I would like to offer my thanks to Peter French for his hard work as the ITIC Chairman from 2012 until he retired in March 2019. It is my pleasure to be the new Chairman of ITIC.
I can report that in the 27th financial year, ITIC has produced a small surplus. ITIC, combined with its mutual reinsurer TIMIA, returned a modest US$1.3m for the year to 31st May 2019 (“2018/19”). This result is after the cost of the very high continuity credit paid in 2018/19.
The investment return of 3.7% accounted for a contribution of US$10.4m and this was an improvement on the originally anticipated investment return of 2.9%.
The continuity credit is given to renewing members and it effectively reduces the cost of your insurance. Your board, at its meeting in March 2019, reviewed the level of ITIC’s free reserves and as these remain above the amount required for ITIC’s solvency requirement, the board decided to pay the second highest levels of continuity credit.
- For one year policies, the credit was 25% of the premium.
- For two year policies, the credit was 35% for year one with at least a 25% credit for year two.
These credits will apply to all renewals in the 2019/20 year.
Those in the second year of a policy begun in 2018/19 will also get a credit of 35%, up from promised level of 25%.
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 in 2019/20 is US$19.2m which is almost the same as was paid out in the previous year and this level is three times above the average pay out over the last few years. Since the continuity credit payments began 24 years ago, I am pleased to report that more than US$141.0m 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 has increased in 2018/19 by about 5%. In recent years, premium has remained static largely because of continued consolidation in the maritime services market. Other marine and transport insurers have moved away from professional indemnity insurance, which has led to an increase in business at ITIC. The amount of new premium gained in 2018/19 was US$3.3m. At the end of July 2019, the level of new business gained since 1st June 2019 has been the highest ever. Also, 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.
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$177.9m as at 31st May 2018 to US$179.1m as at 31st May 2019. The impact of the much higher levels of continuity credits in 2018/19 and 2019/20 will feed through into the financial accounts in due course.
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 2017/18 policy year or any earlier year. The only full year that remains open is 2018/19. 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 will provide cover via a fronting arrangement with an insurer based in Rotterdam in the Netherlands for renewals within the EU27 from 30th October 2019 (or whenever Brexit actually happens). The business within the EU27 is very important to us and the cover and service will be unchanged.
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 and quality service and sound risk management provided by its highly competent staff.
The accounts and financial highlights for the 2018/19 year will be available on the website (www.itic-insure.com) before the AGM on 26th September 2019.
International Transport Intermediaries Club Ltd