GLOBAL MARINE INSURANCE REPORT 2015 - IUMI · PDF file1 GLOBAL MARINE INSURANCE REPORT 2015...

1

GLOBAL MARINE

INSURANCE REPORT 2015

Astrid Seltmann, Vice Chair F&F, Analyst @ Cefor

THIS YEAR’S ADVICE

Before you enjoy 2014 results…

Check impact of recent 2015 events (Tianjin explosion)!

Before you believe in sustainable improvement…

2015 economic & global environment:

Substantial changes with impact on marine market.

2014 is history.

Focus on 2015 (& 2016) risks and conditions.

GLOBAL MARINE INSURANCE REPORT

Global Marine Insurance – Overview

Focus: The exchange rate rollercoaster

Cargo – Market & results

Focus: Aggregation risk

Hull – Market & results

Focus: 2015 trends

Offshore Energy – Market & results

Focus: A changed market environment

___________________________________________________________

@ www.iumi.com: Tables: Premiums by country & Loss ratios triangulations

http://www.iumi.com/

23.2%

51.9%

6.6%

18.2%

2014

Global Hull

Transport/Cargo

Marine Liability

Offshore/Energy

MARINE PREMIUM 2014 - BY LINE OF BUSINESS

Total: 32.6 USD billion Change 2013 to 2014: -3.2%

Reduction due to strong USD!

In most local currencies,

income stable or increased.

52.6%

25.0%

9.8%

6.4%3.1% 3.0%

2014Europe

Asia/Pacific

Latin America

North America

Middle East

Africa

MARINE PREMIUM 2014 – BY REGION

Total: 32.6 USD billion

BUILDING UP DATA - PREMIUMS

Start

date Area Association

Data

from

1993 IUMI members IUMI, with Cefor 1992

2010 Russia RUMI more market data 2008

2011 China Research Vivian 2008

2012 Asia non-IUMI Research Vivian 2010

Latin America

complete

ALSUM 2010

Middle East complete GAIF 2010

2014 UK – IUA IUA complete IUA

market

2012

Africa FANAF

countries

FANAF/CESAM 2010

2015 - USA AIMU Increase US

market coverage

ongoing

Premiums

change

also

backwards!

0

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

2008 2009 2010 2011 2012 2013 2014

Europe

Asia/Pacific

Latin America

North America

Middle East

Africa

MARINE PREMIUM 2008-2014 – AS OF 2015

UK-IUA

New data

survey

2008: China

2010: non-IUMI Asia

Latin America, Middle East, Africa:

complete data

Global premium:

2013: 33.7 USD bill.

2014: 32.6 USD bill. (both as of 2015)

2014: strong USD «reduces»

income in most currencies

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%20

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

CNY (China)

JPY (Japan)

EUR (Euro)

NOK (Norway)

GBP (UK)

BRL (Brazil)

USD EXCHANGE RATE 2005-2014 AGAINST SELECTED CURRENCIES, INDEX, 2000=100%

Exchange rates not necessarily correlated, but in 2014 weakened most against USD.

2014: strong USD!Many currencies with

double-digit % devaluation.

Source: Norges Bank exchange rates, as of December each year.

60%

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%20

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

CNY (China)

JPY (Japan)

EUR (Euro)

NOK (Norway)

GBP (UK)

BRL (Brazil)

USD EXCHANGE RATE UNTIL 2015AGAINST SELECTED CURRENCIES, INDEX, 2000=100%

2015: even

stronger USD!

* 2015 rates as of August

62%

29%

6% 3%

UK

Nordic

Japan

US

Calls 2014:UK: 2.27 Nordic: 1.08Japan: 0.24US: 0.09Total: 3.69 (USD billion)

P&I CLUBS INTERNATIONAL GROUP GROSS CALLS (PREMIUM) 2014 – OPERATIONAL LOCATION

Stable (+0.06)






Focus: 2015 trends




43.0%

28.9%

12.7%

6.4%5.6% 3.4%

2014

Europe

Asia/Pacific

Latin America

North America

Middle East

Africa

CARGO PREMIUM 2014 - BY REGION

Total: 16.95 USD billionChange 2013 to 2014: -7.1%

Reduction = effect of strong USD!

