- AMERICAN CLUB’s 10% GENERAL INCREASE FOR 2014
- Increases in some deductibles
- Claims pooling continues to drive overheads
- Shipping and pricing power may move into recovery mode
NEW YORK, November 22, 2013: Unchanged from last year is the American Club’s message for the 2014/15 year when on February 20 next members will be asked for a 10% general increase in all classes (mutual and fixed-premium) for both P&I and FD&D. In all cases, any additional costs of the club’s reinsurance arrangements for 2014 will be charged separately.
This was decided by the directors when they met in New York to review the club’s current and prospective circumstances against the overall economic climate, the outlook for both the investment and freight markets, and the near- and longer-term implications of emerging trends within the P&I environment.
After this review, the directors concluded that, as last year, a general lack of pricing power combined with mounting external overheads, notably those associated with pooling, will continue to affect the cost of P&I cover going forward.
“However, there are signs that the outlook for shipping will improve over the foreseeable future, and that the global economic recovery will gain pace in 2014. While freight markets may lag to some extent, real improvement could start to emerge later in the year and into the early stages of 2015.
“At the same time, however, attritional exposures will likely maintain an upward trend, the size and volatility of large claims will be unlikely to reduce, and the investment climate will remain uncertain.
“It is likely, too, that the increasing absorption of risk by individual clubs, and the International Group itself, will continue to feature over time, placing a growing need on all clubs to ensure that the cover they provide is properly priced.”
Taking all these and other factors into account, the specific decisions reached by the directors can be briefly summarised thus:
- 2011 not expected to attract any further call in excess of the original estimate. Intended for closure within the first half of 2014; release call reduced from 15% to 5%.
- 2012 developing in deficit and may need some contingency fund assistance in due course, although the final outturn may be expected to improve towards anticipated closure for 2015. Release call to remain at 20% over and above the current estimated total premium for the year.
- 2013 also showing a deficit in the early stages of development, but likely to improve towards closure expected in first half of 2016. Release call remains at 20%.
In addition to the above, 2014 renewals will also include increases in, and minimum levels of, certain deductibles, as well as of deductibles for certain P&I risks.
On the investment front, the club continues to enjoy solid results, and at mid-November 2013 the portfolio had earned a year-to-date return of 5.24%. The managers are optimistic that earnings will continue to develop positively over the coming months.
The club’s contingency fund stood at $78.3m. at September 30 last, a record figure more than $9m. higher than 12 months earlier.
Speaking in New York recently, Joe Hughes, chairman and ceo of Shipowners Claims Bureau Inc., the managers, also noted the satisfactory result of a recent customer satisfaction survey among members and brokers. This independent research was carried out by Circle Research of London over several weeks from early July into early August this year, and all members and their intermediaries were consulted.
Overall, the survey indicated a generally high level of satisfaction with the club’s services, members scoring the club at an average of 8.1 out of 10 across all sectors, and brokers at 7.2 out of 10. A figure above 7.0 is regarded as very good by reference to the metrics of business-to-business research as a whole. In addition, the club was given a net promoter score (NPS) of +36 by its members, significantly higher than a normative benchmark of about +12 for this type of research in general.
However, Mr Hughes added, the managers are conferring closely with the board to identify ways in which the club can enhance the value it provides in those areas where more could be done. New initiatives to streamline certain functions, and to grow the club’s outreach to members and brokers in every service sphere, are under review. In order to monitor progress of these developments, a follow-up survey will be undertaken in the first half of 2015.
The American Club was founded in February 1917. In addition to its US headquarters in New York, the club is able to provide local service across all time zones, communicating in 11 languages, with subsidiary offices in London, Piraeus and Shanghai and a worldwide network of correspondents.