23.7m, or 6.9 per cent, reflecting positive results across the whole of the asset base and, in particular, benchmark-beating performance by the investment-grade fixed income holdings, which form the lion’s share of the portfolio.

Over the course of the policy year the club secured additional entries from many existing members as well as from new members in countries which included Germany, Greece, India, Turkey, the United Arab Emirates and Ukraine.

There was also a relatively high level of ships withdrawn during the year, some sold for further trading but many for scrapping. As a result there was a small increase in the club’s owned entry to approximately 41.5m gt. In addition, the charterers’ facility continued to make steady progress. www.londonpandi.com

London Club posts record free reserves to consolidate financial strength

THE London P&I Club consolidated its financial strength by recording an overall surplus of $3.6m for the 2010/2011 year of account. This lifted free reserves to $145.1m, the highest level in the club’s 145-year history.

The club’s continued policy of achieving controlled growth in its membership resulted in a five per cent increase, of almost 2m gt, in owned entered tonnage over the course of the year. The volume of charterers’ business also continued to grow, and these developments produced a total entry of 42.5m gt at year-end, with more ships scheduled to attach during the course of 2011.

Chairman, John M Lyras, writing in the club’s Annual Report for 2011, says, “Advances of this sort, together with further steps to strengthen rating and deductible levels, augment the club’s financial strength for 2011/2012.”

Pointing out that the 2010/2011 policy year saw an unusually high number of claims in excess of $1m, Mr Lyras added, “Our claims exposure – whether to incidents involving our members or other clubs’ members through the International Group Pool – plays the greatest part in the club’s performance.” He emphasised that loss prevention awareness occupies an increasingly important role in the club’s activities, with further attention being given to the dissemination of relevant information through its loss prevention publication and alerts programme, as well as workshops and seminars provided in response to member feedback and requests.

Elsewhere in his comments in the Annual Report, Mr Lyras lamented the “inadequacy” of governmental response to the problem of piracy, and the troubling signs of increased risk to the wellbeing and safety of hostage crew members. The important Best Management Practices produced by the shipping industry and international naval organisations played a significant part in reducing the danger of piracy, but the way in which the risk has developed meant that the ‘industry debate over the potential role to be played by properly trained guards’ was ‘unsurprising’.

On another subject, Mr Lyras also expressed the hope that the provision by the clubs of a very substantial amount of information to those conducting the European Commission review of some of the International Group’s arrangements would help inform the EC case team’s understanding of the unique features of mutual P&I and the important benefits it delivers.

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