North Group Increases Projected Free Reserve

Directors of the North P&I Club and Sunderland Marine Insurance Company (North Group) have revised their projection for the group’s year-end free reserve up to $380 million, an increase of 12 percent on last year and $20 million more than estimated at the half-year point.

In North’s pre-renewal report published today, chairman Pratap Shirke said, "Claims on the current policy year have continued to develop favorably and this, together with the assistance we have received from our reinsurance partners, has enabled us to increase our projected free reserve at February 20, 2016 to $380 million."

The directors also forecast that North’s combined ratio will improve from 109 percent to 87 percent this year. "The Club’s long-term average combined ratio is amongst the best within the International Group of P&I Clubs," Shirke said. "We aim to continue this performance by ensuring Members continue to make a fair and mutual contribution towards their own claims experience and exposure."

He confirmed North has set a general premium increase of 2.5 percent for both P&I and freight, demurrage and defence (FD&D) for the 2016/17 policy year. "The relatively low increases compared to recent years reflects the improvement in the Club’s financial position during 2015/16, with favorable claims development more than offsetting negative investment income."

He said investment return on P&I class assets in the financial year to October 31 was -0.65 percent, equating to a loss of $4.5 million, with the 29 percent invested corporate bonds performing particularly poorly. "On the plus side, increasing bond yields have resulted in our pension scheme liabilities falling by $10 million, though this has not been factored into the projected free reserve in view of current volatility in the financial markets."

Shirke also says that North has engaged with the UK’s Prudential Regulatory Authority and North will be fully compliant with the European Union’s stringent ‘Solvency II directive’ for insurance businesses when it comes into force on January a, 2016.

"The directors and I are satisfied North remains in a strong, financially secure position and that our proactive renewal strategy will maintain this position. While we appear to be in the midst of a relatively benign claims environment, we nevertheless continue to believe that the upward trajectory in the cost of claims will persist in line with the last several years. As such North remains focused on its cautious underwriting philosophy and continued aim of achieving a breakeven underwriting result."