The premium rate increase comes in addition to any increase in the cost, determined next January, of the International Group reinsurance premium for 2014 for the mutual members.
In a statement, UK P&I made reference to “a period of sustained underlying claim inflation", citing the average cost per claim, which has risen by 30% since 2006, and with the total cost of claims in the first half of 2013 outranking any other during that time. However, the club also indicated that the actual frequency of insurance claims was at “record low levels”. The increase “reflects the Club’s commitment to maintain balanced underwriting”.
The club’s new chairman Alan Olivier said: “Our decision to make a 10% general increase reflects the Board’s determination to keep the Club’s underwriting in balance. Facing a choice between relatively modest premium increases in the short term or more substantial and painful increases in future, the Board does not view the latter option as being in the best long-term interests of its Members or the Club.”
The club had free reserves and capital standing at $473m and total assets of $1.6bn as of 20th August 2013, with a A- ‘Strong’ rating from Standard & Poor’s.
“Although the Club continues to hold sufficient capital to meet solvency and rating agency requirements, it can only preserve that position by maintaining balance over the claims cycle through disciplined underwriting,” said Hugo Wynn-Williams, chief executive of UK Club managers Thomas Miller P&I (Europe). “Increasing premiums in line with the rising overall claims trend is essential to achieve that underwriting balance.”
The move by the UK Club follows a 10% increase by Steamship Mutual and 7.5% increase by North P&I Club for policy year 2014.
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