P&I Overview
International Group
In the same way that the shipowners grouped together to create the P&I clubs, six of the largest English clubs joined efforts and established the London Group of Clubs to share common risks amongst them. It was formed in 1899 by entering into force the first Pooling Agreement, whereby the Group clubs set out the terms and conditions for arranging at-cost collective insurance and reinsurance on a not-for-profit basis, just like the mutual clubs. Many other clubs joined the Group, known as of 1982 as The International Group of P&I Clubs (IGP&I).
Insuring more than 90% of the world’s deep-sea merchant fleet, the IGP&I currently comprises twelve clubs, which are listed below:
- American Steamship Owners Mutual Protection and Indemnity Association, Inc.
- Assuranceforeningen Skuld (Gjensidig)
- Gard P&I (Bermuda) Ltd.
- 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 Shipowners’ Mutual Protection & Indemnity Association (Luxembourg)
- NorthStandard Limited
- The Steamship Mutual Underwriting Association (Bermuda) Limited
- Sveriges Ångfartygs Assurans Förening (The Swedish Club)
- United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited
- The West of England Ship Owners Mutual Insurance Association (Luxembourg)
The IGP&I is an unincorporated association chaired by a representative elected on a three-year rotation from one of its members P&I clubs. Its internal administration and external representation are coordinated by the Group Secretariat, based in London and headed by the Secretary and Executive Officer. The Group has a number of Subcommittees and Working Groups to deal with a broad range of legal, regulatory and insurance issues impacting shipowners, operators and charterers.
The Pooling Agreement is constantly renewed to reflect changes in the market and international legislation. For the policy year 2023/2024, the Pool and GXL Reinsurance contract structure is illustrated in the table below.
The IGP&I explains the complex Pooling Agreement as follows:
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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 12 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 $650 million excess of US $100 million, Layer 2 – US $750 million excess of US $750 million, Layer 3 – US $600 million excess of US $1.5 billion). Hydra now retains a US $107.1 million AAD within the 75% Market Share in Layer 1, and there are three multi-year private placements in Layer 1, two of which are 10% and one at 5%.
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.
At the 2022 renewal, annual aggregate limits were introduced for the excess layers in response to the market-wide coverage restrictions with respect to Malicious Cyber, Covid-19 and other new Pandemic risks (the “Risks”). These aggregate limits remain in place for the excess layers for the 2023/24 policy year, but now only apply to losses with a value greater than US $750 million (2022/23: losses 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 $750 million are covered by the reinsurance on a free and unlimited basis whether or not the loss is caused by one of the defined Risks.
The annual aggregate limits within the reinsurance for losses directly caused by these Risks apply to Layers 2 and 3 as follows:
- Annual aggregate limits have been agreed separately for each Layer, but with ‘drop-down’ features resulting in Layer 3 reinsurers agreeing to make their aggregate limit available for claims in the lower Layers if necessary.
- These aggregate limits total US$1.35 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.
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This video explains in a friendly way how the Group’s pooling and reinsurance arrangements work.
Like the P&I clubs, the IGP&I does not only deal with the payment of claims. It is also a very important representative of the membership in organisations such as the International Maritime Organisation (IMO) and international governments and, through its various sub-committees, deals with a number of issues affecting its clubs’ membership.
There are respectable P&I clubs that are not part of the Group because of their domestic policy or because the type of cover needed by their members does not need to be as high as those made available by the so-called Group clubs.
Learn more about how the IGP&I operates in this video.
