NEW YORK, NOVEMBER 15, 2019: The American Club has just announced its intentions for the 2020 renewal, provided information on, and taken action in regard to, the development of its recent policy years, and commented on its broader market position – and aspirations – following a recent meeting of its Board of Directors in New York.
In a November 14 circular to its Members, the American Club notes that, in addition to the expansion of its core mutuality, its Eagle Ocean Marine fixed-premium facility (which continues to grow its market presence), as well as its investment in American Hellenic Hull (which over recent months has moved into encouraging profitability), have given the Club a broadly-based industry footprint, well–positioned to exploit the opportunities of the future. In conjunction with this, the American Club has also benefited from the augmentation of its Managers’ capabilities through the reorganization of its existing resources, the recruitment of new professional talent and other initiatives aimed at securing the promise of further success over the years ahead.
The Club also notes that the P&I market is in a period of transition, characterized by a new reality of persistently low premium pricing, rising claims and the likelihood of less ample future investment returns (although the American Club did in fact enjoy an excellent year-to-date return on its investment portfolio of just under 9% as of the end of October).
Nevertheless, taking these and other factors into account, the Club’s Board has resolved to apply no standardized, or general, increase for 2020. However, Members’ premium rating and terms of entry for the forthcoming year will be calibrated to their own particular circumstances, including their loss records, vessel-type, trade and regional factors, as well as other relevant matters, including the assessment of Members’ individual risk profiles.
This approach allows for a more Member-specific treatment of pricing and terms of cover. However, to embrace the more hostile trends developing in the claims environment, and a possibly less benign investment climate going forward, your Board expects to see a year-on-year increase in the pricing of risk for 2020 of a magnitude which properly reflects future exposures. This intended adjustment upward will embrace not only the need for cash rises but also, as individual cases might demand, changes in deductibles and/or other terms of entry.
However, the Club’s Board has also taken the view that, in order to optimize its future prospects, the Club needs to strengthen its financial position generally. It has determined to do this by making supplementary calls of 22.5% of estimated total premium in regard to the 2016 policy year and 17.5% for 2017, both years having been financially challenged by the untypically adverse recent development of certain large claims, both for the Club’s own account and within the Pool.
The decision to seek these calls was motivated by the view of the Club’s Board that those years should be treated on a stand-alone basis, rather than be subsidized by the Club’s contingency fund which had in fact increased by about 15% over the nine months, to September 30, 2019.
It was also noted that these calls would only apply to the Club’s P&I (Class I) business and not to its Freight, Demurrage and Defense (Class II) entries. In this connection, the 2016 year will be formally closed as of September 30, 2019, with 2017 being slated for closure in early 2020, the release call margin for that year being reduced to 5% of estimated total premium over the intervening period.
Announcing this news, the American Club’s Chairman, George D. Gourdomichalis of Phoenix Shipping & Trading S.A., made the following comments: “My fellow Directors and I are aware that certain elements of the American Club’s intended future action will not be welcome, but the Board remains resolute in its commitment to consolidate the financial standing of the Club in order to provide a firm footing for the exploitation of the exciting prospects for its core and related businesses over the years ahead.
“Much has been achieved recently and, as the American Club transitions, in many and different ways, to fulfill its aspirations for the future, your Board is determined that it does so in a financial condition equal to the challenges, and opportunities, which lie ahead.”
Speaking in conjunction with Mr. Gourdomichalis, Joe Hughes, Chairman and CEO of SCB, Inc., the Club’s Managers, said: “2020 will mark the twenty-fifth anniversary of the implementation, in 1995, of the American Club’s strategy of growth and diversification, then entitled Vision 2000. Over the intervening years, and through several business cycles, the Club has been successful in building a market presence and spectrum of proficiencies exponentially greater than those it possessed when the strategy began.
“Over the last decade, in parallel with the experience of the American Club itself, the marine insurance market in general, and the P&I sector in particular, have undergone great change. The American Club has not been immune to the deteriorating operational results which have characterized the industry at large over the past eighteen months. However, despite the financial challenges which this brings, and which the recent action taken by the Board is intended to remedy, the progress made by the American Club and its related businesses in the recent past has given it an excellent point of departure for future success, particularly as the climate for marine insurers may be expected to improve over the months and years ahead.”
Notes to Editors
The American Club
American Steamship Owners Mutual Protection and Indemnity Association, Inc. (the American Club) was established in New York in 1917. It is the only mutual Protection and Indemnity Club domiciled in the entire Americas and its headquarters are in New York, USA.
The American Club has been successful in recent years in building on its US heritage to create a truly international insurer with a global reach second-to-none in the industry. Day to day management of the American Club is provided by Shipowners Claims Bureau, Inc. also headquartered in New York.
The Club is able to provide local service for its members across all time zones, communicating in eleven languages, and has subsidiary offices located in London, Piraeus, Hong Kong, Shanghai and Houston, plus a worldwide network of correspondents.
The Club is a member of the International Group of P&I Clubs, a collective of thirteen mutuals which together provide Protection and Indemnity insurance for some 90% of all world shipping.
For more information, please visit the Club’s website http://www.american-club.com/
P&I Insurance
Protection and Indemnity insurance (commonly referred to as “P&I”) provides cover to shipowners and charterers against third-party liabilities encountered in their commercial operations; typical exposures include damage to cargo, pollution, death/injury or illness of passengers or crew or damage to docks and other installations.
Running in parallel with a ship’s hull and machinery cover, traditional P&I cover distinguishes itself from usual forms of marine insurance by being based on the not-for-profit principle of mutuality where Members of the Club are both the insurers and the assureds.