Risk assessment – an insurer’s perspective 41st Interferry Conference - ManilaSam Kendall-Marsden, Head of Division
UK & Americas
18 October 2016
Contents
1 Introduction
2 Why risk assessment?
3 Risk selection
4 Member risk review
5 Ship risk review
6 Conclusions
7 Questions
• A leading International Group P&I club, established in 1884 and now insuring over 10% of global shipping across all major markets
• Industry-leading service, a track record of financial security, and a selective, conservative approach to growth
• 2015/16: overall underwriting profit for the financial year, steady growth, launch of The Standard Syndicate and the Singapore War Risks Mutual
• A broad range of P&I and other marine and energy covers, offering sustained excellent value to high-quality operators
The Standard Club
• Not-for-profit association of shipowners
• Controlled by shipowner members through a board, with day-to-day management by Charles Taylor plc
• Covers third-party marine liabilities, e.g. crew, passengers, cargo, pollution, collision, wreck removal, fines etc.
• Premium + investment income = claims + ‘overheads’ (balanced combined ratio)
• Claims excess individual club retention (USD 10m) ‘pooled’ with the other 13 International Group clubs
• Reinsurance for claims excess pool limit (USD 80m up to USD 3.08 bn)
What is a P&I club?
Owned tonnage by ship type
MembershipDiverse spread of business by country of management and ship type
Owned tonnage by region
7%3%3%
4%6%6%
8%11%
7%4%
7%8%
6%3%
4%6%
7%
Rest of EuropeUnited Kingdom
MonacoNetherlands
ItalyGermany
Nordic countriesGreece
Rest of Asia-PacificRepublic of Korea
SingaporeJapan
Rest of worldMiddle East
TurkeyUSA
Canada
31%
28%
25%
13%1%2%
Tankers
Container and general cargo
Dry bulk
OffshorePassenger and ferryOther
116mgt
48%
26%
26%
116mgt
Europe
Asia-Pacific
Rest of world
Combined ratio
95%2015/16
S&P rating
A (strong)AAA capital strength
Premium income
$322mProjected 2016/17
Free reserves
$39020 Feb 2016
Owned tonnage
116m gt20 February 2016
Surplus 2015/16 financial year
$10m
Total tonnage
138m gt20 February 2016
Investment return
-0.9%2015/16 financial year
Overview of the club: key financialsSelective growth; breakeven underwriting; strong balance sheet
+2.5%20 Feb 2015 – 20 Feb 2016
1.8%2014/15 financial year
+3.6%20 Feb 2015 – 20 Feb 2016
$12m2015 financial year
$354m2015/16
$380m20 Feb 2015
100%2014/15
Affirmed June 2016
Our ambition
To provide first-class financial security01
To provide a broad range of P&I insurance and related covers that represent excellent and sustainable value
To be recognised for providing excellent service through solving members’ problems
To pursue selective growth, consistent with the other objectives
03
02
04
Enabled by a culture of flexibility
and innovation
Financial year combined ratio Key principles
Sustainable ‘breakeven’ underwriting
99%
94%
115%113%
101% 100%
95%
80%
90%
100%
110%
120%
2009
/10
2010
/11
2011
/12
2012
/13
2013
/14
2014
/15
2015
/16
100%‘breakeven’
• Disciplined underwriting to align member premiums with claims and risk:- Assessment of risk profile- Proprietary pricing tools
• Selection and management of risk based on a sound understanding of operating quality
• Continuous improvement in efficiency to minimise rate rises required, e.g.:- agreed rate reductions with lawyers and
other third-party suppliers- centralised operational activity
• Diversification into profitable non-P&I lines to support P&I business
• Supported by ‘Loss Prevention’ technical experts since 1989• Multidisciplinary team:- Master mariners- Ship operational managers- Naval architects- Engineers- Surveyors
• Objectives:- Ensure the club underwrites ships and members of high-quality- Minimise losses to members and the club- Provide technical and loss prevention advice to members and the club
Focus on quality of operations
• Assessment of member/ship risk profile – to support members and the club:- ‘Desktop’ assessment pre-attachment
- Member risk review carried out by the club’s own technical experts
- Ship risk review with ~20% carried out by the club’s own technical experts
- Efforts at each renewal to improve operating quality via non-renewal of some members
• Safety and Loss Advisory Committee:- Technical and operational experts from the membership, plus club experts
- Examines claims trends, individual claims and industry issues
- Informs the club’s stance and advice given on safety and operational issues
• Communication of ‘best practice’ via publications, seminars, member dialogue etc.
Focus on quality of operations – cont’d
Selecting and managing risks based on operating quality
Communication of operational ‘best practice’
www.standard-club.com/what-we-do/loss-prevention/
Ongoing focus on reducing members’ losses
Member risk review• Thorough review of shore-side elements of a member’s organisation
• Assess effectiveness in running a safe operation
• Face-to-face meeting, plus document review
• All new members on entry, plus following any significant issues
• Provides:
- members with practical feedback and advice
- club underwriters with risk-related information
• Overall score (out of 100), plus detailed comments
What we look at• Corporate profile:
- Key risk: is the management up to the task of overseeing the strategy, management and performance of the company?
• Management:
- Key risk: has the company demonstrated a commitment to implementing high-quality policies and procedures?