CARGO PREMIUM 2014 - BY MARKETS

Total: 16.95 USD billion Belgium1.7%

Brazil5.4%

China9.2%

France4.7%

Germany6.9%

Italy2.6%

Japan8.0%

Mexico2.2%

Netherlands2.3%

Nordic1.8%

Russia2.3%

Spain1.3%

UK (IUA)4.1%

UK (Lloyds)8.3%

USA5.9%

Other33.3%

2014

**

** incl. proportional and

facultative reinsurance

*

* AIMU ocean marine

-

500,000

1,000,000

1,500,000

2,000,000

2,500,00020

08

2009

2010

2011

2012

2013

2014

China

Japan

UK (Lloyds)

Germany

USA

Brazil

France

UK (IUA)

CARGO PREMIUM 2008-2014SELECTED MARKETS

2014: strong USD «reduces»

income in most countries.

Difficult to identify «real»

market development (not only

one currency in local figures…)

0%

50%

100%

150%

200%

250%

300%

350%

400%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

World Trade Values

World Trade Volume

Global Cargo Premium

CARGO PREMIUM /

WORLD TRADE VALUES & EXPORTS

Source (World Trade

Volume & Values):

IMF, World Economic

Outlook, April 2015

Exchange rate influence

on USD cargo premium!

Index of evolution, 1995=100%

?

?

IMF estimate

April 2015

0%

20%

40%

60%

80%

100%

120%

140%

19

96

1997

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

2010

20

11

20

12

20

13

20

14

Since 2007: Most

years expected to

end > 70% gross

loss ratio.

2012

Sandy

peak

* 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

CARGO – ULTIMATE* LOSS RATIOSEUROPE/USA**, UNDERWRITING YEARS 1996 TO 2014

August 2015

Tianjin port explosion:

Which impact on 2014

uw year result?

?

2014: Seeming

improvement may

deteriorate due to

Tianjin explosion.

40%

50%

60%

70%

80%

1 2 3 4 5

2009

2010

2011

2012

2013

2014

2011-2013:

Start at similar

level. Gross loss

ratio expected to

end above 70%.

2014:

Starts lower than

2012/2013, but

deterioration

expected due to

Tianjin explosion!

CARGO – ULTIMATE LOSS RATIOS EUROPE/USA**, UNDERWRITING YEARS 2004-13, AS AT 1, 2, 3, 4, 5 YEARS

CARGO CONCLUSIONS

Market: Strong USD ‘hides’ local market growth. Market growth and results differ by region.

Results: Seeming improvement probably outweighed by Tianjin port explosion

(2014 and 2015 underwriting years, various countries).

Claims: Tianjin port explosion potentially largest single cargo loss event ever. Auto industry major contributor to cargo/stock losses. Risk of costly cargo claims expected to increase:

Natural catastrophes (Thailand floods, Sandy)

Increased accumulation risk (Tianjin port)

Outlook: Impact of China/world economy and oil price on trade. Further strengthening of USD. Euro crisis solved? Difficult to predict combined impact of changing economic environment.







Focus: 2015 trends



53.0%34.6%

5.1%5.3%

1.1%1.0%

2014

Europe

Asia/Pacific

Latin America

North America

Middle East

Africa

HULL PREMIUM 2014 – BY REGION

Total: 7.6 USD billionChange 2013 to 2014: -5.8%

** Norway, Denmark,

Finland, Sweden

HULL PREMIUM 2014 – BY MARKETS

China11.9%

France3.9%

Italy4.0%

Japan7.6%

Korea, Republic3.6%

Netherlands3.0%

Nordic11.2%Spain

1.8%UK (IUA)

6.2%

UK (Lloyds)17.1%

USA4.7%

Latin America5.1%

Other20.0%

2014

**

** includes proportional

and facultative reinsurance

*

* AIMU ocean marine

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

2014

UK (Lloyds)

Nordic

China

Japan

Latin America

UK (IUA)

HULL PREMIUM 2004-2014SELECTED MARKETS

Before 2010: only Mexico and/or Brazil

From 2012: extended data survey

Lloyds: increase in

original currencies

Japan: -7% in JPY

(-18,5% in USD)

Latin America:

various influences

70%

80%

90%

100%

110%

120%

130%

140%

150%

160%20

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

CNY (China)

JPY (Japan)

EUR (Euro)

NOK (Norway)

GBP (UK)

BRL (Brazil)

USD EXCHANGE RATE 2005-2014 AGAINST SELECTED CURRENCIES, INDEX, 2000=100%

2014: strong USD!

