20 2017 17 Glob lobal al Ma Marin ine e Ins nsura urance - - PowerPoint PPT Presentation

20 2017 17 Glob lobal al Ma Marin ine e Ins nsura urance nce Ma Market et

Data sourced from IUMI 2018 Facts and Figure Committee Presentation

Gl Glob

• bal

al Mari rine ne Marine rine Insu surance rance Repo port

Foto: Astrid Seltmann

Big thanks to Astrid Seltmann Analyst/Actuary, The Nordic Association of Marine Insurers (Cefor) Vice chair, IUMI Facts & Figures Committee

Please Note & Disclaimer Figures reflect the 2018 state of reporting and will change

• retrospectively. Some figures are estimates.

For comparison purposes, therefore compare the updated premiums and loss ratios at www.iumi.com ! All information given is of informational and non-binding character. Figures related to the marine market’s performance reflect market averages. They do not disclose single companies’ or local markets’ results. As with all averages, individual underwriting units may out- or underperform compared to the average. IUMI’s aim is to provide information as available and raise consciousness for the importance of a fact-based evaluation of the risk exposure covered – and inspire everyone to do their

• wn critical evaluation of real and seeming facts.

Gl Glob

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al Mari rine ne Marine rine Insu surance rance Repo port

Market overview Income by line / by region Cargo Premiums / Loss ratios Hull Income / Vessel values / Claims / Loss ratios

______________________________________________________________

Additional data Marine premiums by line of business by country (https://iumi.com/statistics) Loss ratios triangulations Hull, Cargo, Energy

Gl Glob

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al Mari rine ne Premiu emium m 2017 17 (By Line of business)

24% 57% 7% 12%

Tota tal l Estima imate e $28 28.5B 5B USD

NB: Exchange rate effects!

Global Hull Transportation/Cargo Marine Liability Offshore/Energy

2% from m 2016 6 to 2017

Hull & offshore energy share reduced 1%, Cargo share up 2%.

Gl Glob

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al Mari rine ne Premiu emium m 2017 17 (By Region)

Europe

• pe

49.2 .2% Asia Pacific cific 29.2% .2% LATAM M 9.7% 7% North th Amer erica ica 5.6% 6% Other her 6.3% 3%

Marine premiums by region 2010-2017

2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000 14,000,000 16,000,000 18,000,000 20,000,000 2010 2011 2012 2013 2014 2015 2016 2017 Europe Asia/Pacific Latin America North America Middle East Africa

Premium reduction 2013-16: Combination of strong USD and market conditions. 2017 influenced by strengthening

• f local currencies against USD

(besides market conditions).

2016 Total: 27.9 USD 2017 Total: 28.5 USD (+2%)

Glob lobal al Ca Cargo go Res esults ults 20 2017 17

41% 32% 12% 6% 6% 3%

Tota tal l $16. 6.1B 1B USD

Europe Asia Pacific Latin America North America Middle East Africa 6% from m 2016 6 to 2017

Gl Glob

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al Cargo go Premium mium 2017 17 (By Region)

Gl Glob

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al Cargo go Premium mium 2017 17 (By Market)

Belgium 1.8%

Brazil 5.3%

China 9.6%

France 4.8%

Germany 7.4%

India 2.1% Italy 2.6%

Japan 9.0%

Mexico 2.6% Netherlands 1.8% Nordic 1.4% Russia 2.0% Singapore 2.4% Spain 1.4%

UK (IUA) 3.3%

UK (Lloyds) 8.8%

USA 5.1%

Other 28.6%

2017

* * incl. prop & fac. reinsurance

Total estimate: 16.1 USD billion

2016 Top 5: UK (Lloyds) 9.5% Japan 8.9% China 8.4% Germany 7.3% Brazil 5.3% 2017 Top 5: China 9.6% Japan 9% UK (Lloyds) 8.8% Germany 7.4% Brazil 5.3%

Wor

• rld

ld Tra rade e Values ues and Ex Expo ports ts

80% 100% 120% 140% 160% 180% 200% 220% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 World Trade Values (Goods) World Trade Volume (Goods) Global Cargo Premium

Index of evolution, 2005=100% Evolution of world trade values and cargo premium seem to correspond. Premiums increase in 2017 purely reflects exchange rate influences (USD). Extended risk covers and the increasing risk of event losses (risk accumulation) need also to be taken into account!

And then…There’s the Cargo Loss Ratio!

Cargo go Gr Gros

• ss

s Lo Loss ss ra ratio

• ( UW Years 1996-2017

17 **) Gross s Premiums, s, Paid & Outstan andin ing Claim ims

* Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (acquisition cost, capital cost, management expenses) ** Data: Belgium, France, Germany, Netherlands, Italy, Spain (until 2007), UK, USA

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 reported IBNR estimate (normal pattern) IBNR Estimate (recent pattern)

Recent years strong impact by

• utlier & Nat-cat event losses:

2015: Tianjin port explosions 2016: Hanjin, Amos-6 satellite 2017: Hurricanes / Nat Cat 2018: Mærsk Honam Increasing expenses a concern. 100% C/R doesn’t cut it any more 2017

?

