Clearly these financial developments and the current strength of our capital position will be important as we move to comply with the developing requirements of the European Solvency 2 regime; but as I mentioned last year, the new regulatory regime also places great importance on a company’s corporate governance arrangements and its ability to assess and manage risk.


As Solvency 2 approaches, we have initiated a high level review of our structure with a view to optimising the amount of capital required. At the same time, the opportunity will be taken to simplify and streamline, where appropriate, the corporate governance arrangements for the Club, whilst still maintaining the benefits of a widely representative board drawn from the membership and the technical expertise of our independent professional managers.


This active membership participation in the governance of the Club reflects the mutual nature of the Club which is shared with the other clubs in the International Group and lies at the heart of the pooling and reinsurance arrangements of the Group. Ultimately these are designed to provide all Members with the highest sustainable level of cover at an economic cost.


In August last year the European Commission initiated a formal investigation into the competition aspects of these arrangements following on from the expiry of the second ten year exemption for the International Group Agreement. We, and all other clubs in the International Group, are fully co-operating with this investigation and have been providing full and timely answers to the Commission’s requests for information.


We hope that as on the previous occasions when the Commission has considered these matters in detail, the


conclusion will be that the Group’s pooling and reinsurance arrangements remain appropriate. These arrangements provide unique benefits in the high levels of cover made available at economic cost, delivering security not only to the members of all the clubs (who are the consumers in this context), but also to the wider public in the context of the major human, environmental or property claims that occur from time to time.


During the year, the Board also had to consider the serious implications for the Club of recent sanctions legislation in Europe and the United States, particularly in relation to Iran. The apparently growing trend towards including insurance in international trade sanctions has raised new issues for the Club.


There is a difficult balance to be struck between trying to ensure that individual Members have the best possible cover for their own legitimate trading operations and protecting the Club and all its Members from the serious consequences of being in breach of relevant sanctions legislation.


As a result of the Board’s consideration of this issue, Rule changes have been introduced for the 2011 policy year which we hope reflect a fair solution and will give the Club the essential protection we felt was necessary. Unfortunately one casualty was the enforced departure from the Club of a long-standing Member for whose fleet the Club was no longer able safely to provide cover as a result of such legislation.


Whatever the outcome of the review I referred to earlier, it is certain that the workload of Directors, and particularly the members of two of the Board’s key committees—the Strategy and the Audit & Risk committees—will not be reduced. We are very conscious


5


the process of rebuilding the Club’s reserves has been successful


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16