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Simon Beale

VIEWS: 4 PAGES: 23

  • pg 1
									Hull Insurance in the 21st Century
                                             AMLIN




          - does it have a future?



                  Simon Beale
      Marine Divisional Underwriter, Amlin
Agenda


    Shipping Statistics

    Market Results

    Current Market

    Future Market



                          2
Shipping Statistics




                      3
World Merchant Fleet
of ships of 300gt and over
Evolution of the growth rates (GT, DWT, and Number of ships) between
1993 and 2004


       45%
                                                                                                                         570,325 m GT
       40%                                                                                                                  + 38.9%

       35%
                                                                                                                   840,355 m DWT
       30%
                                                                                                                       + 26.8%
       25%
                                                                  488,032 mGT
                                                                      (+ 18.8%)
       20%
                                                                                                                         39,665 ships
       15%                                                       743,611 mDWT                                              + 14.2%
                                                                      (+ 12.2%)

       10%
                                                                  38,500 ships
                                                                     (+ 10.8%)
        5%

        0%
                 1993      1994     1995      1996      1997      1998      1999      2000      2001      2002      2003      2004


Source: Indicators issued from various sources such as ISL Bremen for World fleet and trading figures (as at May 2004)
and Clarkson Research Studies for shipbuilding and scrapped vessels (as at June 2004).                                           4
Total Merchant Fleet
DWT 1993 - 2003


                      850,000
                                                                                                                    2003 DWT
                                                                                                                     816,384
                                                                             2003
                      800,000
                                                                              =
                      750,000
                                           1993 DWT
                                            662,553
                      700,000
       DWT
                      650,000


                      600,000
                                                           +23%
                      550,000
                                                                      growth on
                                                                             1992
                      500,000
                                     1992        1993   1994   1995   1996    1997   1998   1999   2000   2001   2002   2003

                                                                                  Year
Source: Institute of Shipping Economics & logistics.
                                                                                                                        5
Fleet Growth


   Since 1993
        Strong growth (13%) in numbers of vessels
        Stronger growth (23%) in world fleet size
        Average size increased
        19,100 DWT – 20,700 DWT (9% growth)


   ? increased values

   ? increased premiums

                                                    6
Freight Rates
Clarksons Index 1990 - 2004


                           35,000
                           30,000
           Freight Index



                           25,000
                           20,000
                           15,000
                           10,000
                            5,000
                                0
                                    1990   1992   1994   1996     1998   2000   2002   2004

                                                                Year

                                                                                              7
  Source: Clarksons Freight Index
Cargo Shipowners’ Earnings


         120,000,000


         100,000,000


          80,000,000


          60,000,000

                                                          Income
$ '000




          40,000,000                                      Expense
                                                          Profit

          20,000,000



                  0
                       1999   2000   2001   2002   2003

         -20,000,000


         -40,000,000




                                                                    8
International Market Results




                               9
                 Marine Hull – Evolution of Gross Loss Ratio,
                 actual and estimated towards ultimate
                 U/W Year 1996 to 2003

                          140%

                          120%                                                                        1999

                                                                                                      1998
                                                                                                                    1996
                          100%                                                                        2000/ 2002
Assuming a 30%                                                                                                      1997
expense ratio
(acquisition and                                                                                      1997 / 2001
                                                                                                      2003          1998
management
expenses), technical        80%
                                                                                                      1996
break even is
achieved when the
                                                                                                                    1999
gross loss ratio does
                                                                                                                    2000
not exceed 70%
                            60%
                                                                                                                    2001

                            40%                                                                                     2002
                                                                                                                    70%

                            20%                                                                                     2003


                              0%



                                                                                                        e
                                   12

                                           24

                                                    36

                                                            48

                                                                     60

                                                                             72

                                                                                      84

                                                                                              96

                                                                                                      at
                                                                                                     m
                                                                                                  lti
                        Ultimate calculation based on figures of 6 Member Organisations:
                                                                                                U

                        France, Germany, Italy, Norway, UK Lloyds, UK IUA (6 for 1996 – No Germany)                        10
Global Marine Hull Premium ($m)
1992 - 2003



