TT Club takes the long view

By: | at 08:00 PM | Channel(s): Ports & Terminals  

Market conditions in 2008 were difficult and this year doesn’t look appreciably better. But the global transport insurer TT Club is looking to the future.By George Lauriat, AJOTTo say that market conditions for the maritime industry in 2008 were difficult would be akin to saying the RMS Titanic, sprung a leak and got into a little trouble. Not surprisingly, the transportation related insurance industry was also hard hit with premium rates falling and claims rising. Despite these very difficult market conditions, the TT Club, a mutual association whose membership includes ship operators, ports and terminals, road, rail and airfreight operators, logistics companies and container lessors, managed to weather the blow.
The Club announced in March an overall net deficit of US$5.3 million for 2008, compared to a surplus of US$5.3 million for the previous year. However, the Club’s overall surplus and reserves is US$121.6 million, just four percent off the record level posted in 2007. Solvency, as measured by the Club’s capital resources as a percentage of the FSA’s Enhanced Capital Requirement (ECR), is 216%, an improvement on the 2007 mark. Prudent investing also served the Club well. According to the TT Club annual report 90% of the Club’s assets were invested in highly rated government bonds and cash deposits. As a result the Club was not exposed to the effects of the severe downturn in the equity markets in the second half of the year and achieved an underlying investment return of 3.5%.
The TT Club tends to fly a little below the radar but for over four decades the mutual has been a major player insuring the box business. Ship operators and terminals account for nearly half of the gross premiums for the TT Club. This group includes many of the world’s top 100 boxship owners and major terminal operators. Although it is often thought of in terms of shipowners and TOs, the TT Club opened its doors up to Freight Forwarders and Container Depot operators in 1969 and Port Authorities in 1988. Geographically, the Americas account for 26%, Asia-Pacific another 32% and Europe 42% of the gross premiums.
Despite the industry wide problems of 2008, the TT Club again posted a retention rate of over 90%. Being a mutual the TT Club traditionally has posted a high retention rate. Ian Lush, Marketing Director for TT Club, in an interview with the AJOT, said, “We have for a decade had retention rates of over 90% and frankly would get nervous if they fell below that benchmark.” However, as Lush explained non-renewals of loss making business are also an element maintaining a healthy mutual. “Always, some loss-making business won’t be renewed. You can’t afford to let the good investments [continually] prop up the others. You can’t take a bath on loss-making business. Certainly, pricing is adjusted to the market. There is always some rogue pricing but our renewals reflect that we [TT Club] are price competitive. But if the business doesn’t look right the underwriters turn it down.”
Although the Club has a very strong membership in its core market, the TT Club isn’t standing pat. Lush said the Club was deploying a strategy to provide more “balance to our overall book which is heavy on ports and terminals” by developing products for the logistics and transport sectors. “There’s the perception that we cater to only the ‘Bluechip’ operators but much of what we offer is for mid-sized transportation and logistic companies.”
Brian Sullivan, a logistics expert for TT Club, related that there is a great deal of potential for new membership in the logistic community. Many of which are the kind of mid-sized company that the TT Club would like to have balance their portfolio of members.
“We can take a longer term view,” Lush said. “The mutual model has some advantages over the commercial model,” Lush added. He explained that the TT Club is owned by its policyholders (members) and is a non-profit.

 In a sense, the big advantage of the mutual model

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American Journal of Transportation