For the first time in its history, Members attending the American Club’s Annual Meeting in New York yesterday did so remotely, in a virtual format made necessary by the COVID-19 pandemic. Despite the unusual circumstances, Members heard that the Club had made solid progress across all business lines over the previous twelve months, with 2020 having also started on a positive note.
While the shipping and insurance sectors had continued to experience headwinds in 2019, the American Club had nonetheless seen a modest growth in tonnage, although income had remained flat. However, the Club’s fixed premium facility, Eagle Ocean Marine (EOM), aimed at the operators of smaller vessels in local and regional trades, had continued to expand its market share and revenue while maintaining respectable profitability. Year-on-year premium growth had been in excess of 10%, while the facility’s cumulative combined ratio remained below 80%.
American Hellenic Hull, the American Club’s fast-growing, Solvency II-accredited hull and war risks underwriting subsidiary domiciled in Cyprus, had enjoyed conspicuous success during 2019, with rising revenue and profits buoyed by higher levels of market pricing. This had continued with growing momentum into the opening months of the current year. The company’s results as of end-May, 2020 indicated a year-to-date combined ratio of just over 90%, driven, among other factors, by a 29% increase in rates on renewing business. Rising profitability was expected over the months ahead.
The American Club’s attritional exposures during 2019 had remained stable by comparison with the previous year, but the incidence of larger claims had increased over the period. The experience of the International Group’s Pool in 2019 had been broadly the same as that of 2018, while the early development of exposures into 2020 suggested a continuation of the elevated level of losses which had characterized the two earlier years. It was encouraging to note, however, that the Club’s retained claims had emerged in a relatively benign manner over the opening months of the current policy year.
The 2019 financial year had seen a 10.6% return on the Club’s investment portfolio, the best result in a decade. This, together with a 48% increase in net premium and assessments earned by comparison with the previous year, some of which was attributable to supplementary calls for 2016 and 2017 (formally closed without further call at the meeting), and a 6% reduction in management overhead, had contributed to a year-end increase in the Club’s GAAP free reserves of 20%, in tandem with a rise of 18% in statutory surplus.
Having adopted a zero-general increase for the 2020 renewal, the American Club nevertheless experienced an increase in average P&I rates per ton of about 10%, albeit with a modest reduction in overall tonnage against a background of membership consolidation. It was also encouraging to note that, partly in consequence of that consolidation, the risk profile of the existing membership had improved once again for 2020, implying a favourable claims outlook for the future.
The meeting was told that, in early 2020, the “lockdowns” precipitated in many parts of the world by the COVID-19 pandemic, together with their social, economic and political implications, had created new and unprecedented challenges for the American Club and its related businesses.
Happily, with the active support of its Board, the Club’s Managers had been able to respond with agility to these new circumstances, adapting traditional modes of operation to take account of remote working in a virtual environment. The Managers’ IT and other capabilities had been marshalled to considerable effect in responding to these new realities to secure unimpaired service to all the Club’s and EOM’s stakeholders. The early impact of COVID-19 on the Club, EOM and American Hellenic Hull had been muted, but the longer-term consequences for the marine insurance sector at large remained uncertain.
At the Annual Meeting of the Members, Mr. Weipeng Chen of CCCC International Shipping Corp., Mr. Emmanuel Michelakakis of Global Maritime Group, Inc., Mr. Leon Patitsas of Atlas Maritime, Ltd. and Mr. Joseph Hughes of the Club’s Managers were elected as new Directors. Messrs. Nicholas Tragakes and Mr. Lianyu Zhu retired from the Board at the meeting, and were thanked most warmly for their contribution to the Club’s affairs over their years of service.
The Board also noted with sadness the death, in April 2020, of Mr. Richard H. Brown, Jr. Dick Brown was one of the leading maritime lawyers of his generation and had been a servant of the American Club for some forty years as General Counsel and, more recently, as a member of its Board. He had participated in the affairs of the Club over much of its recent, transformational development in which he played an important role. He would be much missed by all who had been privileged to know him.
At the Annual Meeting of the Directors, which took place immediately after that of the Members, Mr. George D. Gourdomichalis of Phoenix Shipping and Trading S.A. and Mr. Robert D. Bondurant of Martin Resource Mgmt. Corp. were re-elected as, respectively, Chairman and Deputy Chairman of the Board.
At the same time, Mr. Joseph Hughes, Chairman and CEO of the Club’s Managers, Shipowners Claims Bureau, Inc., retired as Club Secretary after twenty years’ service in that role. Ms. Dorothea Ioannou, Deputy Chief Operating Officer of the Managers, was elected Secretary in his stead. In addition, Mr. Lawrence J. Bowles was re-elected as General Counsel.
Speaking in connection with the Annual Meeting, Mr. Gourdomichalis, the Club’s Chairman, said: “2019 was not an easy year for P&I underwriters. In common with its counterparts elsewhere in the International Group, the American Club encountered headwinds in conducting its business and had to make difficult choices in several areas. However, with the unwavering support of its membership, the Club was able to make solid progress in achieving many of its longer-term goals. More recently, the challenges of the COVID-19 pandemic have caused the Club to adopt new and agile responses to the needs of its Members. We have weathered the storm with some success, I believe, and are well placed to exploit the post-pandemic insurance landscape of the future.”
Joe Hughes, Chairman & CEO of Shipowners Claims Bureau, Inc., the Club’s Managers, also commented: “2019 brought both challenges and opportunities for the American Club and its related businesses. Attritional claims remained stable, but larger exposures continued to rise. Premium pricing strengthened across all insurance lines. Investment earnings were the best for a decade. Difficult decisions to levy calls on earlier years were made to ensure continuing balance sheet strength. Loss prevention initiatives multiplied. The management team was strengthened through the acquisition of new, and redeployment of existing, professional talent. Both Eagle Ocean Marine and American Hellenic Hull performed conspicuously well.”
He continued: “The COVID-19 pandemic over recent months has generated an unprecedented mobilization of management resources, geared to entirely new ways of working, to secure unimpaired service to our stakeholders. Despite the exigencies of the present, my colleagues and I look forward with optimism to the many opportunities for future growth and development which will gain further momentum when normal conditions return.”
Source: The American Club