CEO's strategic overview
vertical line
CEO's strategic overview

COVID-19 has made for an exceptionally challenging year for everyone in the maritime industry.

Whatever we thought might lie ahead of us all this time last year, I think we can all confidently agree that the reality was not as anyone predicted. Every aspect of life has been affected by the Covid-19 pandemic, and it has made for an exceptionally challenging year for everyone in the maritime industry. Our focus, as always, has been to help and support our Members and clients as they each faced differing challenges in their lives and work.

Despite a testing environment for everyone, I am pleased to say that the full year results for the group have improved considerably from the half year point when they had been impacted by adverse events in both the maritime and financial markets. For the financial year ending 20 February 2021 the group overall saw a return to profit:

  • Result after tax of USD 68 million on an Estimated Total Call (ETC) basis
  • Combined ratio net (CRN) of 104 per cent on an Estimated Total Call (ETC) basis
  • Non-technical result of USD 113 million
  • Equity of USD 1,263 million

Excelling at the fundamentals

Overall gross premium written has increased, driven by both hardening rates in all classes of business and a growth in new business volume. We achieved the best P&I renewal in the history of Gard, with 99.4% of our tonnage renewing with us. Two key factors for our Members during the renewal were the strength of our service capabilities and the change we made to our premium policy. This has resulted in 17 million GT being added in the last 12 months, with the majority coming during the renewal period. Owners’ mutual tonnage now totals 246 million GT.

We have also continued to attract more business in our Marine Hull book. This expansion of our marine portfolio has contributed to the growth of the Nordic insurance market (Cefor), which is now larger than Lloyd’s for hull insurance. Our marine offering is proving attractive to many of our mutual P&I Members, who are placing the claims lead for their hull cover with Gard. This is a tremendous vote of confidence from our Members and clients.

While Marine & Energy has delivered a strong profit, our P&I business has been impacted by some major claims; both for our own account and pool claims from the International Group clubs which have risen sharply. Another issue was a 50 per cent increase in the number of crew illness claims caused by Covid-19 with associated costs arising from the quarantining and disinfecting of vessels. Despite incredibly challenging conditions for owners in the last year, with significant operational hurdles to overcome, Gard Members continue to run quality operations which is reflected in our results. We aim to run the mutual business at a small loss, balanced with the returns earned on our commercial insurance book which have been positive and better than expected in 2020.

No last instalment of the premium for the 2019 policy year was recognised in the full year accounts for 20 February 2020. By deferring a decision on the last instalment, we hoped to ease the cashflow burden for our Members through a period of uncertainty. The decision about what would be called was taken at the Board meeting in November 2020 where it was decided that Gard would only collect 75 per cent of the last instalment, giving a total saving of USD 18 million for the mutual Members.

The spring of 2020 experienced periods of extreme volatility across the investment markets, followed by a strong recovery in the autumn which resulted in a positive return of five per cent on our investment portfolio, which is similar to the 2019 result.

The capital position of the group remains strong with an increase in our equity of USD 84 million. There is always ongoing debate about whether clubs hold too much capital, but we are confident that our model benefits from the size and diversity of the group and gives us the lowest regulatory requirement to net earned premium, so we do not hold more capital on behalf of our Members than is needed.  

Positive industry influence

It would have been easy to allow the pandemic storm to drive us off course in our ambition to enable sustainable maritime development. While helping Members and clients to respond to the challenges created by the pandemic, and the switch to delivering our services remotely, have undoubtedly taken energy and focus, looking to the future has remained a key priority. Guided by our core values, our commitments to international standards and guidelines, and the expectations of key stakeholders, we have continued to take steps to engage industry-wide on topics that are vital to the future success of the maritime industries.

Sustainability is the responsibility of everyone at Gard whether through risk prevention, risk reduction and risk sharing. As a leading marine insurance group, we have an important responsibility to protect the lives and livelihoods of seafarers and make the oceans cleaner and safer, as well as an opportunity to use our leverage to support the transition to a more sustainable maritime industry.

