Lars Rhodin, chief executive of the Swedish Club, believes a recent S&P Global Ratings upgrade could prove to be a major boost for the protection and indemnity and hull mutual.
The ratings agency raised the insurer's financial strength rating to A- from BBB+, giving the protection and indemnity club a stable outlook.
New market
The Gothenburg-based mutual is one of the International Group of Protection & Indemnity Clubs’ smaller clubs, but the upgrade promises to open up new a market of shipowners and financiers that only want to deal with A-grade insurers.
The S&P rating also carries weight as it prioritises technical underwriting performance in terms of a combined ratio being a key indicator.
A combined ratio under 100% indicates a positive underwriting performance.
“What they look at is the ability to run a business and demonstrate a combined ratio of 98% in the long term,” Rhodin said.
The Swedish Club has demonstrated an average underwriting profit over the past decade.
What they look at is the ability to run a business and demonstrate a combined ratio of 98% in the long term
Lars Rhodin
This compares favourably with that of International Group counterparts, which have a recent average of about 106%.
'Testing conditions'
Some have questioned Rhodin’s claim that the upgrade has been achieved “despite testing conditions,” pointing out that the Swedish Club, in common with other P&I mutuals, has had it easy over recent years.
It has benefited from low claims and high investment returns that have helped it grow its free reserves. The last reported free reserves at the Swedish Club stood at $210m compared with $150m in 2012.
Rhodin points out that the Swedish Club has had to contend with soft premiums on both the hull and P&I side of the business and that the club has been “under a lot of pressure” on the rates side.
However, he is optimistic that premiums are showing signs that the marketis hardening. “I feel we are at a turning point,” he said.
On the hull market, he said there has been an upturn in enquiries. This is being taken as a positive sign for the market, he added, and one that should help the club continue with disciplined underwriting strategy.
A recent spike in claims, it is suggested, could threaten the Swedish Club’s combined ratio performance and its S&P rating.
Swedish Club opts for no premium rise in 2019
Lars Rhodin
But none of the high-value claims that have hit the International Group members appear to involve the Swedish Club.
Diversification
Rhodin said that the S&P upgrade will help the Swedish Club “further develop growth and diversification strategies”.
He said that there are no fresh diversification ideas on the table at the moment. The intention is to step up cross-selling globally between its main products in hull, P&I, war risk, loss of hire and charterers' liability as the main strategy.
“We take a holistic view of risk,” he said.