Exchange rates not necessarily correlated, but in 2014 weakened most against USD.

50%

75%

100%

125%

150%

175%

200%

225%

250%

275%19

95

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Gross tonnage(> 300 GT)

Av. insured vesselvalue (Renewals &newbuilds - Cefor)

Global Marine HullPremium

No. Ships (> 300 GT)

Data source: Insured vessel values: Cefor NoMIS statistics as of June 2015; No. Ships & tonnage: ISL Bremen, as at January 2015.

HULL PREMIUM / WORLD FLEET INDEX OF EVOLUTION, 1995 = 100%

Drop in 2014 hull premium can not

only be explained with strong USD

(global hull often written in USD).

0%

20%

40%

60%

80%

100%

120%

140%

19

96

1997

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

2010

20

11

20

12

20

13

20

14

Since 2009:

Repair cost relative

stable. Volatiliy by

major loss impact

(strong until 2011).

2014: Record-low

major loss impact.

Technical profit for

first time in years?

2013 also improved

(USD effect, when

repairs not in USD?)


** Data: Belgium, France, Germany, (Netherlands), Italy, Spain (until 2007), UK, USA

Costa

Concordia

peak

HULL – ULTIMATE LOSS RATIOS*EUROPE/USA**, UNDERWRITING YEARS 1996 TO 2014

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5

2010

2011

2012

2013

2014

2011:

Unprecedented

total loss impact.

2012:

Similar to pre-

Costa Concordia

years.

2013/2014

Improved results.

Sustainable

change?


** Data: Belgium, France, Germany, (Netherlands), Italy, Spain (until 2007), UK, USA

Costa Concordia

peak

HULL – ULTIMATE LOSS RATIOS*EUROPE/USA**, UNDERWRITING YEARS 1996 TO 2014






Focus: 2015 trends




HULL CLAIMS TRENDS

Drawing by Dagfinn Bakke

(Foto by Astrid Seltmann,

taken on MS Finnmarken)

TOTAL LOSS FREQUENCY 1998-2014TOTAL LOSSES AS % OF WORLD FLEET

Sources: Lloyds

List Intelligence

(Casualty stats)

Clarkson Research

(World Fleet)

Vessels > 500 GT)

Long-term downwards trend

0.00%

0.05%

0.10%

0.15%

0.20%

0.25%

0.30%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

40.00%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Claim frequency, by date of loss

partial claims (left axis) TLO claims (right axis)

CLAIMS FREQUENCY AS OFJUNE 2015CEFOR NORDIC MARINE INSURANCE STATISTICS

Claims frequency – all claims

Total loss frequency

(right axis)

Overall claims

frequency:

Downwards

trend continues.

Total loss

frequency:

Long-term

positive trend –

but do we see a

new increase in

2015?

-

20,000

40,000

60,000

80,000

100,000

120,0001996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Ultimate partial and total claim cost per vessel (USD), by date of loss

Ultimate claim per vessel incl. IBNR Ultimate partial claim per vessel incl. IBNR

CLAIM COST PER VESSEL (USD)CEFOR NORDIC MARINE INSURANCE STATISTICS

Including total losses

Excluding total losses

2014: Next to no

total loss impact.

2015: Renewed

total loss impact.

Excluding total

losses:

Claim cost per

vessel stable

since 2009.

25%

10%

16%

28%

6%

13%

28%

19%

29%

10%

35%36%

19%18%

26%

20%

54%

30%

19%

41%

0%

10%

20%

30%

40%

50%

60%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Claims in excess of 10 MUSD as % of total claim cost

MAJOR CLAIMS IMPACT: CLAIMS XS 10 USD MILLION AS % OF TOTAL CLAIMS COST

2015:

Renewed

impact of

major claims.

Accident

year

Cefor Nordic Marine

Insurance Statistics

as of June 2015

(claims costs reflect

100% of each vessel).

HULL CLAIMS TRENDS

Claims frequency: Long-term positive trend, only

interrupted by peak in 2008.

Total loss frequency: Long-term positive trend, but some

increase in 2015.

Claims cost excluding total losses: Stable since 2009.

Influence of strong USD on recent results?

(If hull premium written in USD, repairs done elsewhere)

Major losses: stay volatile.

2014: Unusually few major claims.

2015: Impact back to expected level.

