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I can report that in its 28th financial year, ITIC has produced a surplus. ITIC, combined with its mutual reinsurer TIMIA, returned a US$5.5m surplus for the year to 31st May 2020 (“2019/20”) after paying US$19.7m for the cost of the continuity credit. This follows the US$19.5m credit paid in the previous year.
The investment return of 7.2% accounted for a contribution of US$18.1m. This was despite the significant downturn in the financial markets in February and March 2020 due to the pandemic. Over those months, the investment return declined from +8.0% to -3.3% before bouncing back to +7.2% by the year-end. The original budgeted forecast for the investment return was +3.2%.
The continuity credit is given to renewing members and it effectively reduces the cost of your insurance. Your board, at its meeting in March 2020, reviewed the level of ITIC’s free reserves and the extremely uncertain investment markets. The board decided that, as the free reserves were still well above the amount required for ITIC’s solvency requirement and being aware that the members needed all the support they could get in these very difficult and uncertain times, they were going to pay a continuity credit for the 26th consecutive year for all renewals in the 2020/21 year.
Your board considers the payment of such continuity credits to be a very important benefit of being covered by a mutual insurer, even more so in these difficult times. The amount of the credit that was paid in 2019/20 was US$19.7m, similar to the previous year but considerably higher than the US$9.7m of 2017/18. Since the continuity credit payments began 25 years ago, I am pleased to report that more than US$161.0m has been returned to you, the members.
The risk for all claims up to US$1.0m continues to be retained by ITIC, as well as 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). We are comfortable that the reinsurance in place reduces the risks of large claims to an acceptable level at a reasonable cost.
ITIC’s annual premium increased in 2019/20 by about 4% and we had a record amount of new business join ITIC. In recent years, premium has remained static largely because of continued consolidation in the maritime services market. Other marine and transport insurers continue to move away from professional indemnity insurance, which has led to an increase in business for ITIC in 2019/20. The amount of new premium gained in 2019/20 was US$4.7m up from US$3.3m in 2018/19 from almost 500 new members. ITIC continues to retain approximately 96% of its members at renewal each year, which is a very high retention rate.
The insurance, claims, 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. Due to the lockdown in many countries and the difficulties travelling, ITIC has organised more webinars which have attracted widespread international audiences.
It is important for ITIC to maintain its level of free reserves both for solvency reasons and to allow the levels of continuity credits to be paid to the membership. I am pleased to advise that the combined free reserves of ITIC and TIMIA have increased from US$179.2m as at 31st May 2019 to US$184.7m as at 31st May 2020 despite the two very high years of continuity credits paid in 2018/19 and 2019/20.
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 2018/19 policy year or any earlier year. The only full year that remains open is 2019/20. 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”). ITIC has been using the fronting arrangement provided by an insurer based in Rotterdam, Netherlands for renewals within the EU27 from 30th October 2019. The business within the EU27 is very important to us and the cover and service remains unchanged. Much of ITIC’s EU business has now renewed via this route.
ITIC reports fully to Solvency II standards and is regulated by the Prudential Regulation Authority. This will not change post Brexit. Details of our solvency position can be found in the Solvency and Financial Condition Report, which is available on the ITIC website:https://www.itic-insure.com/about-itic/solvency-ii-reporting/
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 as will quality service and sound risk management provided by its highly competent staff.
The accounts and financial highlights for the 2019/20 year will be available on the website (www.itic-insure.com) before the AGM on 24th September 2020.
International Transport Intermediaries Club Ltd
The audited Report and Financial Statements for the year ended 31st May, 2020 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 TIMA, 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 TIMA, 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.
ITIC: Taking care of your concerns globally