For the 17th year in succession, International Transport Intermediaries Club (ITIC) has paid a renewal credit to its members. For the year ended 31 May, 2012, members received a total of $5.2m. In the past 17 years, ITIC has returned more than $67.3m to members in credits.
ITIC Chairman Peter French said: “One of the unique strengths of a mutual is the absence of shareholders, allowing its members to benefit from any financial surplus. Solvency II, the new regulatory regime with which all insurers within the EU will have to comply by 1 January, 2014, will have an impact on the future capital requirements of the business. This will necessitate our maintaining strong reserves not only to ensure compliance, but also to sustain continuity credits at renewals in the future.”
From 1 June 2012, ITIC has reduced the level of the continuity credit for renewing members to either 2.5 % or 5% of their expiring premium. This reflects both the tougher investment environment and the challenging claims market, while also preserving the strength of its reserves. ITIC’s combined reserves, at $78.4m, continue to remain comfortably higher than current and anticipated future regulatory requirements.
Professional indemnity insurers tend to see a sharp increase in both the number and the value of claims during an economic downturn and ITIC is experiencing claims inflation of 10% each year. French added: “It is often easier for a client to sue or counter-sue its service provider than to settle an invoice or a claim. Claims increased significantly in 2009, levelled off a little in 2010 and initially showed an increase again in 2011. However, there are now signs that this higher claims activity may be starting to reduce.”
At renewal, ITIC introduced special deductibles for those types of claims that occur most frequently, such as demurrage claims for ship brokers, refrigerated cargo claims for ship agents and legal costs in US litigation for ship managers. In this way, the club has increased its premium income while continuing to retain approximately 95% of its members at renewal each year. ITIC emphasises that this is an excellent result in the prevailing economic climate