TSC Annual Report 2024 final - Flipbook - Page 85
De昀椀nitions and glossary
De昀椀nitions and glossary
AER, Average Expense Ratio:
IBNR, Incurred But Not Reported:
all members of the International Group of P&I Clubs are subject to the EU
Commission requirement to report the AER for P&I business. This is a measure of
cost-effectiveness. AER is measured in US dollars and calculated for the latest 昀椀veyear period by relating operating costs, excluding claim handling costs, connected
with P&I activity to premiums plus investment income concerning P&I activity.
a term used to describe an estimate of claims which may have occurred, but of
which the Club is not yet aware, or is only partially aware and for which provisions
must be made when calculating the Club’s liabilities.
International Group of P&I Clubs:
Ancillary own funds:
this organisation arranges collective insurance and reinsurance for P&I clubs and
reflects the views of the P&I community.
consists of items in addition to those included in basic own funds and which may
be required for covering losses.
For items in Level 2 and 3 of the hierarchy, the maximum amount of ancillary own
funds that may be included here is 50% of the SCR.
Loss ratio:
claims incurred, net of reinsurance, as a percentage of earned premiums f.o.a.
Marine & Energy (vessels):
Basic own funds:
the core of eligible own funds according to Solvency II. Calculated as the difference
between assets and liabilities, including technical provisions measured at fair value.
a main class of insurance which includes Hull & Machinery (H&M), Hull Interest, War,
Loss of Hire and Energy. For more information: see Insurance at www.swedishclub.
com
Claims frequency:
MCR, Minimum Capital Requirement:
the observed relationship during a speci昀椀c period between the number of claims
arising within a certain category of insurance and the number of insurance policies
within the same category. Does not include major claims.
insurers subject to Solvency II must at all times have eligible basic own funds of
at least the level of the MCR. The authorisation of an insurer is withdrawn when
the undertaking's amount of eligible basic own funds falls below the MCR and the
undertaking is unable to re-establish the amount of eligible basic own funds at the
level of the MCR within a short period of time.
Combined ratio:
claims for own account and net operating expenses in the insurance business, as a
percentage of earned premium for own account.
CTL, Constructive Total Loss:
is when the vessel is beyond any reasonable cost for repairs. The damage or
damages to the ship will cost more to repair than the insured value.
MRM, Maritime Resource Management:
is a training course intended for seagoing staff, pilots, and shore-based personnel.
The overall objective is to minimise casualties and losses caused by human and
organisational errors. The Swedish Club Academy AB is the owner of the MRM
course and has licensed a large number of training providers world-wide for delivery
of training. For more information see: www.swedishclub.com/academy.
Direct yield:
direct yield on investments (dividends received and interest income) as a
percentage of the average fair value of investments and cash/bank balances.
Eligible own funds:
own funds consist of basic own funds and ancillary own funds, established
according to the Solvency II requirements. Own-fund items are classi昀椀ed in three
tiers, depending on their value. Only basic own funds classi昀椀ed as Tier 1 and Tier 2
are eligible for covering the MCR.
Overspill:
claims exceeding the International Group of P&I Clubs’ reinsurance are pooled
amongst the members up to the overall limit set by the P&I Rules. The estimate is
currently USD 3.5 billion in excess of reinsurance.
P&I, Protection & Indemnity (ship liability):
a main class of insurance that indemni昀椀es or covers the insured in respect of the
discharge of legal liabilities incurred during the operation or employment of the
vessel.
Energy:
insurance that is comprised of Hull & Machinery, Increased Value, Hull Interest,
War, Loss of Hire for Mobile Offshore Units and FPSO. For more information see:
Insurance Products at www.swedishclub.com.
Pool:
the P&I clubs in the International Group share claims made in excess of the
retention of USD 10 million. In the excess of the pool limit, the Group has jointly
purchased Excess of Loss reinsurance.
Expense ratio:
net operating expenses in the insurance business, as a percentage of earned
premium f.o.a.
Retention:
the highest insured or claims amount relating to the same risk that an insurer
retains for its own account, without reinsurance.
FD&D, Freight, Demurrage & Defence (legal protection):
a main class of insurance that convey advice and cover the legal costs incurred
in pursuing or defending claims covered by this class of insurance pursuant to its
terms and conditions. There is no cover under FD&D, however, for the claim itself.
For own account, f.o.a:
SCR, Solvency Capital Requirement:
capital requirement in accordance with the Solvency II Directive. It corresponds to
the level where the probability that the company is unable to meet its obligations
does not exceed 1 in 200. The requirement is calculated using a standard model. The
capital requirement is affected by insurance, market, credit, and operational risks.
net of reinsurance.
Total return:
Free reserves:
equity less deferred tax assets plus untaxed reserves and deferred tax liability.
direct yield on investments (dividends received and interest income), unrealised
pro昀椀ts and losses and capital gains or losses from the sale of investment assets, in
relation to the average fair value of the investments and cash/bank.
H&M, Hull & Machinery:
a cover that protects the insured against damage to, or loss of, his vessel
or machinery.
Underwriting:
includes the risk assessment and pricing that occurs when insurance contracts are
drawn up. In accounting contexts, the term is also used more broadly to designate
the operations of an insurance company that do not have the character of asset
management.
The Swedish Club | Annual Report 2024
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