P&I Report Experienced Guidance

Transcription

1 P&I Report 2014 Experienced Guidance

2 Index 01 Introduction In Words In Numbers a) Underwriting b) Investments c) Overall Result 1011 Group Reinsurance Renewal Circumstances 1528 Clubs at a Glance Appendices 2931 Alternative Facilities, including Fixed Premium Options 32 Contacts

3 Dear All, Well it is that time of year again when you are free to digest our annual analysis of the Protection and Indemnity markets, and this year under the banner of LOCHAIN PATRICK INSURANCE BROKERS LIMITED. You may of course already be in the process of your renewal negotiations or about to start and we wish you all the best for that and the New Year. It has been a very exciting year for us, and it is with some pride that we have brought the name of Lochain Patrick back to the marine markets. We parted company with the Oval Group in March 2014 to reform LPIB as a specialist marine and energy broker. We are totally committed to staying in this space, looking after our existing wholesale and retail clients, and indeed welcoming new clients to us as we embark on a period of sensible and sustained growth. We see a real opportunity for buyers of marine insurance products to benefit from the service and skills we offer as dedicated mariners. Whilst we are part of a large group now the Kaufman Financial Group we will maintain our independent and apolitical stance at a time when many marine brokers are being absorbed into each other. We are excited by this prospect and look forward to working with you for many years to come. We wish you all a prosperous and successful From all at Lochain Patrick Insurance Brokers 01

4 2014 IN WORDS The February 2014 renewal was in many ways quite similar to its predecessor in that the average General Increase, in ETC terms, was 8.4% in both years. Again there was some focus on deductibles, which continued to rise as insurers sought to make owners increasingly responsible for smaller attritional claims. The effect of increasing deductibles may finally be paying dividends as claims fell somewhat in the 14 policy year and there is evidence that claims frequency is falling at the attritional level. In so doing, however, the Clubs are moving away from their roots as the owners claims office and this is helping to change the retained risk complexion of the market. The increases proposed were less creative than those seen in the preceding year, although the termination of the one off loyalty rebate offered by Britannia in meant that the premium increase demanded in 2014, in cash terms, was significantly more than the published 2.5%. The main loser at renewal was the Standard Club, who sought a market high 12.5% increase and was hard on those owners with poor records. The Club lost some 7 million GT but, such is the state of the market, we would not be at all surprised to see this made up during the next two years. Past history has shown that lost tonnage is often recovered quickly, usually with newer tonnage, as demonstrated in Britannia and North of England following the renewal. DECEMBER Standard & Poor s downgrade their rating of Royal Sun Alliance from A to A. RSA provide underwriting capacity to fixed premium providers Charterama and Lodestar; JANUARY 2014 Rolf Thore Roppestad is appointed group CEO of Gard. Bjornar Andresen takes up the role of Head of Underwriting; Group excess reinsurance programme renews with an average increase of 8.9%. Most vessels face a 5% increase but passenger vessel owners face a 2 hike; FEBRUARY 2014 North of England and Sunderland Marine merger completes effective 20 February 2014 resulting in the birth of The North Group ; Standard Club launch a fixed P&I facility which supports, amongst others, the newly formed Turkish Pandl Sigorta Sirketi; Mike Hill retires as Underwriting Director at the London Club, to be replaced by Reto Toggwiler; MARCH 2014 Standard & Poor s revise their rating of Royal Sun Alliance back to A from A; Jeremy Grose is appointed Chief Executive of Standard Club in succession to Alistair Groom; APRIL 2014 The 2002 Protocol to the Athens Convention, 1974 enters into force in an initial 17 states; The requisite number of ratifications of the Nairobi Wreck Removal Convention is achieved: this will now enter into force in April 2015; Skuld announce that Stale Hansen will succeed Douglas Jacobsohn as Chief Executive Officer in February 2015; 02

5 MAY 2014 Standard & Poor s upgrade their rating of The UK Club from A to A; Mike Bennett is confirmed as active underwriter on Skuld Syndicate 1897; JUNE 2014 Gard forego $34.8 million of call income by reducing the deferred call on the 14 policy year from to 15%; Stuart Todd retires as Head of Underwriting at the American Club. Tom Hamilton assumes the role of Director Global Underwriting Services; NOVEMBER 2014 UK Club announce a breakeven result for the 6 months ended 20 August 2014; The Standard Club project a breakeven result for the financial year with a small underwriting deficit balanced with investment income; Skuld advise their intention to offer all Skuld P&I products via their London office DECEMBER 2014 The Japan Club announce the creation of a new fixed premium Gaiko Class for dry cargo vessels trading in Asia, Australasia and Middle East AUGUST 2014 The Swedish Club announce six monthly figures to 30 June 2014: a surplus of $10.3 million has arisen, increasing Free Reserves to around $175 million; SEPTEMBER 2014 Skuld announce six monthly figures to 20 August 2014: a surplus of $20 million has arisen, boosting Free Reserves to $354.1 million; OCTOBER 2014 The Shipowners Club results reveal a $15.2 million surplus for the first 6 months of , increasing Free Reserves to $314.1 million; West of England report an $11.6 million surplus for the first 6 months of the year, lifting Free Reserves to $227.8 million; News emerges of Standard s plans to establish a new Lloyd s syndicate, number 1884, to start trading in April 2015; Gard announce a $129 million surplus during the first 6 months of the financial year, pushing Free Reserves past the $1 billion mark; Steamship Mutual commences a restructuring plan which will result in all underwriting at 20 February 2015 going through SMUAL; 03