HULL PORTFOLIO TRENDS




6.0% 5.7%

2.7%

8.5%

4.9%

-14.3%

-9.3%

-3.6%

-6.3%-5.6% -6.0%

-8.4%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%2

00

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

Average annual change in insured values on renewed vessels

Some reduction

expected due to

aging of vessels.

CHANGE IN VALUES ON RENEWAL = VALUE ON RENEWAL / VALUE PREVIOUS UW YEAR FOR SAME VESSELS

Financial

crisis effect

Source: Cefor Nordic Marine Insurance Statistics as of June 2015

THE RISK EXPOSURE –INFLOW OF HIGH-VALUE VESSELS CONTINUES

0%

1%

2%

3%

4%

5%

6%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Portfolio share of ships with values xs 100 USD million

> 300MUSD

100 - 300MUSD

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

Source: Cefor

Nordic Marine

Insurance Statistics

as of June 2015

HULL PORTFOLIO TRENDS

World fleet: Continues to grow, especially in tonnage.

Insured values:

Renewals: some value reduction expected due to aging.

Newbuilds: Inflow of high-value vessels continues.

Overall fleet: Inflow of high-value vessels outweighs

value reduction on renewals to a certain degree.

Global hull premium: Reduction since 2012.

(Strong USD only partial explanation.)

STAYING IN CONTROL




ISSUES TO MONITOR (AND PRICE)

High-value risks

Arctic risks

© Astrid Seltmann

© Astrid Seltmann

© Astrid Seltmann

Navigation

Oil price, fuel quality,

effect of ECA’s?

New technology

Climate changes

Law and liability changes

The human factor/

Qualification

Dagfinn Bakke

(Foto by Astrid Seltmann)Accumulation

HULL CONCLUSIONS

World fleet continues to grow, insured risk increases.

Global hull premium reduced.

Claims frequency improved.

Major claims risk stays volatile and follows exposure.

Technical results improved. For 2014 technical profit

expected – due to extraordinary absence of major claims.

Economical environment is rapidly changing.

For sustainability: All risk aspects must be considered.






Focus: 2015 trends




UK (Lloyds), 47.4%

UK (IUA), 22.3%Brazil, 4.4%

Nigeria, 3.8%

Mexico, 3.6%

Malaysia, 3.1%

Nordic, 2.5%

Japan, 2.4%

Egypt, 1.9%

India, 1.9%

Italy, 1.5%

USA, 1.3%

Other, 3.8%

2014

OFFSHORE ENERGY PREMIUM 2014

No data: Kazakhstan.

*

* incl. proportional and

facultative reinsurance

Total: 5.7 USD billionChange 2013 to 2014: 11.1%

(major part written in USD; two

units with substantial increases)

No data: Kazakhstan.

(large bi-annual renewal)

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Other

USA

Nordic (2011)

Nigeria (2008)

Mexico (2010)

Malaysia

Japan

Italy

India

Brazil

UK-IUA (2012)

UK-Lloyds

OFFSHORE ENERGY PREMIUM 2004-14

Nordic, Nigeria, Mexico: no data available before indicated year;

UK- IUA: from 2012 extended data survey; Kazakhstan: no data available;

*

*

*

*

0%

100%

200%

300%

400%

500%

600%

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Average Day Rates

Global Offshore Energy Premium

Oil price, Brent Crude

No. Contracted Rigs

OFFSHORE ENERGY PREMIUMENERGY MOBILES, DAY RATES, OIL PRICE

Index of evolution, 2000 = 100%

Source: Day rates, contracted rigs: Rigzone

0%

100%

200%

300%

400%

500%

600%2

00

0

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

Average Day Rates

Global Offshore Energy Premium

Oil price, Brent Crude

No. Contracted Rigs

OFFSHORE ENERGY INTO 2015ENERGY MOBILES, DAY RATES, OIL PRICE

Index of evolution, 2000 = 100%Different business mix – Influx of

drillships with higher day rates.

By rig type, day rates stable.

2015 drop in oil price will have

substantial impact on market.

Source: Day rates, contracted rigs: Rigzone

0%

50%

100%

150%

200%

250%

300%

350%

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

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

2005

Katrina & Rita2004

Ivan

2008

Ike

2009-14 no major

hurricane activity

Offshore Energy – Loss Ratios (incl. liability)

Underwriting years 1996 to 2014 / data from UK, US and (new!) Nordic

As of December 2014

OFFSHORE ENERGY – AS OF 2014

Hurricane/weather impact little in recent years (Gulf of

Mexico).