     1992   1993   1994   1995   1996   1997   1998    1999   2000   2001   2002   2003
                                                                                          6,000

                                                2003
                                                                                          5,000




                                                                                                   Premium Income ($m)
                                                  =
                                                                                          4,000


                                                                                          3,000



                                        69%                                               2,000


                                                                                          1,000
                                                  of
                                                1994                                      0

                                                                                              11
Global Marine Hull Premium ($m)
v‟s Merchant Fleet (DWT) between 1992 - 2003


                                                    1994                                        2003

                                900,000         $8.3 / DWT                                  $4.7 / DWT
                                                                                                     6,000
                                                                       2003
                                800,000
                                                                         =




                                                                                                                 Premium Income ($m)
         Merchant Fleet (DWT)




                                                                                                        5,000
                                700,000

                                600,000                                                                 4,000

                                500,000



                                                              56%
                                                                                                        3,000
                                400,000

                                300,000                                                                 2,000
                                                                             1999
                                200,000
                                                                       $3.7 / DWT
                                                                       Of                               1,000
                                100,000

                                     0                                 1994                             0
                                          1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

                                                                    Year
                                                                                                                12
International Market Results


 Lost money / inadequate profits since 1995

 Recent Premium increases inadequate
 compared to 1994

 Current Premium wholly inadequate for
 world fleet



                                              13
             SEX




9 Minutes!
Current International Market




                               15
        Global Hull Premium - Major
        Markets 1992 - 2003 (USD Million)
1,400

1,200
                                                                      France
1,000                                                                 Italy
                                                                      Japan
 800
                                                                      Norway
                                                                      Spain
 600
                                                                      UK (ILU/IUA)
 400                                                                  UK (Lloyd's)
                                                                      USA
 200

   0
        1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

                           Accounting Year                               16
Underwriting Statistics
Relative Rating 1995 – 2003
(Sample 1)


   Average Value ($m) &
                                                                                              $/Dwt Overall
       Average Age
      36                                                                                             6
                   Average Values           Average Age         $/Dwt Overall
      30                                                                                             5


      24                                                                                             4


      18                                                                                             3


      12                                                                                             2


        6                                                                                            1


        0                                                                                            0
        1995          1996         1997          1998        1999       2000    2001   2002
                                                           U/W Year


                                                                                               17
   Source: Broker Portfolio (1) for Joint Hull Committee
International Market Premiums
‟Discounted‟ Fleet


                  1,400,000
                              $1,234,906                                                      51%
                  1,200,000
                                                                                                of
                                               $1,037,860
                  1,000,000                                                                   Claims
                                                            $827,044    $820,445               Lead
      $ Premium




                                 Claims Lead


                   800,000
                                                                                               Price
                                                                                   $621,313   $607,145
                   600,000


                   400,000


                   200,000


                         0
                                  A                B           C            D         E          F

                                                                   Market

                                                                                                       18
        Source: Broker Research
International Market Premiums
‟Discounted‟ Fleet


                  1,400,000                                           25


                  1,200,000
                                                                      20

                  1,000,000           Total Price Paid
                                            (100%   order)
      $ Premium




                                                                      15
                   800,000




                                                                           Order
                   600,000                   68%                      10

                   400,000            Of Claims Lead Price
                                                                      5
                   200,000


                         0                                            0
                              A   B     C       D            E   F

                                              Market
                                                                     19
        Source: Broker Research
Current International Market


       Dearth of technical understanding in global
         underwriting community

       Total lack of discipline

       Too many underwriters and brokers




                                              20
Future Market


     Requirement for Insurance
            Larger world fleet
            Significant assets
            Cruise vessels to fishing vessels

     „Rewrite‟

     Capital requires profit

     Shipowner better served by stability
                                                21
Options


     Captives

     Reinsurance Market

     Mutuals

     Consortiums
          Marketing
          Underwriting Expertise
          Claims service           22
Conclusion



     World Fleet Growth

     Inadequate returns

     „Rewrite‟ – a question of when

     Price / Profit is key

     “Niceties”, if at all, come later
                                         23

								
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