The rate rise was agreed by Gard’s shipowner directors despite a $46m half year surplus that lifts Gard’s free reserve above $1bn.
The Norway based marine mutual reports an 84% net combined ratio indicating strong underwriting profitability.
There was however a 0.7% investment loss.
Gard has a long term strategy of subsidising the cost of P&I cover for its shipowner members from the profit earned by its commercial hull and offshore energy insurance business.
But against a background of a soft insurance market and a challenging investment climate Gard is reducing the anticipated subsidy from 5% to 2.5%, which corresponds to a 2.5% general increase for both P&I and freight, demurrage and defence (FD&D) cover.
Gard the only ‘A+’ rated club has an unequalled record of not collecting the full deferred P&I call which has saved members $205m over the past decade.
“Running the portfolio at a loss gives our members an upfront rebate on mutual P&I,” said Gard chief executive, Rolf Thore Roppestad.
“We only ask for the general increase that we need over time and when our results and capital position allow we look to reduce costs for our members,” he added.
The positive first half result lifts Gard’s free reserve to $1,015m, with another reduction in the deferred call in prospect if there is a good second half.
Roppestad said the strong first half result came from “a combination of good risk selection, a benign claims environment and a favourable development on prior years.”
“Gross written premium is 6% lower than it was in the same period last year. The marketplace for marine and energy is very competitive and pricing softer than it was 12 months ago. At the same time, exposures are decreasing in difficult offshore energy and shipping markets,” he added.
The Britannia and UK clubs have previously set 2.5% general increases but offered matching discounts on the deferred call. The London Club is seeking a 5% rate rise while the Shipowners’ Club is holding premium to expiry levels.
