JLT asks Clubs: Do we need a fundamental review of IG Reinsurance buying? (part 1)

In its 2017 report on the P&I Clubs, broker Jardine Lloyd Thompson asked all of the clubs a list of questions. Here are the responses of American Club, Britannia and Gard to one of those questions. Over coming days IMN will be printing in the responses of the remaining P&I Clubs.

Q: The International Group (IG) excess of loss reinsurance programme is no longer the relatively simple construction of years gone past, given the participation of Hydra (the IG captive reinsurer) and the introduction of so-called “private placements”. The IGP&I Annual Review 2016/17 talks briefly about a review of Hydra’s role during 2017, but do you consider a more root and branch review of how the IG buys reinsurance is called for?

American Club

American Club said that it was correct to note that the International Group’s annual review referred to an assessment of Hydra’s role during 2017.

American said it was likely that further developments in this area – particularly as the group approached the 2018/19 renewal season – would  emerge over the months ahead. The American Club said it took “the uncontroversial view that Hydra should work for the benefit of all clubs in an even-handed way and in the manner for which it was originally designed”. Moreover, the Club felt that it should maximize the dynamics of the market at any given point in time, rather than become an end in itself or, put another way, a solution seeking a problem.


Britannia noted that the IG’s Reinsurance Subcommittee reviewed the current structure of the group excess of loss programme each year, including considering the role and participation of Hydra, the programme layering and composition, as well as alternative structures. The aim was to achieve the right balance between retention and transfer of the collective risk, both from the scope of cover and pricing perspectives. Britannia said that the subcommittee was supported by the knowledge and experience of the Group’s broker, while also taking separate advice from consultants on a range of factors, including pricing.


Gard said that both it and the Reinsurance Subcommittee reviewed the group reinsurance programme from time to time. “We believe it is possible to increase the value of that programme. However, it is important to remember that each club will have its own risk appetite as well as philosophy on underwriting, reinsurance and capital requirements and that this is a collective purchase”, Gard said, while noting that the key was to achieve a balance in the purchasing that took into account this range of views.