IG Reinsurance contract (GXL) structure for the 2023/24 finalized

The International Group (IG) Pooling and Group Excess of Loss Reinsurance contract (GXL) structure for the 2023/24 Policy Year has now been finalised.

This press release details the background to the IG’s GXL renewal rates for 2023/24 policy year.

To date, the IG has seen a benign Pool claims environment for the 2022/23 Policy Year. However, there has been some deterioration in prior years and Hurricane Ian and the Russia/Ukraine war have had a significant impact on the IG’s reinsurance partners, which led to difficult market conditions going into the 2023 renewal. Nevertheless, coupled with the increase paid in 2022/23, the IG has been able to renew its reinsurance programme for 2023/24 with only a small increase in rates for shipowners.

The GXL allows IG Clubs to offer uniquely high levels of free and unlimited coverage for most of the risks they insure. In securing this renewal, the IG is therefore grateful for the hard work of its leader, AXA XL, and also to its many other longstanding reinsurance partners

As part of the GXL, the IG renewed one of its two expiring 10% multi-year private placements (which provide cover in the layer USD 650m xs USD 100m) whilst replacing the other expiring 10% private placement with a 5% line. This in turn means that there is an increased, 75%, share of the GXL for the open market.

Within that 75%, coverage for COVID-19, Malicious Cyber and Pandemic risks has been expanded and is now free and unlimited for all claims up to USD 650m xs USD 100m, with aggregated cover above USD 750m.

To ensure the fairness of cost allocation between different vessel types, each year the IG’s Reinsurance Committee considers the vessel categories used.  Having given due consideration, those categories remain unchanged with the rates having been adjusted as set out in detail at the end of this release.

Statement from Mike Hall, Chairman of the IG’s Reinsurance Committee

“Despite challenging general reinsurance market conditions, I am delighted to announce a very positive renewal for shipowners in 2023. The IG has shown that it has been able to weather the COVID-19 pandemic without a significant adverse impact to the GXL placement and despite the challenges presented by the Russia/Ukraine conflict.

The excellent communication between the IG and the GXL leader, AXA XL, as well as with the IG’s many longstanding reinsurance partners has helped all parties understand the importance of and unique nature of the IG’s coverage requirements in support of the global shipping community. I am therefore grateful to them and to the IG’s brokers for their continued support in finalising this year’s reinsurance programme.”

Renewal Overview

The main GXL placement (Layers 1-3, USD 2 billion excess of USD 100m) has returned to three layers (as was the position for the 2020 and 2021 renewals). There continues to be the USD 1 billion Collective Overspill excess of the GXL together with three private placements in Layer 1 (although with a reduced 25% share).

An overview of the entire GXL for 2023/24 is:

  • Individual Club’s retention remains at USD 10m;
  • Pooling remains up to USD 100 m excess USD 10m;
  • Excess USD 100 m, the GXL applies as follows:
    • Layer 1 USD 650 m excess USD 100m; Layer 2 USD 750 m excess USD 750 m; Layer 3 USD 600 m excess of USD 1.5 bn;
    • 75% of Layer 1 and 100% of Layers 2 and 3 are placed with the open market on a free and unlimited basis, except for risks in respect of malicious cyber, COVID-19 and Pandemic. For those risks, for the 2023/24 policy year, there is expanded free and unlimited cover for claims up to USD 650m excess of USD 100m. This covers almost all IG Clubs’ certificated risks.  Excess of USD 750m there is up to US$1.35bn of annual aggregated cover in respect of these three risks across Layers 2 and 3. Excess of that aggregated cover, the IG continues to pool any reinsurance shortfall, resulting in no change to shipowners’ cover.
    • 25% of Layer 1 is covered by three private market placements, which are renewed independently of the open market element of the GXL;
    • Hydra continues to retain an Annual Aggregate Deductible (“AAD”) in Layer 1, which remains at the same value as for the 2022/23 policy year in 100% terms. Due to the increase in order for the open market layer to 75%, the value of this AAD has increased to USD 107.1m for the 2023/24 policy year.
  • Other placements: The Collective Overspill (USD 1bn excess of USD 2.1 bn) and ancillary covers are being renewed with premiums included within the overall rate per GT.

