International Group Pool and Reinsurance arrangements

2022/23 Pool and GXL Reinsurance contract structure

The structure of the Group’s claims-sharing arrangements (the “Pool”) and the commercial market and captive (Hydra) reinsurance arrangements for the 2022/23 policy year are depicted in the diagram below.

The Pool is structured in three layers from US $10 million to US $100 million. Excess of US $30 million, the Pool is reinsured by the Group captive reinsurance vehicle, Hydra Insurance Company Limited. Hydra is a Bermuda incorporated Segregated Accounts company in which each of the 13 Group Clubs has its own segregated account (or “cell”) ring fencing its assets and liabilities from those of the company or any of the other Club cells. Hydra reinsures each Club in respect of that Club's liabilities within the Pool and reinsurance layers in which it participates. Through the participation of Hydra, the Group Clubs can retain, within their Hydra cells, premium which would otherwise have been paid to the commercial reinsurance markets.

The annual Group General Excess of Loss (“GXL”) reinsurance programme attaches at the Pool ceiling of US $100 million, and provides up to US $2 billion of reinsurance cover in a four-layer structure (Layer 1 - US $450 million excess of US $100 million, Layer 2 - US $200 million in excess of US $550 million,  Layer 3 - US $750 million excess of US $750 million and Layer 4 – US $600 million excess of US $1.5 billion). Hydra retains a US $100 million AAD within the 70% Market Share in Layer 1, and there are three multi-year private placements, each of which are 10%.

A further US $1 billion of reinsurance cover (the “Collective Overspill”) is purchased by the Group to provide protection in respect of claims exceeding the upper GXL cover limit of US $2.1 billion.

In response to the market-wide coverage restrictions with respect to Malicious Cyber, Covid-19 and other new Pandemic risks (the “Risks”), there are now annual aggregate limits within the reinsurance for any losses with a value greater than US $550 million directly arising from these Risks. All other claims continue to be covered on a free and unlimited basis within all layers of the GXL. Losses below US $550 million continue to be covered by the reinsurance on a free and unlimited basis whether or not the loss is caused by one of these Risks.

The annual aggregate limits within the reinsurance for losses directly caused by these Risks apply to Layers 2, 3 and 4, as follows:

  • Annual aggregate limits have been agreed separately for each Layer, but with ‘drop-down’ features resulting in Layers 2, 3  and 4 reinsurers agreeing to make their aggregate limit available for claims in the lower Layers if necessary.
  • These aggregate limits total US$2.15 billion for the Risks across all Layers.

For any losses excess of these annual aggregate limits, Group Clubs have agreed to Pool losses that would otherwise be recoverable from the GXL, ensuring no change to the cover provided to Shipowners.

USD 3.1bn USD 2.1bn USD 1.5bn USD 1bn USD 750m USD 550m USD 100m Collective Overspill - USD 1bn and in the annual aggregate, (one reinstatement) xs USD 2.1bn Layer 4 - USD 600m xs 1.5bn Layer 4 - USD 600m xs 1.5bn Annual aggregate USD 600m Layer 3 - USD 250m xs 750m Layer 3 - USD 750m xs 750m Layer 3 - USD 750m (but USD 250m for oil pollution) xs USD 750m Annual aggregate USD 750m PP 1 - 10% PP 2 - 10% PP 3 - 10% PP 1 - 10% PP 2 - 10% PP 3 - 10% Layer 2 - USD 200m xs USD 550m Layer 2 - USD 200m xs USD 550m Layer 2 - USD 200m xs USD 550m Annual aggregate USD 400m applying separately to P&I/OP Layer 1 - USD 450m xs USD 100m USD 100m AAD (for order) Layer 1 - USD 450m xs USD 100m USD 100m AAD (for order) Pool Oil pollution only P&I Malicious cyber, covid and pandemic only in respect of Layers 2, 3 & 4 only
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