No.3 2023/24 - Class 1 and Class 2 Policy Year Balances and Financial Position at 20 February 2023
May 2023
Report and Accounts for the year ending 20 February 2023 for The West of England Ship Owners Mutual Insurance Association (Luxembourg) were approved, on 10 May 2023, by the Board who are pleased to report strong and continued progress over the last 12 months despite the economic headwinds that have impacted financial markets.
You can view our Financial Highlights video here and the full Report and Accounts 2023 will be published in due course.
Financial summary for year-ending 20 February 2023
- Combined ratio 96.7% (2022: 114.4%)
- Underwriting surplus USD 8.0m (2022: deficit USD 32.1m)
- Gross earned premiums USD 293.2m (2022: USD 266.5m)
- Earned premiums, net of reinsurance USD 244.7m (2022: USD 222.8m)
Claims incurred, net of reinsurance USD 187.7m (2022: USD 210.1)
- Investments returned a loss of USD 28.3m (2022: loss of USD 8.0m)
- Free reserve USD 230.8m (2022: USD 251.2m)
- Capital - solvency coverage 176% (2022 163%)
Financial commentary
The Club’s operating performance improved significantly compared to the previous 12 months. There were three drivers for this improvement. The first is that the Club had a successful renewal in February 2022 so began the year in a much stronger position than recent years. Rating levels have increased, and the Club’s risk profile has improved.
Secondly, Covid related claims abated which meant that Members’ own claims performance in 2022 was better than forecast despite evidence of inflation impacting claims costs. Back year claims also developed more favourably than expected.
Thirdly, and the most important driver, the cost of IG Pool claims for Policy Year 2022 was far lower than anticipated. Only five claims have been notified to the IG in Policy Year 2022 and West was again fortunate enough to not notify any Pool claims of its own. This had a positive impact on our Pool share and the incurred cost of Pool claims to West was much lower than in recent years. This had a favourable impact on the Club’s operating performance but there was a marked deterioration in the cost of IG claims in prior Policy Years which offset much of this benefit.
The improvement in the Club’s technical performance has resulted in a combined ratio of 96.7%, the best result since 2017.
Investment markets were difficult and high inflation and the consequent monetary tightening meant interest rate rises resulted in losses for fixed income investments. Equity holdings also suffered during the year but the Club’s alternative assets made a positive return. Overall, the Club’s investment portfolio returned a negative 3.6%.
The Free Reserve reduced to USD 230.8m but the Club’s capital position improved with the solvency coverage increasing to 176%, the highest it has been since February 2020.
Policy Years and Release Calls
In setting the level of release call percentages for each open Policy Year for Class 1 and Class 2, the Board has taken into account the Club’s overall capital position and all the factors that are set out in Clause 8 of the International Group Agreement:
Class 1 (P&I)
2020/21 – Closed without further call
2021/22 - Release call reduced to 10% of the estimated total mutual call
2022/23 – Release call maintained at 15% of the estimated total mutual call call and fifth instalment confirmed payable on 20 August 2023
2023/24 – Release call maintained at 15% of the estimated total mutual call
Class 2 (FD&D)
2019/20 – Closed without further call
2020/21 – Release call reduced to 0% of the estimated mutual call
2021/22 – Release call reduced to 10% of the estimated mutual call
2022/23 – Release call maintained at 15% of the estimated total mutual call and fifth instalment confirmed payable on 20 August 2023
2023/24 – Release call maintained at 15% of the estimated total mutual call
Yours faithfully,
For: West of England Insurance Services (Luxembourg) S.A.
(As Managers)
T Bowsher
Group CEO