Clubs are a big buyer of (captive) reinsurance

The International Group of P&I clubs (IG) chairman Paul Jennings, speaking at its inaugural VIP briefing in Singapore yesterday, noted that the choice of Singapore as the launch pad for the event was a testament to "the importance of Asia to the future of protection and indemnity (P&I)."

Mr Jennings pointed to the first of three functions of the IG as being co co-ordinating the operation of the claims pooling agreement for claims in excess of the individual club retention ($10m) and the collective reinsurances for the group clubs ($100m-$3.1bn).

Of greatest interest to any reinsurers who happened to wander past would have be details of the 2019/20 pool and GXL reinsurance contract structure - a claims-sharing arrangements - and the commercial market and captive reinsurance arrangements, called Hydra Insurance Company. Hydra is a Bermuda-incorporated segregated accounts company in which each of the 13 group clubs has its own segregated account ring fencing its assets and liabilities from those of the company or any of the other clubs.

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 pool is structured in three layers from $10m to $100m. Excess of $30m, the pool is reinsured by Hydra.

Global reach

IG is a global body that represents the 13 P&I clubs around the world – and Asia already has a strong presence in the grouping. Mr Jennings revealed that Singapore presently has 10 clubs employing 149 people, Hong Kong has 12 clubs employing 165 people, Japan has seven clubs employing 223 people and China has three clubs employing 13 people.

On a global basis 13 P&I clubs which comprise the IG between them provide marine liability protection and indemnity cover for around 90% of the world's ocean-going tonnage.

The second function is to provide a forum for the exchange of information between clubs and other maritime organisations and sectors. “Shipping needs a sustainable future,” Mr Jennings said, “and collaboration on data is an important part of that.” The third function is to represent the views of clubs' ship owner members on matters of concern to the shipping industry in relation to insurance and liability issues.

Source: Asia Insurance Review