The Japan P&I Club is to embark on a financial stability plan to maintain its free reserves at ¥25bn ($180.6m) in response to a recent ratings downgrade.
Last year S&P Global Ratings downgraded the Japan Club to BBB with a stable outlook after its free reserves dropped following a difficult claims year.
The International Group of P&I Clubs requires a minimum BBB- rating for membership.
Although the Japan P&I Club said it is still within the International Group requirement — and it said there is no imminent concern — it wants to bolster its finances and protect against a further downgrade.
“The association should stabilise and strengthen the financial ground urgently to avoid further downgrading,” the Japan Club said in a statement.
The financial stability plan will aim to “recover the reserve that had decreased last year and to maintain and even upgrade the S&P rating,” the Japan Club added.
As part of the plan the Japan Club will apply a 10% general increase in premium at next February’s renewal.
An unbudgeted supplementary call up to 25% will be made on the 2020 policy year, and management will decide on a possible further 25% unbudgeted supplementary call on the 2021 policy year after a deterioration of prior year claims costs.
Advanced call
Japan Club payment terms require the payment of an advanced call during the policy year and an additional supplementary call which is adjusted according to the club’s loss record.
From the 2023 policy year, the Japan Club will change its payment method. It will drop the current system of an advanced and supplementary calls and replace it with a single mutual premium payment method.
The Japan Club will also increase its contribution to the International Group’s captive reinsurance vehicle Hydra by $17m after the facility slipped below the minimum capital requirement.
