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International Group and the pooling system

International Group and the pooling system. Lars Nilsson The Swedish Club. The Nordic Association of Marine Insurers. The International Group. Goals for this session Get an understanding for how the International Group is organized

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International Group and the pooling system

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  1. International Group and the pooling system Lars Nilsson The Swedish Club The Nordic Association of Marine Insurers The Nordic Association of Marine Insurers

  2. The International Group Goals for this session • Get an understanding for how the International Group is organized • Understand the basicfunctions of the Pooling system and the Group reinsurancestructure

  3. The International Group The Group • Comprises 13 non-profit-making mutual insurance associations (“Clubs”) • which insure third party liabilities relating to the use and operation of ships • and insure over 90% of world ocean-going tonnage – excess of 900 million tons and excess of 50,000 vessels • and insure over 95% of ocean-going tankers • with a total Group premium 2013 of USD 3,5 billion

  4. The International Group History • 1855 First P&I Club - Today known as Britannia • First Pooling Agreement 1899. Six British Clubs – London Group • Reinsurance Contract 1951 • Limited policy 1995 • Hydra captive 2005

  5. The International Group Current principal underwriting Group members • American Steamship Owners Mutual Protection and Indemnity Association, Inc • Assuranceforeningen Gard • AssuranceforeningenSkuld • The Britannia Steam Ship Insurance Association Limited • The Japan Ship Owners' Mutual Protection & Indemnity Association • The London Steam-Ship Owners’ Mutual Insurance Association Limited • The North of England Protection and Indemnity Association Limited • The Shipowners' Mutual Protection and Indemnity Association (Luxembourg) • The Standard Steamship Owners’ Protection and Indemnity Association (Bermuda) Limited • The Steamship Mutual Underwriting Association (Bermuda) Limited • The Swedish Club • United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited • The West of England Ship Owners Mutual Insurance Association (Luxembourg)

  6. The International Group Group members – Tonnage 2013

  7. The International Group Group functions • to co-ordinate the operation of the claims pooling agreement for claims in excess of the individual club retention ($9m) and the collective reinsurance for the Group clubs ($80m - $3.08bn) • to provide a forum for the Group clubs to develop common policy and promote shipowners’ interests in relation to liability and insurance issues • to provide a useful forum for sharing information on matters of concern to clubs and their members.

  8. The International Group Underlying agreements • Constitution (amended 2006) • International Group Agreement “IGA” (amended 2013) • Pooling Agreement (renewed annually)

  9. The International Group • Constitution • the objects of the group • membership • appointment of officers, sub committees and working groups • organisation of group meetings • Resignation, cessation and expulsion

  10. The International Group International Group Agreement (“IGA”) • vessel quotation procedures • references to the committee / reduced pooling facility • release calls • disclosure of average expense ratio (AER)

  11. The International Group Pooling Agreement • pooling/poolabilityof claims • excluded risks and losses • Individual club retention • basis of contribution to pool claims • individual/collective reinsurances • overspill provisions • Provision for new applicants to the pool

  12. The International Group Group organisation • the activities of the Group are co-ordinated through the Group secretariat based in London • the work of the Group is carried out by the secretariat and by club managers in sub-committees and working groups which formulate policy recommendations for consideration by boards • the Group managers meet three times each year to co-ordinate the work of its sub-committees and working groups

  13. Bills of lading Claims Co-operation Compulsory 3rd Party Liability Insurance Capital Adequacy Maritime Security Confirmation of Entry Personal Injury Pilotage Pollution Regulatory Affairs Reinsurance Representation Salvage Ships’ Standards Ship Technical War and Terrorism The International Group More than 90 sub-committees and working groups, including:

  14. The International Group Group policy positions • the Group’s policy positions are set by club boards who report through their managers into the Group – Group managers do not make Group policy – Shipownersdo • need to reflect the wishes, sometimes conflicting, of different industry sectors

  15. The International Group Challenges and issues • The EU investigation • Sanctions legislation and regulation • Piracy • Cargo concerns

  16. The International Group • Summary of benefits provided by the Group system • Unparalleled range and limits of cover • Guaranteed prompt security / payment of compensation to victims • Experienced and effective casualty and claims management • Promotion/implementation of ship standards and safety measures • Further information at www.igpandi.org

  17. The International Group Reinsurance -Pooling Reduced volatility

  18. The International Group Reinsurance – Pooling • Reinsurance based on risk transfer • Poolingwillnormally not provide risk transfer • Mechanism to regulate the payback • Time value of payments

  19. The International Group SELENDANG AYU – USD 100 million

  20. The International Group COSCO BUSAN – USD 209 million

  21. The International Group HEBEI SPIRIT – USD 218 million

  22. The International Group RENA – USD 350 million

  23. The International Group COSTA CONCORDIA – USD 1,600 million

  24. The International Group

  25. The International Group Pooling Agreement • Lower Pool Layer USD 36M XS USD 9M • Upper Pool Layer USD 15M XS USD 45M (90%) • UpperUpperLayer USD 20M XS USD 60M (95%) • Share of Pool dependent on volume and result

  26. The International Group Reinsurance structure • General Excess Loss R/I Contract • Three layers (2x$500m and 1x $1bn) excess of $80m • Unlimited Reinstatements • Oil pollution two layers (2x$500m) limited to $1bn • Charterers P&I and oil pollution $270m excess of $80m • Collective Overspill Layer $1bn, one reinstatement

  27. The International Group Reinsurance Capacity • over 90 participating reinsurers worldwide • security guidelines limit participation per layer and overall • Minimum credit rating agency requirements for participants A- stable • Downgrading and consolidation within reinsurers increases default exposure

  28. The International Group Hydra Insurance Co. Ltd • Single cell Bermuda captive established 2005 • 1 cell per club • Reinsures pool $30-80m layer and 30% of GXL layer 1 • Strategic response to market pricing and capacity volatility • Long-term commitment

  29. The International Group

  30. The International Group What have we achieved? • Discovering the function of the international Group • Understanding of the Group Pooling and reinsurance system • Understanding the difference between Pooling and reinsurance

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