Strong investment returns provide solid results for P&I Clubs

Strong investment returns have seen both the UK P&I Club and Steamship Mutual posting solid results for the 2019/20 financial year.

At the UK P&I Club, free reserves increased by $54 million to $559 million as at 20th February 2020, driven by exceptional investment returns of 9.6% for the year. The Club continues to meet all its regulatory capital requirements and Standard & Poor’s reaffirmed the Club’s A (Stable) rating in December 2019.

The Club also benefited from reasonably good large claims experience for the year, however premium rates have been insufficient to cover the cost of claims and expenses. Members have benefited from significantly reduced rates across the P&I sector over recent years, leading to the Club’s combined ratio of 120% for the year, which continues to be above the Club’s acceptable range. Although the cost of large claims is high, there remains the need for future action on premium rates.

The underwriting result for the year was said to demonstrate the importance of scale and strong capital.

At their Board Meeting held yesterday (2nd June), the Directors of Steamship Mutual approved the Clubs’ Report and Accounts for the 2019/20 policy year. A strong underwriting result gives combined ratio of 99.8% for the 2019/20 financial year and an average combined ratio for last six years of 92.1%.

The Club distributed $16.3 million to mutual renewing members on 20th March 2020, a total of $90 million over the past four years, and Free Reserves improved by $48.3 million after the capital distribution, standing at $515 million at year end.

The Club’s capital remains comfortably in excess of the S&P AAA rating level, and the 2019/20 renewal was the fifth consecutive year of no general increase.

Renewal rates for owned mutual Members increased by an average of approximately 5%, and at renewal, the total entered tonnage stood at 157 million GT, an increase of 3.5 million GT over the year.

Club Chairman Armand Pohan said: “Despite the 18 Pool claims (two involving the Club), the Club’s claims experience in the last policy year was relatively benign. The result was a significant improvement (compared to the preceding year) in the 2019/20 financial year combined ratio to 99.8%. A very strong investment return meant that the Club ended the year with free reserves of $515 million after payment of a $16 million capital distribution to renewing members. By any standards this was a positive result, but of course since 20th February the COVID-19 pandemic has taken its toll on almost all commercial enterprise, and the Club’s reserves may well be adversely impacted in 2020/21.  The Club accumulates reserves in order to absorb and help shield its Members from all kinds of financial shocks, including the unexpected.”