The UK P&I Club has transferred its occupational disease liabilities to subsidiaries of insurance specialist Randall & Quilter (R&Q).
The London-based protection and indemnity mutual said removing the pending liabilities from its books would improve its financial position.
Occupational disease liability can negatively impact a club’s capital outlook and risk appetite.
Ken Randall, executive chairman of R&Q
UK P&I Club chairman Nicholas Inglessis said: “Transferring these claims to a recognised and well-regarded occupational disease specialist, such as R&Q, will significantly improve the club’s capital position and bring finality to a highly volatile book of claims. This will greatly benefit the club’s current members.”
The majority of the UK P&I Club's occupational disease claims are linked to seafarers' exposure to asbestos on ships and some date back as far as the 1950s. It can take up to 40 years before the symptoms of asbestosis start to appear.
The quantity of liabilities that the UK P&I Club has moved over to R&Q, and the price paid to do so, has not been disclosed. Asbestos claims are understood to make up a significant part of the club’s total historic claim’s reserve.
Asbestos uncertainty
However, the length of time it takes to reach a settlement, and the different types of claims and jurisdictions under which they are assessed, has made them a cause of financial uncertainty for the P&I insurer.
Explaining the reasons for the move, the UK P&I Club said: “These claims are very uncertain and volatile, and the exposure will continue for many years to come.”
The transfer of liabilities will first require the approval of the High Court in London to make sure that claims are not prejudiced. It could take up to two years for the move to be completed.
The transaction will also be overseen by the UK insurance regulators, the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).
R&Q is a UK Alternative Investment Market-quoted insurance company that specialises in run-off business. It struck a similar deal with the Liverpool & London Steamship P&I Association back in 2015.
“This agreement with the UK Club recognises our experience in this field and follows on from the previous transfer of liabilities from the Liverpool & London Steamship P&I Association in 2015,” R&Q executive chairman Ken Randall said.
Capital outlook
“Occupational disease liability can negatively impact a club’s capital outlook and risk appetite. This transfer agreement will allow the UK Club more flexibility and stability in planning its financial future, while ensuring any claimants remain unaffected.”
Although asbestos-related claims are often regarded as a thing of the past, there is growing evidence that seafarers are still routinely being exposed to asbestos on ships.
The recent TradeWinds Recycling Forum 2020 heard from a number of experts that the Inventory of Hazardous Materials (IHM) — now mandatory under the European Union’s Ship Recycling Regulation — is uncovering the continued widespread use of asbestos onboard ships.
The problem is particularly acute on Chinese-built ships, where asbestos is frequently used as insulation in onboard electrical systems.
One view is that the extent of the use of asbestos usage on ships now being uncovered by IHM inspections could prompt further claims from seafarers in the future.
