Dali claim reserves surge to $2.8bn, prompting questions on reinsurance structure
Reserves for the Dali claim have increased to approximately $2.8 billion, up from earlier market expectations of $1.5 billion, leading to concerns about the International Group's excess-of-loss reinsurance renewal.
8 billion has prompted questions over whether the loss could lead to changes in the International Group's excess-of-loss reinsurance renewal. 5 billion. 8 billion earlier this year. One senior reinsurance broking source said the increase had added almost 70 percentage points to average loss ratios across relevant 2024 underwriting-year reinsurance programs.
How The International Group Program Works The International Group combines claims-sharing between its 12 P&I club members with external reinsurance to cover large shipowner liability claims. An individual club retains the first $10 million of each claim, with the next $90 million shared through the proup’s pool. The main general excess-of-loss reinsurance program attaches when losses rise above $100 million. The first layer provides $650 million of cover, responding to the portion of a claim between $100 million and $750 million.
5% open-market share. The group’s captive, Hydra, also retains an annual aggregate deductible within the first layer’s open-market portion. 5 billion. 35 billion.
At the time of the Dali loss, the program’s overall limit was $3 billion excess $100 million. 5 billion previously. Will The Program’s Limit Rise? While one option for the program could be to purchase more limit, every marine reinsurance market source The Insurer asked about it said that was unlikely.
Three reinsurance broking sources said the program’s vertical limit was already sizeable, especially given the $250 million increase at the most recent renewal. Those sources also said increasing the limit could have an adverse effect on insurance market losses given the nature of legal awards, particularly in the US. 1 billion, the settlement award to the State of Maryland would have been commensurately higher. Two of the sources said a lesson from the US liability market was that juries were acutely aware of (re)insurance protections and would adjust awards to maximise recoveries, so the International Group should be careful to avoid exposing itself to that risk.
What Could Happen At The Bottom Of The Program? There is more discussion around adjustments to the first layer of the International Group’s excess-of-loss program. 5% open-market share in layer one. There has been no movement in that $100 million retention since it was increased in the 2017/2018 policy year, despite the high inflationary environment during and since the pandemic.
One senior reinsurance broking market source said there may be a rationale for upping this retention given those inflationary pressures, albeit they were sceptical about the likelihood of this. This sentiment on how inflation has adjusted the nature of losses flowing through to the first layer was echoed by a reinsurance source, who said the first layer was now a “real working layer” that suffers losses three to four times a year.
But that source also questioned whether raising the retention was the most appropriate response, arguing instead that reinsurers were more likely to question whether the open-market element of layer one should continue to offer free and unlimited reinstatements. What About The Private Placements? 5% of its first layer, compared with three placements accounting for 25% in 2025/26. 75% shares.
Sompo’s private placement expires at the conclusion of the 2026/2027 program, and it is unclear whether it intends to renew. The private placements renew independently of the open-market element. They respond alongside the other first-layer reinsurers, rather than forming an additional layer that must be exhausted before the wider market pays. One reinsurance broking source said at the International Group could add another private placement, potentially reducing its reliance on the open market as brokers negotiate the next renewal.
An additional placement could take a 5% to 10% share of the first reinsurance layer, they said, and suggested the structure could ease negotiations with incumbent markets seeking improved terms following losses. Hannover Re, Axa XL, Aon, The Fidelis Partnership and Scor declined to comment. The International Group, Miller and Sompo did not immediately respond to a request for comment.