2018/19 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 programme for the 2018/19 policy year are depicted in the diagram below.

Currently 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 three-layer structure (Layer 1 - US $500 million excess of US $100 million, Layer 2 - US $500 million in excess of US $600 million, and Layer 3 - US $1 billion excess of US $1.1 billion). Hydra retains a 30% coinsurance within Layer 1, and there are three multi-year private placements of 5% each within Layers 1 and 2.

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

International Group of P and I Associations General Excess of Loss Reinsurance Contract Structure - Owned and Chartered Entries (including Overspill Protection, Hydra participation, Pooling, Private Placements and Individual Club Retentions) 12 months at noon GMT 20th February, 2018 2017 - 2019 multi-year Private Placement 2015 - 2019 multi-year Private Placement 2016 - 2018 multi-year Private Placement Collective Overspill Excess of Underlying Third Layer Excess of Underlying Second Layer Market Share First Layer Market Share Upper Pool Layer - Reinsured by Hydra Lower Pool Layer - Reinsured by Hydra Lower Pool Layer Individual Club Retention (ICR) First Layer Hydra Share Private Placement Private Placement Private Placement Second Layer Market Share Private Placement Private Placement Private Placement 7.5% ICR First Layer Market Share First Layer Hydra Share First Layer Market Share First Layer Hydra Share P P P P P P Upper Pool Layer - R/I by Hydra Lower Pool Layer - R/I by Hydra Lower Pool Layer Individual Club Retention (ICR) 7.5% ICR P&I Oil Pollution P&I and Oil Pollution Single per vessel retention Owned Entries Chartered Entries 3.1bn 2.1bn 1.1bn 1.0bn 600m 100m 100m 50m 50m 30m 30m 10m 10m 350m

Value: $ - $

The Pool, the first and second layers of the GXL and the private placement participation structures for the separate oil pollution cover mirrors the main (P&I) placement up to the Oil Pollution cover limit (US $1 billion), as visualised above. For chartered entries, there is a single combined P&I and oil pollution cover limit of US$350 million. The Pool and Reinsurance layers structures for chartered entries are identical to those in place for owned entries up to the cover limit.

The Pool and Reinsurance structures are reviewed annually and any changes to the existing structures will be reported under the News section on the Group website.

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