2010 Houston Marine Insurance Seminar Westin Galleria Hotel September 20 th , 2010

2010Houston Marine Insurance Seminar

Westin Galleria HotelSeptember 20th, 2010

Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited1

Evolutionary Change at OIL


Genetic Evolution


Corporate Evolution & Adaptation

It is unlike genetic evolution Brought about by internal and external forces Can be slow or fast In OIL’s case, the forces have been both

monumental and subtle Ivan, Katrina, Rita & Ike: $3.3 billion in claimsRating & Premium Plan: Leaks, shifts & others Deepwater Horizon: TBD


Windstorm Changes

5 Oil Insurance LimitedMarine Insurance Seminar - Sept 20, 2010

Ivan, Katrina, Rita & Ike

In hindsight, Ivan, Katrina & Rita

• Demonstrated that the mutual did not adequately allocate premium based upon Atlantic Named Windstorm (ANWS) risk

• Onshore and Offshore ANWS Sectors were introduced in 2007

Ike• Demonstrated that the ANWS Sector Weightings

were very difficult to properly calibrate and that large losses still produced scaling of limit

• New Windstorm Plan in 2010


Windstorm losses have contributed over 58% of OIL’s total losses during the past 5 years and 49% over the past 10 years

From 1999 to 2003, windstorm losses only accounted for 6% of OIL’s total losses

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Historical Losses (10 yrs)

Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Windstorm Losses

8 Business Sectors

New Windstorm Plan Summary

$150M part of $250M Quota Share per occurrence limit

Per shareholder annual aggregate limit = twice the per occurrence limit

Losses up to an annual aggregate retention of $300M are mutualized among all members in the Standard Pool

Losses above the $300M retention are mutualized among windstorm members in two new pools (onshore & offshore)ANWS Sectors are eliminated

No losses flow through the Flat Pool

Oil Insurance Limited8Marine Insurance Seminar - Sept 20, 2010

New Windstorm Plan Summary

New deductible discount curves No deductible scaling Premium weighting for high vs. low windstorm

activity areas Rest of the World coverage

Differs from ANWS Other features

New Retro coverage & pricing mechanism for both windstorm and non-windstorm losses

Oil Insurance Limited9Marine Insurance Seminar - Sept 20, 2010

Loss to Premium Flows

Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited

$150M Q/S

Deductible

$300MPer

Shareholder Annual

Aggregate Limit

$750MPer Event

Aggregation Limit

$300M WS Pools’ Annual Aggregate Retention

(8 Business Sectors & Standard Pool Only)

Onshore Excess Pool

Offshore Excess Pool

Multiple events are added together at year’s end before allocation to the WS Pools’ Annual Aggregate Retention and Excess Pools

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Limits Premium

Rating & Premium Plan (R&PP) Changes



Old R&PP – What was bad?

Changes in WGAs can shift premium from one group of members to another

Immediate & Automatic

System is subject to “surprises”

The use of Current WGA to calculate Current Premium & TWP

Optionality Complexity

APS discourages deductible changes

Members must account for future obligations to OIL (TWP)

New Lock-In Method

It maintains the same 5 year post loss funding method of the Old R&PP

The new plan is designed to:

Eliminate significant swings in premium and TWP

Simplify the R&PP formula

Eliminate the periodic and unintended shifting of premium and TWP from one or more members to others



New Lock-In Method

WGA calculation and Sector Weightings remain independent of this method

Pool %N = Weighted Gross AssetsN

Total Weighted Gross AssetsN

Final Pool % in any given year is calculated using the Gross Assets reported as of December 31 from the prior year

Premium is only affected in the year following a new loss year and new Pool %’sAsset Year → Pool % Year → Premium Year


New Lock-In Method

Current Premium(separate calculations for Standard and Flat Premium)

20% of Losses1 * Pool %1





Expenses1 * Pool %1

Risk Premium Factor (+ or -), if any

Deepwater Horizon


OIL’s Response

OIL will likely wait for final legal, regulatory & financial requirements to be established before contemplating change.


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Thank You


Oil Casualty Insurance, Ltd.

Marine Insurance Seminar

September 20, 2010

Oil Casualty Insurance, Ltd.Marine Insurance Seminar - September 20, 2010

Hurricanes Katrina & Rita

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Hurricanes Katrina & Rita’s impact on OCIL:

– Speculative reaction by rating agencies– Exposure analysis– Executed new underwriting strategy

• Increased attachments• Reduced maximum limits • Reduced expected losses and volatility• Growth and diversity


Significant Changes Since the Hurricanes

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2006• Reduced the minimum limit required for membership to $25 million from $50

million

2008• Shareholders approved amendments to the Shareholders’ Agreement to

provide for Non-Shareholder Policyholders and to allow OCIL to act as a reinsurance company

• Maximum Policy Limit reduced to $100M• Policy form flexibility (claims made and occurrences reported)

2009• Wrote first assumed treaty reinsurance contract

2010• Shareholders’ Agreement was amended permitting other lines of insurance

subject to ¾ approval by the Board of Directors


Where we are today!

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• 2009 & 2010 saw significant growth and wider spread of business from direct writings and assumed reinsurance transactions

• 60 Shareholders and 10 Policyholders headquartered in U.S., Canada, South America, Europe & Africa.

• 4 Treaty Reinsurance Programs


Who we are today!

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• S&P’s May 2010 report states that OCIL’s capital adequacy ratio is above S&P’s minimum for the AAA range

• Strong reinsurance program provided by quality reinsurance companies


Impact from Deepwater Horizon

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• OCIL’s exposure to the event is minimal

• Questions remain on how the conventional market will react in maintaining capacity

• Awaiting outcome of government drilling ban and amendment to OPA

• OCIL has seen an increase in submissions and requests for increased limits since the explosion

• OCIL is responding promptly to inquiries

THANK YOU!

2010 Houston Marine Insurance Seminar Westin Galleria Hotel September 20 th , 2010

Documents

Transcript of 2010 Houston Marine Insurance Seminar Westin Galleria Hotel September 20 th , 2010