2017 Chairman's Statement
The good news to report for the 25th financial year of ITIC for 2016/17 is a strong combined surplus from both ITIC and its mutual reinsurer, TIMIA, of US$22.9m, largely due to an improvement in the historical claims figures together with a very good investment return of 5.9% which accounted for US$13.1m of that surplus.
Due to the relatively volatile nature of the investment markets, the anticipated investment return for 2016/17 was budgeted at 2.9%. The investment return of 5.9% was appreciably higher than the return last year of 1.9%. This was an excellent result in a fluctuating investment market and was above the investment return benchmark.
Your board, at its meeting in March 2017, decided to increase the level of the continuity credit for one year policies from 12.5% to 17.5% of the premium and to increase the credit for two year policies from 17.5% to 22.5% each year. These credits apply to all renewals from 1st June 2017 onwards.
Your board considers the payment of such credits to be a very important benefit of being covered by a mutual insurer, particularly in these more difficult economic times. The amount of the anticipated credit that will be paid out at renewal in 2017/18 is US$9.5m which is twice as much as it was three years ago. Since the continuity credit payments began 22 years ago, I am pleased to report that more than US$99.0m has been returned to you, the members.
ITIC continues to retain the risk for all claims up to US$1.0m and also retains an additional two claims of US$1.0m each (so a maximum of US$2.0m) excess of the primary US$1.0m. This structure is beneficial to both the reinsurance underwriters, as they have seen the number of claims reported to them reduce, and to ITIC which has saved on reinsurance premium in 2016/17 and again in 2017/18.
The annual premium of ITIC has reduced in 2016/17 due to a combination of lower incomes declared at renewal and increased consolidation in the maritime services market. The good news is that over US$2.5m of new premium was gained from new members partially offsetting any losses due to consolidation and cessation of the insured services. Existing members continue to buy the additional insurances offered by ITIC, such as cyber liability, Directors’ & Officers’, loss of commission and cash in transit covers. A new insurance added this year was Maritime Labour Convention (“MLC”) liability cover for ship and crew managers (offered at no additional premium) as they, potentially, face a liability under MLC as well as the ship owner.
The number of new members joining ITIC between 1st June 2016 and 31st May 2017 increased by over 10%. 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 free reserves of the combined ITIC and TIMIA clubs have increased from US$136.7m as at 31st May 2016 to US$159.7m as at 31st May 2017. This is a larger increase than anticipated but it is a very important buffer as the regulatory regime that governs ITIC, called Solvency II, will likely require increased future capital requirements for all UK and EU based insurers.
The clubs’ (ITIC and its reinsurer TIMIA) reserves are invested in a wide portfolio of assets and these are invested to match any currency exposure that ITIC may have to its 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 2015/16 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 2016/17. It should be noted that ITIC has never requested additional premium for any policy year.
Your board, at its meeting in September 2017, will consider whether it is feasible to distribute more of the free reserves to the membership separate (or in addition to) the credits already paid at renewal.
The board continue to consider options for ITIC as a result of the Brexit referendum which will ensure that ITIC will still continue to cover approximately 30% of its business that will remain in the EU after the UK leaves.
The accounts and financial highlights for the period from 1st June 2016 to 31st May 2017 will be available on the website before the AGM on 21st September 2017.
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.
International Transport Intermediaries Club Ltd