Gard, the largest of the protection and indemnity insurers, has announced a new premium policy for its members that involves a 5% discount at the start of next February’s renewal.
The move in effect offers Gard’s members an aggregate $18m off next year’s premium, on top of $18m that it recently decided to return to members in the current policy year.
The discount will be subtracted from the members’ total annual premium at renewal and spread equally between three equal instalments throughout the policy year.
Gard usually offers its discount on premium at a mid-term board meeting based on the club’s performance the previous policy year.
Gard chief executive Rolf Thore Roppestad said that the move is intended to make financial planning more certain for its members and reflect the financial status of the P&I mutual.
Roppestad said: “Our previous practice of deferring any reduction in the ETC premium until several months after the end of the policy year in question has made budgeting harder for shipowners.”
He said the former policy also “makes it even harder for members to appreciate the fact that the group’s superior performance has delivered lower prices”.
The Norwegian insurer is calling the new premium policy an owners’ general discount on the estimated total call (ETC).
Loss-making combined ratio
But the change in approach also comes as Gard seeks to address its underwriting losses through rate rises at the next renewal. The insurer made an underwriting loss of $54m in the first half of the current policy year with a loss-making combined ratio of 116%.
Gard wants to adjust rates upwards to achieve an underwriting loss of 102%. Rating’s agency Standard and Poor’s also recently adjusted Gard’s A+ stable outlook to A+ negative and said it wants to see the P&I Club improve its underwriting performance.
Gard has not announced a general increase in rates but instead wants to improve its income based on individual negotiations with members based on their risk profile and claims performance.
Roppestad said the underwriting losses are a P&I market-related matter that need to be addressed through long-term rate adjustment.
The new premium policy is intended to help members out.
“By bringing the discount forward to the beginning of the policy year, we aim to give our members much greater transparency and predictability as to the real cost of buying mutual P&I products with Gard and rewarding them for being part of a strongly performing club,” he said.
