12 TO 15 SEPTEMBER

Global Marine Insurance Report 2010

Astrid Seltmann

Facts and Figures Committee, Vice Chairman

Analyst/Actuary @ Cefor, The Nordic Association of Marine Insurers

212 TO 15 SEPTEMBER

Global Marine Insurance Report 2010

• Global Marine Insurance – Overview

• Global Cargo market

• Global Hull market

• Global Offshore Energy Market

• Addendum (in download only): Tables with underlying reported figures

312 TO 15 SEPTEMBER

29.0%

51.5%

6.6%

12.9%

2009

Global Hull

Transport/Cargo

Marine Liability

Offshore/Energy

Global Marine Premium 2009, by line of business

Total reported: 22.9 USD billion

Total estimated including not reported: 23.6 USD billion

712 TO 15 SEPTEMBER

61.3%21.4%

9.5%7.8%

Europe

Asia/Pacific

North America

Rest of the world

Market Shares 2009

Europe : Albania, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Nordic (Cefor), Poland, Portugal, Romania, Russia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom (IUA + Lloyds)Asia/Pacific : Australia, Chinese Taipei, Hong Kong, India, Japan, Korea DPR, South Korea , Malaysia, New Zealand, SingaporeNorth America : Bermuda, Canada, USARest of the World : Bahrain, Brasil, Congo, Egypt, Israel, Kazakhstan , Kenya, Lebanon, Mexico, Morocco, Nigeria, South Africa,Tunisia, United Arab Emirates

Countries in italics did not report in 2010

Total reported: 22.9 USD billion

1012 TO 15 SEPTEMBER

67%

23%

6% 4%

UK

Nordic

Japan

US

Calls 2009:UK: 2.47 Nordic: 0.86Japan: 0.21US: 0.14Total: 3.68 (USD billion)

MARINE MUTUAL MARKET P&I Clubs International GroupGross Calls 2009 (Premium) – Operational location

Source: Standard & Poors P&I Highlights 2010/ +27%

1212 TO 15 SEPTEMBER

Global Cargo Premium by marketsTotal: 11.8 USD billion

Belgium3%

Brasil8%

France8%

Germany12%

Italy5%

Japan14%Netherlands

5%

Russia2%

Spain3%

UK (IUA)

2%

UK Lloyds7%

USA7%

Other markets27%

2009

1412 TO 15 SEPTEMBER

France7% Italy

6% Japan9%

Korea, Republic5%

Netherlands5%

Nordic (Cefor)

14%Spain5%

UK (IUA)4%

UK (Lloyds)14%

USA5%

Other markets26%

2009

**

** includes facultative and prop. reinsurance

Global Hull Premium by markets

Total: 6.6 USD billion

*

* Cefor members in Norway, Denmark, Sweden, Finland

1612 TO 15 SEPTEMBER

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Total World Trade Values

Total World Trade Volume

Global Cargo Premium

World Seaborne Trade Volume and Trade Values, Global Cargo Premium, Index of evolution, 1995 = 100%

Source: Indicators for World Trade Volume from ISL Bremen, 2010 figures based on IMF estimates

Cycle irregularities before 2008 mainly due to exchange rates.

2009: reduction in cargo income – due to less global trade, exchange rates, or soft market? 2010: upswing in trade, but probable further decrease of cargo premium due to time lag effects.

?

1712 TO 15 SEPTEMBER

60%

80%

100%

120%

140%

160%

180%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EUR

GBP

JPY

NOK

Index of Evolution of USD Exchange rate

against selected currencies (exchange rates as of December each year, 2010 as of June 10)

Source: Norges Bank Exchange Rates Statistics

USD weaker

strongerwea

ker

stronger

Since Financial crisis less correlation between exchange rates

1812 TO 15 SEPTEMBER

50%

70%

90%

110%

130%

150%

170%

190%

210%

230%1

99

5

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

Average insured value per vessel (Cefor - including new and renewed vessels)

Gross tonnage (> 300 GT)

No. Ships (> 300 GT)

Global Marine Hull & Liab. Premium

World Merchant Fleet and Global Marine Hull & Liability Premium, Index of evolution, 1995 = 100%

Sources: Indicators for World Fleet from ISL Bremen, Vessel value index: Cefor, as of 30.06.10

1912 TO 15 SEPTEMBER

5.5%7.1%

1.9%

8.3%

5.6%

-15.1%

-9.2%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%2

00

4

20

05

20

06

20

07

20

08

20

09

20

10

Average annual change in insured values for renewed vessels

Change in insured values on renewed vessels, by year of renewal (= insured value on renewal / insured value previous year)

Source: Cefor, The Nordic Association of Marine Insurers, figures as of 30. June 2010

Insured values decrease from 4Q 2008

2112 TO 15 SEPTEMBER

0%

20%

40%

60%

80%

100%

120%

140%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Marine Hull

Cargo/Transport

Marine Hull and Cargo/TransportGross* Ultimate Loss Ratio, U/W Years

1998 to 2009

* Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (usually 20%-30% acquisition cost, capital cost, management expenses)

2007 / 2008: Changing frame and market conditions provoke increase in claims reserves for both cargo and hull.

