A merican Club Circular No. 29/17 1 NOVEMBER 17, 2017 CIRCULAR NO. 29/17 TO MEMBERS OF THE ASSOCIATION Dear Member: RECENT CLUB PERFORMANCE. DEVELOPMENT OF CLOSED AND OPEN POLICY YEARS. RELEASE CALLS. PREMIUM REQUIREMENTS FOR THE 2018 POLICY YEAR. At its meeting in New York yesterday, your Board considered the American Club’s present and prospective circumstances by reference to a variety of factors. These included the overall economic climate, the current state of the freight markets, the Club’s recent operating performance, the nature of the present investment landscape and the implications of emerging trends within the P&I environment. Your Board also reviewed the development of closed and open policy years and, having discussed the Club’s position in light of these several perspectives, made a number of important decisions, including the determination of premium requirements for the 2018 policy year. Recent Club performance Some of the trends which have characterized the marine insurance market in recent years have continued into 2017. In particular, the “churn effect” (the term applied to the reduction of premium volume as older, higher-rated vessels are replaced by newer, lower-rated ships) has continued to influence both the level of turnover and the risk profile of vessels entered into the Club, although less markedly so than in earlier years. Both tonnage and annualized premium income for 2017 have increased substantially over the period since February 20. Class I (P&I) tonnage has grown by 10% since the renewal, Class II (FD&D) by 11%. Similarly, P&I premium has increased by 7.5%, and by 10% for FD&D business. The Club’s charterers’ (Class III) business has also grown respectably during 2017. As the above figures imply, the average rate per ton for vessels entered for P&I risks has declined by 2.5% since the commencement of the year but, in a continuingly soft rating environment, this is an encouraging trend, the more so since the attenuation of premium pricing has slackened over the past twelve months. This modest reduction in average rates for P&I cover must be seen in the context of claims development over the recent past. This has been a major driver in the pricing of risk. American Club Circular No. 29/17 2 While results for both 2015 and 2016 continue to emerge in accordance with expectations, in the case of 2015 very favorably so, the Club’s retained exposures for 2017 have also developed positively over the first nine months of the year. The aggregate value of claims for the Club’s own account for 2017, as of mid-November, is less than half that for 2016 at the same point of development, and about 8% less than that at the equivalent stage for 2015 - which was itself an excellent year in this respect. In short, retained losses for the current policy year are emerging at a volume and tempo which suggests a solid result in due course, albeit that the year is still immature. As to the International Group Pool, the 2013 through 2016 policy years continue to develop favorably. 2017 is so far exhibiting a higher level of exposure than the two previous years at the same point of development, but this is still less than earlier years. However, and has been noted in the past, since large P & I losses tend to be volatile, it is impossible to say whether the current year will ultimately follow the pattern of its most recent predecessors, although present signs do not give cause for concern. On the investment front, the Club’s port