TT Club Announces New Premium Levels
16 November 2001
Leading transport mutual moves to address cost and capacity concerns
The TT Club, the insurance mutual for ship operators, stevedores, port authorities, transport and logistics companies and freight forwarders worldwide, has this week moved decisively to address issues of concern arising from underwriting results, reinsurance costs and investment returns.
In a statement released to Club Members and their brokers, TT Club Chairman Sir David Thomson warns of the need to respond to adverse pressures in all three areas, and raise premiums to a "sustainable level". The Club is also determined to expand successfully while at the same time maintaining its high standards of cover and service.
TT Club has informed its Members and their intermediaries that it will act resolutely to maintain its financial strength and manage its exposure to reinsurance risk. On policy renewals, the Club has determined to incorporate the normally applied Claims Inflation Factors into an across-the-board General Increase, which the Club's Directors have set at a level of 20%. New business premiums will also be rated accordingly. In common with general insurance market practice, TT Club also announced that it would introduce a 30-day cessation clause in all policies to enable it to respond effectively in the event of unsustainable change in the cost or availability of reinsurance.
The Club's candid statement declares that underwriting losses over the four policy years 1997-2000 cumulatively reached US$50m, necessitating funding from investment income and free reserves which, at the end of 2000 and after deducting the losses, stood at approximately US$80m.
"These results reflect increasing levels of liability, litigation and claims within the transport industry, combined with competitive pressures in the global insurance market created by over-capacity and price competition," commented Sir David in his message. "The Club, despite its policy of seeking to underwrite at cost at stable long term rates, is not immune from such trends."
The whole insurance market had been facing rising reinsurance rates even before the start of 2001 and TT had been expecting further moderate rises in 2002. Since the events of September 11th however, there has been a dramatic contraction of capacity in the reinsurance market and rates are now expected to rise sharply during the next twelve months. TT Club stressed that it had no direct exposure to claims arising from the September 11th attacks in the US but it, like all other primary insurers, would be affected by the future cost and availability of reinsurance. The Club has been similarly realistic when considering the likely contribution from investment returns, which have historically provided the Club with a high level of solvency. "Returns for 2001 are expected to be weak as interest rates have fallen sharply and equity markets have not yet recovered to their former levels," Sir David observed. "The outlook for 2002 is very uncertain and it is clear that the Club cannot rely upon investment returns to support underwriting results for the foreseeable future."
The TT Club's statement to its members stresses that the move to fixed premium insurance while maintaining mutual status, announced last month and approved at November 5th General Meetings of TT Bermuda and TT EurAsia, has no influence on the level of General Increase, which has been solely determined by the negative influences of underwriting results, reinsurance cost and investment returns.
Looking forward, the Club points to its strong, long-term position in the transport insurance market, the scope of its specialised cover, the global span of its network and the recognised quality of its claims and advisory services. By maintaining its financial strength, TT Club is ensuring that it continues to deliver the range of value for money services that its members require.
ENDSNote to editors:
The TT Club provides liability and equipment insurance to ship operators, stevedores, terminal and depot operators, port authorities, logistics providers, freight forwarders and other transport operators in 150 countries. The TT Club insures 70% of the world's container fleet, over 2,000 ports and terminals worldwide and more than 4,000 transport and logistics operations around the globe. The Club's directors are drawn largely from the membership and have significant experience within the transport industry. TT Club is the transport and logistics industry's leading provider of liability and associated insurance and risk management products. To maintain this position the TT Club will continue to maximise its value-adding process with innovative concepts such as TTXpress.com, ThruCargo, TTe-claims and Claimstrac.
For further information please contact:
Tel + 44 (0)20 7204 2642
Michael Haig and Peter Owen, ISIS Communications
Tel +44 (0)1737 248300