Posted on: 17 June 2020
Steamship Mutual has issued Management Highlights 2020, a document outlining the 2019/20 key statistics.
Armand Pohan, Steamship Mutual Chairman of the Board Armand Pohan said the following in his introduction:
In 2019/20 the financial year combined ratio was 99.8% compared to 116.1% in the preceding (2018/19) financial year. The Club’s goal is to achieve a financial year combined ratio of 100% or less.
Premium for the last financial year increased by a modest US$2 million, reflecting lower levels of churn, growth in entered fleets and individual rating corrections; the 2019/20 policy year was the 5th successive renewal without any general increase. (In 2020/21, the general increase was 7.5%).
Investment income in the 2019/20 policy year significantly exceeded expectations at US$66.9 million, the highest level of return for the last decade.
The Directors also decided to distribute USS$16 million of capital to renewing Members, leaving free reserves of US$515 million, comfortably in excess of required levels for regulatory and rating agency purposes. The Club’s strong financial position also enabled the Directors to defer payment of the first quarter premium.
Members records are generally assessed over a six-year period. Notwithstanding higher claims in recent years, the Club’s average combined ratio over the most recent six-year period remains at an acceptable level of 92.1%.
The year ahead
The Global Sulphur Cap came into force on 1 January 2020. The number of issues reported to the Club has however been comparatively modest, with no fines having been reported. The outbreak of COVID-19 has no doubt had an impact in various ways, diverting attention from and perhaps diminishing the investigation and enforcement of the new regulations. The Club nevertheless continues to monitor the situation very closely and provide assistance to Members wherever possible.
The threat to shipping from cyber risks continues to escalate. As technology has developed there has been a corresponding increase in dependence upon computer software to operate and control shipboard systems, including critical features such as navigation, propulsion, and positioning. The industry’s reliance on computer systems and increased levels of interconnectivity throughout the chain makes it particularly vulnerable to cyber incidents. The Club’s Class 1 P&I cover responds to liabilities resulting from cyber attacks when those liabilities would otherwise be poolable under usual terms of entry, and the Club will continue to support members in their efforts to counter cyber threats through loss prevention initiatives.
Sanctions continue to impact shipping activities. The United States has been particularly active in implementing sanctions which have “secondary” effect, i.e. activities conducted by non-US persons not otherwise subject to US jurisdiction. Such measures have been used for many years to regulate trade activities involving Iran, Syria and North Korea. More recently, they have had a significant effect upon trade to and from Venezuela.
There is an ever-increasing expectation on the part of the US authorities that the shipping industry itself will take further steps to deter sanctions breaches. P&I insurers are now expected to know more about activities conducted by entered vessels, including monitoring and other means to identify current and potential historic breaches. The Club adopts a proactive approach and has taken steps to meet these expectations.
During the year, Steamship Mutual Underwriting Association (Europe) Limited was established in Cyprus. This company, created as a response to Brexit, has received a warm welcome in Cyprus and provides cover to members in the European Economic Area as well as in Monaco and Switzerland. It commenced operations on 20 February 2020 and is providing Members with the Club’s usual high standards of service.
In a normal year, we might expect to be reporting positive expectations for the forthcoming policy year. COVID-19 is of course a serious threat and it is impossible to predict with any confidence what the eventual impact will be upon the Club’s premiums and claims. As would be expected the Managers are reviewing the position on a frequent and regular basis, taking account of numerous factors, including investments, operations, reinsurance and regulatory requirements.
During the course of the year we welcomed Mr Roine Ahlquist, Mr Christakis Klerides and Mr Robert Shaw to the Bermuda Board. Mr Ahlquist and Mr Klerides also joined the Europe Board. We hope they will enjoy their time with us.
