A merican Club Circular No. 24 / 2 1 1 NOVEMBER 19, 2021 CIRCULAR NO. 24/21 TO MEMBERS OF THE ASSOCIATION Dear Member: BACKGROUND TO THE 2022 AMERICAN CLUB RENEWAL. DEVELOPMENT OF CLOSED AND OPEN POLICY YEARS. LEVYING OF SUPPLEMENTARY CALLS FOR 2018, 2019 AND 2020 (IN PROSPECT). PREMIUM AND RELATED REQUIREMENTS FOR THE 2022 POLICY YEAR. At its meeting held virtually from New York yesterday, your Board reviewed the American Club’s present and prospective circumstances by reference to a variety of factors. This Circular describes the issues discussed by your Board, and the decisions it reached in consequence of those discussions. Background to the 2022 American Club renewal While there are grounds for optimism that the most debilitating human and economic aspects of the COVID-19 pandemic may be receding, the trajectory of marine losses has continued to move relentlessly upward over the recent past. This has been most visible in the escalating cost of larger claims, particularly those falling within the International Group’s Pool (the arrangement within which Group clubs share claims of a per incident value between $10 million and $100 million in accordance with an agreed formula). Although the frequency of losses has remained broadly constant, their individual severity has risen substantially over the past few years. Indeed, the aggregate cost of Pool claims from 2018 to 2020 is almost double that of the three previous years, while the Pool for 2021 appears to be heading in the same direction. Although the American Club has not itself brought any claims to the Pool since 2016, its contribution to the losses of other clubs has itself almost doubled since 2018, and now accounts for about a third of the Club’s net claims overhead. Other unfavorable trends have also emerged. The impact of “social inflation” has become evident across a broad spectrum of exposure, particularly in regard to personal injury and environmental claims. Their cost has grown appreciably over the past few years, in a manner much less predictable than has traditionally been the case. On a more positive note, Eagle Ocean Marine (EOM), the Club’s fixed premium facility, has continued to make a strong contribution to the mutuality over the past twelve months, with steadily rising premium and continuingly favorable underwriting results. While American Hellenic Hull has struggled to achieve profitability, it has maintained a solid and respected A merican Club Circular No. 24 / 2 1 2 footprint in the market. And, as a component its overall results from year to year, the Club’s investment portfolio has recently performed well, generating a year-to-date return of 6.7% as of the middle of November. The negative developments described above have emerged against a background of chronically weak premium pricing. Most clubs have now experienced several years of underwriting losses, and have mainly relied on investment returns to cover them. The American Club has been no stranger to these realities. In common with its peers within the International Group, the Club has seen pressure on reserves as mounting claims and other costs prove increasingly irreconcilable with inadequate premium income. The American Club approaches the 2022 renewal confronting the same headwinds which the P&I sector at large is experiencing at present, but with a determination seriously to improve its overall financial position. This has caused your Board to make some difficult decisions, intended to fortify th