6 2014 IN NUMBERS Underwriting The collective premium income earned by the Clubs on a financial year basis is set out in the table below: Change in Calls/GT Weighted Average GI FINANCIAL YEAR PREMIUMS IN $ MILLIONS 2 YEAR TO 20 FEB % CALL INCOME 4, , , , , , , %AGE CHANGE +7.2% +0.2% +2.6% +12.4% % +7.3% 5% Elements of the growth seen above are unassociated with normal growth. The substantial leap forward seen in, and fall back in 2010, are both due to the booking of massive amounts of excess call income in. The substantial growth in is down to a change in accounting at Gard, who now include their Marine & Energy premium in their financial year data. Since then matters have stabilised and growth is mainly routine, but next year the acquisition of Sunderland Marine by North of England is likely to result in another distortion at financial year level. In order to examine the pure trends in the P&I premium we need to strip out other class income and also excess calls: POLICY YEAR PREMIUMS IN $000S YEAR TO 20 FEB P&I CALL INCOME * RETURN / EXCESS CALLS NORMALISED CALLS %AGE CHANGE WEIGHTED AVERAGE GI TOTAL FLEET GROWTH CALL CHANGE IN THEORY CHURN ESTIMATE , , % 8.1% +6.1% +14.2% 6.7% * including estimated uncalled income , , % 4.6% +2.5% +7.1% 6.2% 3,204.9 With the exception of the policy year, the growth in normalised P&I premium does not even match the weighted average general increase, even before one considers such factors as fleet growth. Whilst some of this difference can be explained by changing terms and conditions, and some by the acceptance of larger deductibles, it is clear that the average rate per ton continues to fall, albeit at less dramatic levels than between and when the shipping recession was at its deepest. The decline in premium rate achieved is a direct consequence of the phenomenon known as the Churn whereby older tonnage with high premium rates are scrapped or laid up, and replaced by newer build tonnage which attract (rightly or wrongly) a lower premium per GT. Not all Clubs are as exposed to this average churn effect those with older or larger ships appear to be more vulnerable. For example, the Steamship Mutual and American Clubs comment that the impact is still there although declining in significance , % 3.3% +5.7% % 3, , % +11.6% , , % 15.9% +5.8% +21.7% 16.2% 3, , % +7.3% , , % 6.5% +8.1% +14.6% 7.8% 5% The churn effect is most obviously seen during the times of economic recession when vessels are being scrapped or laid up but whilst there is still a backlog of new deliveries coming on stream. This explains why across the market the churn effect was at its peak in the period between and but has then regressed in the past three years, as the shipping industry stabilised, albeit in an adverse condition. Churn is now stable at the 67% level and it will be interesting to see how the churn rate responds to the shipping market recovery when, and if, it happens. One market response could be to bring older tonnage back into service, which should see the churn rate fall; the other, delayed reaction (due to newbuilding lead times), would be to bring new vessels into play at still cheaper rates which would push the churn rate back up. There is a counter argument that this churn effect also has a parallel impact on claims, but this, whilst logical, has remained unproven by results although the fall in claims in 2014 could be the first sign of it. Equally the decline in financial year claims could be due to the pervasive effect of deductible increases. Nonetheless, it still remains the case that newer, larger and more technologically advanced vessels can be just as prone to random claims, particularly ones due to navigational error. The more advanced the technology, the more expensive it is to repair, hence claims severity rises. Turning to claims, 14 saw a slight reversal in financial year claim levels for the first time since. Whilst the same trend is not immediately obvious in policy year data, it is likely that, as the policy year matures, we will see an overall reduction of claims for 14 on this basis too. Bearing in mind the 56% increase in GT insured, it is sure that claims per GT entered are falling. This may not be entirely aligned with all Club manager s comments, but the numbers do not lie: given that pool claims remained at high levels in 14, it is evident that net incurred claims within retention are improving. Absent a reversal of fortunes in , this should justify a lower general increase for

7 POLICY YEAR / FINANCIAL YEAR CLAIMS IN $ MILLIONS YEAR TO 20 FEB POOLING LOSSES AT DEVELOPMENT POINTS, IN $ MILLIONS, (HISTORIC THRESHOLDS) PY CLAIMS %AGE CHANGE FY CLAIMS %AGE CHANGE 2, % 2, % 2, % 2, % 2, % 2, % 2, , % 1, % 2, % 2, % 2, % 2, % 2, % MONTHS # Claims severity remains the primary driver for incurred losses: be they attritional, large or pooling losses. Equally the random incidence of large losses appear to be the most influential determinant of overall claims levels. Deductible increases have finally started to make their mark with attritional claims frequency appearing to fall with most clubs. The reduced frequency may also be explained by the continued reduced trading activity. Unfortunately, whilst there are less claims around, the ones that do arise are costing more, by and large. There is however contradictory evidence at this level the UK Club sees the average attritional claim costing 5 more than 10 years ago, whilst Steamship comment that the average cost of an attritional claim actually fell by almost 3% in 14. At the other end of the scale, rising Club retentions make large losses increasingly influential at gross level and stress reinsurance costs for within retention excess of loss protection. Reinsurance spend in 14 rose by almost 2 and this was not all down to the large increases on the Group Programme. From a frequency perspective, these losses strike at random, and so the incidence pattern varies significantly from one Club to another. Industry wide issues such as slow steaming ought to reduce large claims across the board with less potential for navigational errors but there is no clear evidence to support this contention. More consistent though is the escalating severity of these claims. All clubs report increasing severity: the UK Club, who suffered a particularly bad year for large losses in 14, identify the fact that 1% of claims by number account for 6 of the incurred claims cost in dollars. Pooling losses remain at high levels, although there is a chink of light as regards the current pool performance, and as with the individual club retention, the pooling retention continues to rise, now to $80 million. Whilst there have been no significant claims on the International Group programme since the Costa Concordia (the cost of which has now stabilised at around $1.45 billion), the Group, through Hydra, continue to retain more of the primary $500 million of that contract as well. In overall terms, the Clubs are changing in complexion, and becoming more like excess insurers than the primary insurers they were 10 years ago. Increased deductibles have been a long time coming, and represent a philosophical shift in the role of the Club as part of the owner s business. In addition to seeing the cost of attritional claims falling, we would expect to see claims handling costs fall as frequency of claims decline, and clubs claims departments shrink in terms of staff numbers. At the other end of the spectrum, exposures to bigger retained risks continue apace as Clubs become more commercially minded Not all Clubs are equal in terms of their underwriting performance, notwithstanding the homogenous nature of their retained risk profiles. In the table overleaf figures have been calculated using policy year data and so do not allow for any claims development beyond 36 months. The combined ratio is calculated by dividing Net Claims Incurred + Administration Costs by Call income less Reinsurance Premium less Acquisition Costs. Excess calls are ignored in these figures. 05

8 2014 IN NUMBERS Underwriting 7 YEAR COMBINED RATIO BY CLUB YEAR ENDED 12m 24m Average last 7 years SHIPOWNERS 99.97% 98.26% 96.33% JAPAN % 96.73% SKULD % 97.89% STEAMSHIP % % NORTH OF ENGLAND % % GARD % % % AVERAGE % % % UK % % % AMERICAN % % % STANDARD % % % SWEDISH % % % WEST OF ENGLAND % % % BRITANNIA % % % LONDON % % % Gard figures continue to be impacted by their reduced deferred call in the past 5 years, as, to a limited effect, have those of the UK Club and Britannia who also under called in one of the years in the cycle. The result shown for Britannia is further complicated by the incomplete disclosure of the performance of Boudicca. Bearing in mind the increase in Boudicca s net assets since , and that company s likely investment income, the real combined ratio for Britannia might be slightly worse. The results at the Shipowners Club and Skuld continue to excel, in the former case perhaps reflecting the fact that their primary competition is from the fixed premium market and so they are under pressure to get the pricing right first time, and in the latter case mainly due to the performance of their nonmutual portfolio of business. The performance of the Japan Club is heavily influenced by the Yen/Dollar exchange rate and may be somewhat misleading. Performance at the West of England is improving, whilst that of the Standard Club is heading in the opposite direction. Gard have recovered from a bad 13 which saw them beset by a series of large losses that pushed their combined ratio to comparatively high levels. On an overall underwriting result basis, the 14 financial year has therefore turned out reasonably well, although this is more due to back year favourable development than it is due to the pure policy year result, which stands at an underwriting loss of $405.7 million. GROUP WIDE UNDERWRITING RESULT IN $ MILLIONS YEAR TO 20 FEB FY U/W RESULT $200 million of this difference is due to favourable back open year development and some $70 million improvements have been seen in closed back years. The balance, almost $90 million, has been earned on non P&I business, including FD&D. 06

