A year of volatility
Investment activities contributed above expectations as well. Despite significant volatility during the year, bond and equity markets generally yielded returns at or above expectations. Uncertainty is still higher than normal, not least in respect of public finances in many western countries.
In sum, developments and results in 2010 are a reminder of the inherent volatility of an insurance undertaking. This year, the deviation from expectations was in the Club’s favour. However, given the significant volatility, maintaining adequate financial strength and flexibility is very important.
The result before change in equalisation provisions and tax was USD 49.8 million, which is the best result in the history of the Club. Based on the good result, the Club will pay a dividend for 2010 corresponding to 5 % of earned, mutual premium. At the end of 2010, the Club’s free reserves were USD 203.3 million. Norwegian Hull Club has satisfactory risk capacity in relation to generally applied risk measures.
Products and strategy
Norwegian Hull Club is a marine insurer, with Hull
& Machinery related insurances as its main products. Over the last few years, the insurance business has become more diversified. The majority of the Club’s business is in the international arena, with clients spread throughout the world. The registered office is in Bergen.
Norwegian Hull Club’s business strategy is to provide integrated claims leader services and offer a diversified product mix stemming from its historical Hull & Machinery base. In the chosen market segments, the Club seeks to be a significant provider of insurance capacity and expertise, and to have a sustainable business model. The Club also strongly emphasizes the provision of supplementary services, mainly related to loss prevention activities.
It is a part of the Club’s strategy to maintain a strong capital position.
Market environment
Despite major concerns following the financial crisis in 2008, volumes and rates in shipping markets have not collapsed. On the contrary, markets were probably better than expected in 2010.
The impact on marine insurance has not been negative, and may even have been positive due to less strain on operation and thereby lower claims.
The fact that the business volume in marine insurance has been upheld while claims development has been more positive than expected, has resulted in fresh capital entering marine insurance with consequences for rate levels in the market, which in general is very competitive.
In 2010, there has once again been considerable movements in currency exchange rates. Managing currency exposure is a complex issue, where the true currency exposure of some assets and liabilities may differ from their respective denominations. While a lot of attention is paid to managing currency exposure, currency fluctuations adds to the complexity and volatility of a marine insurance operation.
Management of human capital onboard ships is an important issue. The human factor is still a key cause in many claims. The introduction of the Maritime Labor Convention, expected in the second half of 2012, is a part of this issue,
