Protection & Indemnity

Comparative club analysis – underwriting

Wide variation in individual club underwriting results

As we have commented in previous P&I market reviews, there is a significant variance between the best and worst performing club in the IG.

Combined ratios are a direct comparison of clubs’ underwriting performance, as seen in the graph below.

Only two of the 13 IG clubs reported an improvement in their financial year underwriting results, with the majority of club reporting materially deteriorating underwriting figures.

The variance between the most positive and the most adverse underwriting results is stark in 2017/18, with a 25% difference between the best and worst results.

There is a 25% difference in combined ratio between the best and worst underwriting results.

Highlights

  • Market average combined ratio of 104%
  • 5 out of the 13 clubs reported underwriting surpluses (by contrast in 2016/17, 11 clubs were in underwriting surplus)
  • 2 out of the 13 clubs experienced improvement in underwriting performance and 1 club reported underwriting results almost unchanged
  • Continuing wide variation in underwriting performance between clubs

Combined Ratio

The combined ratio is essentially the net loss ratio for the club and is defined as follows:

Net combined ratio =

(net incurred claims + operating expenses)
(Premium - reinsurance costs)
  • A combined ratio of 100% represents an underwriting break-even position
  • Anything in excess of 100% would be an underwriting loss
  • A combined ratio less than 100% would represent an underwriting surplus.