Norwegian Hull Club to offer 7.5% premium dividend - 16/03/2015

Good profit in a year of low claims leads to another healthy return to shipowning members

Members of the Norwegian Hull Club are set for a 7.5% return of premium following a year of benign claims and a good profit.

Directors of the club this week decided to declare a further dividend after a 10% return of premium last year.

The preliminary accounts of the Bergen-based hull underwriter point to a $37.7m surplus for the 2014 policy year, so a decent result but not quite as good as the $52.7m of the previous year.

Chief executive John Wiik says the result, although lower than the previous year, is “very acceptable”.

The surplus lifts the solvency capital or free reserve of the Norwegian Hull Club to $331m compared to $298m a year ago.

The club, one of the world’s top hull underwriters, made a $44.7m underwriting surplus but a 22% strengthening of the dollar against the Norwegian kroner led to an unrealised investment loss, as the portfolio was revalued on a mark-to-market basis.

Most of the club’s portfolio is dollar-denominated but there are also big euro and kroner investments.

Written premiums declined slightly to $210m from $225m, with the gross loss ratio 47% and the combined ratio 74%.

Although the insurance account performed well overall, the hull insurance business nevertheless made a slight loss reflecting chronic overcapacity.

The overall result was also held back by a marginal fourth-quarter loss.

Wiik says that although the club is not a commodity underwriter, but operating at the high end of the market, where it can charge more for risk management and loss mitigation, margins in the over supplied hull market remain slim.

But the club can make a better return on other classes of insurance, with the offshore energy book covering rigs and vessels such as floating production, storage and offloading (FPSO) units the star performer in 2014.

The return of premium has to be approved by the club’s representative board and the annual meeting but it would be rather surprising if it was rejected.

The dividend goes to shipowners with hulls insured on a mutual basis by the club.

Rise in claim frequency

On the claims side, the year was benign in terms of the severity of casualties but Wiik says the frequency of claims had risen and more costly incidents were being seen in relation to ro-ro vessels, car carriers and passengerships.

Meanwhile, 2015 appears to have got off to a more challenging start in claims terms for the club.

The club was the claims leader on both Gearbulk’s 56,000-dwt Bulk Jupiter (built 2006), which sank with the loss of 18 crew off Vietnam while carrying a bauxite cargo, and of Fred Olsen’s 28,500-gt cruiseship Boudicca (built 1973), damaged by fire off Morocco. The Bulk Jupiter is a total loss, while the Boudicca is not badly damaged. But both claims will fall into the current year rather than 2014.

The club is also exposed to the explosion on BW’s 277,000-dwt FPSO Cidade de Sao Mateus (built 1989) but this is also a 2015 loss.

in 27 February 2015