9 2014 IN NUMBERS Investments INVESTMENT INCOME ON FINANCIAL YEAR BASIS IN $000 s The collective investment income earned by the Clubs on a financial year basis is set out in the table below: YEAR TO 20 FEB INVESTMENT INC FOREX GAINS The amount of investment income is stated after deduction of taxation. Ordinarily the foreign exchange gains arise as a result of two things: forward selling predominantly dollar income to meet administrative costs in local currency and hedging against claims liabilities that will arise in non reporting currency. This year however the biggest element of loss has arisen in the Japan Club where significant dollar strengthening has weakened their Balance Sheet. INVESTMENT YIELD ON FINANCIAL YEAR BASIS, ON INVESTED ASSETS YEAR TO 20 FEB INVESTMENT YIELD % 4.1% 2.9% 4.5% % 10.1% In the table above, and that below, a simple yield has been computed by dividing gross investment income by total invested funds at the year end. At the midpoint of the year, there were considerable doubts about the eventual level of investment income for the year. Several Clubs were reporting negative or zero income and almost all were seeing yields well below the figure 12 months earlier. The latter part of the year saw a significant revival and eventually the overall level of investment income might be characterised as satisfactory if below par. 7 YEAR INVESTMENT ON TOTAL ASSETS, BY CLUB % The biggest underperformance in the year came at the Standard Club whose yield, second worst in the market, was out of character with previous years performances, which had seen them near the top of the performance table. This was down to strategy decisions in the first half of the year to position themselves defensively and to reduce US equity holdings at a time when this sector performed well. It was also for the latter reason that the American Club more heavily involved in US equities produced one of the better returns in the Group. The London Club was the top performer on the year, achieving a yield in excess of 6% in the year despite not being overpositioned in equities. Steamship and the Japan Club remained steadfast in their refusal to invest in equities albeit that the latter Club does not have that option. North of England cautiously dipped their toes into the equity market, but the portfolio remains strongly biased on security over yield. The underwriting result at these three clubs therefore is more critical since they have minimal investment returns as to bolster the bottom line. The year was characterised by mixed fortunes equity markets in the developed economies performed well, despite concerns over the scaling back of quantitative easing measures and fears of interest rate rises. Conversely equity performance in the developing economies was more sluggish, impacted by political events and slower economic growth. There was growing confidence in the sustainability of the global economic recovery and government bond yields rose during the early part of the year, albeit they fell back towards the end of the financial year. The year ended with data supporting an optimistic outlook for the US, UK and Japanese economies, with low but sustained economic growth and interest rates rising very slowly over the next few years. The table overleaf sets out the composition of the Clubs investment portfolios at the year end. Cells shaded green are where the equity element goes up by more than 5%; cells shaded pink indicate years when the equity allocation fell by more than 5% YEAR ENDED Average last 7 years GARD 3.07% 4.93% 3.83% BRITANNIA 4.08% 3.44% 3.81% LONDON 6.11% % SHIPOWNERS 3.37% 6.12% 3.3 AMERICAN 5.03% 5.31% 3.18% STANDARD 1.06% 5.34% 3.03% MARKET AVERAGE 2.84% 3.68% 2.81% UK % 2.68% WEST OF ENGLAND 3.34% 4.11% 2.49% SWEDISH 2.51% % SKULD 3.95% 2.53% 1.89% JAPAN % 1.62% NORTH OF ENGLAND 1.36% 1.27% 1.42% STEAMSHIP 0.51% % 07

10 2014 IN NUMBERS Investments INVESTMENT PORTFOLIO MIX PROPORTION INVESTED IN EQUITIES YEAR TO 20 FEB AMERICAN 40.63% 40.84% 34.82% 33.23% 27.74% 21.21% BRITANNIA % 16.12% 16.44% 20.53% 14.99% GARD 32.42% 21.57% 20.29% % 20.61% JAPAN LONDON 25.11% 22.95% 22.21% 22.34% 20.61% 20.72% NORTH OF ENGLAND 6.86% 0.01% 0.01% 0.01% 0.01% 2.09% SHIPOWNERS % 22.94% % SKULD 19.69% 17.24% 17.32% % 10.76% STANDARD 20.66% 17.47% 20.22% 29.03% 34.03% 31.98% STEAMSHIP 3.64% 3.59% 3.39% 2.34% 6.56% 12.54% SWEDISH 23.41% 11.79% 11.81% 19.38% 17.44% 12.59% UK 25.97% 28.39% 19.31% 23.74% 22.94% 11.55% WEST OF ENGLAND % 24.15% 29.19% 26.93% 22.87% During 14, The UK Club took a bullish stance on equity investments, as did the American Club to a lesser degree, whilst the West of England took a contrary opinion and reduced their equity exposures. Subsequent to the year end, North of England has cautiously dipped its toes back into the equity market, with a 7.5% allocation at August, whilst West of England has maintained its safety first approach noted in 13 The first six months of 14 saw a return to poor yields, with the Clubs collectively incurring an investment loss between February and August. Care should be taken in interpreting this statistic though since at an equivalent stage last year several Clubs reported only breakeven investment income through 6 months, and in some cases net losses. Generally markets recovered in September and October and so the only thing that can be categorically stated is that yields are volatile! $600m $500m $400m $300m $200m $100m Unrealised Gains Realised Gains $0 $100m $200m $300m $400m $500m $600m $700m $800m The above graphic, which tracks annual realised and unrealised losses, demonstrates the club fund managers at work. The unrealised gains and losses in each year broadly track the market movements, whilst the realised gains and losses demonstrate the fund managers reactions and profit taking. 08