• Operations and commercial management:
- Key risk: does the company have the skills, experience and sufficient knowledge to be a commercial success in its chosen trades?
• Technical:
- Key risk: does the company have the necessary skills, sufficient knowledge and technical competence to manage its fleet safely and efficiently at all times?
What we look at – cont’d• Safety:
- Key risk: are the company's risk management controls sufficient to ensure the safe operation of its fleet and compliance with relevant regulations?
• Marine:
- Key risk: does the company have the necessary skills, sufficient knowledge and marine competence to manage its fleet safely?
• Crewing operations:
- Key risk: does the company recruit, select, train and retain competent crews to operate its fleet safely?
Ship risk review
• Determines the condition of ships in a member’s fleet and associated risks
• 10% of entered tonnage (including new members’ ships if over 12 years old)
• Informed by loss record, ship age, carriage of persistent oil, trades, claims trends, Port State Control detentions or material changes in risk etc.
• Written reports with recommendations for deficiencies
• Requirements to remedy deficiencies issued in more serious cases
• Warranties/exclusions imposed if necessary to mitigate risk to the club
What we look at• International Safety Management (ISM) compliance:
- Key risk: is the ship being operated safely, including to prevent injury/loss of life and/or pollution?
• Maintenance and class:
- Key risk: is the ship being appropriately maintained and are certificates up to date so as to minimise incidents?
• Hull integrity:
- Key risk: is the ship in sound structural condition so as to minimise incidents?
• Machinery and equipment:
- Key risk: is machinery and equipment in good working order and appropriately maintained so as to minimise incidents?
What we look at – cont’d• MARPOL compliance:
- Key risk: are pollution risks being adequately mitigated?
• Navigation:
- Key risk: is navigation equipment properly functioning, are procedures appropriate and has adequate training been given so as to avoid navigational incidents?
• Safety equipment:
- Key risk: is appropriate equipment in place and maintained appropriately so as to protect against incidents and minimise their effects?
• Manning:
- Key risk: is the ship manned with a competent crew so as to minimise the adverse influence of the ‘human element’
What we look at – cont’d• Security:
- Key risk: is the ship properly protected against external threats, including piracy?
• Cargo areas and operations:
- Key risk: are the ship’s cargo spaces and handling operations suitable for the safe carriage of its intended cargoes?
• Passenger areas:
- Key risk: is the ship suitable for the safe carriage of passengers and (if appropriate), their vehicles?
• Vehicle decks: non-slip, coatings, lashing points, walkways, signage, lighting, fire monitoring and protection, chemical/oil/fuel storage• Vehicle deck operations: door checks, CCTV, switch gear, fire doors, pre-sailing
tally, crew walk-arounds• Shell openings: water ingress, hydraulic systems, plating, coatings, gaskets,
anti-skid ramps• Passenger areas: lighting, slips/trips, supervision, security, signage, PA system,
refreshment and leisure areas, food storage, preparation and service• Passenger safety: passenger ship safety certificate, passenger numbers,
emergency equipment, lifejackets, lifeboats/liferafts, muster list and stations, evacuation instructions and drills
Specific ferry risks
• High-quality growth viewed as positive for the membership as a whole as it increases the financial strength and efficiency of the club over time• In pursuing new business, the club will ensure the operating quality of members
and ships and an appropriate spread of risk• Preference is to grow with existing members – in P&I and in non-P&I covers• The club welcomes new members that are quality operators seeking a long-term
partnership with their marine and energy insurer• The club aims to build in all major trades and markets
Conclusions
Aiming to drive growth, as long as this is consistent with the club’s focus on operating quality, financial stability and service
The Standard Club
The Standard Club Ltd is regulated by the Bermuda Monetary Authority. The Standard Club Ltd is the holding company of the Standard Club Europe Ltdand the Standard Club Asia Ltd. The Standard Club Europe Ltd is authorised by the Prudential Regulation Authority and regulated by the FinancialConduct Authority and the Prudential Regulation Authority. The Standard Club Asia Ltd is regulated by the Monetary Authority of Singapore.
The Standard Syndicate
The Standard Syndicate 1884 is managed by Charles Taylor Managing Agency Ltd, a Lloyd’s managing agent, which is authorised by the PrudentialRegulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
The Standard Syndicate Services Limited, trading as 1884 Europe, is a service company and a Lloyd’s coverholder that is part of the Charles Taylor Plcgroup of companies. The Standard Syndicate Services Limited is an appointed representative of Charles Taylor Managing Agency Ltd which is authorisedby the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. The Standard SyndicateServices Limited has authority to enter into contracts of insurance on behalf of the Lloyd’s underwriting members of The Standard Syndicate 1884 whichis managed by Charles Taylor Managing Agency Ltd.
The Standard Syndicate Services Asia Pte Ltd, trading as 1884 Asia, is a service company and a Lloyd’s coverholder that is part of the Charles Taylor Plcgroup of companies. The Standard Syndicate Services Asia Pte Ltd. is regulated by the Monetary Authority of Singapore in its capacity as a Lloyd’scoverholder under the Insurance (Lloyd’s Asia Scheme) Regulations. The Standard Syndicate Services Asia Pte Ltd. has authority to enter into contractsof insurance on behalf of the Lloyd’s underwriting members of The Standard Syndicate 1884 which is managed by Charles Taylor Managing Agency Ltd.
Regulatory status