About Japan P&I Club

International Group of P&I Clubs

Japan P&I Club and International Group of P&I Clubs

The Japan P&I Club was established in accordance with The Ship Owners’ Mutual Insurance Association Law passed by the Diet in 1950, and is the only P&I Club based in Japan. The Club’s story started with 132 members on our books, all Japanese shipowners and operators. As time has passed, the Club has grown larger and more international with entries from Japan and other Asian countries.

The history of the International Group of P&I Clubs (IG) goes back as far as 1899. This is when the six Clubs of the so-called London Group of P&I Clubs entered into a claims sharing agreement called the “Pool”. The IG is now made up of 13 not-for-profit mutual insurance associations, including the Japan P&I Club, and the Group Clubs between them insure over 90% of world ocean-going tonnage. Each of the 13 clubs is independent of the others, and provides indemnity cover for its members against liabilities arising in their respective businesses. The Clubs also co-operate on various issues in the area of shipowners’ liabilities.

One of the rôles of the Group is to provide a forum for sharing information on matters of concern to Clubs and their members. This forum mainly takes the form of IG Sub-Committees and Working Groups, and the Japan P&I Club is represented on over 30 of these. Even where we do not sit on the Sub-Committee, we are still able to make the voice of our members heard.

The whole ethos of the IG in which Japan P&I Club plays a full part is about service to Members, which includes trying to find solutions to the problems all shipowners face on a daily basis. Even where shipowners are faced with a challenge which does not naturally fall under the P&I “umbrella”, such as the credit insurance aspects of the Maritime Labour Convention, the Group will try to find a solution which enables shipowners to continue trading.

International Group Pool and Reinsurance Programme for 2018/19 Policy Year

1. What is the IG pool and reinsurance programme?

One of the main roles of the IG is to arrange the pool and reinsurance programme under which the Clubs can offer the highest level and broadest range of liability insurance cover on a cost-effective basis. We, the Japan P&I Club, participate in the IG pool and reinsurance programme as a member of the IG.

2. IG pool and reinsurance programme structure

The outline of the IG pool and reinsurance programme for 2018/19 Policy Year is shown in the below diagram.

IG pool and reinsurance programme structure
IG Pool and Reinsurance Programme 2018/2019 Policy Year

  1. up to USD10 million (Individual Club Retention)
    Each Club retains the first USD10 million per claim in excess of its member’s deductible.
  2. from USD10 million up to USD100 million (Pool)
    Claims in excess of each Club’s retention are shared by the Pool up to a limit of USD100 million. Within the Pool, claims from USD30 million up to USD100 million are reinsured by the IG’s Bermuda-based captive insurer Hydra.
  3. from USD100 million up to USD2,100 million (Market reinsurance programme)
    The IG arranges market reinsurance to provide reinsurance for claims from USD100 million up to USD2,100 million any one claim (USD1,000 million for oil pollution claims, see further below). This market reinsurance programme is divided into three layers and each layer is underwritten by various reinsurers. A part of the first layer is reinsured by Hydra. [ * , ** & *** in the diagram are Multi-Year Fixed Placement named “Private Placement”. ]
  4. from USD2,100 million up to c. USD8,275 million (Overspill)
    The IG arranges Overspill Protection for its members of USD1,000 million. Thus, the first USD 1,000 million of an overspill claim, from USD2,100 million to USD3,100 million, is reinsured under this cover. Claims which exceed USD3,100 million are divided between all IG Clubs, with each Club funding its share by levying an overspill call on every individual member amounting to 2.5% of the value of each entered ship as defined in the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC). Applying the 2.5% formula across all the ships entered in all the Clubs of the International Group would result in total overspill cover of c. USD 8,275 million.

Reinsurance for oil pollution claims is purchased as a separate cover with a limit of USD1,000 million. Reinsurance for passenger and seafarer claims is subject to a limit of USD2,000 million for liability to passengers, or USD3,000 million for passenger and seafarer claims combined.

3. IG Reinsurance Rates

IG reinsurance costs are paid by all Members whose vessels are entered with IG Clubs. Every year the IG calculates the reinsurance rates per gt and divides them between different types of vessels on the basis of the total reinsurance premium amount agreed with market reinsurers.

The IG reinsurance rates for 2017/18 Policy Year and 2018/19 Policy Year are allocated as follows:

Tonnage Category 2017PY Rate per GT
(USD)
2018PY Rate per GT
(USD)
Percent Change
from 2017 (%)
Dry Cargo Vessels 0.4114 0.4038 – 1.85
Dirty Tankers 0.5955 0.5845 – 1.85
Other Tankers 0.2675 0.2626 – 1.83
Passenger Vessels 3.3319 3.2707 – 1.84