A merican Club Circular No. 30/17 1 DECEMBER 13, 2017 CIRCULAR NO. 30/17 TO MEMBERS OF THE ASSOCIATION Dear Member: INTERNATIONAL GROUP REINSURANCE ARRANGEMENTS FOR 2018 The arrangements for the renewal of the International Group’s general excess of loss reinsurance contract (GXL) and Hydra reinsurance program for the forthcoming 2018 policy year have now been finalized. Notwithstanding the uncertainty in the insurance and reinsurance markets following the 2017 windstorm, earthquake and wildfire events, the Group, with the support of its program leader and panel of reinsurers, has once again been able to advance the traditional renewal timetable by approximately one month with the objective of assisting both shipowners and clubs in their negotiations for the 2018 P&I renewals. Renewal overview The loss experience of the reinsurance program on the 2012 to 2017 (year-to-date) policy years remains acceptable to reinsurers, notwithstanding some claims development over the year. This, combined with continuing surplus market capacity, the continuing positive financial development of the Group captive, Hydra, and the effective use of multi-year private placements, has enabled the Group to achieve satisfactory reinsurance renewal terms which will result in a further year of reinsurance rate reductions across all vessel categories. Club retention and GXL attachment point The individual club retention, which was increased with effect from February 20, 2016 to US $10 million, will remain unchanged for the 2018 policy year. The attachment point on the Group GXL reinsurance program will remain at US $100 million for the 2018 policy year. Pool structure changes Following a detailed review of the current Pool structure during 2017, a number of recommendations for change were made by the Pool review working group, aimed at simplifying and improving the efficiency of the pooling arrangements. These changes were reviewed and approved by the Reinsurance SubCommittee. At present, the lower Pool layer attaches from US $10 million to US $45 million, and the upper Pool layer attaches from US $45 million to US $80 million. With effect from February 20, 2018, the lower Pool layer ceiling/upper Pool attachment point will be raised from US $45 million to US $50 million, and the layer from US $80 million to the GXL attachment (US $100 million) will be absorbed into the Pool and merged with the upper Pool layer which will attach from US $50 million to US $100 million with an individual club retention of 7.5% across the layer. A diagram showing the revised Pool layer structure for 2018 is set out below. American Club Circular No. 30/17 2 Hydra participation Currently, the layer from US $80 million to US $100 million is reinsured 100% by Hydra. From February 20, 2018, following the changes to the Pool structure outlined above, the Hydra reinsurance within this layer will be reduced to 92.5%, with the remaining 7.5% comprising an individual club retention. Hydra also currently reinsures 30% of the first layer of the GXL (US $100 million to US $600 million). This will remain unchanged for 2018. Private placements The three multi-year private placements covering the first and second layers of the Group GXL placement (US $1 billion excess of US $100 million) will remain in place for the 2018 policy year. MLC cover The market reinsurance cover (US $190 million excess of US $10 million), which was put in place with effect from January 18, 2017 as part of the solution devel