West of England chief executive Tom Bowsher says the club is benefiting from its decision to expand its business portfolio at a time when protection and indemnity earnings are under pressure.
The London-based P&I club has invested in a succession of maritime insurance-related companies in the last year.
West of England set up joint venture legal services company Qwest, and bought into delay insurer Nordic Marine Insurance and cyber-cover provider Astaara. It has also boosted its offshore and fixed premium capability.
The investments came as continued low premiums and a series of expensive claims have generally put the underwriting performance of P&I clubs under stress. Diversification has come under criticism by some insurance brokers who suggest P&I clubs can ill afford to take the additional risk, particularly during the downturn.
Bowsher said the investments are already paying their way and providing additional services to the West of England’s mutual members.
“We saw the value of this during 2020, as all three businesses saw good initial returns on our investment,” he said.
“From my conversations with members the feedback has been very positive, and they recognise the value these partnerships provide and that the quality of our services, staff, and capital remain as strong as ever.”
Bowsher added that the investments were also made after careful due diligence.
He said the West of England has taken a conservative approach by acquiring stakes in established companies that offer complimentary services and do not represent a financial risk to the mutual P&I business.
Bowsher also added that ratings agency Standard & Poor’s (S&P) did not take issue with its diversification strategy and does not view it as a potential threat to the West of England's financial standing.
Bowsher said: “This was reflected by S&P late last year, when it said that it expects that we will maintain a capitalisation more than its 'AAA' confidence level over the next two to three years. Commenting on our approach more generally, S&P also said that the club's brand and reputation has significantly improved in recent years.”
Bowsher said the diversification was undertaken with the intention to help the mutual P&I business.
“Our priority will always be our mutual business," he said. "We are a mutual P&I club and, with that, comes a responsibility to deliver confidence, strength, and the best service possible to our members.”
