Steamship Mutual tightens underwriting target
Steamship Mutual, a leading P&I Club providing marine liability insurance worldwide, announced a 17.5% standard increase in P&I premiums for 2009/10. In reaction to the extreme investment market volatility which is expected to persist into next year, the Directors of Steamship Mutual have decided to eliminate any future reliance on investment income in achieving a breakeven underwriting result and to set a policy year combined ratio target of 100% for future years. A standard increase of 17.5% is required to meet this target for next year. In future investment income will be allocated entirely to reserves.
Other factors contributing to the Club’s decision to raise rates for 2009/10 are the risk that, while the Club’s claims experience for the 2008/09 policy year appears to be developing in line with projections, claims could deteriorate in the second half of the year as the North Atlantic winter gets under way and the uncertainties surrounding the claims outlook as the world economy and the shipping markets slow. Given the inexorable effects of inflation on legal costs and the average size of routine claims, the Club has decided that, in addition to setting standard premium increases for 2009/10 policy year of 17.5% for P&I and 15.0% for FD&D, it is also necessary to raise minimum deductible levels for both classes.
Steamship Mutual also reports, in its latest Circular to Members, that the underwriting results of both earlier open years continue to improve. In addition, Steamship has seen continued growth in the first eight months of this year and reports a positive increase in owned entries (net of disposals) of 3.2 million GT.
James Stockdale, Steamship Mutual’s CEO, said, “With commodity prices falling, economic conditions deteriorating and shipping activity showing signs of a rapid slow down, the claims outlook is extremely difficult to predict. Faced with uncertainty in the outlook for claims and extreme levels of financial market risk, the Club must ensure that any adverse developments are capable of being met by maintaining the strong and conservative approach to underwriting taken over recent years”.
Earlier this year Steamship Mutual posted record financial results, announcing an operating surplus of USD27.6 million and a 17.5% increase in free reserves. Steamship’s underwriting track record is amongst the best in the industry and it remains committed to maintaining that position and to protecting its financial strength for the benefit of its existing and future Members.