EXAMPLE PAGE - ANNUAL REPORT - THE SWEDISH CLUB - Flipbook - Sida 87
DEFINITIONS & GLOSSARY
Definitions & 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 costeffectiveness. AER is measured in US dollars and calculated for the latest five-year
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.
Ancillary own funds:
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.
International Group of P&I Clubs:
this organisation arranges collective insurance and reinsurance for P&I clubs and
reflects the views of the P&I community.
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 specific 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.
Combined ratio:
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 The authorisation of an insurer is withdrawn when the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.
claims for own account and net operating expenses in the insurance business, as a
percentage of earned premium for own account.
MRM, Maritime Resource Management:
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.
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:
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.
Own funds consist of basic own funds and ancillary own funds, established according
to the Solvency II requirements. Own-fund items are classified in three tiers, depending
on their value. Only basic own funds classified as Tier 1 and Tier 2 are eligible for
covering the MCR.
a main class of insurance that indemnifies or covers the insured in respect of the
discharge of legal liabilities incurred during the operation or employment of the vessel.
Energy:
Pool:
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.
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:
Retention:
net operating expenses in the insurance business, as a percentage of earned premium
f.o.a.
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):
SCR, Solvency Capital Requirement:
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.
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.
P&I, Protection & Indemnity (ship liability):
For own account, f.o.a:
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 profits
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:
Underwriting:
a cover that protects the insured against damage to, or loss of, his vessel or
machinery.
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 2021
87