Annual report and accounts
2012 Chairman's Statement
Harry Gilbert has been on the Club’s Board as a Director representing either Denholm Ship Management or Wallem Group since 1992 and has been the Club Chairman since 2005. Harry stepped down from the Board in March 2012 and I would like to thank him for all his hard work and for handing over the Club to my chairmanship in such strong order.
For the year to 31st May 2012, the Club has returned to its Members a continuity credit of US $5.2m, which is slightly below the previous year's level of US $6.2m. From 1st June 2012, the Board has reduced the level of continuity credit to those Members renewing to either 2.5% or 5% of their expiring premium. This reflects the Board’s recognition of the need to continue to be prudent in a challenging market whilst also noting the strength of the Club’s reserves. Since the continuity credits began 17 years ago, more than US $67.3m has been returned to Members. One of the unique strengths of a mutual is the absence of shareholders, allowing its members to benefit from any financial surplus. Solvency II (the new regulatory regime with which all insurers within the EU will have to comply by 1st January 2014) will have an impact on the future capital requirements of the business. This will necessitate our maintaining strong reserves not only to ensure compliance, but also to sustain continuity credits in the future.
As we are all well aware, the economic outlook remains weak. In any recession, professional indemnity insurers tend to see a sharp increase in both the number and the value of claims presented and the Club is no exception. We are currently experiencing a10% claims inflation every year and have seen significant individual claims paid which have impacted on the reinsurance that the Club has in place. It is often easier for a client to sue or counter sue its service provider than to settle an invoice or a claim. Claims increased significantly in 2009, levelled off a little in 2010 and showed an increase again in 2011. However, there are now some signs that this higher claims activity may be starting to reduce.
There has been a focus on Members with adverse claims records and, at renewal, special deductibles are being applied to those types of claims that occur frequently, such as demurrage claims for ship brokers, refrigerated cargo claims for ship agents and legal costs in US litigation for ship managers. Through this, the Club has increased its premium income whilst continuing to retain approximately 95% of its Members at renewal each year. The increase in claims, allied to a very small investment return, has reduced the level of combined free reserves over the year by 0.9% at 31st May 2012, which contrasts with a 17% increase last year. However, the Board believes this to be a good result in the prevailing economic climate and the Club’s combined reserves, at US$78.4m, continue to remain comfortably higher than the current and anticipated future regulatory requirements.
The Club offers valuable support to its Members with their claims and debt collections (where applicable) and by providing general or loss prevention advice on a wide range of issues. I would urge you all to look at the new Club website (www.itic-insure.com), which contains a wealth of information and advice. The accounts and financial highlights for the period from 1st June 2011 to 31st May 2012 are also available on the website.
After two years of strong investment returns yielding 7.0% and 10.6% respectively, the current year has produced a much lower combined return of 0.6%. The Club’s reserves are invested in a wide portfolio of assets designed to match any currency and time exposure which it may have to existing claims (which are mostly in US dollars), whilst also balancing the ability to yield a return based on an acceptable level of risk.
In common with previous years, the Board has closed the 2010/11 policy year, meaning that no additional premium can be requested from Members for this or any earlier year. The only year that remains open is 2011/12. It may be noted that the Club has never requested an additional premium for any policy year.
Looking forward, the Club will continue to provide, through a mutual structure, competitively priced, professional indemnity insurance and loss prevention advice to companies servicing the transport industry. It will aim to maintain strong reserves and be reinsured by at least “A-” rated security and will ensure that sound risk management principles are followed. The Club will continue to manage its risks in order to achieve these objectives.
Finally, on behalf of all the Members and the Board of Directors, I should like to thank the team at Thomas Miller for their continued strong and effective management of the Club.
International Transport Intermediaries Club Ltd
Report and Financial Statements
The audited Report and Financial Statements for the year ended 31st May, 2012 for both ITIC and TIM (Transport Intermediaries Mutual) are below.
The Directors and Managers of ITIC and TIM are mindful of the difficulties you may have in appreciating the financial strength of ITIC and its quota share reinsurer TIM, merely by reading their respective accounts in isolation. Accordingly, in order to assist you in reaching a practical understanding of the combined financial strength of ITIC and TIM, we have prepared unaudited Financial Highlights of the combined Accounts of the two Clubs, which can also be found here - Combined Highlights of ITIC and TIM.