North P&I Club is targeting a 10% general increase in premium at its upcoming policy renewal as it aims to correct its underwriting losses.
The UK-based protection and indemnity insurer, in common with all the members of the International Group of P&I Clubs, is suffering from a higher number of expensive pooled claims in the current policy year. International Group members share claims in excess of $10m.
Rating agency Standard & Poor’s recently reassessed North’s outlook from A stable to A negative, although it maintained its AAA capital strength rating.
In a more positive development, North’s combined ratio — a reflection of its underwriting performance — is expected to improve from 125.8% in the previous policy year to 110% in the current year. North has also earned a 2.16% investment return so far in the year to August.
However, North still expects its financial reserves to shrink as a result of a difficult pool claims year and is increasing premiums at next February’s renewal.
“The challenges presented by rapidly increasing pool claims are exacerbated by the prevailing unsustainable premium rates,” North chairman Pratap Shirke said.
“Our experience of rising pool claims in 2018, 2019 and the first half of 2020 indicate that a new claims pattern is emerging.
"As I have reported for the last two years, premium levels that do not keep pace with rising claims threaten the longer-term financial strength and stability of all P&I clubs.”
North chief financial officer Ed Davies said that, for transparency, the insurer had decided to maintain its policy of declaring a general increase in contrast to an increasing number of clubs that are declining to disclose the figure.
Davies was positive about the outlook for North. He said the P&I club's own retained claims fell this year. He added that the increase in premiums should go some way to improving the club’s underwriting performance.
However, he warned that the changes in the corporate bond market could mean that investment returns become less certain in the coming years.
In a separate development, Shirke is to step down as North chairman. Current vice chairman James Tyrrell of Arklow Shipping has been named as his successor. Ioanna Procopiou of Sea Traders was elected as vice chair in September.
