Members' Records - Abatement of Large Claims
CIRCULAR REF: 2011/032
CIRCULATED TO ALL MEMBERS, BROKERS AND DIRECTORS
As part of the continuing review of the way in which individual Members contribute to the overall expenses and exposure of the Association, Member’s Record reports will now include abated claims.
The abatement of claims is a process by which the small number of larger more volatile claims that randomly affect the Association are spread across the whole of the Membership in accordance with mutual principles. Whilst this concept has been recognised for a number of years, the formal inclusion of this in Members’ Records will more accurately and transparently reflect the allocation of Members’ premiums and demonstrate the adequacy of an individual Member’s contribution to the overall costs of the Association.
Abatement will apply to all claims in the record of an Entered Ship that exceed US$2 Million net of the individual Member’s deductible. The amount of the claim exceeding US$2 Million but not exceeding the relevant International Group Pool Retention level for the relevant policy year will be abated. Of the abated amount, 10% will be allocated back to the record of the claiming Member whilst the remaining 90% will be allocated across the whole Membership split equally proportionate to premium and entered tonnage in the same manner as pool costs are currently allocated. A worked example is shown in the FAQs attached.
FD&D – ADMINISTRATION EXPENSES
In order to reflect more accurately and transparently the allocation of Member’s FD&D premium and therefore demonstrate the adequacy of an individual Member’s contribution to the overall costs of the FD&D Class, Member’s FD&D Record reports will now show not only net premium paid to the Club, but will also separately reflect an allocation in respect of administration expenses. These expenses represent the cost to the Association in running the FD&D Class and are allocated 50% pro-rata to Entered Ships and 50% pro-rata to annual net premium.
As Members are already aware, the Association’s approach to FD&D involves a high level of in-house claims handling which minimises external costs and therefore the overall exposure of the Class but this does of course lead to a higher base cost in running the Class. Whilst the individual use of FD&D resources by individual Members is taken into account by the Managers in their assessment of appropriate rating of any given fleet, it is appropriate that the actual internal cost is also spread amongst the whole of the mutual Membership.
Further details of the way in which both of these changes will be implemented are attached in FAQs.
New style Records are now available for download by Members and brokers through North Online (through our website at www.nepia.com). We encourage those Members and brokers not currently registered to ensure that they are able to use the North Online service. For access or in the event of a forgotten password, please contact the Underwriting Department.
SS REBAIR
ASSOCIATE DIRECTOR – North Insurance Management Limited
As Managers on behalf of the North of England P&I Association Limited