London Club has reported a deficit of $50.5m for the /23 policy year, with a combined ratio of 128%. Free reserves were $113.5m as of February 20th 2023 (12 months earlier, $164.0m).
The Club noted that gross earned premium income increased and the average rating of the mutual book strengthened as a result of action taken by the Club at the February 2022 renewal “to transition rates as well as deductibles to more sustainable levels, and to improve the Club’s risk profile”.
The Club’s ‘day to day’, attritional claims outturn was the lowest since /19. The Club conceded that a drop in Covid-related claims was a factor, but reductions in the cost of other claims “reflect the effectiveness of our underwriters’ ongoing attention to deductible levels, to mitigate the impact of inflation”.
The Club’s FD&D and War Risks Classes and fixed premium products generated positive returns.
However, the result for the core mutual P&I book was heavily impaired by the cost of Pool claims brought by Members, in what was a benign policy year for the IG pooling system generally. The Club incurred two Pool claims during /23, which made up 50% of the Pool claims reported by all IG Clubs at expiry.
Cost deterioration relating to other Clubs’ Pool claims from prior years also weighed on the /23 financial year result.
London Club observed that “many Clubs highlight the fortuitous nature and the sensitivity of their technical results to claims of sufficient severity to enter the Pool”. Over the past two policy years London has incurred five Pool claims – more than any other Club, irrespective of size.
“Analysis of these claims underlines their random nature; and this is further illustrated by the fact that the Club incurred only four Pool claims in the six policy years prior to /22”, the Club said.
On the investment side, London Club observed that /23 was a year like no other in recent memory for financial markets generally, and bond markets in particular. The return on the Club’s invested assets and cash for the year was equal to a loss of 3.9%.
At the renewal this February the Club said that there was a strong focus on the sufficiency of rating and deductible levels for each fleet, taking into account individual loss records, risk profiles and the part that all Members have to play in balancing the Club’s underwriting results.
This approach included some further strategic de-risking of the book, while there were some instances where terms could not be agreed.
“However, there was strong support from the vast majority of our Members and the result was a successful renewal with an approximate 13.5% increase in rates on renewing business, including the value of changes in terms through increased deductibles”, the Club said.
The Club’s regulatory solvency coverage stands at an estimated 150% following an increase in approved ancillary own funds, as well as a favourable claims experience and small positive investment return in Q1 of the current financial year.
London Club CEO Ian Gooch said that “we had a challenging time last year and our result was heavily impacted by two Pool claims in a year when generally the IG Clubs’ experience of such claims was – thankfully – very benign”.
