2018 Chairman's statement
- Date: 22/11/2018
I am pleased to report that the 26th financial year of ITIC has produced a strong surplus. ITIC, combined with its mutual reinsurer TIMIA, returned US$18.2m for the year to 31st May 2018 (“2017/18”). This was due to a continued improvement in the position of historical claims together with a reasonable investment return.
The investment return of 3.9% accounted for US$8.3m of the surplus. This was a significant improvement on the anticipated investment return which, due to the relatively volatile nature of the investment markets and the asset allocation of the portfolio, was forecast to be just 2.9%.
The continuity credit is a credit given to renewing members and it effectively reduces the costs of your insurance. Your board, at its meeting in March 2018, reviewed the level of ITIC’s free reserves and, since these were significantly above what was required for ITIC’s solvency requirement, decided to substantially increase the levels of the continuity credit.
- For one year policies, the credit was increased from 20% to 40% of the premium.
- For two year policies, the credit was increased from 25% to 50% for year one with at least a 25% credit for year two.
Those in the second year of a policy begun last year will also get a credit of 50%, up from promised level of 22.5%.
These credits are the highest that ITIC has ever paid and will apply to all renewals in the 2018/19 year.
Your board considers the payment of such continuity credits to be a very important benefit of being covered by a mutual insurer. The amount of the anticipated credit that will be paid out in 2018/19 is US$19.5m which is three times as much as it was three years ago and four times what was paid out four years ago. Since the continuity credit payments began 23 years ago, I am pleased to report that more than US$122.0m has been returned to you, the members.
The risk for all claims up to US$1.0m continues to be retained by ITIC, but it now also retains an additional US$3.0m in excess of the primary US$1.0m level (subject to a maximum additional retention of US$1.0m for any claim). This retention of slightly higher levels of risk has seen ITIC save on its reinsurance costs for the last three years.
ITIC’s annual premium remained approximately the same in 2017/18 as in the previous year, largely because of continued consolidation in the maritime services market. However, the good news is that US$3.5m of premium was gained from new members (up by US$1.0m from last year) and this offset the losses due to consolidation and cessation of the insured services.
ITIC continues to retain approximately 95% of its members at renewal each year, which is a very high retention rate.
The insurance, claims and contractual advice and practical help that we can provide through our staff in London to members, advisers, brokers and introducers around the world, continues to set us apart from the competition.
It is important for ITIC to maintain its level of free reserves both for solvency reasons and to drive up the levels of continuity credits paid to the membership. I am pleased to advise that the combined free reserves of ITIC and TIMIA have increased from US$159.7m as at 31st May 2017 to US$177.9m as at 31st May 2018. It is perhaps worth noting that the results for the next few years will be held back as the impact of the much higher levels of continuity credits feed through into the financial accounts.
In common with past years, the board decided to close the preceding policy year, meaning that no additional premium can be requested from members for the 2016/17 policy year or any earlier year. The only full year that remains open is 2017/18. It should be noted that ITIC has never requested additional premium for any policy year.
ITIC underwrites, approximately, 30% of its business in the European Union excluding the United Kingdom (the “EU27”). The plan post Brexit is that ITIC will continue to provide cover but via a fronting arrangement with an insurer based in Rotterdam in the Netherlands, starting at the end of 2018. The business within the EU27 is very important to us and the cover and service available will be unchanged.
We are now reporting fully to Solvency II standards, both to the Prudential Regulation Authority and the general public. Details of our solvency position can be found in the Solvency and Financial Condition Report, which is available on the ITIC website.
ITIC is committed to consistently providing competitively priced professional indemnity insurance (and related insurance covers) with valuable, high quality loss prevention advice to businesses servicing the marine, aviation, rail and general transport industry through a mutual insurance company supported by at least “A-” rated security from its external reinsurers. Strong reserves will be maintained and quality service and sound risk management provided by its highly competent staff.
The accounts and financial highlights for the 2017/18 year will be available on the website (www.itic-insure.com) before the AGM on 20th September 2018.
International Transport Intermediaries Club Ltd