Global marine insurance report - Studio Legale Lauro · 2014-11-25 · Global marine insurance...

Global marine insurancereportPatrizia Kern, Head Marine, Shipping & Law 2014

Patrizia Kern | Head Marine | Shipping & Law 2014 2

Agenda

• Hull Overview

• Offshore Energy Overview

• Outlook

Patrizia Kern | Head Marine | Shipping & Law 2014

Hull Overview

3


In 2013 worldwide premium volume has totalledto USD 34.2 billion …

Total: 34.2 USD billionChange 2012 to 2013: -1.7%

Marine Premium 2013 - By line of business



… with Hull remaining largely unchanged incomparison to last year …Hull Premium 2013 - By region


**** includes proportionaland facultative reinsurance *

* Norway, Denmark,Finland, Sweden

… which is also reflected by the various marketshares …

Hull Premium 2013 - By markets


0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

UK (Lloyds)

Nordic

China

Japan

Latin America

UK (IUA)

France, Italy, USA, others: some increase until 2008/2009, some decrease since.

Before 2010: only Mexico and/or Brazil

From 2012: extended data survey

… as well as in the momentum of premiumgrowth …Hull Premium 2004 - 2013 – selected markets


50 %

75 %

100 %

125 %

150 %

175 %

200 %

225 %

250 %

275 %19

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

14

Gross tonnage(> 300 GT)

Av. insured vesselvalue (Renewals &newbuilds - Cefor)

Global Marine HullPremium

No. Ships (> 300 GT)

Sources: Insured vessel values: Cefor NoMIS statistics ; No. Ships & tonnage: ISL Bremen

Hull Premium / World Merchant FleetIndex of evolution, 1995 = 100%

… however premiums are not growing at thesame pace as world tonnage


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

2011Strong major loss impact(Costa Concordia &others)

2012/2013Less major loss impactas in 2011.

2013

Improvement buttechnical result still atloss (18th year)

Hull – Gross* Ultimate Loss Ratio Europe/USA**, Underwriting years 1996 to 2013

* Technical break even: gross lossratio does not exceed 100% minusthe expense ratio (usually 20%-30%acquisition cost, capital cost,management expenses)** Data: Belgium, France, Germany,NL, Italy, Spain (until 2007), UK, USA

CostaConcordiapeak

There are some improvements…


24%

10%16%

28%

6%

13%

28%

18%

29%

11%

33%35%

22%17%

32%

21%

54%

31%

5%

0%

10%

20%

30%

40%

50%

60%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Claims in excess of 10 MUSDas % of total claim cost

Claims xs 10 USD million as % of total cost

Cefor NoMIS statistics, as of June 2014 (claims reflect 100% of each vessel)

Record-low impact ofmajor losses in 2014.

Accidentyear

…but only thanks to lack of major losses …


40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6

2008

2009

2010

2011

2012

2013

2011:Unprecedented total lossimpact.

2012:

Similar to pre- CostaConcordia years.

2013Starts better.

Hull – Gross* Reported Loss Ratio Europe/USA**, Underwriting years 1996 to 2013

* Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (usually 20%-30% acquisition cost, capital cost, management expenses)** Data: Belgium, France, Germany, NL, Italy, Spain (until 2007), UK, USA

Costa Concordia peak

… however how sustainable is the change?


As …

… missing claims experience does not mean no risk… major claims cannot be assessed from one year

– Need to monitor longer time period

– Need to know actual insured risk – potential for claims not yet experienced (CostaConcordia, Emma Mærsk, MOL Comfort,...)

– Need to extrapolate from existing claims experience to areas with less or no statisticaldata.


Orderbooks have further increased …

13

Total value of Newbuilding orderbook as of 1st August 2014 is US$311.8 bncompared to US$279.4 bn in 2013 (both at contracted values)

Source: Clarkson Research, August 2014 & August 2013.

by Vessel Type by Country/Region of Build

0

20

40

60

80

100

120

140

160

Tank

ers

Bulk

ers

Con

tain

er/ M

PP Gas

Oth

ers

US$

billio

n

Orderbook 2013 Orderbook 2014

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

Japa

n

Sout

h Ko

rea

Taiw

an

P.R.

Chi

na

Oth

er A

sia

Euro

pe

Braz

il

USA

Oth

ers

US$

billio

n

Orderbook 2013 Orderbook 2014


… as average age of world fleet has decreased …

14

Source: Clarkson Research, August 2014.Note (1): Includes all vessels in these categories above 100 GT.

Note (2): Average age is calculated using number of vessels. Calculations are based on year and month of build.