Cargo go Lo Loss ss Tri riangu ngulati lations

• ns ( UW Years

s 2011-20 2017 17)

50% 60% 70% 80% 90% 1 2 3 4 5 2010 2011 2012 2013 2014 2015 2016 2017

*Data included from: Belgium, France, Germany, Netherlands, Italy, UK, USA

2014, 2015, 2016: Each year extraordinary increase in loss ratios. Change in typical pattern. The new normal? 2017 starts at 2014 level. With a ‘normal’ pattern (grey lines), 2017 would end around 70%. With recent pattern, 2017 ends around 80%. Gross Premium miums, , Paid d & O Out utstandin tanding Claims aims

Cargo go Conclu

• nclusions

sions

1

Growth

Trade growth accelerating, but change in economical and political frame conditions makes prognoses uncertain. USD premium influenced by combination of market conditions and exchange rates.

2 Results

Tianjin affecting 2014 & 2015 UW years. Amos 6, Hanjin and HIM will affect 2016 &

• 2017. Maersk Honam

impacting 2018. 2014-2016 results all severely deteriorated. 2017 underwriting year also expected to deteriorate more than average. New normal?

3

Claims

Tianjin port explosion potentially the largest single cargo loss in history. Risk of large event losses (Nat Cat and man-made) substantially increased.

4 Outlook

Unstable, uncertain. Trade wars and Protectionism. Covered risks increasingly represent stock exposure rather than just transit exposure. Increasing value accumulation

• n single sites/vessels.

Tightening London market, repatriation of some accounts. CAT events every year?

Glob lobal al Hu Hull ll Res esults ults 20 2017 17

Gl Glob

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al Hul ull l Premium mium 2017 17 (By Region)

48.1% 39.7% 5.8% 3.9% 1.6% 0.8%

Total tal $6.9B 9B USD

Europe Asia Pacific Latin America North America Middle East Africa 10% from m 2015 to 2016 2.3% % from m 2016 to 2017

Gl Glob

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al Hul ull l Premium mium 2017 17 (By Market)

Total estimate 2017: USD 6.9 billion

2016 Top 5: UK (Lloyds) 17.3% Singapore 11.8% China 10.9% Nordic 8.8% Japan 7.8% 2017 Top 5: UK (Lloyds) 16.4% Singapore 12.1% China 10.6% Nordic 9.0% Japan 7.3%

China 10.6%

France 4.0% Italy 4.5%

Japan 7.3%

Korea, Republic 2.8% Netherlands 2.0%

Nordic 9.0%

Singapore 12.1%

Spain 1.6% UK (IUA) 5.1%

UK (Lloyds) 16.4% USA 3.3% Latin America 5.8% Other 15.4%

2017

* * Includes prop. &

• fac. reinsurance

World fleet continues to grow, especially in tonnage. Hull premium deteriorates in line with ship values (FX has less impact)

Hul ull l Premiu mium m / Wor

• rld

ld Fl Fleet et

50% 75% 100% 125% 150% 175% 200% 225% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Gross tonnage (> 300 GT)

• No. Ships (> 300 GT)

Global Marine Hull Premium

• Av. insured vessel

value (Renewals & newbuilds - Cefor)

* Premium adjusted backwards for missing historical data. Sources: No. Ships/tonnage: IHS, Av. Ins. vessel value: Nordic Marine Insurance statistics

World fleet continues to grow, especially in tonnage. Ship values depressed by supply/demand Hull premium deteriorates in line with ship values. Increasing mismatch between fleet/vessel growth & income.

And then…There’s the Hull Loss Ratio!

* Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (acquisition cost, capital cost, management expenses) ** Data: Belgium, France, Germany, Italy, Spain (until 2007), UK, USA

Costa Concordia peak

Hul ull l – Ultimat timate Lo Loss ss Ra Ratio*

• * (UW Years

s 1996-2017 17** **)

• 20%

0% 20% 40% 60% 80% 100% 120% 140% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 as reported per December 2017 (paid+outstanding) IBNR estimate (normal pattern)

???

Substantial deterioration of loss ratios since 2013. Overcapacity, dropping vessel values and reduced activity influenced income negatively. Yachts impact 2017 results, but: The income does not seem to cater for expected ‘normal’ repair cost any more. Since IUMI 2018, some London markets have withdrawn from Hull.

