United Kingdom
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Introduction

It is naturally too soon to forecast 2017/18 with any certainty, but recent underwriting results are proving to be a mixed bag. In pure technical underwriting terms, the best performer was Britannia, with a 79% combined ratio, while the worst performer was London Club, with a combined ratio of 118%. These results signal that claims are on the rise following what have been several benign years. However, the picture has been softened somewhat by welcome investment returns. We know that major claims are still a concern but attritional claims have been, and continue to be, managed more proficiently than in past years.

Given the hardening in the reinsurance sector, and with it an increased appetite to retain risk, there is now even more pressure to get the underwriting right. Furthermore, we know there continues to be some deterioration in back years. Nevertheless, the swelling free reserves are evidence that the International Group is in good financial shape.

We have little doubt there will be some “talking up” of the market following recent soft renewals. Naturally we are a long way off February, but it will be a brave club that dares to post a general increase. However, increases will be back on the radar soon. One only has to look at how premiums have dwindled against tonnage in the past 12 months to gain some indication of the challenges ahead. The reduction in underlying net call income against an increasing tonnage base emphasises the pressure on returning positive underwriting results when core premium is being squeezed. We have and will continue to champion mutual P&I, the continued lowering of deferred calls and capital returns are testament to the system. This income drop does, however, add more pressure to those clubs presently in a weaker financial position.

Challenges ahead….

The International Group is always at the forefront of managing key issues that the maritime industry faces and no doubt the ongoing sanctions will be yet another thorn in its side. There’s not a great deal of clarity just yet, but trade restrictions continue to apply and we may need revisit the issue of US insurers participating in reinsurance programme/s.

In our last bulletin, we highlighted that the International Group was yet to embrace a more collective approach to the sharing of information and IT. We are not suggesting clubs live in a time warp, far from it; but considering the pace at which the whole insurance industry is evolving, we suggest that a makeover in certain areas would both enhance the product and save costs. Indeed, could a collective programme have been sought on Brexit positioning? The next few years may call for some careful navigation; but all is well and once again free reserves within the Group have never been higher. The Aon P&I Passport outlines in detail the financial performance of each club and for a full market commentary please refer to our latest P&I Mid-Year Bulletin.

 

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