The UK P&I Club, whose capital has improved by $300 million over the span of 10 years, has decided it is time to redeem its $100 million hybrid bond.
Managed by Thomas Miller, the protection and indemnity insurance provider was the first P&I club in July 2008 to raise $100 million of new capital ahead of the introduction of the EU Solvency II directive. A cost-effective means to increase regulatory solvency capital over and above free reserves, the hybrid bond allowed greater flexibility in the Club’s investment strategy.
“We have come a long way in the last decade, and now the financial strength of the Club is among the best in the industry,” commented Alan Olivier, chair of the UK P&I Club. “Hybrid capital helped the Club to strengthen its capital base to where it stands today at $540 million.”
Earlier this year the marine insurer reported not only an underwriting surplus of $28 million for 2017 but also a strong investment return of more than $43 million. Now it is happy to note that it is capable of meeting its risk appetite with or without the hybrid capital.
“The Club will still hold sufficient capital to retain its indicative ‘AAA’ rating under the Club’s S&P model once hybrid is redeemed,” said Olivier, who saw investment returns of 6.1% for the Club for the year ended February 20.
Meanwhile the hybrid bond redemption has received the nod from the Prudential Regulation Authority.