Calls or Premiums. Some mutual associations term the payments for cover as “calls” while others term them as “premiums”. The concept of mutuality is that each member protects the others and this is done by levying “calls” rather than the businessman’s “premium”.
Indeed, section 85(2) of the Marine Insurance Act prevents “premium” being used for mutual insurance but a guarantee or such other arrangement may be substituted for the premium.
When calculating the size of the calls the club needs to consider the call income required to cover a member’s claims within the club’s own retention, a contribution to claims, a proportion of the excess reinsurance premium, together with management expenses and investments.
The basic rate achieved by weighing all these factors will be multiplied by the contributing or gross tonnage for the period of cover and this produces the rate of “advance call”. Advance is usually payable in two or more installments.
The rules also permit the club to levy supplementary or additional calls. An estimate of this is advised at the beginning of the year.
Other calls are:
Release calls – this allows a terminating or retiring member to be released from obligations for future calls on payment of an agreed amount.
Return calls or laid up returns – if the vessel is laid up with no cargo in a safe port, usually for at least 30 days after berthing, the laid up return of advance call can be as much as 90 per cent.