Gross Hull loss ratio Development - Europe (& part US)

40% 50% 60% 70% 80% 90% 100% 1 2 3 4 5 2010 2011 2012 2013 2014 2015 2016 2017

Trend towards more severe loss ratio

• development. (Steeper increase/

change in pattern). 2017: Extreme 1st year loss ratio compared to previous years. 2017 Hurricane impact (yachts). Ocean hull: Little major loss impact, loss ratios driven up by ‘normal‘ repairs (attritional losses). Outlook for 2018 poor

• Vessel fires
• Italian mega yacht losses

Costa Concordia peak 2011

Hul ull l Mark rket : T : Trends ds and Con

• nclusions

clusions

Exposure

• Values and income down, contrary to increasing fleet & vessel size.
• Higher single-risk exposure (with inherent risk of unprecedented major claims).

Claims (other than yachts)

• Claims frequency and cost per vessel: Stable at moderate level.
• Total losses: long-term downward trend. Came to a halt with fluctuation below 0.1%.
• Major losses: modest impact after 2015, but increased volatility steered by (non-)
• ccurrence.
• 2017 Nat Cat event loss with severe impact (yachts).

Results

• With reduced major claims impact, partial losses account for an increasing share of

the total claims cost.

• Loss ratios rise. Current income level does not even cater for expected ‘normal’

repair cost any more!

• No buffer for the return of major losses.
• For sustainability a balance between the risks covered and the cost must be re-
• established. All risk aspects must be taken into account.

Mari rine ne insura suranc nce mark rket et is ch s challe allenging nging

Cargo

• Results strongly impacted by recent years’ unprecedented event losses (man-

made & Nat-cat).

• Value ACCUMULATION an issue (on land and at sea)

Hull

• Results deteriorate further despite last years’ benign claims trends (except

yachts).

• Current income unsustainable, does not cater for expected normal repair cost any

more. Market environment

• Trade growth accelerating, but political and economic uncertainty prevails.
• Climate change / Nat-Cat losses /accumulation / new risks.

Ca Cana nadian ian Ma Marin ine e Ins nsura urance nce Ma Market et

2017 17 Resu sults ts

Canad nadian ian P& P&C Insur surance ance Pr Prem emium um 2017 17 (Ex Ex-Lif Life) e)

Source ce Canadian adian Under erwrit riter er Statis atisti tical cal Issue 20 2017

$46.92 6.928B 8B (Net Writ

itten ten Premium) m)

THE MARINE PREMIUM IS CLASSED UNDER PROPERTY

Marine Insurance Premium (DWP) CAD $332,9 ,900,000* 00,000*

*(1.8% 8% of Net Earn rned ed Prope

• perty

ty premiu ium of CAD $18. 8.41B 41B )

Up slightly from 2016: CAD $323,595,000

Auto to Proper

• perty

ty Other er Marin rine

16.3 .3% 39.2 .2% 44.4 .4% 0.7% 7% of ove

veral all P&C premium

Note: DWP = before RI

2017 17 Dir irect ect Canadia nadian n Marine rine Pr Premium mium

$- $20 $40 $60 $80 $100 $120 CARGO YACHT HULL P&I/LIAB

Tota tal l DWP WP: : $332.9 CAD

Cargo $113M Yacht $110M Hull $56.6M .6M P&I/Li Liabi bilities $53.3M .3M

Premium in Millions (CAD)

Source: Reported to Canadian Underwriter, spilt based on historical data as reported by CBMU members.

Marine rine Res esults ults 2011-2017 2017

50 100 150 200 250 300 350 2011 2012 2013 2014 2015 2016 2017

Net Writt tten en Marin ine e Premiu mium/Losses m/Losses – All lines nes Combin bined ed

(Can anad adian an Under erwriter, ter, 2017 MSA Resea earch ch & CU)

Net Earned Premium Net Losses

58.5% 41% 41% 52.5% 52.9% 59.8% 52.2% 55.9% Lloyds $29.4m down from $66.5m in 2016

Marine rine Res esults ults 2011-2017 2017

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016 2017

Estimated C/R based on all lines and 35% expense ratio

2017 17 Cana nadian dian Ma Mari rine ne Resu sults lts

20 2017 7 Net t Marine ine WP > $1 $10M 0M – All l lines es (in Millio llions) ns) – CANADI ADIAN AN UNDE DERWR RWRITER ITER

10 20 30 40 50 60

$48.2 $35.2 $33.4 $29.4 $28.8 $24.2 $13.6 $11.1

Cargo go Hull ll/P /P&I &I Yachts ts Liabi bili lities ies

• Competitive
• Capacity still strong
• Increasing demand for

stock as property market hardens

• Some repatriation of

Cdn risks from Ldn

• CAT modelling more

common on stock

• Aging fleet
• Losses, especially on

West Coast

• Rates depressed
• Tightening capacity in

London leading to some repatriation of Cdn risks.

• CAT Losses
• Higher repair costs
• Capacity tightening

especially in London

• Some CAT exposed

risks seeing substantial premium increases.

• Higher limits
• Capacity
• Competitive Pricing
• Disconnect between

contracted liability and insurance cover

• Mind the gap!

Canadi adian an Mark rket t Sum umma mary