S&P Global Ratings has downgraded the UK P&I Club from A, with a negative outlook, to A- with a stable outlook.
The move is inline with a recent downgrading of a number of protection and indemnity clubs by the ratings agency in response to widespread underwriting losses in the sector.
The P&I clubs have been hit by rising claims from the Covid-19 pandemic. They have also faced two years of record claims over $10m which are handled through the International Group of P&I Clubs' claims pool.
At the same time P&I clubs have struggled to adequately increase premiums in the past two renewal years.
UK Club chief executive Andrew Taylor pointed out the UK Club remains an A-rated insurer. He said: "We are naturally disappointed S&P has taken this step to revise our rating at this time. The estimated cost of pool claims is the largest in history; this, coupled with premium levels that have failed to keep up with rising claims, has resulted in this change of rating from S&P."
The UK Club reported underwriting losses in the first half of this year, with a combined ratio of 115%.
Capital strength
Despite the losses, the UK Club has retained its capital strength, with AAA-rated free reserves of $534m. The UK Club announced it will be seeking a 12.5% general increase in premium at next February's renewal to correct its underwriting losses.
"The UK Club remains very strong financially and this has allowed us to take a measured approach to addressing inadequate premium rates. The combined ratio of 115% for the first half of 2021 was in line with the club's plan and the club remains in a strong competitive position," Taylor said.
