The Japan P&I Club has had its Standard & Poor’s (S&P) insurance rating outlook raised after a profitable 2018 policy year that delivered an increase in free reserves.
In its annual review, Japan P&I revealed its S&P credit rating remained stable at BBB+ but that its outlook had been raised from “stable” to “positive”.
Japan P&I director general Hiroshi Sugiura said the revision was “due to strengthened capital”.
Hike in reserves
Sugiura revealed that in the 2018 policy year the club’s free reserves increased to ¥26.4bn ($251m), a jump of ¥2.3bn.
By contrast, rival mutual London P&I Club recently had its S&P outlook downgraded from “stable” to “negative”. This was largely due to an underwriting loss and falling free reserves in its last policy year.
The Japan P&I report revealed it has 3,221 members with the P&I insurer covering 4,234 vessels amounting to 96.3m gt.
In 2018, its insured fleet grew by 199 vessels of 8.8m gt. Japan P&I also added a further 97 vessels of 200,000 gt to its coastal cover, known as Naiko Class. Charterers' cover increased by 1.7m gt to 13.7m gt.
Next year, Japan P&I will celebrate its 70th anniversary. Ahead of that, it is undergoing a series of reforms in response to competition for Japanese shipowners' insurance business.
The association [Japan P&I] has supported members in their challenging business environment ... On the other hand, there is concern at a gradual increase in claims since 2017 for all International Group clubs
Yukikazu Myochin
Under the medium-term business plan — Leap Forward 2023: Your First Club, Our Best Service — Sugiura said the club is going “back to basics”, with the aim of rediscovering its founding principles to be an “association created by shipowners for shipowners”.
Four-pronged plan
There are four main prongs to the business plan: to place more importance on members' views, improve the quality of service, regain trust and support, and develop an overseas strategy and sales.
The company is also reviewing its investment strategy with the aim of taking on more risk to earn higher returns.
Japan P&I said it would reduce its investment in Japanese bonds and investment trusts, while increasing its investment in global bonds and equities.
The club said it would hedge its US dollar investments to reduce currency risks.
Overall, Japan P&I’s investment income has been modest compared with other members of the International Group of P&I Clubs.
Over the past five years, the Japan mutual’s investment return has ranged from a high of 2.6% to a low of 1.44%, compared with returns as high as 8% among its closest competitors.
General increase
K Line chief executive Yukikazu Myochin was this year appointed chairman of Japan P&I.
He hinted the five-year period without a general increase might be coming to an end because of increasing claims.
Myochin said: “The association [Japan P&I] has supported members in their challenging business environment, by reducing supplementary calls and postponing a general increase in premiums.
"On the other hand, there is concern at a gradual increase in claims since 2017 for all International Group clubs including the association, and in claims amounts as well, due to an increase in ship size and environmental awareness."
