Release Call Levels
The Club’s Directors reviewed the level of release calls at the 2023 Board Meeting, and decided to move the present release call levels forward by a year.
Release Calls relieve a Member of liability for any additional calls that might be levied by the Club on any open policy years.
The Club’s regulators set a regulatory capital requirement (RCR) which is the amount they deem could be lost in the event of an extreme adverse financial event that might affect the Club. At a minimum, the Club must ensure that it has sufficient resources to cover its RCR.
The RCR reflects the likelihood and severity of risks (Reserving, Underwriting, Credit, Market and Operational) which in isolation or combination could cause capital resources to be depleted to such an extent that they would have to be replenished in order for the Club to continue trading. The Club’s own capital model assesses all of these risks and simulates scenarios to identify the variability and probability of such losses.
If the Club were to experience an extreme financial loss equivalent to its RCR, it could reasonably expect to raise some of the required capital through increases at successive renewals, and by use of its own capital reserves. However, any remaining shortfall would have to be met from an additional call or calls, for which release calls provide security .
The release call percentages have therefore been set at a level which, if levied by way of additional calls, would contribute enough capital to make up such a shortfall. Release calls are regularly reviewed by the Board to ensure they are at the necessary level to achieve that objective.
Because reserving represents the primary risk for open policy years, release call rates reflect the level of uncertainty in each year’s claim projections, which largely of course depend upon the maturity of the policy year in question.
In the event of a loss equivalent to the Club’s regulatory capital requirement, its replenishment would be funded by
- Available free reserves in excess of that loss,
- Premium increases over one or more subsequent renewals, and
- Additional calls.
Release calls discharge a Member’s obligations to pay additional calls (C).
Applying these principles, the Board has set release calls as follows:
• 2021/22: 5%
• 2022/23: 5%
• 2023/24: 10%
• 2024/25: 10%