11 2014 IN NUMBERS Overall Result So despite a gloomy looking position at the midyear point, particularly in relation to investment income, the Clubs still managed to make a surplus of $231.4 million, and this was after a $39 million pension adjustment at North of England. GROUP WIDE OVERALL RESULT IN $ MILLIONS YEAR TO 20 FEB FY OVERALL RESULT Fee Reserves continue to move inexorably upwards, reaching $4.3 billion by the end of 14. Not bad for a not for profit provider of insurance at cost! 2014 OVERALL RESULT IN $000 s Investing Underwriting 80,000 60,000 40,000 $000 s 20, ,000 40,000 West of England UK Swedish Steamship Standard Skuld Shipowners North of England London Japan Gard Britannia American Subsequent to the 2014 year end, various Clubs have reported interim results, as follows: CLUBS GARD SHIPOWNERS SKULD STANDARD SWEDISH UNITED KINGDOM WEST OF ENGLAND PERIOD 6 months to 14 6 months to 14 9 months to 14 Projected months to months to 14 6 months to 14 RESULT Profit $129 million Profit $15.2 million Profit $20.0 million Breakeven Profit $10.3 million Breakeven Profit $11.6 million The discussions surrounding these results show a mixed bag of comments as regards claims levels. Some see claims at expectation, some below, but most importantly no one is complaining about extremes of claims. Pool claims so far have been relatively benign but there is three months of the Atlantic winter to go. Again the variations are being sparked by large random claims within the retention: a trend that has emerged strongly over the past 5 years as deductibles increase and risk retentions have also risen. Investment income, whilst better than at the same time 12 months ago, remains sluggish. 09

12 GROUP REINSURANCE In contrast to the 14 reinsurance renewal, the renewal of the International Group reinsurance programme was a stroll in the park. Granted the Costa Concordia claim had escalated into the third excess layer, but the Rena claim was more stable and no new claims had emerged. The eventual result saw an increase of some 5% in premium for all classes except passenger vessels, which saw a 2 increase, reflecting the higher layer penetration by Costa Concordia and further clawbacks by the lower layers. Additionally the pool retention was increased by a further $10 million to $80 million. Further thought was given to introducing a separate rating structure for container vessels but this was eventually, once more, set aside. In general the opportunity to make radical changes to the programme structure was resisted, although there was one innovative change in that part of the coverage was placed on a fixed premium 3 year deal. This placement is slightly out of synchronicity with the main programme, covering 5% of $1 billion excess of $100 million, hence straddling the primary, second and third excess layers. The primary Individual Club retention remained unchanged at $9 million, otherwise the pool layering was unchanged (albeit the upper upper layer was extended) with the upper upper and upper pool ICR s remaining at the same percentage. Hydra s role was unchanged and it continued to coinsure a 3 line on the primary layer of the reinsurance programme. Its reinsurance of the basic pool exposure changed in parallel with the increased pool retention and covered claims between $30 million and $80 million. Hydra s participation on the first excess layer of the group programme continued to be protected by a $250 million excess of $250 million retrocession (10 figures) effectively limiting its exposure to $75 million. Hydra is a multicellular captive formed by the International Group as a vehicle to allow the Clubs to accumulate reserves and eventually take on more risk. It may be that its time is about to come. Hydra s results themselves, as reflected via Britannia s cell share, have been volatile, as one might expect in a vehicle where claims have high severity and low frequency. For 14 the cell result was back into surplus, with the cell income exceeding outgoings by $1.1 million, in contrast to a $1.9 million deficit in the preceding year. On a positive note for owners, the US Voyage Surcharge in respect of oil tankers was reduced to nil. The surcharge had been falling annually since 1994, and had reached levels that were as little as 1 of the peak surcharge level in Additionally there was a 1 reduction in the cost of P&I excess war risk reinsurance. The renewal has commenced with rumours of a renewal as is, although it is unclear what structural changes may be required to underpin the zero premium increase. An eventual structure featuring a $10 million individual club retention and a $100 million pool retention seems inevitable, it being a question of when, rather than if. Quite where this would leave the smaller clubs is open to debate. GROUP REINSURANCE RATE BY TYPE OF VESSEL IN CENTS PER GT Dirty Tanker Clean Tanker Dry Passenger 10

13 GROUP REINSURANCE continued The Group Reinsurance Programme, CUMULATIVE VALUE $6,200m $3,080m $2,080m * $1,080m * LAYERS Uninsured Overspill: Reverts to Pooling approximately $3,120 million. Collective Overspill Layer $1,000 million. General Tower only. One Reinstatement. 3rd Excess Layer $1,000 million. General Tower only. Unlimited Reinstatements. 2nd Excess Layer $500 million. Towers: General & Oil Polution. Unlimited Reinstatements. $580m * $80m $60m $45m $30m $9m 1st Excess layer $500 million. Towers: General & Oil Polution. Unlimited Reinstatements. Upper Upper Pool $20 million, reinsured by Hydra. Upper Pool $15 million, reinsured by Hydra. Lower Pool (B) $15 million, reinsured by Hydra. Lower Pool (A) $21 million. Individual Club Retention ( ICR ) $9 million. 3 Coinsured by Hydra. 5% ICR. 1 ICR. * 5% of the $ 1billion dollar placing between $100 million and $1,100 million is placed on a 3 year fixed price basis. Actual coverage offered with a standard Club entry is modified to tie in with the above reinsurance structure, and has sub limits as follow: As regards oil pollution: $1 billion; As regards passenger losses: $2 billion; As regards combined passenger and crew losses: $3 billion The Group Reinsurance Programme, 14 CUMULATIVE VALUE $6,100m $3,070m $2,070m $1,070m LAYERS Uninsured Overspill: Reverts to Pooling approximately $3,130 million. Collective Overspill Layer $1,000 million. General Tower only. One Reinstatement. 3rd Excess Layer $1,000 million. General Tower only. Unlimited Reinstatements. 2nd Excess Layer $500 million. Towers: General & Oil Polution. Unlimited Reinstatements. $570m $70m $60m $45m $30m $9m 1st Excess Layer $500 million. Towers: General & Oil Polution. Unlimited Reinstatements Upper Upper Pool $20 million, reinsured by Hydra. Upper Pool $15 million, reinsured by Hydra. Lower Pool (B) $15 million, reinsured by Hydra. Lower Pool (A) $21 million. Individual Club Retention ( ICR ) $9 million. 3 Coinsured by Hydra. 5% ICR 1 ICR Actual coverage offered with a normal Club entry is modified to tie in with the above structure, and has sub limits as follows: As regards oil pollution: $1 billion; As regards passenger losses: $2 billion; As regards combined passenger and crew losses: $3 billion 11

