2014 Chairman’s Statement
The good news to report on the last financial year of 2013/14 is that the improvement in both the level of claims and the investment return has continued from last year. The combined ITIC and TIMIA clubs made a surplus of over US$20m due to a combination of a good investment return (9.0%) and an improvement in the historical claims figures.
ITIC continues to return premium to its Members via the continuity credit at renewal. Your Board considers the payment of such credits to be a very important benefit of being insured by a mutual insurer. The amount of credit paid in 2012/13 was US$3.3m and the same level of credit was paid out again in 2013/14. Since the continuity credit payments began 19 years ago, I am pleased to report that more than US$75m has been returned to you, the Members.
The improved claim and investment returns allowed the Board, at its meeting in March 2014, to increase the level of continuity credit for one year policies from 2.5% to 7.5% and to increase the level of credit on two year policies from 7.5% to 12.5%; this applies to all renewals from 1st June 2014 onwards and will increase the amount of credit paid in 2014/15 to US$5.8m.
The economic climate worldwide is showing increasing signs of improvement and ITIC has seen the number of professional indemnity claims decrease, although the cost of each claim is still increasing.
As a result of the increased number of claims paid by the Clubs’ reinsurers in the years 2009 to 2011, ITIC now retains more of each claim before the reinsurers begin to pay. It is, therefore, essential that the Club continues to act prudently on both its pricing and its appetite for risk.
ITIC has increased its premium income in 2013/14 through a combination of new Members joining the Club and existing Members buying the wider insurances offered by ITIC, such as Directors’ & Officers’ liability, loss of commission and cash in transit insurances.
Furthermore, the Club continues to retain approximately 95% of its Members at renewal each year, which is a very high retention rate.
It is important for the Club to maintain its level of free reserves and I am pleased to advise that the reserves of the combined ITIC and TIMIA clubs have increased from US$91.3m to US$111.8m at 31st May 2014. This is a significant increase but, as I mentioned last year, Solvency II, the new regulatory regime with which all insurers within the EU will have to comply by 1st January 2016, will have an impact on the future capital requirements of the business.
The investment return for 2012/13 was 7.5% and for 2013/14 was 9.0%; this is an excellent return which has helped fund the increased levels of continuity credit agreed by your Board for 2014/15. The clubs’ (ITIC and its reinsurer TIMIA) reserves are invested in a wide portfolio of assets designed to match any currency exposure that ITIC 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.
The accounts and financial highlights for the period from 1st June 2013 to 31st May 2014 will be available on the website before the AGM on 25th September 2014.
In common with previous years, the Board has decided to close the 2012/13 policy year, meaning that no additional premium can be requested from Members for this or any earlier year. The only full year that remains open is 2013/14. ITIC has never requested additional premium for any policy year and your Board is considering changing ITIC to a fixed premium mutual which would give you all the benefits of being a Member of a mutual without any exposure (no matter how remote) to a request for supplementary premiums.
ITIC will continue to provide competitively priced professional indemnity insurance (and related insurance covers) with loss prevention advice to businesses servicing the marine and 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.
International Transport Intermediaries Club Ltd