JLT asks Clubs: Do we need a fundamental review of IG Reinsurance buying? (part 3)

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 Skuld, Standard, Steamship, Swedish, UK Club and West of England to one of those questions. Over coming days IMN will be printing the responses to other questions.

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?




Steamship said that the increase in the capital within the International Group did, in its view, justify a reassessment of the purpose of the reinsurance programme.


Skuld said that the IG Reinsurance Subcommittee’s annual review of the structure of the programme had become more complex over time, reflecting a balance between optimal risk transfer and retention on which all 13 Group clubs could agree, as well as utilizing market opportunities (both in scope of cover and pricing) to the benefit of all clubs and their members.

Skuld said that, although a simpler structure would be preferred for communication purposes, it should not come at the price of this optimization. Skuld felt that Hydra had done what it was established to do, by playing an important and valuable role in the programme. “However, as always, it is important to ensure it remains fit for purpose for the future”, the club concluded.

Swedish Club

Swedish Club said that the extent of pooling, Hydra participation and excess of loss reinsurance purchase were the subject of continuous reviews in various working groups and committees to cater for the needs of shipowners, using actuarial and consultancy expertise to find the best solutions.

UK Club

UK P&I Club noted that the annual review of the Group reinsurance programme by the Reinsurance Subcommittee of the Group managers included looking at the role and participation of Hydra, the programme layering and composition, and alternative structures (e.g. multiyear placements, optimization of cover terms and alternative risk transfer mechanisms) and was intended to ensure the optimal transfer of the collective risk, both from the scope of cover and pricing perspectives. The Club said that the RISC was able to draw on the combined wisdom of its specialist brokers and had, for a number of years, taken separate advice from consultants on a range of factors, including pricing.

West of England

West of England said that the review of the Group’s reinsurance arrangements was an ongoing process. It felt that Hydra had served Group clubs well by enabling them to retain significantly more risk at cost. The Club said that the Reinsurance Subcommittee regularly evaluated the structure of the programme and the extent to which Hydra, private placements, the clubs’ own retained risk and other tools could be used to optimize the level and pricing of the reinsurance programme.