2015 Chairman's Statement
The good news to report on the last financial year of 2014/15 is the continued improvement in the level of claims. The investment return of 4.5%, whilst lower than last year which was 9.0%, is still an excellent return in fluctuating investment markets. The combined ITIC and TIMIA clubs made a surplus of US$15.8m due to a combination of a good investment return 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 2013/14 was US$3.3m and the level of credit that will be paid out in 2014/15 will be just under US$6.0m. Since the continuity credit payments began 20 years ago, I am pleased to report that more than US$81m has been returned to you, the members.
The improved claim and investment returns allowed the Board, at its meeting in March 2015, to increase the level of continuity credit for one year policies from 7.5% to 12.5% and to increase the level of credit on two year policies from 12.5% to 17.5%; this applies to all renewals from 1st June 2015 onwards and will increase the amount of credit paid in 2015/16 to US$6.5m.
As ITIC has grown, more of each claim is now being retained before the reinsurers become involved. ITIC now retains the risk for all claims up to US$1.0m and also retains two claims of US$1.0m each (so a maximum of US$2.0m) excess of the primary US$1.0m. That structure has proved both beneficial to the reinsurance underwriters as they have seen the number of claims reported to them reduce and to ITIC which has saved on reinsurance premium.
ITIC has increased its premium income in 2014/15 through a combination of new members joining and existing members buying the wider insurances offered by ITIC, such as Directors’ & Officers’ liability, loss of commission and cash in transit insurances. ITIC will be offering a Cyber Liability insurance extension before the end of 2015.
The number of new members joining ITIC increased by 15% between 1st June 2014 and 31st May 2015. This is the highest number of new members for over 12 years.
ITIC continues to retain approximately 95% of its Members at renewal each year, which is a very high retention rate.
It is important for ITIC 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$111.8m at 31st May 2014 to US$127.7m as at 31st May 2015. 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 returns for 2014/15 of 4.5% 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
In common with previous years, the Board has decided to close the 2013/14 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 2014/15. ITIC has never requested additional premium for any policy year and your Board, at their next meeting in September 2015, will be considering whether to recommend to the membership that ITIC become a fixed premium mutual. This would give you the benefits of being a member of a mutual without any exposure (no matter how remote) to a request for supplementary premium. The ultimate decision on this issue will lie with you, the members, as this would need to be approved at an EGM.
Three years ago, ITIC conducted a qualitative member and broker survey. The results were very positive from the relatively small number of businesses that were contacted. This year, ITIC will be conducting a wider quantitative survey of all members and brokers. It is important that as many of you as possible take part and provide your views. The results will be shared with you all early next year.
The accounts and financial highlights for the period from 1st June 2014 to 31st May 2015 will be available on the website before the AGM on 24th September 2015.
ITIC will continue to provide competitively priced professional indemnity insurance (and related insurance covers) with 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.
International Transport Intermediaries Club Ltd