A challenging claims environment including increased claims on the IG pooling system and the effects of the coronavirus pandemic were factors which impacted The London P&I Club's result for 2020/21. In a recent update to the membership, the Club reported a combined ratio of 136.8% and an overall operating deficit of US$20.3 million for 2020/21. The year-end free reserve stands at US$153.6m.
Ian Gooch, CEO of the Club's managers (A Bilbrough & Co Ltd), explains:
“Our products for charterers and owners of smaller ships recorded positive underwriting results and we saw a 5.3% return on the Club’s invested assets. However, our mutual P&I business experienced a number of challenges. These included increased claims on the International Group Pool and deterioration in the costs of the already expensive prior years of 2018/19 and 2019/20. We also saw a higher frequency of retained claims last year with a number of those resulting from the pandemic. In short, claims costs have increased in five consecutive years to the point that in 2020/21 they were at twice the level we saw five years ago. This came at a time when rating in the sector was already approaching unsustainable levels.”
The Club's update also reviewed positive developments from the recent P&I renewal. Its strategy had focused on increasing rates as well as deductible levels, including the setting of uplifted and bespoke terms for Members with challenging records. The Club is pleased to have seen strong support for its approach from the membership. The outcome of the renewal has paved the way for a material improvement in the Club's combined ratio for the current year.
“The 2020/21 result falls outside the Board's appetite for risk even in the current claims environment. This places even more importance on the measures we took during this year's renewal process – and the further work which we have in hand - to ensure we continue to deliver top-class support to our Members from a robust financial base”, said Ian Gooch.
The opinions expressed herein are the author's and not necessarily those of The Xinde Marine News.
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