Gard has 99 direct and 11 indirect memberships in industry bodies, boards, and committees, with many including a wide range of participations through working groups and subcommittees. This is in addition to Gard’s ongoing industry and academic engagement through articles, webinars, publications, lectures, presentations, and speeches. The ability of Gard to work with our partnerships has, ironically, been helped by the global pandemic since it is now possible to hold industry meetings more frequently as they are invariably virtual. This has resulted in better attendance, greater efficiency and noticeably more output.

In 2020, we took part in the development of a guidance for shipyards as part of our partnership with the UN Global Compact Action Platform. These practical guidelines will serve as an implementation tool for the Sustainable Ocean Principles. It will establish common industry standards for social and environmental performance in shipyards which are an important element in our supply chain.

As an active member of the International Group of P&I Clubs (IG), Gard has been working with fellow members to make sustainability a core part of its activities. The IG Sustainability Working Group was converted to a formal sub-committee in 2020 and the IG’s Constitution was amended to include a reference to sustainable development. Mapping is being carried out of the IG’s significant contribution in the fields of safety (including loss prevention and sharing safety data), claims pooling, one industry voice and casualty response. This will help to integrate sustainability and specific Sustainable Development Goals (SDGs) into the IG’s sub-committee and working group structure. Gard also joined The Nordic Association of Marine Insurers (Cefor) Environmental Social and Governance (ESG) Working Group, which is considering the 17 SDGs in the context of Cefor's clauses, statistics, industry policy and education functions.

Deep maritime expertise

Last year we published our statement on sustainable ship recycling and signed up for the Ship Recycling Transparency Initiative, a cross-sectoral coalition calling for increased transparency around ship recycling practices. I am pleased to say, that since then, Gard has supervised the removal and recycling of five wrecks, all in line with the standards of the Hong Kong Convention or the EU Ship Recycling Regulation. Recent wreck removals include the Kaami and the Hoegh Xiamen. The latter suffered a fire in Jacksonville, Florida in June 2020, and was subsequently towed to an EU-approved shipyard in Turkey. In March 2020, the bulk carrier Kaami grounded off Scotland and was towed to Kishorn Port & Dry Dock for sustainable recycling.

For Gard, sustainable ship recycling is already an integral part of our P&I cover when a ship is declared a Total Loss or a Constructive Total Loss as a consequence of an insured risk. This means that for EU-flagged vessels we will cover the extra cost and travel necessary to make sure the vessel is recycled in line with EU regulations. We will assist the Member in the planning phase, appoint contractors, and pay for the full operation. When dealing with vessels which are flagged outside of the EU, Gard will put emphasis on whether the yards are making efforts to operate sustainably over and above the standard set by the Hong Kong Convention. In other words, sustainability is one of the key factors when deciding which yard will be the successful bidder. Responsible recycling is not only good for people and the environment, it also reduces the Club’s exposure to additional claims costs which might occur as a consequence of sub-standard recycling processes. 

We are now implementing a series of sustainability measures throughout our value chain and in our claims handling. In 2020 a project was launched to establish 27 targets which the Claims team is committed to implementing. 20 senior claims handlers and leaders took part in working groups to identify these goals. These goals are now being implemented and new working groups have been established on the topics of seafarers’ wellbeing, carbon foot printing, ESG at repair and scrapyards, reporting and operational excellence and compliance.

Dealing with an uncertain future

The importance of the marine industries in supporting the wider economy has been given considerable attention in the last year – not just because of the effects of the pandemic but more recently with the blockage of the Suez Canal. While the Canal crisis was fortunately short-lived, the ongoing issue around crew changes still needs more, and more urgent, attention. Gard is committed to supporting all our Members and clients through the challenges they face both today and those that may occur in the future.  

Every business has had to face the challenge of switching to remote working, and I would like to express my gratitude to all my colleagues within Gard for their efforts in the last year. This is particularly impressive given the challenges everyone has faced during the pandemic. The group has continued to offer exemplary support to its Members and clients, as well as moving forward with many of our ambitions to improve our own operations and enable sustainable maritime development. An example of this was the launch of our new production system for P&I at the 20 February 2021 renewal.

Marine insurance has at its very heart the ability to be prepared for and respond to the unexpected. These last 12 months have been a test of that promise and I suspect that while the challenges may change and evolve, they will not disappear in the coming months and years. We are committed to constantly improving our offering so that we can deliver the support that our Members and clients will need to continue to trade successfully.