1. International Group and the pooling system Lars Nilsson The Swedish Club The Nordic Association of Marine Insurers 1

2. 2 The International Group Goals for this session  Get an understanding for how the International Group is organized  Understand the basic functions of the Pooling system and the Group reinsurance structure

3. 3 The International Group The Group  Comprises 13 non-profit-making mutual insurance associations (“Clubs”)  which insure third party liabilities relating to the use and operation of ships  and insure over 90% of world ocean-going tonnage – excess of 900 million tons and excess of 50,000 vessels  and insure over 95% of ocean-going tankers  with a total Group premium 2013 of USD 3,5 billion

4. 4 The International Group History  1855 First P&I Club - Today known as Britannia  First Pooling Agreement 1899. Six British Clubs – London Group  Reinsurance Contract 1951  Limited policy 1995  Hydra captive 2005

5. 5 The International Group Current principal underwriting Group members  American Steamship Owners Mutual Protection and Indemnity Association, Inc  Assuranceforeningen Gard  Assuranceforeningen Skuld  The Britannia Steam Ship Insurance Association Limited  The Japan Ship Owners' Mutual Protection & Indemnity Association  The London Steam-Ship Owners’ Mutual Insurance Association Limited  The North of England Protection and Indemnity Association Limited  The Shipowners' Mutual Protection and Indemnity Association (Luxembourg)  The Standard Steamship Owners’ Protection and Indemnity Association (Bermuda) Limited  The Steamship Mutual Underwriting Association (Bermuda) Limited  The Swedish Club  United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited  The West of England Ship Owners Mutual Insurance Association (Luxembourg)

6. The International Group Group members – Tonnage 2013

7. 7 The International Group Group functions  to co-ordinate the operation of the claims pooling agreement for claims in excess of the individual club retention ($9m) and the collective reinsurance for the Group clubs ($80m - $3.08bn)  to provide a forum for the Group clubs to develop common policy and promote shipowners’ interests in relation to liability and insurance issues  to provide a useful forum for sharing information on matters of concern to clubs and their members.

8. 8 The International Group Underlying agreements  Constitution (amended 2006)  International Group Agreement “IGA” (amended 2013)  Pooling Agreement (renewed annually)

9. 9 The International Group Constitution  the objects of the group  membership  appointment of officers, sub committees and working groups  organisation of group meetings  Resignation, cessation and expulsion

10. 10 The International Group International Group Agreement (“IGA”)  vessel quotation procedures  references to the committee / reduced pooling facility  release calls  disclosure of average expense ratio (AER)

11. 11 The International Group Pooling Agreement  pooling/poolability of claims  excluded risks and losses  Individual club retention  basis of contribution to pool claims  individual/collective reinsurances  overspill provisions  Provision for new applicants to the pool

12. 12 The International Group Group organisation  the activities of the Group are co-ordinated through the Group secretariat based in London  the work of the Group is carried out by the secretariat and by club managers in sub-committees and working groups which formulate policy recommendations for consideration by boards  the Group managers meet three times each year to co-ordinate the work of its sub-committees and working groups

13. 13 The International Group  Bills of lading  Claims Co-operation  Compulsory 3 rd Party Liability Insurance  Capital Adequacy  Maritime Security  Confirmation of Entry  Personal Injury  Pilotage  Pollution  Regulatory Affairs  Reinsurance  Representation  Salvage  Ships’ Standards  Ship Technical  War and Terrorism More than 90 sub-committees and working groups, including:

14. 14 The International Group Group policy positions  the Group’s policy positions are set by club boards who report through their managers into the Group – Group managers do not make Group policy – Shipowners do  need to reflect the wishes, sometimes conflicting, of different industry sectors

15. 15 The International Group Challenges and issues  The EU investigation  Sanctions legislation and regulation  Piracy  Cargo concerns

16. 16 The International Group Summary of benefits provided by the Group system  Unparalleled range and limits of cover  Guaranteed prompt security / payment of compensation to victims  Experienced and effective casualty and claims management  Promotion/implementation of ship standards and safety measures  Further information at www.igpandi.org

17. Reinsurance -Pooling Reduced volatility The International Group

18. 18 The International Group Reinsurance – Pooling  Reinsurance based on risk transfer  Pooling will normally not provide risk transfer  Mechanism to regulate the payback  Time value of payments

19. The International Group SELENDANG AYU – USD 100 million

20. 20 COSCO BUSAN – USD 209 million The International Group

21. 21 HEBEI SPIRIT – USD 218 million The International Group

22. 22 RENA – USD 350 million The International Group

23. 23 COSTA CONCORDIA – USD 1,600 million The International Group

25. 25 The International Group Pooling Agreement  Lower Pool Layer USD 36M XS USD 9M  Upper Pool Layer USD 15M XS USD 45M (90%)  Upper Upper Layer USD 20M XS USD 60M (95%)  Share of Pool dependent on volume and result

26. 26 The International Group Reinsurance structure  General Excess Loss R/I Contract  Three layers (2x$500m and 1x $1bn) excess of $80m  Unlimited Reinstatements  Oil pollution two layers (2x$500m) limited to $1bn  Charterers P&I and oil pollution $270m excess of $80m  Collective Overspill Layer $1bn, one reinstatement

27. 27 The International Group Reinsurance Capacity  over 90 participating reinsurers worldwide  security guidelines limit participation per layer and overall  Minimum credit rating agency requirements for participants A- stable  Downgrading and consolidation within reinsurers increases default exposure

28. 28 The International Group Hydra Insurance Co. Ltd  Single cell Bermuda captive established 2005  1 cell per club  Reinsures pool $30-80m layer and 30% of GXL layer 1  Strategic response to market pricing and capacity volatility  Long-term commitment

29. The International Group

30. 30 The International Group What have we achieved?  Discovering the function of the international Group  Understanding of the Group Pooling and reinsurance system  Understanding the difference between Pooling and reinsurance