North P&I Club retains S&P ‘A’ rating and stable outlook for 12th year

P and I Clubs — By on February 2, 2016 at 3:33 PM

North PI club logo (1)Leading ratings agency Standard and Poor’s (S&P) has given North P&I Club an ‘A’ financial strength rating and stable outlook for the twelfth consecutive year, and increased its financial flexibility rating from adequate to strong. The ratings also apply to the club’s fishing and aquaculture subsidiary Sunderland Marine (collectively known as North Group).

S&P analysts Maren Josefs and Mark Nicholson say the rating confirmation reflects North Group’s strong business risk profile and strong financial risk profile, built on a strong competitive position and strong capital and earnings. ‘In our opinion, the group has strong capital and earnings, supported by very strong capital adequacy, which we anticipate will be sufficient to support the group’s growth over the next three years.’

North’s combined free reserve increased by 8% in the financial year to 20 February 2015 to reach a record US$338 million. According to the analysts, ‘Our base-case expectation is that the free reserves of the combined entities will be sufficient to maintain capital adequacy at the ‘AA’ level for the 2016 and 2017 financial years’.

S&P predicts the group will achieve an underwriting profit in the current financial year, significantly improving on the 109% combined ratio experienced in 2014/15 but in line with its five-year average of 97%. ‘We anticipate that the North Group will show combined ratios of below 100% for the 2015 financial year and about 100–105% for the 2016 and 2017 years, barring abnormally high claims.’

The analysts have revised their assessment of North’s financial flexibility from adequate to strong, reflecting its 25 year record of not making unbudgeted supplementary calls. ‘Unlike many of its International Group peers, North Group has not utilised this right in recent years, which we believe should enhance its capacity to do so if needed.’ The group’s plans to increase its proportion of mutual premium over the next five years will also have the effect of, ‘limiting the diluting effect of the fixed-premium business on its ability to make supplementary calls’.

North is a leading global marine insurer providing P&I, FD&D, war risks and ancillary insurance to 130 million GT of owned tonnage on a mutual basis and 45 million GT of chartered tonnage. Through its guaranteed subsidiary Sunderland Marine, North is also a leading insurer of fishing vessels, small craft and aquaculture risks. The Standard and Poor’s ‘A’ rated club is based in Newcastle upon Tyne, UK with regional offices in Greece, Hong Kong, Japan and Singapore and Sunderland Marine offices worldwide. North is a leading member of the International Group of P&I Clubs (IG), with 11.6% of the IG’s owned tonnage. The 13 IG clubs provide liability cover for approximately 90% of the world’s ocean-going tonnage and, as a member of the IG, North protects and promotes the interests of the international shipping industry.

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