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Dealing with exceptional circumstances

Claes Isacson,
Chief Executive Officer

The end of the summer sees the halfway point of our financial year, and the start of what is always a very busy autumn as the renewal season gets under way. We are pleased to report a good result for the first half year, in what continue to be competitive market conditions and difficult economic times.

Our combined net ratio was 105 per cent, gross written premium rose by five per cent to USD 724 million and we remain strongly capitalised with free reserves of USD 817 million. The results for the first half of the 2012 policy year were impacted by a number of large claims during the first quarter; however, the underlying profitability of the insurance portfolio was acceptable. While investment results reflect the ongoing low interest rate environment and volatility in the financial markets, our aim is to outperform the benchmark over time.

Refining our offering
It has been nearly four years since we took the decision to re-structure our underwriting processes to better meet the needs of our Members and clients by reflecting the way they are organised. Based on our experiences during this period, we have looked at our structures and processes, and decided to refine them to deliver a more effective service.

A major part of this has been to merge some of our underwriting teams – reducing the overall number by four – so that we can increase the depth of resource available and ensure even closer co-operation. We are also investing significantly in product development and distribution.

Local and global
Gard has invested considerable resources over the last decade to create a genuinely global footprint – designed to offer a first class service wherever we are needed. We are continuing to build on this strategy by ensuring that we go where our Members and clients are going, and where growth is being driven by the emerging markets.

In the first instance we are looking at Brazil – one of the world’s fastest growing economies. While the P&I clubs have always had access to the Brazilian market, the same has not been the case for foreign marine and energy insurers. As a result, while Gard P&I has had a portfolio of Brazilian business for more than 20 years, Gard Marine & Energy Limited (Gard M&E) has only been able to compete in a very limited way.

In August we began the process of seeking to establish Gard M&E as an admitted reinsurer in Brazil, with a representative office in Rio de Janeiro, which will have a low-key underwriting presence, but no claims handling capabilities. With the quantity and value of assets increasing rapidly in the country, we hope that, by having a local presence, we can build closer relationships with maritime businesses in the region.

We also continue to invest in more mature markets.  For example, we are seeking to widen our Japanese presence to offer greater ‘on the ground’ support in Imabari.  A significant number of shipowners operate from the west of Japan, so we are opening an office there to get to understand local needs, and decide on what resources we should provide to meet them going forward.

This is a pivotal time of year. The recent past has been dominated by major marine claims, and these continue to develop – the losses on the COSTA CONCORDIA for example have increased by a further USD 100 million. As we move through the second half of the year, we need to balance the technical rating that is required in such tough market conditions with the long-term support we offer to our Members and clients. Our focus, as always, is to plot the steadiest course forward.

Any comments on this article can be e-mailed to the Gard News Editorial Team.