North P&I Club's business remains 'resilient' in face of large claims

Two major claims made a dent in the club's underwriting figures for the year

North P&I Club's business remains 'resilient' in face of large claims


By Ryan Smith

Two major casualties had an impact on North P&I Club’s underwriting figures for the policy year ending February 20, the club said. However, the period also saw the launch of new products, member retention at 99% and more tonnage insured than ever before. North also received an “A” financial strength rating for the 15th consecutive year.

“Rising claims based on greater market share and weak pricing pointed towards an underlying combined ratio for North of 108% -- closely aligned with International Group of P&I Clubs counterparts – but North’s exposure on the Grande America and Golden Ray casualties helped push the figure to 125.8%,” North said.

The Grande America was a cargo vessel that caught fire and sank in March 2019. The Golden Ray, another cargo ship, capsized in September. The claims were among the largest ever handled by North – and, at potentially more than $400 million, the Golden Ray claim could be among the largest in International Group history.

“The overall result clearly demonstrates the P&I industry’s volatility and sensitivity to large claims,” said Pratap Shirke, chairman of North. “While it is unusual for two such large claims to fall in so short a time, it is simply the job of the P&I club to protect its members. Effectively managing these casualties in partnership with local authorities and international experts demonstrates North’s commitment to keeping member interests central in everything that it does.”

“We continue to build the strength and sustainability of the club based on our clear diversification strategy and bringing in additional underwriting talent,” said Thya Kathiravel, North chief underwriting officer. “In September 2019 we launched our Owners’ Fixed Premium P&I product, and earlier this month announced a new blue-water hill and machinery product. The formal legal integration of North and Sunderland Marine, a key diversification initiative for us, is also close to being finalized, and will further reinforce the resilience and sustainability of our underlying business.”

North is also continuing to diversify its investment strategy, spreading asset risk across a broader range of funds. Strong returns of 6.4% earned $64.5 million net of fees. However, reduced corporate bond yields offset that with a $16 million increase in the accounting deficit for the pension scheme, North said.

The reporting period pre-dates COVID-19 impacts, North said. However, the club said its asset strategy was “proving robust in the face of new volatility.”

“At April 30, our position showed losses below 2% of the portfolio; this is comfortable in an extraordinary market,” said Ed Davies, chief financial officer for North.

Owned tonnage surpassed 160 million gross tons (GT) for the first time in 2019-2020. Including charterers, North’s entered fleet grew by 20 million GT to exceed 230 million GT.

“In the last year, North insured more tonnage than ever before, continued to diversify our income base to enable members to trade with confidence, and strengthened our team, and we are now supporting members through the COVID-19 pandemic,” said Paul Jennings, chief executive of North.

The club’s premium income grew slightly to $347 million, although Jennings said that concerted action was needed to correct a three-year halt on premium increases.

Free reserves fell $19.5 million to $444 million. However, a corresponding increase in 2018-2019 left the club’s two-year position broadly neutral, Jennings said.

“Two unusually large claims in close succession have led to a one-off combined ratio figure in 2019-20, but North’s underlying business remains strong, resilient and healthy,” Jennings said.

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