14 2015 RENEWAL CIRCUMSTANCES Two consecutive years where general increases of over 8% were sought looks to have allowed to regain some control over their underwriting results: 14 saw a return to some sanity with a small deficit only, and looks to be running smoothly so far. How much this is due to a premium increase, rather than deductibles eroding attritional claims frequency is unclear however. At the end of the day, the frequency of large random claims is what will make or break the result. The table opposite sets out the entered tonnages of each Club, both owned and chartered, together with their respective market shares by owned tonnage, and the Free Reserves. In the past a measure of Clubs solvency could be obtained by dividing Free Reserves by owned tonnage or indeed policy year premium income as a measure of relative risk. However with business diversity continuing to grow apace and, in some cases, patchy clarity of disclosure, these old style measures are becoming of limited value. As the Clubs become more commercial, then their comparability becomes less easy. The eventual use of a business based risk model to determine capital adequacy will of course overcome a lot of these uncertainties and variables. With the implementation dates for Solvency 2 seeming to be locked into place for January , it will not be too long before we start seeing appropriate solvency disclosures in club financial statements. The question will then be one of interpreting what we see and understanding the implications. CLUB AMERICAN BRITANNIA GARD * JAPAN LONDON NORTH OF ENGLAND SHIPOWNERS SKULD STANDARD STEAMSHIP SWEDISH * UK WEST OF ENGLAND FREE RESERVE $ MILLIONS 57, , , , , , , , , , , , ,196 OWNED TONNAGE MILLIONS GT CHARTER TONNAGE MILLION GT 0.3 * consolidated Free Reserves In some cases the Free Reserves have been embellished with excess call income over the past 7 years, the issuance of subordinated debt and various corporate restructuring. The table below shows the approximate impact of call deviations for the last 5 years; the first figure is the actual supplementary call, the second is the planned supplementary call and where appropriate the $ figure is the impact on Free Reserves of the deviation FREE RESERVE $ MILLIONS 1.59% 10.39% 17.55% 8.65% 4.05% 12.22% 2.22% 7.14% 10.15% 6.14% 3.54% 11.28% 5.11% CLUB AMERICAN / / / / / BRITANNIA 4/45% 45%/45% 4/4 4/4 4/4 $15.0m GARD / 15%/ 15%/ 2/2 15%/ $ 34.8m $30.70m $15.0m $28.2m JAPAN 4/4 4/4 4/4 4/4 5/4 +$13.8m LONDON / / / / / NORTH OF ENGLAND / / / / / SHIPOWNERS / / / / /1 SKULD / / / / / STANDARD / / / / / STEAMSHIP / / / / / SWEDISH / / / / / UK / / / (2.5%)/ / $7.3m WEST OF ENGLAND 35%/35% 35%/35% 3/3 3/3 3/3 Following the abandonment of the EU Investigation into the operation of the International Group in August, the Clubs have introduced particular rules in the International Group Agreement which govern the quantum of release calls. These are enshrined in Clause 8.1 and begin with the important motherhood statement that the release call percentages shall reflect its assessment of the risk that the published levels of expected premiums may be exceeded. These are set out opposite 12

15 2015 RENEWAL CIRCUMSTANCES continued CLUB AMERICAN BRITANNIA GARD JAPAN LONDON NORTH OF ENGLAND SHIPOWNERS SKULD STANDARD STEAMSHIP SWEDISH UK WEST OF ENGLAND NEXT YEAR PLANNED 20. TBA TBA TBA CURRENT YEAR 20. Rates marked as TBA indicate where the Club has not announced the prospective Release Call for the forthcoming year. 17.5% 20. In setting these Release Calls the Clubs are expected to take into account the following risk factors: Premium risk; Reserve risk; Catastrophe risk; Market risk; Counterparty default risk; Operational risk % % % Generally speaking the levels of Release Calls are slightly falling, which, given the frequency of favourable back year development over the past few years, they really should. This is particularly true in respect of the older policy years. Given the homogenous nature of the risk, and the degree of risk sharing involved in the system, it is perhaps hard to understand why such deviations exist in the level of release call. The low levels seen at the Japan Club (due territoriality) and SOP (due to size of vessel and fixed price competition) might perhaps explain their low level but why do Steamship need when Standard only require 8% for the year? This must perplex the managers of Carnival who have a 50/50 quota share placing with the 2 Clubs. After two consecutive years with 8% general increases, and significant uplifts in the allocated group reinsurance cost, a 3.3% general increase will give owners some relief. There is however no gain without pain, and deductibles both continue to increase and also are starting to apply to fees and surveys etc. Not only does this cost the owner more in claims cost but also it increases the owners management cost for dealing with the smaller claims in house. While the clubs may see attritional claims falling, that simply means owners pay for more of their own small claims. On the whole, emphasis continues to shift away from general increases and more towards specific tailored increases based on claims experience. Whilst only Skuld has outright abandoned general increases, Gard and SOP are well on the way to doing so and others may well follow. This is another sign of how mutuality is being eroded by commercialism in today s marketplace. The unknown in the renewal process remains the impact of the phrase + the incremental increase in group reinsurance costs. This may, as speculated above, be a year with renewal as is in general. If renewal is as expiring, there may even be a reduction in the reinsurance cost for some vessel classes, as entered GT will have risen. However even then it is unlikely that owners of passenger vessels will avoid an increase entirely, as reinsurers continue to extract a further pound of flesh in respect of the Costa Concordia. 13

16 2015 RENEWAL CIRCUMSTANCES continued 18% 16% 14% 12% 1 8% 6% 4% 2% P&I FD&D The following table summarises the General Increases announced for to the date of publication of this review: CLUBS AMERICAN BRITANNIA (1) GARD (2) JAPAN (3) LONDON NORTH OF ENGLAND (4) SHIPOWNERS SKULD (5) STANDARD STEAMSHIP SWEDISH UK / UKDC WEST OF ENGLAND Notes: P&I 4.5% 2.5% 2.5% % 0. N/A % 6.5% 2.5% FD&D 4.5% % 0. N/A (1) Britannia also reduced the deferred P&I call by 5% and the deferred FD&D calls on the previous 2 years, effectively resulting in a small reduction of cost across the decisions; (2) Gard P&I figure is an increase designed to achieve a 105% Combined Ratio Net; (3) Owners risk 3%, Charterers risk 5% and Naiko coastal craft risk ; (4) Inclusive of 2. for pool claims; (5) Skuld once again eschew the concept of a general increase; (6) In all cases, with the exception of Shipowners Club, the incremental cost of the Group Reinsurance programme will be passed on to members 14

17 APPENDIX 4.1 American Steamship Owners Mutual Protection and Indemnity Association, Inc IN A SNAPSHOT Owners GT 17.0 million GT Market Share by GT 1.59% General Increase 4.5% Free Reserve $57.3 million Annual Premium Income $98.1 million CALLS ORIGINAL LATEST RELEASE GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 3% 9% 48% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating BBB 3% 45% 7% 45% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s On this page and on succeeding pages, cells shaded pink indicate policy years where excess calls took place; light blue cells indicate years where premium was not called in full. YEAR TO 31 DEC PY PREMIUM * PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: New York, London, Piraeus, Shanghai, Hong Kong FREE RESERVE TOTAL FUNDS * full annual estimated at $98.1 million for

