2012 seltmann global marine insurance report 180912 · 2012: strong total loss impact (on uw2011)...

2012 Global Marine Insurance Report

Astrid Seltmann

Vice chairman IUMI Facts and Figures CommitteeAnalyst/Actuary @ Cefor, The Nordic Association of Marine Insurers1

Global Marine Insurance Report 2012

• Global Marine Insurance – Overview

• Cargo – market & results

• Hull – market & results(with some words on major losses...)

• Offshore Energy – market & results____________________________________________________________

• Underlying Data – for download (Premium by country, Loss ratio triangulations)





• Offshore Energy market/results

New this year (1):

• Latin America – fully covered via ALSUM(Latin American Marine Underwriters Association)

• Middle East – improved data via GAIF (General Arab Insurance Federation)

• Asia – data of non‐IUMI countries included (research from official sources)

New this year (2):

Further premium increase due to:

• UK/Lloyds – Gross premiums (previously net)

• UK/IUA – 2011 premiums reflect market better(more realistic market coverage, based on recent income study)

Global Premiums: «complete» world income (?) (some estimates & parts of central Africa missing)

__________________________________________________________________

• Offshore Energy Loss ratios – include liability

Marine Premium 2011 – by region

Check download for marine premiums by country.

New countries

New countries

Total: 31.9 USD billion Actual increase 2010 to 2011: +7%

New countries

Marine Premium 2011 – by line of business

Total: 31.9 USD billion

P&I Clubs International GroupGross Calls (premium) 2011 – Operational location

Source: International Group of P&I Clubs

stableup 8%up 9%up 6%

up 4%

Cargo Premium 2011 – by region

Total: 17.2 USD billionActual increase 2010 to 2011: +9%

Cargo Premium 2011 – by markets


**

** includes proportionaland facultative reinsurance

0%

50%

100%

150%

200%

250%

300%

350%

400%1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

World Trade Values

World Export Volume

Global Cargo Premium

Cargo Premium World Trade Volume & Trade Values

Index of evolution, 1995 = 100%

Source: World Trade Values: IMF

Some cycle irregularities due to exchange rates.

After 2009 upswing in trade, but still unstable market conditions.

60%

80%

100%

120%

140%

160%

180%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

EUR

GBP

JPY

NOK

USD Exchange rate indexagainst selected currencies

Index, 2000 = 100%

Source: Norges Bank Exchange Rates Statistics, Exchange rates as of December each year, 2012 as of June 2012

Since Financial crisis less correlation between rates

0%

20%

40%

60%

80%

100%

120%

140%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Cargo – Gross* Ultimate Loss Ratio Underwriting years 1996 to 2011

Data from: Belgium, France, Germany, NL, Italy, Spain (no update 2011), UK, USA(2010 Japan tsunami affected mainly Japanese market)

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

2011: Starts high at 72%, may end at 74%. No technical profit.

Since 2007: Deterioration of results .

2002 to 2006: Gross loss ratios stayed below 60% ‐technical profit.

..and 2012?

40%

50%

60%

70%

80%

1 2 3 4 5

2004

2005

2006

20072008200920102011

Cargo – Gross reported Loss RatiosUnderwriting years 2004–11, as reported after 1, 2, 3, 4, 5 years

2011:Starts high at new maximum of 72%.

2010:follows 2007/2008 pattern; passed 70%

2007/2008:improved, but still at high levels > 70%

Since 2007:Market changes demand adjustment of claims reserves => Change in typical pattern

Previous loss ratio level

Recent loss ratio level2011

Summing up Cargo

2011 Premium growth reflects upswing in trade Commodity prices rising, stock througput programs expanding (US), but economical environment remains unstable.

Increase in claims reserves – change in pattern2007/2008 improved later, but loss ratios stay high.

2011 Loss ratio starts at new maximum of 72%Impact of Natural catastrophes (Thailand floods), more general average claims, increasing acquisition costs.

Claim cost unlikely to decreaseIncreased accumulation risk, moral hazard, theft frequency, natural catastrophes. Sanctions and piracy still a concern.

Hull Premium 2011 – by region

Total: 8.3 USD billionActual increase 2010 to 2011: +1%

**

** includes proportionaland facultative reinsurance

Hull Premium 2011 – by markets


** Norway, Denmark, Finland, Sweden

50%

75%

100%

125%

150%

175%

200%

225%

250%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Gross tonnage(> 300 GT)

Average insuredvessel value(Cefor ‐ renewals& newbuilds)

Global MarineHull Premium

No. Ships(> 300 GT)

Hull PremiumWorld Merchant Fleet


Sources: Insured vessel values: Cefor – Nordic Marine Insurance Statistics as of 30 June 2012; No. Ships & tonnage: ISL Bremen

and 2012?

5.4%7.0%

2.4%

8.3%

5.4%

-14.5%

-9.2%

-3.2%

-7.3%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%20

04

2005

2006

2007

2008

2009

2010

2011

2012

Average annual change in insured values on renewed vessels

Source: Cefor - Nordic Marine Insurance Statistics as of 30 June 2012

Decrease in insured values continues

Change in insured values on renewed vesselsby year of renewal

(= insured value on renewal / insured value previous year)

0%

20%

40%

60%

80%

100%

120%

140%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Hull – Gross* Ultimate Loss RatioUnderwriting years 1996 to 2011

“Actuarial nonsense”, based on pre‐Costa Concordia data…:Data from: Belgium, Germany, France, Italy, NL, Nordic, Spain (no update 2011) ,UK, USA

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

Hull – 2009 to 2011: Some improvement compared to peak years 2006‐2008.

