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					Energy Insurance The Road Ahead
Dominick Hoare

The Loss/Profit Equation

• • • •

Inherent Business Dilemma Demands of Capital Stable Profit Environment Sustainable Business Concept

Current Environment

• • • •

Volatility Premium Increases Severe Loss Frequency Long Term Uncertainty

Toulouse

Toulouse

Toulouse

Toulouse

Toulouse

Toulouse

P36

P36

P36

P36

P36

P36

P36

P36

P36

P36

P36

P36

Gulf of Mexico Blowout

Gulf of Mexico Blowout

Gulf of Mexico Blowout

Gulf of Mexico Blowout

Gulf of Mexico Blowout

Willis Loss Database

Years 1991 - 1996 1997 – 2001 All Years

No. of Incidents 1417 1808 3225

Total US$ Loss 16,881,924,551 19,323,966,884 36,205,891,439

Lloyd’s Energy Statistics
Offshore Physical Damage - Incurred Loss Ratio

250%

200%

150%

100%

50%

0% 1996 1997 1998 1999 2000

Lloyd’s Energy Statistics
Control of Well - Incurred Loss Ratio

250%

200%

150%

100%

50%

0% 1996 1997 1998 1999 2000

Lloyd’s Energy Statistics
Onshore Physical Damage - Incurred Loss Ratio

400% 350% 300% 250% 200% 150% 100% 50% 0% 1996 1997 1998 1999 2000

Lloyd’s Energy Statistics
Energy Liability - Incurred Loss Ratio

200% 180% 160% 140% 120% 100% 80% 60% 40% 20% 0% 1996 1997 1998 1999 2000

Lloyd’s Energy Statistics
All Classes - Incurred Loss Ratio

250%

200%

150%

100%

50%

0% 1996 1997 1998 1999 2000

Combined Ratio

100
d's

140

180

220

260

Eu ro pe an re i ns ur er s ur er s

Llo y

US pr op er ty & ca su alt y un ic h Re

US re ins

M

Ge ne ra lR e CN AR e Ha rtf or d Re Sw iss RE QB E SC OR St XL

Re

US Pa ul Re Re ins ur an ce

Lloyd’s Peer Group

Rating Index

160% 140% 120% 100% 80% 60% 40% 20% 0% 1993 1994 1995 1996 1997 1998 1999 2000 2001

Equity Markets

9/11 P36 - March

Toulouse - September

Situation

• Capital Intolerance • Flawed Business Model • Short Term Solutions vs. Long Term Business

Solution

• • • •

Mutual and Constructive Reduce Volatility Renewed Confidence Stable Capital

Fundamental Restructuring of Business

• Return on Capital • Higher and Consistent Premium Levels • Transparent Risk Transfer

Insured's Charter

• Higher Quality Product • New Standard Levels • Commitment and Continuity

Lloyd’s

• Flexible and Innovative Product • Expertise and Professionalism • Unique Talent Pool

Lloyd’s

• Chairman’s Strategy Group/Franchise Concept • Proactive and Supportive • Entrepreneurial Spirit • Strong Corporate Governance

Lloyd’s

• • • • • •

9/11 Trading Continuity Funding Obligations 2000 Gross Income – £ 10.2bn 2001 Gross Income – £ 11.6bn 2002 Gross Income – £ 12.8bn

Regulatory Environment

• • • •

Risk Focused Management LMP Reforms Product Centered Market Leadership from Lloyd’s

Re-Definition of Insurance Business Model

• • • •

Structural Change – Mutually Driven Product of Highest Quality and Integrity Sustainable and Profitable Is Failure an Option?

Energy Insurance The Road Ahead
Dominick Hoare


				
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