The West of England P&I Club’s latest financial figures are another indication that protection and indemnity mutuals are starting to turn around two years of heavy underwriting losses.
The West’s combined ratio, which reflects the balance of premium income and claims costs, was 114% for the 2021 policy year.
Although the figure represents a loss, it is a big improvement on the 140% combined ratio the club reported in the previous year, which was one of the highest in the International Group of P&I Clubs.
Crew-related Covid-19 claims played a large part in last year’s underwriting losses. The West said that without the pandemic-related claims, its combined ratio would have been 101%, close to breakeven.
The West’s figures come shortly after industry leader Gard reported it had improved its combined ratio in 2021 to a profitable 94%, compared with 104% a year earlier.
Shipowners’ P&I Club earlier also reported a combined ratio of 98.7%, after recording losses in the previous year.
Preliminary figures from two merging clubs, North P&I Club and the Standard Club, also indicate an improving underwriting picture at both clubs.
P&I clubs’ figures have been helped by a dramatic fall in International Group pooled claims in the second half of the last policy year.
Underwriting losses are, however, still affecting the free reserves of P&I clubs. The West’s free reserves at the end of the 2021 policy year stood at $251m — $40m lower than at the same point in the previous year.
But the West is still in a strong financial position, with a 168% solvency ratio and A- rating from S&P Global Ratings.
The club believes it can improve on its underwriting performance after increasing premium at last February’s renewal and parting ways with shipowners with a poor claims record, or a high risk operating profile.
Chief executive Tom Bowsher said: “We can look ahead with confidence because of the decisive action we took at the last renewal as part of [a] planned strategy to better position the club for the future.”
The West set a general increase of 15% at the last renewal.
It also declined to renew terms for 22m gt of tonnage with a combined loss ratio of 170%.
“We identified a number of risks where either their operating profile no longer met our risk criteria or their record on claims performance or rating did not contribute positively to the club’s financial result,” Bowsher said.
“This was a difficult decision, as deliberately parting company with members is never easy and something we actively avoid when we can.”