18 APPENDIX 4.2 The Britannia Steam Ship Insurance Association Limited IN A SNAPSHOT Owners GT million GT Market Share by GT 10.39% General Increase 2.5% Free Reserve $471.9 million Annual Premium Income $274.9 million CALLS ORIGINAL LATEST RELEASE 45% 45% 45% % 45% 45% % % GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 2.8% 6.1% 53.1% 38% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A Figures include the net assets of Boudicca Insurance Company Limited as part of the Club s Free Reserve notwithstanding their existence in a separate legal entity under common ownership. At 20 February 2014 this amounted to $118.9 million. Underwriting Offices: London, Hong Kong 1% 34% 34% 31% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM * PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S FREE RESERVE TOTAL FUNDS BOUDICCA , , , , * full annual estimated at $98.1 million for 14 16

19 APPENDIX 4.3 China Shipowners Mutual Assurance Association IN A SNAPSHOT Owners GT 31.7 million GT Market Share by GT n/a General Increase n/a Free Reserve $1,091.8 million Annual Premium Income $70.0 million CALLS ORIGINAL LATEST RELEASE GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 1 23% 67% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating n/a Not all data is available on the Club and that which is available has not necessarily been prepared on a consistent basis with that of the International Group members. Data is in respect of P&I and FD&D element of Club only. 4% 13% 2% 23% 21% 37% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM * PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: Peking, Hong Kong, Shanghai, Dalian FREE RESERVE TOTAL FUNDS 1, , * full annual estimated at $70.0 million for each of 12 and

20 APPENDIX 4.4 Assuranceforeningen Gard Gjensidig IN A SNAPSHOT Owners GT million GT Market Share by GT 17.55% General Increase 2.5% Free Reserve $944.6 million Annual Premium Income $582.0 million CALLS ORIGINAL LATEST RELEASE % 5% 15% 5% 2 15% 1 GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 9% 66% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A+ With the exception of policy year data, figures set out below for onwards are group figures and include the results and the Free Reserves applicable to the Marine & Energy business portfolio. 4% 12% 2% 29% 18% 35% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT Underwriting Offices: Arendal, Bergen, Oslo, Gothenburg, Helsinki, Piraeus, London, New York, Tokyo, Hong Kong, Singapore, Rio de Janeiro, Imabari FY OVERALL RESULT CLAIMS O/S FREE RESERVE TOTAL FUNDS , , , , , , , , , , ,

21 APPENDIX 4.5 The Japan Ship Owners Mutual Protection & Indemnity Association IN A SNAPSHOT Owners GT 92.0 million GT Market Share by GT 8.65% General Increase * 3% Free Reserve $156.0 million Annual Premium Income $233.2 million CALLS ORIGINAL LATEST RELEASE 4 4 5% 4 4 5% 4 4 5% 4 4 5% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating BBB+ * Charterers Risks 5%, Naiko Class 12.4% 56.2% 11.4% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 31 MAR PY PREMIUM * PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT Underwriting Offices: Tokyo, Kobe, Fukuoka, Imabari, Singapore, London (liaison) CLAIMS O/S FREE RESERVE TOTAL FUNDS * full annual estimated at $233.2 million for

22 APPENDIX 4.6 The London SteamShip Owners Mutual Insurance Association Limited IN A SNAPSHOT Owners GT 43.1 million GT Market Share by GT 4.05% General Increase 6% Free Reserve $160.6 million Annual Premium Income $96.6 million CALLS ORIGINAL LATEST RELEASE 15% 15% 12.5% 5% 4 4 GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 4% 34% 62% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating BBB 57% 18% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: London, Piraeus, Hong Kong FREE RESERVE TOTAL FUNDS

23 APPENDIX 4.7 North of England P&I Association Limited IN A SNAPSHOT Owners GT million GT Market Share by GT 12.22% General Increase 4.75% Free Reserve $312.3 million Annual Premium Income $321.3 million CALLS ORIGINAL LATEST RELEASE 2 5% 5% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 1 7% 35% 48% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A 8% 1% 37% 24% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM * PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT Underwriting Offices: Newcastle, Durham, Piraeus, Hong Kong, Singapore, Tokyo CLAIMS O/S FREE RESERVE TOTAL FUNDS , * full annual estimated at $233.2 million for

24 APPENDIX 4.8 The Shipowners Mutual Protection and Indemnity Association (Luxembourg) IN A SNAPSHOT Owners GT 23.6 million GT Market Share by GT 2.22% General Increase Free Reserve $298.9 million Annual Premium Income $243.8 million CALLS ORIGINAL LATEST RELEASE 1 1 GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 23% 10.73% 43.95% 22.32% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A 43.48% 24.04% 4.32% 14.49% 13.67% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: London, Singapore FREE RESERVE TOTAL FUNDS

25 APPENDIX 4.9 Assuranceforeningen Skuld (Gjensidig) IN A SNAPSHOT Owners GT 76.0 million GT Market Share by GT 7.14% General Increase n/a Free Reserve $334.5 million Annual Premium Income $297.0 million CALLS ORIGINAL LATEST RELEASE 15% 15% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 1% 11% 21% 67% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A 8.6% 1.7% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT Underwriting Offices: Oslo, Bergen, Copenhagen, Hamburg, Piraeus, Hong Kong, Singapore, New York, Aberdeen, London FY OVERALL RESULT CLAIMS O/S FREE RESERVE TOTAL FUNDS

26 APPENDIX 5.0 The Standard Club IN A SNAPSHOT Owners GT million GT Market Share by GT 10.15% General Increase 5. Free Reserve $368.5 million Annual Premium Income $325.0 million CALLS ORIGINAL LATEST RELEASE 8% 4% 3% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 9% 18% 31% 42% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A 3% 9% 11% 26% 26% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT Underwriting Offices: London, Piraeus, New York, Tokyo, Singapore, Hong Kong, Rio de Janeiro CLAIMS O/S FREE RESERVE TOTAL FUNDS

27 APPENDIX 5.1 The Steamship Mutual Underwriting Association (Bermuda) Limited IN A SNAPSHOT Owners GT 65.3 million GT Market Share by GT 6.14% General Increase Free Reserve $301.2 million Annual Premium Income $304.5 million CALLS ORIGINAL LATEST RELEASE 1 5% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 7.4% 23.4% 38.9% 30.3% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A 3.2% 12.8% 39.3% % SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: London, Hong Kong, Rio de Janeiro, Piraeus FREE RESERVE TOTAL FUNDS ,

28 APPENDIX 5.2 Sveriges Angfartygs Assurans Forening (The Swedish Club) IN A SNAPSHOT Owners GT 37.7 million GT Market Share by GT 3.54% General Increase 2.5% Free Reserve $164.7 million Annual Premium Income $100.0 million CALLS ORIGINAL LATEST RELEASE 2 15% 1 7.5% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 56.7% 43.3% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating BBB+ With the exception of policy year data, figures set out below are group figures and include the results and the Free Reserves applicable to the Hull and Energy business portfolio. 5.76% 3.02% 31.03% 40.17% 20.02% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 31 DEC PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: Gothenburg, Piraeus, Oslo, Tokyo, Hong Kong FREE RESERVE TOTAL FUNDS

