Pool scheme deficit ‘nowhere near’ worst projections, says Bowsher

THE deficit on the International Group pool scheme last year is set to swerve the worst projections forecast by some brokers, according to the chief executive of the West of England P&I Club.

While the numbers are not yet in, some 17 claims have been formally notified to the IG to date, and more could yet arrive, Tom Bowsher confirmed.

At more than $100m, last year’s settlement with the US Department of Justice concerning the incident in which a boxship brought down a bridge spanning Baltimore harbour is the obvious big knock.

But the likely combined hit to the 12 marine mutuals, which share liability insurance payouts once they top a $10m retention, is likely to be somewhere a little north of $600m rather than the $750m touted in some quarters.

Bowsher spoke to Lloyd’s List after publication of West’s results for the 2024-2025 financial year, which showed the club had overshot its ultimate target of a break-even underwriting performance.

The club’s combined ratio — defined as the ratio of payouts and operating expenses to premium income — rose to 104%, above the mutual insurer ideal of 100% or just under.

Pool contributions were the main cause of the deficit. But Bowsher believes West’s rivals will also feel the squeeze.

He stressed that West’s own claims experience remained within budget, and that its three- year average combined ratio had fallen to 98.4%, the best it has been for eight years.

He also contended that inside the IG, four clubs run their accounting periods to the calendar year and eight, including West, instead choose the policy year from midday on February 20 to same point the following year as the basis for reporting.

Figures for the former group will therefore not include major casualties that occur in January and early February, some of the worst months of the northern hemisphere winter.

They are also not marked by the deterioration of earlier policy years, which was also a feature of the first quarter.

While these club remain on the hook, these factors will temporarily flatter their balance sheets until their next results are out.

“We always expected to be a little bit behind them. It’s not ideal. We’re marginally above where we wanted to be; we would prefer to be below 100%.

“But on a relative basis, we will be in a pretty strong position compared to most of our peers,” he added.

A number of clubs are due to meet in the next few weeks, after which their outcomes will be declared.

Bowsher said he did not know how brokers have arrived at their estimates, although presumably they will have been briefed by individual clubs.

A lot of this year’s claims are still in their infancy, are notably complicated and are in difficult jurisdictions, meaning that commentators should be reticent to throw around big numbers.

“The total claim on pool at the moment is nowhere near $750m. I don’t know what they are basing that on. It’s unconfirmed, but it’s in the low six hundreds.”

However, the situation does mean that the pressure will be on for another round of significant target and general increases when clubs set out their stalls for 2026 this autumn.

“Clearly there is an underwriting deficit issue which will need to be addressed. Every club is either pretty much on or above 100%, and I’m led to believe some clubs could be quite considerably above 100%.

This year’s renewal was otherwise something of a success for the club, which won at least some business from Greek shipowner Harry Vafias, best known for his StealthGas interests.

West described its asset allocation strategy and capital strength as resilient, with its investment portfolio seeing a return of $44m, equivalent to 5.6%.

This was said to be its strongest investment result in five years. Bowsher conceded that the current investment climate is less propitious given political uncertainty in the US, but emphasised that West’s investments are pitched conservatively, with little exposure to equities.

Free reserves were up by 11% to reach $306.1m and West’s solvency capital ratio is estimated at 190%. Ratings agency AM Best reaffirmed its A- excellent rating, although Standard & Poor’s has maintained its BBB+ stable assessment.

Gross premium for the 2025 policy year is forecast to reach close to $400m, up from $347m at the closure of the renewal on February 20.

Other developments during the past year or so include the opening of a regional office in Dubai last November, making West the first IG club with a presence in the UAE.

In April, West secured regulatory approval for its full takeover of Sweden’s Nordic Marine Insurance. It first took an unspecified stake in the company five years ago.

The Stockholm- and Piraeus-based outfit offers cover for delay, primary loss of earnings, H&M, loss of hire, maritime lien solutions and other specialist products.

West of England executives have previously revealed plans to expand its war risk offering in the wake of the Houthi campaign against merchant tonnage in the Red Sea.

Bowsher confirmed that he is looking to diversify West’s portfolio into commercial lines, for the benefit of its mutual members. That business model has been pioneered by Scandinavian clubs Gard, Skuld and the Swedish Club.

But his plans are not as extensive as those of NorthStandard, where joint managing directors Paul Jennings and Jeremy Grose have declared their ambition of getting its commercial book above the halfway mark.

At present, non-mutual business makes up about 25% West income, or roughly $80m, and the emphasis will remain on mutuality. A recent board meeting has decided to raise that level, although Bowsher declined to specify the new target, other to say that it is less than 50%.

“In the world we live in, it’s good to have a spread. Also, we’re adapting to what shipowners want. A lot of shipowners are looking for more diversified products, and we’re applying our service ethos to other product lines.

“Nordic is another part of that process, working with people who have expertise in different sectors. But we’re doing things in a measured way and we’re not exposing the club’s capital.”

Lloyd's List Daily Briefing 16 May 2025

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