OCTOBER 31, 2013 — He may look happy in the official portrait, but Alan Olivier, CEO of Grindrod Ltd., had little good news to bring in his first public pronouncement as the newly elected chairman of the UK P&I Club.
The P&I club's board has agreed that the general increase for 2014 renewal will be 10 percent and the premium rating increase is in addition to any increase in the cost of the International Group reinsurance premium for 2014 for the mutual Members, which will be determined next January.
"Our decision to make a 10 per cent general increase reflects the board's determination to keep the club's underwriting in balance," said Mr. Olivier. "Facing a choice between relatively modest premium increases in the short term or more substantial and painful increases in future, the board does not view the latter option as being in the best long-term interests of its members or the club."
Despite the prolonged shipping recession, the club says that performance of both the 2012 and 2013 policy years indicates P&I claims have resumed their upward trend. This environment of increasing claims costs requires premiums to move forward in line with that claims experience. Although claims frequency overall dropped steeply in 2009 and remained at the lower level, the average cost per claim has increased by 30 per cent since 2006. The total cost of claims in the first six months of 2013 is greater than any other policy year at the same stage of development.
As and when the shipping market recovers, the club anticipates a rebound in claims frequency from what have been record low levels.
Hugo Wynn-Williams, chief executive of UK Club managers Thomas Miller P&I (Europe) said, "Although the club continues to hold sufficient capital to meet solvency and rating agency requirements, it can only preserve that position by maintaining balance over the claims cycle through disciplined underwriting. Increasing premiums in line with the rising overall claims trend is essential to achieve that underwriting balance."
Overall, the club's financial position remains strong with the free reserves and capital standing at US$473million and total assets of US$1.6 billion at August 20, 2013. Since then, the position has improved with investment income increasing from $6 million to $33. The UK Club's Standard and Poor's rating is A- (Strong) Outlook: Positive.