EXAMPLE PAGE - ANNUAL REPORT - THE SWEDISH CLUB - Flipbook - Sida 62
FINANCIAL STATEMENTS - NOTES
The provision for incurred and reported
claims is based on individual assessments
of claims using the latest information
available. Claims reserves must reflect the
total liability, which includes claims
handling costs, expected claims inflation
and currency considerations.
Incurred but not reported claims, IBNR, is
calculated using statistical methods that
are based on experience of the number
and extent of claims reported for prior
accounting years.
claim amount at the end of each insurance
year has developed over time (from the end
of each respective accounting year
through 31 December 2021).
The table below shows the development of
claims, net, i.e. how the originally determined
Insurance year
2016
2017
2018
2019
2020
2021
108,087
112,058
93,428
108,757
125,898
175,060
138,169
Estimated final claims cost (net) at the end of:
claim year
one year later
110,709
118,168
101,720
121,670
two years later
114,455
114,493
105,077
118,859
three years later
109,196
113,966
104,861
four years later
112,560
114,730
five years later
110,862
Counterparty risk (Reinsurance)
Reinsurance protection is essential for
the successful operation of the Club.
Risks can arise due to insufficient or
incorrect reinsurance protection.
Reinsurance purchasing activities are
centralised and they are the responsibility
of the Reinsurance Department. Each
year, a Reinsurance Risk Assessment
Report is compiled, which is used to
ensure that the costs for reinsurance are
optimal given the anticipated risk, results,
volatility and capital needs. Thorough
knowledge of probabilities and expected
outcomes of claims are important
components in assessing the risks
associated with reinsurance.
The Club has had a consistent
reinsurance strategy for many years. For
Marine & Energy, the Club purchases its
own protection. This is based on longterm relationships with some of the
world’s leading reinsurance companies.
For P&I, the reinsurance is based on the
cooperation within the International
Group of P&I Clubs, where claim costs
between USD 10 million and USD 100
million are shared (the Pooling
Agreement).
To supplement this, the Group purchases
reinsurance protection up to USD 3,100
million (Excess reinsurance programme).
The International Group’s joint
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reinsurance company is Hydra Insurance
Group Ltd (Bermuda). It reinsures the
Group’s P&I pool claims for USD 70
million in excess of USD 30 million and
also part of the layer USD 750 million in
excess of USD 100 million.
The Swedish Club has a reinsurance
solution for the level USD 8.5 million in
excess of USD 1.5 million, which covers
the insurance classes, Marine and P&I.
The thought behind this structure is to
combine the protection for the different
classes and only retain the first USD 1.5
Parts of the pool, as well as parts of the
million per combined claim. With this
reinsurance protection are covered by the structure, the Club retains all claims in the
captive company, Hydra Insurance
layer USD 8.5 million in excess of USD 1.5
Company Limited (Bermuda), which is
million during a normal claims year by
owned by the Group's 13 members. Hydra means of an annual aggregated
is a protected cell company, which means deductible of USD 26.5 million. The
that the assets and liabilities in each cell
reinsurance is only settled in a year when
are legally separate from the other cells.
the claims in this layer exceed the annual
Each of the 13 clubs owns one of the
aggregated deductible.
protected cells and from it, claims are
paid and premiums received.
In order to minimise counterparty risk for
losses relating to payments from
reinsurers, in accordance with
Hydra writes two reinsurance contracts
documented procedures, minimum rating
for the clubs:
limits apply to the participating reinsurers,
• 100% of the coverage between USD 30 which means that no reinsurer may have
a rating lower than A- (Standard & Poor's)
and 100 million.
or A3 (Moody's).
• Maximum USD 100 million of the
During 2021, no participating reinsurer
coverage between USD 100 and 750
was rated below A by Standard & Poor’s.
million.
The Swedish Club’s share of the business
in Hydra is approximately 4%. For more
information on International Group see
www.igpandi.org.
THE SWEDISH CLUB ANNUAL REPORT 2021
In connection with claims handling, the
Club occasionally accepts guarantees
from counterparts. In general, the Club
only accepts guarantees issued by other
P&I clubs, major insurance companies,
banks or cash deposits. The number of