0

5

10

15

20

25

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Aver

age

Age

Total Tanker Bulkcarrier Containership/MPP Gas Others

Average Age of the World Fleet 2000-2014


6.0% 6.3%

3.1%

8.5%

5.1%

-14.8%

-9.0%

-3.8%

-7.2%-5.0%

-2.6%

-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

2013

2014

Average annual change in insured valueson renewed vesselsChange in insured values on renewal

= insured value on renewal / insured value previous underwriting year for same vessel

Financial crisiseffect

Source: Cefor NoMIS statistics as of June 2014

… as well as insured values …


0%

1%

2%

3%

4%

5%

6%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Portfolio share of vessels with values xs 100 USD million

> 300 MUSD

100 - 300 MUSD

Vessels with values xs 100 USD million as % of total insured portfolio:

Source: Cefor NoMIS statistics as of June 2014

… whilst the inflow of high-value vessels continues


Hence …

… claim frequency is down after peak in 2008 with a positive tostable long-term trend… long-term positive total loss frequency trend… repair cost is down after peak in 2008 and stable to decreasingsince… major losses had a strong impact on 2011 results and otheryears whilst impact next to none in first half year 2014… world fleet will continue to grow, especially in tonnage… value reduction will normalise when it comes to renewalswhilst inflow of high-value vessel continues


… meaning

… world fleet continues to grow, insured risk increases, global hullpremium stays flat… Claims cost & frequency improve, but major claims risk cannot

be judged from one year and follows exposure… technical results still at loss for 18th consecutive year; some

improvements expected due to reduction in claims cost… for sustainability all risk aspects must be considered


Offshore Energy Overview

19


Offshore Energy Premium 2013

*

* incl. proportional andfacultative reinsurance


No data: Kazakhstan.

In 2013 offshore energy premium has totalled toUSD 5.2 billion …


Offshore Energy Premium 2004-2013

* Nordic, Nigeria, Mexico: no data available before indicated year; UK- IUA: from 2012 extended data survey; Kazakhstan: no data available

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Other

USA

Nordic (2011)

Nigeria (2008)

Mexico (2010)

Malaysia

Japan

Italy

India

Brazil

UK-IUA (2012)

UK-Lloyds

*

*

*

*

… with London continuing to play the leading role


0%

100%

200%

300%

400%

500%

600%20

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

14

Average Day Rates

Global Offshore EnergyPremium

Oil price, Brent Crude

No. Contracted Rigs

Offshore energy premium - Energy mobiles, day rates, oil priceIndex of evolution, 2000 = 100%

Strong Global Growth …


0%

50%

100%

150%

200%

250%

300%

350%19

96

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

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

2009-13 no majorhurricane activity

Offshore Energy – Gross Loss Ratios incl. liability - Underwriting years 1996 to 2013, UK and US data

As of December 2013:

… as well as reduced impact of hurricanes inthe last years …

… have influenced premium development


Outlook

24


Trade growth is expected to accelerate fromcurrent levels relative to GDP …

… however likelihood of permanent change in thetrade intensity of production is increasing …

0

50

100

150

200

250

300

350

2000 2003 2006 2009 2012 2015 2018 2021 2024

World export of goods (real)

World GDP (real)

2000=100

Forecast

Source: Swiss Re Economic Research & Consulting


… as Asia is expected to dominate globalcontainer flows in 2020

1. Includes exports and intra-regional trade only as these have been identified as drivers of cargo shipmentsNote: Container flows based on forecasts excluding empties and transshipment but including domestic for intra-regional trade; some trades excludedfor display purposes; Turkey and Russia included

Global container flows by main trades, forecast 2020 (MTEU)

= Other routes

= Asia related1

(4.3%)

(6.7%)

(6.9%)

(7.1%)

(3.0%)(4.7%)

5.2

20

20

2.92.7

0.73.7

5.2

(3.5%)

(4.3%)

(6.7%)15

(3.7%)

2.9

(8.0%)

2.6

64(6.8%)

(7.1%) 2.9

4.44.5(6.8%)

(4.6%)(8.8%)

2.5

= Europe related1

4.5

(x%) = CAGR

26

(4.7%)

(4.0%)26

(10.6%)

Source: BCG container flow forecast model


To summarize …… economic recovery is likely to be shallow and gradual… inflation expectations remain well contained giving centralbanks scope to stick with their current monetary policy… permanent change in trade intensity of production to affectlong-run demand for marine insurance


… meaning for marine insurance… uncertainty in respect to marine premium… a persistent capacity inflow… continued pressure on rates… London remaining largest Marine Insurance hub, howevertrade is shifting to Asia and Latin America… Big Data and Smart Analytics being the key for future success



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30

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