The Britannia Steam Ship Insurance Association Limited has declared a $15 million capital distribution to its mutual Members.
In August 2019, S&P re-affirmed Britannia’s A (stable) rating with capital well above the AAA level and an ‘exceptional’ liquidity rating.
However, the 2018/19 policy year was challenging, with lower than projected investment returns and claims being higher than expected. Claims continue to be high, in particular those in excess of $1 million. In addition, all insurers in the P&I sector have seen rates declining, with Britannia anticipating an underwriting deficit for the current policy year, with an expected combined ratio of 108%.
At its meeting on 15th October, Britannia’s Board recognised the challenge of having to improve rates whilst noting the club’s continued capital strength. Addressing this challenge, the Board therefore agreed the following series of actions:
A further capital distribution of $15 million will be made to Members with ships on risk at midnight (BST) on 15th October 2019 (using the same method of calculation for each Members’ share as for prior distributions). This brings the total of capital distributed to Members since May 2017 to $85 million. In the past three years Members have benefited from deferred call waivers and capital distributions totalling $100 million.
The Managers will undertake a more technically-based renewal of the membership, to promote sustainable premiums and restore underwriting balance. To support this, the Board agreed to move away from the practice of a General Increase, which it considers to be a less sophisticated method of raising premium levels.
Accordingly, from the 2020/21 renewal, each Members’ rates will be adjusted to reflect their individual claims record and risk profile. As usual, any changes in the cost of the International Group Reinsurance Programme will be reflected in Members’ rates.
For ease of comparison with most of the other International Group (IG) clubs, with effect from the 2020/21 policy year, the Association will simplify its calls system and the terminology used. The terms “Advance Call” and “Deferred Call” will be replaced with Estimated Total Call (ETC).
This change will not result in any difference to the amount of premium due from Members. Simplifying the calls structure will ease administration costs for Members and the club. The traditional calls structure will apply to open policy years until those years are closed.
Britannia’s attempt to bring clarity to the P&I market by setting release calls at 0% has been unsuccessful. To reflect tightening premium margins and to allow a more balanced comparison with other IG Clubs, release calls have been reassessed for open policy years.
Commenting on the Board’s decisions, the Association’s new chairman, Tony Firmin, said:“I am delighted that Britannia remains in excellent financial shape. This has enabled the Board to distribute a further $15 million to its Members whilst agreeing to adjust rates in a way which better reflects individual Members’ records and risks”.