B.3 Reinsurance
An important function of the Group is to provide reinsurance for the clubs. This is done by way of pooling and market reinsurance. The market reinsurance is renegotiated each year, and the upper limit of the market reinsurance and the pool, as well as each club’s retention, can vary from year to year.
By way of example, for the policy year 2021/2022, the reinsurance is arranged as follows:
Each club retains the first USD 10 million of each claim. This means that The Swedish Club will pay out of its own funds the first part of any claim of one of its Members. Part of the Club’s retention is reinsured to mitigate the risk exposure.
Where the amount of a claim exceeds that retained portion, the payment is pooled between the Group clubs up to a fixed amount (currently USD 100 million). Pooling means that the Group clubs share the excess amount among themselves according to an agreed formula.
Beyond that amount, for the next portion of a claim, the Group has a collective reinsurance on the market. This is the largest single contract in the world’s marine insurance market. For oil pollution, Charterers’ risks, and P&I war risks, the cover is limited as described under 6.2.2., and 11.5.7 respectively.
Traditionally P&I cover was unlimited, but from 1996 the Group has applied a global limit based on a formula referring to all the vessels entered. The limit was further reduced in 1998. The overall cover afforded by the Association, unless otherwise stated in the policy or in the Rules, is limited to a maximum contribution of 2.5% of each entered vessel based on the International Convention on Limitation of Liability for Maritime Claims 1976 and its protocols.
Should payment of a claim exceed USD 3.1 billion, the overspill is again referred back to the Clubs for pooling. In the event of such an overspill claim, the Club may have to levy an overspill call. Rule 24 then applies.