The International Group of P&I Clubs, the London based ceiling organisation of mutual providers of liability cover for shipping companies, says significant increases will be introduced in reinsurance cover cost in the 2013/14 policy year that will start on 20 February.
”The 2011/12 policy year produced the first and third largest ever claims on the Group pool resulting in a very significant exposure to the Group's reinsurers. This exposure, coupled with general concerns regarding the increased cost of major casualties, and in particular removal of wreck and SCOPIC exposure, has led the Group’s reinsurers to seek significant rises in the renewal premium for the 2013/14 policy year. There will as a result be rate increases for all vessel categories for the renewal,” the Group said.
For passenger vessels, the increase will be 125% to $3.1493 per gross ton, almost four times as high as for the second largest increase by vessel type, the Group said in an attached list showing the new rates by vessel type.
In order to mitigate the impact of the increase, the excess point on the GXL contract will be increased from US $60 million to US $70 million with the additional US $10 million retained within the Group pool reinsured by the Group captive Hydra for US $40m excess US $30m. In addition, the Hydra coinsurance share in the first layer of the Group general excess loss (US $500 million excess US $70 million) will be increased from 25% to 30%. For 2013/14, a three layer pool structure will be introduced with a lower pool layer from US$ 9 million to US$ 45 million, an upper pool layer from US$ 45 million to US$ 60 million (within which as currently there is a claiming club retention of 10%) and an upper upper pool layer from US $60 million to US $70 million (within which there is a claiming club retention of 5%).
Also, reflecting the continued improvement in the record of the dirty tankers sector, there will be a further reduction in the US oil pollution voyage surcharge.
Hugo Wynn-Williams, Chairman of the International Group Reinsurance Sub-Committee, reported that after a period of years over which the favourable claims history and exposure to the Group reinsurance programme had enabled reinsurance rates to be reduced year-on-year, the inevitable consequence of the significant claims on the 2011/12 policy year was a substantial readjustment in reinsurers pricing but that through the use of the Group captive Hydra it has been possible to mitigate the full extent of the increased reinsurance cost to shipowners entered in the Group clubs.
For 2013/14, the allocation of the market reinsurance cost between the different vessel categories has, as in previous years, been assessed in accordance with the Group’s general allocation objectives, principally that of moving towards a claims versus premium balance for each vessel type over the medium to longer term. The vessel type rates applied for 2013/14 reflect the continuing favourable tanker premium/claims record and the on-going objective of bringing the claims versus premium records back towards equilibrium in dry sector which is moving positively, and in particular in the passenger sector where there remains a long-term imbalance to address through the allocation process.