Wednesday, November 05, 2008
UK Club hits owners with $200m top-up call
Jerry Frank - Tuesday 4 November 2008
Luke Readman
THE credit crunch and an overheated shipping market have landed shipowner members of the UK P&I Club with a supplementary premium call in excess of $200m.
Negative investment returns and escalating claims forced the UK Club, one of the largest marine mutuals, today to call for top-up payments for previous years, in addition to a 12.5% general increase for 2009.
Luke Readman, chairman of manager Thomas Miller P&I, told Lloyd’s List: “We’re looking at a situation of huge uncertainty in the financial markets and further deterioration of claim levels for 2006-2007.”
Shipowner members face a 25% supplementary call for 2007 and 20% for 2006 and 2008, with this year’s supplementary premium level still only an early estimate.
Mr Readman would not rule out the need for further supplementary calls, but added: “If there is a serious recession in the shipping markets, we can expect claims to fall off.”
The P&I clubs are in the middle of announcing their general increases for 2009, which will be finalised in February, amid some of the toughest conditions faced by the mutuals since the early 1990s.
Britannia has called for a 12.5% general increase and Shipowners, which caters for smaller merchant vessels, has opted for a 10% rise, with Gard and the London Club indicating a 15% premium increase.
The UK P&I Club is heading for an investment deficit this year, with prospects uncertain for 2009.
However, heavy claims levels from intense demand for shipping were behind its 2006-2007 deficits.
Chief financial officer Jonathan Goldthorpe said that the supplementary call for 2006-2007 would translate into a $135m additional call before broker costs, with 2008 representing $68m.
An increase in attritional claims, primarily linked to crewing-related incidents, had pushed up the claims deficit for 2006 and 2007 to $61m and $83m.
However, Mr Goldthorpe said that 85% of its portfolio was now held in US and European government bonds, and its minimal exposure to hedge funds had held up better than expected.
The club board delayed the announcement, despite meeting a week ago. Mr Readman said the board recognised the move would be unpopular, but the decision was necessary in the light of claims conditions and uncertainty over investments.
The supplementary calls follow the club’s decision to raise $100m in hybrid capital to shore-up its capital base ahead of new European Union solvency regulations.
However, Mr Readman stressed that the hybrid capital is not in place to buffer against operational losses and mounting claims costs.
As adapted from Lloyds List
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