IG P&I renews reinsurance structure at 1.1, holds rate hike to 5.8%

The  International Group of P&I Clubs claims to have renewed its group excess of loss reinsurance with only minor tweaks to structure and "only a small increase in rates for shipowners."

The group brags of a “a benign pool claims environment,” but suffered “difficult market conditions” nonetheless, in part as the Russia-Ukraine war hit reinsurer sentiment.

“The IG has shown that it has been able to weather the COVID-19 pandemic without a significant adverse impact to the [group excess of loss] GXL placement and despite the challenges presented by the Russia/Ukraine conflict,” International Group chair Mike Hall said of what he called “a very positive renewal.”

The overall average rate increase for shipowners following the new cover should be held to 5.8%, the IG said. Rate moves vary by tonnage category.

Coverage includes excess war P&I, but makes territorial exclusions for the Russia-Ukraine war. The IG is negotiating sub-limited cover for affected vessels, but has yet to conclude terms.

The group returned to a three-layer structure for core P&I, starting with $650 million excess of $100 million from pooling (matching the total of the prior bottom two layers). A second layer covers the next $750 million and a third layer stretches $600 million above that.

Oil spill covers are separate with two layers running to $1 billion, including a bottom layer to match the P&I coverage ($650 million above $100 million similarly split open market vs private placement), plus a $250 million second layer.

75% of layer 1 (up from 70% prior) and 100% of layers 2 and 3 are placed with the open market on a free and unlimited basis. The lingering 25% of layer one goes to private market placements. Malicious cyber, COVID-19 and pandemic have separate second and third layers.

Excess of that aggregated cover, the group continues to pool any reinsurance shortfall, resulting in no change to shipowners’ cover.

The IG’s Bermudan based reinsurance captive Hydra continues to play a role, retaining an annual aggregate deductible in the bottom layer. The portion taken by Hydra will remain flat year on year, but increase nominally to $107.1 million on the reduction in the private placements.

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