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Once again the International Group reinsurance renewal will be dominated by the extreme loss making year of 2011.
Since November last year the claims for the 2011 year have deteriorated by almost $500 million. Although predominantly driven by the COSTA CONCORDIA claim, this deterioration includes a $50 million increase in the cost of the RENA wreck removal off New Zealand. On the positive side, earlier years on the contract have held up well and there has been a significant recovery on the 2004 policy year, of $15 million.
As was the position last year, the reinsurance market continues to be very concerned about the removal of wreck claims and is working closely with the International Group to see what steps can be taken to reduce the risk of cost escalation in these types of claims in the future.
The question of allocation of reinsurance costs is also the subject of debate and will be reviewed as usual by the Reinsurance Subcommittee of the International Group at this renewal. This review will look at the need for, or desirability of, increasing the range of vessel types currently used for reinsurance allocation.
The Club will also be renewing its own comprehensive reinsurance programme which is designed to protect the Club from the worst effects of a significant increase in claims. This programme is assessed using the Club’s internal model and forms part of the risk management programme. It has already proved its worth with a significant potential recovery on the Club’s share of the Pool in 2012.