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International Group of P&I Clubs reduces reinsurance costs in 2019 renewal

19th December 2018 - Author: Matt Sheehan

The International Group of P&I Clubs (IGP&I), a provider of protection and indemnity (P&I) insurance to the global shipping industry, has renewed its reinsurance program for the 2019/20 year with rate reductions across all of its vessel categories.

international-group-of-p&i-clubs-logoThe $3.1 billion reinsurance program included a number of changes to its structure that were aimed at ensuring sustainability whilst improving the cost-efficiency of IGP&I’s collective reinsurance arrangements.

IGP&I explained that the advantageous terms of its renewal were based on the acceptable loss experience of its reinsurance program on the 2012/13 to 2018/19 policy years, continuing surplus market capacity, the positive development of the Group’s captive insurer, Hydra, and the effective use of multi-year private placements.

The main changes to the Group’s reinsurance structure for 2019/20 involved the adjustment of second and third layer attachment points, the introduction of a new multi-year private placement, and the introduction of a $100 million annual aggregate deductible (AAD) within the 80% market share in the first layer of the program.

The individual club retention, which was increased to $10 million in 2016, will remain unchanged for the 2019/20 policy year, while the attachment point on IGP&I’s general excess of loss (GXL) program will also remain at $10 million.

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Additionally, no further changes will be made to the Group’s pool structure, which was increased from $30 million to $100 million for the 2018/19 year.

The first layer of IGP&I’s revised reinsurance program will provide cover from $100 million to an increased upper limit of $750 million, while the second layer will cover from $750 to $1.5 billion, and the third layer from $1.5 billion to $2.1 billion.

There are no changes to the collective overspill layer, which will provide $1 billion of cover in excess of $2.1 billion.

One of IGP&I’s three 5% multi-year private placements expires in February 2019 and will be replaced by a new 10% placement within the new first layer ($650 million excess $100 million), which will increase the private placement participation in the first layer from 15% to 20%.

Within the 80% market share of the first layer of the program, there will be a $100 million AAD that will be retained by Hydra.

Hydra will also continue to retain 100% of the $30-50 million pool layer, 92.5% of the $50-100 million pool layer, and a $100 million AAD  in the market share of the new first layer of the GXL program.

The changes to reinsurance program were based on a review that was undertaken by IGP&I’s Reinsurance subcommittee and the brokers of the current reinsurance program structure.

These included Miller and Aon, who were appointed as co-brokers on the Group’s GXL and collective overspill reinsurance program.

Based on a review of performance by vessel type category, the Reinsurance subcommittee decided to implement an even spread of reinsurance savings across all vessels for the 2019/20 policy year.

“The continuing support of the market has enabled another successful renewal of the Group General Excess of Loss and Collective Overspill insurance programme,” said Mike Hall, Chairman of the International Group Reinsurance subcommittee.

“Changes to the structure of the reinsurance programme for 2019/20 should deliver enhanced value to shipowners, balancing a cost-effective commercial market placement with a robust and well-funded risk retention strategy that strengthens the financial position of the Group’s captive, Hydra,” he continued. “This will all come as welcome news for the Group’s shipowners.”

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