The IG’s Bermudan based reinsurance captive Hydra continues to support the IG through its risk retention.  This enhances stability in pricing. The use of private placements has also continued to give shipowners greater stability, especially in a year when market sentiment has been volatile as a result of Hurricane Ian, the Russia/Ukraine conflict and continued market coverage issues.

The impact of the benign 2022/23 pool claims environment (although prior years have seen some deterioration) has been tempered by volatility in investment markets, together with increased reinsurance market costs for our reinsurers and general inflationary concerns. Nevertheless, the GXL continues to allow the broadest cover for shipowners, with the overall average rate rise for shipowners being 5.8%.

Individual Club retention and GXL programme attachment

The Individual Club retention remains unchanged for the 2023/24 policy year at USD 10 million, as does the structure of the Pool and the attachment point for the GXL programme.

MLC cover

The MLC market reinsurance cover is being renewed for 2023/24 at competitive market terms, with the premium included in the overall reinsurance rates charged to shipowners.

War cover

The excess War P&I cover will be renewed for 2023/24 for a period of 12 months.  Again, this will be included in the total rates charged to shipowners.

However, due to the ongoing active war between Russia and Ukraine, the IG’s Excess War reinsurers require Territorial Exclusion language (consistent with exclusionary language already applied by reinsurers for Primary War P&I coverage) for vessels trading in these waters. The IG is negotiating availability of sub-limited cover for affected vessels, which remains an ongoing process. However, it appears available cover is likely to be on the basis of a significantly lower per-vessel limit than for the main Excess War placement limit of USD 500m. The IG will provide details of this cover in due course.

2023 GXL programme structure

The diagram below illustrates the layer and participation structure of the GXL programme for 2023:

USD 3.1bn USD 2.1bn USD 1.5bn USD 1bn USD 750m USD 100m Collective Overspill - USD 1bn and in the annual aggregate, (one reinstatement) xs USD 2.1bn Layer 3 - USD 600m xs 1.5bn Layer 3 - USD 600m xs 1.5bn Annual aggregate USD 600m Layer 3 - USD 600m xs 1.5bn Annual aggregate USD 600m Layer 2 - USD 250m xs 750m Layer 2 - USD 750m xs 750m Layer 2 - USD 750m (but USD 250m for oil pollution) xs USD 750m Annual aggregate USD 750m Layer 2 - USD 750m (but USD 250m for oil pollution) xs USD 750m Annual aggregate USD 750m PP 1 - 10% PP 2 - 10% PP 3 - 5% PP 1 - 10% PP 2 - 10% PP 3 - 5% Layer 1 - USD 650m xs USD 100m - 75% order USD 107.1m AAD (for 75% order) Layer 1 - USD 650m xs USD 100m - 75% order USD 107.1m AAD (for 75% order) Pool Oil pollution only P&I Layers 2 & 3 limited cover in respect of malicious cyber, covid and pandemic Layers 2 & 3 limited cover in respect of malicious cyber, covid and pandemic Covid and pandemic only in respect of Layers 2 & 3 Malicious cyber only in respect of Layers 2 & 3
Click each section for more details

Reinsurance cost allocation 2023

As part of its annual analysis and in addition to reviewing premiums, the IG’s Reinsurance Committee has, as referred to above, been looking at vessel categories.

The conclusions are that there should be no change in the number of categories at this time, but that there should be some adjustments to the relative rate changes having regard to each category’s historical claims performance against the GXL.

The 2023/24 rates are set out below:

Tonnage category 2023 rate per gt % change in rate per GT
Persistent Oil Tankers 66.63 +3.0%
Clean Tankers 40.51 +10.5%
Dry 59.91 +6.2%
FCC 72.77 +10.5%
Passenger 386.77 +0.0%
Chartered tankers 31.28 +7.5%
Chartered dries 15.26 +7.5%

“This is a positive reinsurance renewal for the International Group and its Members, given the difficult prevailing market conditions.”

Mike Hall – Chair of the International Group Reinsurance Committee

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