TT Club weathers market volatility

1. The condition of the market verges upon the sane. Despite the multiplicity of insurers in this sector, competition has not dragged the game down to the basement.

2. The Club may have done quite well on the year, but its reinsurers may not be so sanguine in the face of the year’s results. Large hurricane losses were largely laid off on the reinsurance market (US$57.5m out of US$60m) which of course took a beating every which way on the storm losses.

3. Consolidation in the liner, transport and waterfront industries have the tendency to introduce a greater volatility into what was a reasonably stable if not particularly profitable sector of insurance. Since the opening of this decade, the Club’s results have swung very low and very high in a manner which does not recall previous decades.

4. This volatility has left its mark on the market and on the way the Club has to respond. By its traditional measure of value, the free reserve available to be distributed to members after all claims have been paid has been eroded by around a third when compared with levels of solvency maintained throughout the 1990s. This helps explain why the Club’s climb back into the good books of the rating agencies is proving such a climb.

5. The Club has dealt with this volatility in a very professional way, buying in large amounts of reinsurance to buttress the position while corrective measures were taken. Reinsurers are like bankers in some way – if you persist in reporting losses to them they tend to make themselves scarce during periods of stress. The Club’s future depends to some extent on finding its way into the future without multiple safety nets and a predictably successful course of trading.

6. The senior members of the Board of Directors are very old and ought to make way for a new generation with a forward looking agenda. A great deal of time and money has been spent during the past five years dealing with the consequences of very poor strategic planning and failed diversifications like the Club’s unhappy foray into the Bolero project.

But after a series of fair years, 2002-2005, the TT Club may be said to be on the mend. It is the traditional partner of an industry which is very difficult to insure and it has work ahead deciding and understanding what it is for.