These are, of course, the financial statements for the year ending 20 February 2020 – a date at which what became the global COVID-19 pandemic was still in its early stages. Since then the world has been turned upside down by the speed of its spread, the actions taken by governments around the world to reduce the impact and the consequences these have had on people, societies and economies everywhere. And that picture is still developing as we write this at the end of April.
In a world of such unprecedented uncertainty, our role – to work every day to manage the risks to our Members and clients’ people and property, as well as those posed to the environment by the consequences of any casualties, becomes more essential than ever. And our financial strength is the bedrock on which this is built.
I am pleased to announce that the 2019 financial year saw a strong performance across the group:
- Result after tax of USD 93 million on an Estimated Total Call (ETC) basis
- Combined ratio net (CRN) of 102 per cent
- Non-technical result of USD 118 million
- Equity of USD 1,179 million
Overall gross premium written has increased, primarily driven by hardening rates in the marine market and a growth in new business volume. While P&I tonnage increased by over 15 million gross tonnes in the twelve months to 20 February 2020, pricing remained very competitive. As a mutual association, we aim for a combined ratio slightly above 100 per cent for mutual P&I, while making an underwriting profit in our marine and energy business.
Last year saw a strong investment return for the group. We entered into the current period of uncertainty with a strong capital base, and it remains robust despite the turmoil in the global financial markets. Most global equity indexes have fallen steeply but Gard has a moderate exposure to equities. We invest more in treasuries and other less risky assets. Consequently, the value of the group’s investment portfolio has fallen much less than global equities and our capital adequacy remains strong.
We know that the next 12 months will be exceptionally challenging for the entire maritime industry. Gard will continue to balance its ability to help individual Members and clients with the maintenance of the long-term financial health of the group. We have been in regular contact with our Members and clients, discussing their specific needs in these extraordinary times and we will continue this dialogue.
No last instalment of the premium for the 2019 policy year has been recognised in these accounts. Due to the uncertainty brought about by the pandemic, the decision concerning the level of the last instalment has been postponed till later in the year, and after the approval of these financial statements. We hope this postponement will offer some limited cashflow help to some Members.
Deep maritime expertise
It is a fundamental part of our philosophy that prevention is better than cure, especially when the environmental impact of maritime casualties can be catastrophic. So, we work to prevent accidents from happening across all aspects of maritime operations, while standing ready to respond swiftly and effectively to mitigate the damage should they occur.
The global pandemic will undoubtedly give rise to further issues as we work to mitigate the consequences of maritime casualties. Responding effectively to a casualty requires an efficient and effective global network of salvors and local correspondents, as well as maritime, legal and environmental skills. There is now a risk that the strong global value chain that has been built to handle accidents at sea develops inefficiencies as a result of the effects of COVID-19 in different countries around the world.
One of the main objectives of loss prevention in Gard is to turn a painful loss experienced by the few into lessons learned for the many. We do this by:
- producing Gard updates – topics covered this year included environmental issues, maritime security and human health.
- conducting client training – for example contingency response training for incidents, cyber awareness and the dangers of enclosed spaces.
- conducting condition and entry surveys of vessels covered by Gard.
We work hard to ensure that we respond fast in changing circumstances so in March of this year we were writing updates on the implications of the virus on ships and crew, lay-ups and even working from home.
Over the last two years we have seen the sanctions landscape change significantly. The US has been very active both by way of passing new sanctions and enforcing existing sanctions regimes. At the same time we see that both US and UK authorities, as well as the UN, have communicated that they have high expectations that the marine insurance industry will closely monitor the activities of its Members and clients to avoid being facilitators of activity which is deemed a breach of international sanctions. This now requires us to undertake in-depth behavioral analysis of fleets, in addition to standard sanctions screening.
As a result, all International Group (IG) Clubs have agreed to a set of Minimum Tracking Criteria for the monitoring of entered vessels via AIS. As a result, Gard has signed a contract with Windward extending our already well established collaboration to use their combination of big data, AI and maritime expertise to enable us to streamline our sanctions compliance process, as well as fulfil requirements for AIS monitoring as agreed between the IG Clubs.
Positive industry influence
We have always worked from a solid base of expertise across underwriting, claims and finance – skills that have built relationships of trust across the maritime industry. Yet we are also adding new areas of expertise to deal with the changes that we all face – issues such as sustainability, more advanced risk management, regulatory shifts and technology. This means we have more skills in different areas, adding depth and breadth to our portfolio of knowledge.
We fully intend to be as market-leading in these areas as we are in our traditional competencies. For example, we are leading the way with CEFOR and the International Group through the contribution our employees are making in these trade bodies on sustainability, and in the wider world through our engagement with the UN Global Compact’s Platform for Sustainable Ocean Business.
For the first time this year, we have published internally our agenda for a sustainable business. In June, we will report externally on what we have achieved against the goals of the UN Global Compact. Both documents highlight very clearly that sustainability is closely woven through all our activities, both internally within Gard and through our external activities. Every time we pay a valid people claim swiftly, we support a world in which everyone has access to decent work and economic growth. When we remove a wreck, we help conserve the oceans and sustain life under water. When an owner with a good claims record gets premium reductions, we reward the behavior of someone who has succeeded in their efforts to avoid or reduce damages to society. In fact, if you look at the P&I Rules, almost every one of them touches one or more of the UN’s Sustainable Development Goals.
And it is not just about what we do today, but what we can all do to be better prepared for the future; meeting our Members’ emerging needs and their expectations of us their business partner. There will be opportunities and challenges: risk transfer for new maritime risks but also helping businesses with regulatory change such as the 50 per cent reduction in shipping emission by 2050.
Earlier this year, we announced both the publication of our statement on sustainable ship recycling and that we had signed up for the Ship Recycling Transparency Initiative (SRTI), a cross-sectoral coalition calling for increased transparency around ship recycling practices.
Looking into the unknown
Our role is to help keep global trade afloat and there is no doubt that the pandemic has been a brutal reminder that national measures to protect the health of different countries can create havoc with the international supply chain. At any given time, over 50,000 ships with 1.2 million seafarers are on the move, with around 200,000 sailors in transit for crew changes around the world. With closed borders, quarantine regulations and airlines grounded, moving personnel is very difficult. There is an urgent need to quickly find practical solutions and agreements to establish safe trade ports on every continent, where seafarers can fly in and out, and establish procedures for health checks and safe lodging.
This is but one example of the challenges the maritime industry is going to be facing. Planning for the future is always an exercise in making the best possible assumptions and using past experience to build a way forward. I am sure that I am not the only voice you will hear saying that today’s business and economic environment make this more demanding than ever before. 2019 has given us a strong base to face the uncertainty that will undoubtedly be part of our future, and our culture and operations are built for the long-term. Our commitment to you is that we will continue to be long-term and resilient partners, helping you to mitigate and manage risk as we face future challenges together.
Rolf Thore Roppestad