29 APPENDIX 5.3 The United Kingdom Mutual Steam Ship Assurance Association (Bermuda) Limited IN A SNAPSHOT Owners GT million GT Market Share by GT 11.28% General Increase 6.5% Free Reserve $528.3 million Annual Premium Income $394.8 million CALLS ORIGINAL LATEST RELEASE 15% 15% 1 5% 4 2.5% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 3% 9% 38% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating A Figures include the subordinated loan capital issue in as part of the Club s Free Reserve notwithstanding its status as being theoretically repayable to the providers of the capita predominantly Club members 3% 4% 38% 15% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: London, Piraeus, Jersey City, San Francisco, Tokyo, Hong Kong, Singapore, Shanghai, Beijing FREE RESERVE CAPITAL ISSUE TOTAL FUNDS , , , , , , ,

30 APPENDIX 5.4 The West of England Ship Owners Mutual Insurance Association (Luxembourg) IN A SNAPSHOT Owners GT 54.4 million GT Market Share by GT 5.11% General Increase 2.5% Free Reserve $216.2 million Annual Premium Income $195.3 million CALLS ORIGINAL LATEST RELEASE 35% 35% 35% 35% 3 35% 35% 15% 35% 35% 5% GEOGRAPHY EUROPE ASIA PACIFIC AMERICAS AFRICAMIDDLE EAST INDIA 6.3% 5.8% 38.3% 49.6% VESSEL TYPE TANKER/GAS CARRIER CONTAINER/GENERAL CARGO BULKER PASSENGER FERRY OFFSHORE OTHER S&P Rating BBB+ 2% 2.8% 39.2% 28.4% 27.6% SUMMARY FINANCIAL PERFORMANCE IN $000,000 s YEAR TO 20 FEB PY PREMIUM PY CLAIMS PY RESULT FY UW RESULT FY INVEST RESULT FY OVERALL RESULT CLAIMS O/S Underwriting Offices: London, Piraeus, Hong Kong FREE RESERVE TOTAL FUNDS

31 ALTERNATIVE FACILITIES, INCLUDING FIXED PREMIUM OPTIONS The bluewater P&I insurance market is dominated by the International Group of P&I Clubs, but there are, nonetheless, other facilities which offer alternative coverage aimed at specific types of vessel operator. Many of these are situated in local ports, but we will here focus on those facilities, predominantly fixed, which are generally accessed via London brokers. As discussed above, these facilities tend to target niche owners and smaller, short trade vessels, principally operating in coastal or inland waters. The primary plus points of insuring with these facilities is that they offer certainty of cost and also offer a lower limit of liability, each of which may be more appropriate to particular owners needs. The facilities mentioned below offer various limits of liability, but additionally excess protections can potentially be obtained in the commercial market in the event that these are required. The fixed sector have long pointed to the advantages of the lower limits that they offer, but, with the evertoughening regulatory environment in which shipowners operate requiring bigger limits, this advantage continues to erode and the fixed facilities are starting to offer increased standard limits. Whilst there have been no major stand alone entrants in the market in 2014 it remains considered opinion that the small vessel sector has become saturated with over capacity. The Group Clubs continue to focus on developing this area of the business, whether via stand alone facilities such as Eagle Ocean and Carina or within the core of the main club. It remains the case that the IG Clubs still insure a greater share of smaller vessels than are insured by the alternatives. In the immediate term this represents good news for the owner, as there is evidence that rates are falling in response to oversupply of capacity. Whether this remains true in the longer term is more questionable, as, like the hull market, where more capacity chases a finite pool of business, the longer term bond between an owner and his insurer is being sacrificed in pursuit of immediate return. After many years in its creation, and its own Act of Incorporation, the Hellenic Mutual Protection Indemnity & War Risks Association has surrendered its independence and been incorporated into Aiagion Insurance Co SA. The Club started underwriting P&I risks in but premium income has barely exceeded $1 million per annum. QBE INSURANCE (EUROPE) LTD T/A BRITISH MARINE Estimated Premium Income: $100 million (10,700 vessels) P&I Tonnage: 11.0 million GT S&P: A+ (rated as core QBE company) British Marine is now but a trading style, with the company itself having been integrated into the Australian QBE Insurance Group. For many years it was itself a mutual, but outside the International Group, until demutualization in Its roots are in coastal trade, which remains its main target business, looking to underwrite vessels of up to 10,000 GT whilst avoiding passenger vessels, dirty tankers and reefers. British Marine seeks to avoid vessels trading to the USA and vessels plying transatlantic or transpacific routes, and no longer accepts Turkish business. Maximum limit $500 million or $1 billion in exceptional circumstances. It also offers Hull and FD&D risks. NAVIGATORS MANAGEMENT (UK) LTD Estimated P&I Premium Income: $21.4 million P&I Tonnage: 2.0 million GT S&P: A (Navigators Group inc) London based subsidiary of US insurance company, underwriting risks on behalf of its parent, Navigators Group. Limit up to $500 million CSL, looking at vessels smaller than 10,000GT although larger vessels are acceptable as part of a fleet. Navigators avoid passenger vessels, and those trading to USA or plying transatlantic or transpacific routes. OSPREY UNDERWRITING AGENCY LTD Estimated P&I Premium Income: $30 million P&I Tonnage: 2.25 million GT (1,800 vessels) S&P: A+ (Lloyd s syndicates) London based agency underwriting under a Lloyd s binding authority. P&I coverage limits generally $1 million for US business and up to $100 million for the rest of the world. Maximum vessel size: 25,000 GT for dry cargo, 10,000 GT otherwise. Also offers crew only, MEL, MGL and various other liability coverage as well as hull & machinery. Osprey Special Risks offers yacht hull and liability insurance which is underwritten on behalf of Great Lakes Reinsurance (UK) plc as regards the primary $1 million and Lloyd s as regards $9 million excess liability. 29

