Wednesday, 8th January 2014

International Group reinsurance renewal update January 2014

The arrangements for the renewal of the International Group General Excess of Loss reinsurance contract and Hydra reinsurance programme for 2014/15 have now been finalized.

Details of the rates to be charged for 2014/15 can be accessed via the PDF below.

The individual club retention will remain at US $9 million for the 2014/15 policy year. The continuing deterioration during 2013 on the 2011/12 policy year which produced the first and third largest ever claims on the Group pool has directly impacted the Group's reinsurers. This exposure, coupled with general concerns regarding the increased cost of major casualties, and in particular removal of wreck and SCOPIC exposure, has led the Group’s reinsurers to once again seek rises in the renewal premium for the 2014/15 policy year. There will, as a result, be rate increases for all vessel categories for the renewal. In order to mitigate the impact of the increase, the excess point on the GXL contract will be increased from US $70 million to US $80 million with the additional US $10 million retained within the Group pool reinsured by the Group captive Hydra for US $50m xs US$30m. The Hydra coinsurance share in the first layer of the Group general excess loss (US $500 million excess US $80 million) will remain at 30%. For 2014/15, there will once again be a three layer pool structure with a lower pool layer from US$ 9 million to US$45 million, an upper pool layer from US$45 million to US$ 60 million (within which, as currently, there is a claiming club retention of 10%) and a top pool layer from US $60 million to US $80 million (within which there is a claiming club retention of 5%). In a further change from the 2013/14 reinsurance programme structure, for 2014/15 the Group has placed 5% of the market reinsurance cover in two layers from US $100 million to US $1.1 billion on a multi-year fixed placement basis. Also, following a series of annual reductions in the amount of the US oil pollution voyage surcharge, and reflecting the continued improvement in the record of the dirty tankers sector, the voyage surcharge has been reduced to nil for 2014/15. In light of this change there will no longer be a requirement for US voyage declarations after 20 February 2014. The result of the renewal negotiations and programme restructuring is an increase in reinsurance cost of approximately 5.25% for clean and dirty tankers and dry cargo vessels, and 20% increase for passenger vessels.

Hugo Wynn-Williams, Chairman of the International Group Reinsurance Sub-Committee, reported that notwithstanding the significant further deterioration during 2013 on the 2011/12 policy year, in particular in relation to the Costa Concordia claim, through the use of the Group captive Hydra it has once again been possible to substantially mitigate the extent of the increased reinsurance cost to shipowners. In approaching the reinsurance cost allocation exercise for the 2014/15 policy year, and in accordance with the Group’s general allocation objective, principally that of moving towards a claims versus premium balance for each vessel type over the medium to longer term, the Group’s Reinsurance Strategy working group and Reinsurance subcommittee have again reviewed the updated historical loss versus premium records of the current four vessel type categories. In the tanker category, both the clean and dirty tanker records show a continuing favourable trend of steadily reducing claims and premium since 2004/5. It would however only take one significant tanker oil spill claim to reverse this trend. In the dry cargo category, after a run of heavy claims years between 2005 and 2012, and a trend of continuing moderate premium increase over that period, claims and premium have returned more towards equilibrium. In comparing container and non-container dry tonnage, the objective stated above of seeking to achieve equilibrium over the medium to longer term, dictates that a new vessel type category should not be created in the short term, absent a compelling reason to do so based on a sustained claims pattern. Whilst the more recent claims record reveals that claims on container vessels impacting on the reinsurance programme are somewhat larger than those incurred by non- container dry vessels, the variance in actual claims experience is only evident in less than the minimum 10 year time frame which more appropriately guides decisions. It would only take one or two major non-container claims to bring the container / non-container claims experience back towards, or beyond, equilibrium. Hence the composite dry cargo category is unchanged, but will remain under review each year. In the passenger category, the claims/premium imbalance in the 1990s/2000s (principally resulting from the Estonia / Express Samina / Al-Salam Boccaccio 98 casualties) had been brought back to equilibrium by 2007, though has since been skewed significantly by the substantial Costa Concordia claim. In relation to the split within the sector between ferries and cruise vessels, the exceptional facts of the Costa Concordia incident mask the underlying pure passenger claims data where the 20 year pool claims record reveals that passenger loss of life from ferries has exceeded 1800 lives whereas in incidents involving cruise vessels fewer than 40 lives have been lost. Whilst, in the passenger sector, where there remains a long-term imbalance to address, the 2013/14 increase, and the more modest 2014/15 increase, should contribute significantly to achieving the return towards equilibrium for this sector.

Download RI 2014 rates summary_201401081141.pdf

Safety animation to help prevent injuries and loss of life during mooring operations.

The International Group of P&I Clubs launches second safety animation to help prevent injuries and loss of life during mooring operations.
15 Mar 2023

Guidelines published for Marine Casualty Claims

The International Group’s Salvage Committee have drafted new Guidelines jointly with the Joint Marine Claims Committee (JMCC) to help improve collaboration in the handling of shipping casualties. The protocol document seeks to promote more effective communication between the parties involved that will ensure the prompt deployment of emergency responses services to vessels in distress.