P&I Overview

P&I Overvie

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 with the main purpose of sharing common risks amongst them. It was formed in 1899 with the entering into force of the first Pooling Agreement, whereby the Group clubs set out the terms and conditions for their 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 from 1982 as The International Group of P&I Clubs (IGP&I).

Insuring more than 90% of world’s deep-sea merchant fleet, the IGP&I currently comprises thirteen clubs, which are listed below along with affiliated associations and reinsured subsidiary:

                                     

       

             

                             

                                             

The IGP&I is an unincorporated association and is 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 co-ordinated 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 on shipowners, operators and charterers.

The Pooling Agreement is constantly renewed to reflect changes in the market and legislation. For the policy year 2020/2021, the structure of the Pool – and the commercial market and captive reinsurance arrangements are as illustrated in the figure below.

The IGP&I explains it as follows:

QUOTE
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 $650 million excess of US $100 million, Layer 2 – US $750 million in excess of US $750 million, and Layer 3 – 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% of layer 1.

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.

Under the Group clubs policies, oil pollution cover is limited to US$ 1 billion and charterers are subject to a single combined P&I and oil pollution cover limit of US$ 350 million.
UNQUOTE

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 payment of claims. It is also a very important representative of the membership in organisations such as 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.

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