2009: signs of improvement, but uncertainty as to effect of unstable environment on ultimate results.

2212 TO 15 SEPTEMBER

Macroeconomic parameters/ Claims cost

Market conditions

Income Insurance results

Market predictability?

Change

Change

Change

2312 TO 15 SEPTEMBER

40%

50%

60%

70%

80%

90%

1 2 3 4 5

2003

2004

2005

2006

200720082009

Marine Hull - Gross* Loss Ratio Underwriting years 2003 to 2009 as reported after 1, 2, 3, 4 and 5 years

From 2007: Repair cost driven up by changing frame conditions. Extraordinary upwards adjustment of claims reserves.

=> Change in typical claims pattern!

2009: Price-driving factors turn back to more ”normal” level, but no stable frame conditions => uncertain effect on claim level.

80+

%? 70+%?

Previous loss ratio level

Currently to be expected loss ratio level

2009

2412 TO 15 SEPTEMBER

40%

50%

60%

70%

80%

1 2 3 4 5 6

2003

2004

2005

2006

2007

2008

2009

2009

Marine Cargo - Gross* Loss Ratio Underwriting years 2003 to 2009 as reported after 1, 2, 3, 4 and 5 years

2007 / 2008: Changing frame conditions demand extraordinary upwards adjustment of claims reserves.

=> Change in typical claims pattern!

2009: uncertain effectof unstable market conditions on final outcome.

70+%?

62%?

Previous loss ratio level

Currently to be expected loss ratio level

2512 TO 15 SEPTEMBER

Summing up Hull in a changing world… Frame conditions – swing in various

directions: steel prices / repair yard capacity / exchange rates / world trade / commodity prices / vessels in lay-up /...

Changes influence both income (vessel values) and cost (claim frequency and repair cost).

Repair cost and claims frequency increased until 2008. In 2009 signs of returning to more ”normal” levels. But too early to tell, strongly depending on further development of frame conditions / price-driving factors in an unstable economical and trade environment.

Strong major claims impact in 2006/07, improvement in 2008/09, but major claims may occur at any time!

2612 TO 15 SEPTEMBER

Summing up Hull in a changing world… Hull technically at loss for 14

consecutive years!

So not everything is changing after all…

Future Global Hull Market depends on Better understanding of dependencies between

macroeconomic parameters and repair cost

Improved models to estimate expected claim cost (= risk premium)

Trade / Fleet development

Market discipline / capacity

and as always: the impact of major claims

2712 TO 15 SEPTEMBER

Summing up Cargo in a changing world…

From 2008 reduction in insured values,with respective effect on cargo income.

Strong upwards adjustment of 2007/2008 claims reserves. If claims reserves prove to be correct, this produces a technical loss for the first time since 2000.

Uncertainties as to the profitability of 2009.

The future: Claim amounts unlikely to decrease because of increased risk of accumulation, moral hazard, theft frequency.

2812 TO 15 SEPTEMBER

UK (IUA)3.2%

UK (Lloyds)61.9%

USA7.8%

Nigeria5.8%

Malaysia3.9%

Japan3.9%

Italy3.7%

Other markets

9.9%

2009

Global Offshore Energy Premium by markets

Total reported: 2.95 USD billion

No data: Nordic region, Russia, Kazakhstan.

*

* includes facultative and prop. reinsurance

2912 TO 15 SEPTEMBER

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

Average Day Rates

Global Offshore Energy Premium

Oil price, Brent Crude

No. Contracted Rigs

Energy Mobiles, Day rates, Oil PriceGlobal Offshore Energy Premium, Index of evolution, 2000 = 100%

Sources: No. Contracted rigs, day rates: RigZone, Oil price: Energy Information Administration (US), 2010 figures as of 31.07.10

3012 TO 15 SEPTEMBER

0%

50%

100%

150%

200%

250%

300%

350%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

outstanding

paid 12th year

paid 11th year

paid 10th year

paid 9th year

paid 8th year

paid 7th year

paid 6th year

paid 5th year

paid 4th year

paid 3rd year

paid 2nd year

paid 1st year

2005Katrina & Rita

2004Ivan

2008Ike

Soft market

2009: no major hurricane activity, but severe physical risk losses not wind-related -> 2009 loss ratio will increase!

Offshore Energy Gross Reported Loss RatiosU/W Years 1996 to 2009, as reported at 31 December 2009

3112 TO 15 SEPTEMBER

Summing up Offshore Energy

Volatile business, results depend strongly on hurricane impact, but trend towards self-insurance in Gulf of Mexico. But no hurricanes does not mean no losses!

Rates and Terms & Conditions improved after 2000, following hurricane activity in Gulf of Mexico.

Long time lag between accident and claims payment, due to technical complexity of the insured objects.

No regular claims patterns. Claims reserves are set depending on knowledge about individual claims.

Deepwater Horizon estimate > 2 USD bill., impact on 2009 & 2010 uw year.

2009: more physical damage losses not related to wind!