UK Club‘s increase aims to maintain financial strength

The UK P&I Club Board has ordered a general increase in premium rating of 20 per cent plus the relevant increase in cost of the International Group's reinsurance programme for 2002.

These increases, agreed at the Board meeting in Zurich last week, aim to maintain the Club's strong financial standing going forward. After application of the general increase, members' premium ratings will be reviewed in the light of loss records and other factors and further increases or reductions applied individually.

In a letter to Club members, Chairman Aleco Kairis acknowledges that the increase is significant. In past years, healthy investment returns had enabled the Club to maintain its position as one of the most strongly funded while reducing the premium cost to members through successive cuts in planned supplementary calls.

"However, the downturn in the financial markets, particularly equities, over the last 18 months means that the pure underwriting deficit is no longer being covered by investment income and the free reserves are being eroded."


The Board did not expect the strong investment returns of the past to be repeated. A significant increase in premium was required to maintain the free reserves position.

Mr. Kairis reminded members that the Club's financial strength was underpinned by its unique reinsurance contract with the AAA rated Swiss Re. This would support the Club if free reserves fell below the Board's target range.

"However, it is the Board's policy to maintain reserves above the trigger point for the Swiss Re contract and to rely on that contract for an unforeseen rather than a foreseeable fall in the free reserves.

"The Board is determined to maintain the Club's financial strength - a strength which is particularly valuable at this time of uncertainty in the world's financial and insurance markets," added Mr. Kairis.

The Supplementary Premium estimates for 2000 and 2001 remain nil. The figure for 1999 remains at 30 per cent and the Board expects to close this year in April 2002.