But: Claim cost and loss ratios stay at high levels, some increase since 2009.

2011:Similar to 2010.

No technical profit.

0%

20%

40%

60%

80%

100%

120%

140%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012:strong total loss impact (on uw years 2011 & 2012)

Costa Concordia:Carnival Corporation & PLC website: 508+17 MUSD from H&M insurance.(2Q financial report, issued 02.07.2012)

...and more total losses in excess of 30 MUSD did incur 1st half 2012 (partly attaching to uw year 2011).

Hull – Gross Ultimate Loss RatioUnderwriting years 1996 to 2011

… and real life: with total losses 1 Q 2012 – the true picture?Data from: Belgium, Germany, France, Italy, NL, Nordic, Spain (no update 2011) ,UK, USA

40%

50%

60%

70%

80%

90%

1 2 3 4 5

2003

2004

2005

2006

20072008200920102011

Hull – Gross* Reported Loss Ratio Underwriting years 2003‐2011, as reported after 1, 2, 3, 4, 5 years

Previous loss ratio level

Recent loss ratio level

2011

2011:starts at normal level.

2009-2010:Price-driving factors return to ”normal” levels, but no stable environment.2010 strong increase.

2006-2008:Repair cost driven up by changing frame conditions => Change in claims pattern

40%

50%

60%

70%

80%

90%

100%

110%

1 2 3 4 5

2003

2004

2005

2006

20072008200920102011

Hull – Gross* Ultimate Loss Ratios Underwriting years 2003‐2011 – estimated development towards ultimate

2011:Unprecedented total loss impact –loss ratio may reach new heights.

1st half 2012: Increase in no. of losses xs 30 MUSD.Impact on underwriting years 2011 and 1012.

2011 – new heights?

Summing up Hull (1)

Frame conditions – still unstableSteel prices / repair yard capacity / exchange rates / commodity prices / vessel utilization /newbuildings / world trade / Euro crisis...Influence• Income (ship values)• Cost (claim frequency/repair cost).

Repair cost / Claim frequency – StabilizeBut: catching up of trade/higher utilization rates may cause repair cost to rise again

Major claims – strong impact 1st half 2012 Unprecedented costly event Increase in total loss frequency 1st half 2012 Continuing downturn in insured values creates more

constructive total losses

Summing up Hull (2)

Hull technically at loss for 16 consecutive years!

Future Global Hull Market:

Understand dependencies between macroeconomic parameters and repair cost

Models to estimate expected claim cost (=risk premium)

Trade / Fleet development Market discipline / capacity

The impact of major claims

Understand the actually covered exposure

Major losses 2012

29« The Economist » June 9th‐15th 2012

Major Hull losses 2012

30

Major claims in % of ship valuesby calendar year of occurence

0.00%

0.05%

0.10%

0.15%

0.20%1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Cost of maximum three claims in % of total insured value

Source: Cefor – Nordic Marine Insurance Statistics as of 30 June 2012Figures reflect 100% of all vessels, not the share written in a specific market.

as of 30 June 2012

0.000%

0.050%

0.100%

0.150%

0.200%

0.250%

0.300%

0.350%

0.400%

0.450%

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,00020

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Claim per Sum Insured & Average Sum Insured

Average Sum Insured excluding total losses including total losses

Source: Cefor Nordic Marine Insurance Statistics as of 30 June 2012; Figures reflect 100% of all vessels, not the share written in a specific market

Average insured valueClaim cost in % of total total insured value

32

Watch your Exposure – one Costa Concordia can double the cost relative to the total insured value

Can it get worse...?

Increasing vessel size

Increasing valueaccumulation per vessel

Offshore Energy Premium 2011 – by markets

No data: Kazakhstan.

*

* includes proportional andfacultative reinsurance

Total: 4.5 USD billionActual increase 2010 to 2011: 11%

(new)

0%

50%

100%

150%

200%

250%

300%

350%

400%

450%

500%20

00

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Average Day Rates

Global Offshore EnergyPremium

Oil price, Brent Crude

No. Contracted Rigs

Offshore Energy Premium Energy mobiles, Day rates, Oil Price


Sources: No. Contracted rigs, day rates: RigZone, Oil price: Energy Information Administration (US), 2011 figures as of 31.07.11

0%

50%

100%

150%

200%

250%

300%

350%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

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

2009-11 no major hurricane activity, but…

Offshore Energy – Gross Reported Loss Ratiosincluding liability (new!) – Underwriting years 1996 to 2011

As of December 2011:

Summing up Offshore Energy

Volatile business, strong hurricane impact – less in recent years.

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

No regular claims patterns. (Claims reserves set according to knowledge about individual claims).

Recent development: Reduced hurricane impact (2012 Hurricane Isaac:

first Gulf of Mexico hurricane in four years, little impact on results)

Increasing frequency of large single loss events (physical loss and liability)

Events with high liability cost in 2009 and 2010 2011: two losses xs 300 MUSD (Gryphon Alpha, Banff) 2012: one loss xs 300 MUSD (KS Endeavour)

Thank you!

F&F Cheerleaders

2012 seltmann global marine insurance report 180912 · 2012: strong total loss impact (on uw2011)...

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