A merican Club Circular No. 25/21 1 DECEMBER 21, 2021 CI RCULAR NO. 25/21 TO MEMBERS OF THE ASSOCIATION Dear Member: INTERNATIONAL GROUP REINSURANCE ARRANGEMENTS FOR 2022 The ar rangements for the renewal of the International Group’s general excess of loss reinsurance contract (GXL) and Hydra reinsurance program for the forthcoming 2022 policy year have now been finalized. This Circular reviews the salient features of the renewal of these important arrangements. R enewal overview The m ain GXL placement (layers 1-3, US$2bn excess of US$100m) has now been split into four layers, with the Collective Overspill renewed excess of the GXL, and the three private placements also maintained in place. As such, the entire commercial market placement can be summarised as follows: •Private placements: 30% of the Layer US$650m excess of US$100m has been secured on expiring coverage terms. This percentage is covered by three private market placements which are renewed independently of the main GXL program. •Main General Excess of Loss: These placements have been renewed with unamended, free and unlimited, coverage for all risks except: oMalicious Cyber oCOVID-19 oPandemic For Malicious Cyber, COVID-19 and Pandemic risks there is free and unlimited cover for claims up to US$450m excess of US$100m, covering almost all Group clubs’ certificated risks. Excess of US$550m there is up to US$2.15bn of annual aggregated cover in respect of these three risks. Excess of that, the Group has decided to pool between Group clubs the unreinsured risks, resulting in no change to Members’ cover. A merican Club Circular No. 25/21 2 •Other placements: The Collective Overspill (US$1bn excess of US$2.1bn) and ancillary covers are being renewed with premiums included within the overall rate per GT. The Group’s Bermudan based reinsurance captive Hydra continues to support the Group through its risk retention within the lower layers of the Group’s reinsurance structure. The Group’s strategy of placing a share of the reinsurance program on a stand-alone basis through the use of private placements has also continued to give shipowners greater stability in a year when market sentiment has been volatile as a result of the impact of the COVID19 pandemic, increased severity of pool claims and market coverage issues. The difficult prevailing market conditions and the need to maintain the broadest cover available have led to significant rate rises for 2022. In this regard, while rates for shipowners have increased by an average of 33% year-on-year, the new rates are similar to those rates per gt in 2014/15. I ndividual club retention and GXL program attachment The indi vidual club retention remains unchanged for the 2022/23 policy year at US$10m, as does the structure of the Pool and the attachment point for the GXL program. Reinsurance structure 2022 O ne of the three current Private Placements (together totalling 30% of US$650m excess US$100m) was due for renewal for the 2022 policy year. Renewal of this layer was secured early in the process on the basis of no change to coverage, and with the incumbent market. The remaining two private placements each have at least one more year to run. W ith regard to the 70% balance of the expiring Layer 1 and the expiring Layers 2 and 3 of the previous structure, a change was negotiated with the reinsurance markets, as follows: •The expiring Layer 1 (US$650m excess of US$100m) has been split into a new Layer 1 (US$450m excess of US$100m) and a