The American Club’s income from premiums declined in 2023 after it cut the riskiest ships from its portfolio because of sanctions and other compliance concerns.
Net income from premiums and calls for 2023 was down 16% to $127.5m, according to its annual report.
The mutual insurer has been in the public spotlight over vessels linked to suspected Iranian and Russian sanctions breaches.
Ships were cut from its protection and indemnity book and hull insurance in 2023. Cash from supplementary calls also declined.
Costs and expenses fell sharply, leading the club to post a combined ratio of 99%. A figure below 100% represents an underwriting profit.
Investment income also bounced back from a historically large loss the previous year with a 7.9% return.
The American Club was downgraded by S&P’s capital rating model from BBB- to BB+ this year because of a weakness in its capital position.
The ratings agency said the mutual would not generate sufficient underwriting earnings to boost its capital base.
The American Club’s free reserves, a key figure of financial strength, fell 9% to $40.3m during 2023, according to the annual report. It said it had recovered by $2.3m in the first quarter of 2024.
The New York-based insurer told TradeWinds in February that it had dropped 40 vessels over the previous year for compliance and other reasons.
Its gross insured tonnage at the end of 2023 of 27.2m gt was slightly up from a year earlier, according to the annual report.
‘Misunderstandings’
The February comments were in response to a report by news agency Bloomberg that claimed the club was involved with 21 vessels linked to the shipment of Iranian oil. It later dropped 19 of them, with more under investigation.
The American Club had also at one time been the biggest single provider of P&I services to the fleet operated by Mumbai-based Gatik Ship Management, which specialised in hauling Russian oil.
The secretive Indian company rapidly expanded its fleet following the invasion of Russia, with some 60 ships under its management before it lost flagging and class services last year over suspected sanctions breaches.
Ships under Gatik management were subsequently shifted to new companies in an apparent attempt to avoid regulatory scrutiny.
The insurer pushed back against “misunderstandings” in a circular to its members in February.
“The club shares the common goal of protecting the industry from those who wish to violate its rules and laws,” it said.
The annual report said sanctions had been the subject of heightened focus during 2023 and into this year.
“With shipping more and more in the public eye as Red Sea missile strikes affect safety in navigation and journalists engage in tracking ships carrying oil, the American P&I Club and other clubs, as insurers, were often caught in political news agendas,” it said.
It added that at the February 2024 renewal, its P&I portfolio was “modestly lower” than the year before.
“However, this followed the club’s decision to derisk the portfolio based on individual member underperformance as well as other factors in the lead-up to the 2024 renewal.”
The club said that applicants for its insurance were fully vetted using industry-standard databases and other measures, including monitoring the past activities of prospective vessels.
There was “vigorous initial pre-entry vetting” with vessels subject to periodic monitoring and detailed investigation if potential sanctions breaches came to light.
It said it had continued to grow its compliance team in 2023 and added satellite services to its checks.
“Confidence in sanctions compliance has never been needed more than at present and, given the state of ongoing geopolitical difficulties, it is certain to continue. The club is well placed to manage this into the future,” the American Club said.
Chief operating officer Dan Tadros told TradeWinds earlier this year that the club could “only do so much” in its searches.
“People need to understand we’re not governments and we do not have the resources governments have,” he said.
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