32 ALTERNATIVE FACILITIES, INCLUDING FIXED PREMIUM OPTIONS AMLIN EUROPE NV/RAETSMARINE BV Owners P&I: Estimated Premium Income: $52 million. Tonnage 15.4 million GT Charterers P&I Estimated Premium Income: $25.5 million. 21,000 vessels S&P: A (Amlin Corporate Insurance) This facility has its roots in the consolidation and rebranding of the former Raets Club (Charterers P&I) and Intercoastal (Owners P&I) facilities. In March the facility was acquired by Amlin Corporate Insurance NV and the combined operations are being streamlined into centres of excellence. Maximum size of vessel up to 40,000 GT for owners P&I, whilst avoids passenger vessels, dirty tankers and reefers. Trading limits are restricted to non USA and no vessels plying transatlantic or transpacific routes: business being predominantly European dry cargo vessels. Maximum limit $500 million, P&I and $2 million FD&D. EAGLE OCEAN MARINE Estimated Premium Income: $7.0 million P&I Tonnage: 0.6 million GT S&P: BBB (The American Club) The facility started underwriting in October 2010, focussing on smaller ships involved in regional trade. It offers limits of $25 million for P&I and a further $25 million in excess P&I cover. The facility is managed by a sister company of the Manager of The American Club and so can access their network of correspondents and claims servicing staff. Security is the American Club, which itself has a quota share reinsurance arrangement with Lloyd s in respect of these risks. HYDOR AS Estimated Premium Income: $9.0 million P&I Tonnage: 1.3 million GT S&P: A+ (Lloyd s syndicate 2987) The facility started underwriting in 2010, and is based in Oslo. It underwrites Owners and Charterers P&I business, up to $500 million limit, and also Hull & Machinery business with a Euro 5 million limit. It also targets smaller vessels up to 10,000 GT. The facility was founded by former Skuld business development director Johannes Gjernes. ROSGOSSTRAKH LIMITED Estimated P&I Premium Income: $4.8 million P&I Tonnage: 1.4 million GT Local Rating from Expert Ra: A++ Marine P&I division which was formed in with the arrival of ex Ingosstrakh team, the company offers $100 million cover to predominantly Russian companies which make up 85% of the portfolio. The company is also open to underwriting selective international business. Maximum vessel size 25,000 GT (8,500 GT for tankers) predominantly coastal and inland vessels. INGOSSTRAKH INSURANCE CO Estimated P&I Premium Income: $21.8 million P&I Tonnage: 5.0 million GT S&P Rating: BBB The company was founded in 1947 and, whilst it has an international portfolio, the majority of its business is derived from Russia, the FSU countries and Eastern Europe. Limits offered are $500 million P&I and $1 million FD&D. No theoretical vessel size restriction is imposed but typically vessels range from small coastal up to 10,000 GT. Tankers, cruise vessels and US based business are avoided. HANSEATIC UNDERWRITERS (Managed by Zeller Associates) Estimated Premium Income: $19.5 million P&I Tonnage: 2.7 million GT S&P Rating: A+ Lloyd s (AA Allianz Global) The Hamburg managed Hanseatic Underwriters Consortium revamped its underwriting security in August and now offers a primary P&I limit of $50 million for owners and charterers P&I underwritten by Lloyd s syndicates (Navigators, Torus, Novae Hiscox and ANV) together with Swiss Re and Austrian company UNIQA. A further $450 million excess cover is available via Lloyd s and Allianz Global. FD&D cover to a limit of $2 million is also available with the Lloyd s and UNIQA consortium as security. LODESTAR MARINE LIMITED Estimated Premium Income: $25.0 million P&I Tonnage: 21.8million GT S&P Rating: A (RSA) The manager was formed as a breakaway from British Marine and started trading in mid. Primary capacity of $100 million is provided by RSA with a further $400 million available underwritten by Lloyd s and London companies. As well as P&I and FD&D, the facility can offer salvors liability, SOL to cargo, contractors liability and war risks covers. Vessels limits typically up to 10,000 GT for tankers and 20,000 GT for bulkers. CARINA (Managed by Tindall Riley Marine Ltd t/a Carina Managers) Estimated Premium Income: not disclosed P&I Tonnage: 2.0 million GT (4,200 vessels) S&P Rating: A+ (Lloyd s) This is a new facility started in and is focussed on owned and chartered small craft of under 5,000 GT. Security for the primary $50 million limit is provided by a consortium of Lloyd s underwriters, and a further $450 million limit is available for owners entries only. Additionally Defence cover is available. 30

33 KOREA SHIPOWNERS MUTUAL P&I ASSOCIATION Estimated Premium Income: $31.8 million P&I Tonnage: 21.1 million GT AM Best: A The Club was established in 2000 offering a basic limit of liability of $300 million (up to $1 billion with reinsurance from Lloyd s, Korean Re and ACR). The Club attracts large tonnage up to 100,000 GT for dry cargo but limits itself to just 10,000 GT for tankers. The vast majority of its business is Korean, but it has recently expanded into other far Eastern countries as well as by sponsoring a fledgling Indonesian P&I facility, Proteksi Maritim Indonesia (Promindo). NORWEIGAN HULL CLUB PIDEF Estimated Premium Income: $11.0 million No. of vessels: 1,900 S&P: A The above figures relate purely to the Charterers Liability book of business in the Club, which is predominantly a Hull mutual association. It began to underwrite this class of business in. It offers a limit of liability of $200 million in respect of Charterers P&I, FD&D and damage to hull risks with a further $300 million xs $200 million being available. COASTAL MARINE SERVICES LIMITED Estimated Premium Income: $5.0 million P&I Tonnage: 1.05 million GT (1,650 vessels) S&P: A+ (Chaucer Syndicate 1084) The facility was launched in with the formation of a coverholder partnership between Coastal and Chaucer to underwrite P&I and Hull and Machinery risks on behalf of the latter. It restricts itself to vessels of up to 5,000 GT (no US FOM) and offers a standard limit of $50 million. CHARTERERS P&I CLUB Estimated Premium Income: $28.2 million No of vessels: 12,500 S&P: AA (Great Lakes/Munich Re) A facility managed by Michael Else & Co, offering with underwriting security having changed from Lloyd s to Great Lakes in. Charterers Club was formerly a mutual facility, but demutualised and became a fixed premium facility in As its name suggests, it underwrites charterers risks only, offering a limit of up to $50 million, but with options to $500 million. The facility also offers FD&D protection to a $2 million limit. CHARTERAMA Estimated Premium Income: $10.0 million No of vessels: 10,500 totalling 7.5 million GT S&P: A (RSA) Charterama is a charterers risks only facility based in Rotterdam, which was started in March by staff formerly with Raets Marine. Limits offered are up to $100 million for Charterers Liability and Cargo Owners Legal Liability and $2 million for Charterers FD&D. Capacity is provided by RSA from November, having previously been provided by REAAL Schadeverzekeringen NV. 31

34 Contact us Broking Team Andrew Hills Managing Director Tel No: Mob No: Roy Bearman Tel No: Mob No: James Burt Tel No: Mob No: Jack Carruthers Tel No: Mob No: Harry Hooper Tel No: Mob No: Robert Hubbard Tel No: Mob No: Anthony Leng Tel No: Mob No: Claims Team Lee Mould Claims Director Tel No: Mob No: Melvin Free Tel No: Mob No: Jonathan Hawkins Tel No: Dean Longley Tel No:

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