Some large single loss events (physical loss and liability)

in recent years.

Recent years still develop due to long time lag until cost is

fully known, but no severe loss events in 2014.

Positive results in recent years.

OFFSHORE ENERGY – 2015

Strong drop in oil price

Downturn in activity

Costly new projects postponed (deep-water, Arctic)

More risk retained in captives

Series of high-profile losses in 2015(Mexico: platform fire&jackup total loss; Brazil: FPSO fire; US: sinking of spar mooring tendons)

Low interest rates / stock market instability

Many mobiles currently idle.

Weather: little hurricane activity predicted for 2015,

but a single event can produce significant losses.

OVERALL CONCLUSIONS

Seeming improvement in 2014 underwriting year results

probably outweighed by 2015 event impact (cargo!).

Trend towards unprecedented large losses continues

2012 Costa Concordia

2012 Sandy

2015 Tianjin explosion largest marine claim ever?

Market environment and conditions change rapidly.

Focus on 2015 / 2016 risks and conditions!

2015: A CHALLENGING ENVIRONMENT

Low oil price

(reduced offshore activity; fuel price and quality)

Low interest rates / stock market volatility

(investment income)

Where is China & the World economy heading?

(influence on global trade)

Strong USD (various impact)

High values, new technology, increasing accumulation,

Arctic risks, climate,…

Oslo: Astrid

A SAMPLE OF THE GLOBAL F&F TEAM

The cap-provider:

Joachim from Hanover

New York:

Henry

Admin support

Hamburg: Lars

Zurich:

Patrizia

Hong Kong: Vivian

London: Darren

& Dave & Phil

ALSUM/ Latin

America: Erika

Bermudas: Jesse

France: Mathieu

Japan: Tetsuya

Madrid: Javier

Milano: Laura

USA II: Donald

F&F Guest speaker

2015:

Graham Slack

Chief Economist

A.P.Møller-Mærsk Group

Astrid Seltmann

Vice chairman F&F Committee

Analyst/Actuary @ The Nordic Association of Marine Insurers (Cefor)

[email protected]

Thank you!

Gross premium = Premium for insurance including the provision for anticipated losses (the pure premium) and for the anticipated expenses (loading), including also commission and brokerage but excluding taxes and other contributions on insurance premiums. Before deduction of any ceded reinsurance.Written premium = Complete premium due for insurance policies which start, i.e. “are written”, in a specific year (= the underwriting year of the policy). Does not give any information on actual premium payments/instalments, i.e. the cash flow.

Paid claims = Amounts the insurer has paid for known and registered claims less recoveries.Outstanding claims reserve = Claims reserve for reported, but not yet (fully) paid claims, of which the insurer has an estimation of the total amount to be paid. Includes loss adjustment expenses = Sum of total claims estimates minus any amounts already paid for these claims. Total claim = Paid amounts + outstanding claims reserve for all reported claims.IBNR = ”Incurred but not reported” = additional claims reserve on top of the outstanding claims reserve, and which for claims incurred, but not yet known or registered in the insurer’s system. The necessary IBNR reserve is derived by statistical methods based on historical claims ladder statistics.Loss ratio = Claims divided by premiums. Indicator of whether premiums are calculated correctly to match claims and other expenses.Gross loss ratio (in this presentation) = Sum of total claims (and IBNR reserves), divided by gross written premiums

Underwriting year basis = Insurance figures are registered with the calender year in which the insurance policy starts, and to which the covered risks accordingly attach to. Example: a policy with cover period 01.07.06-30.06.07 has underwriting year 2006. Both claims occuring in 2006 and 2007 for risks attaching to this policy are thus attributed to underwriting year 2006. The underwriting year is not closed, so underwriting year figures change as long as there are payments related to policies with this underwriting year.Accident year = Claims are registered with the calendar year in which an accident happens. Claims attaching to the same policy may thus be attributed to different accident years. Example: for the policy with cover period 01.07.06-30.06.07 a claim occuring in 2007 has accident year 2007, but underwriting year 2006. The accident year is not closed, so figures will change as long as there are claims payments related to claims occured in that accident year, e.g. a claim payment made in 2009 for an accident which happened in 2007 will be attributed to accident year 2007.Accounting year (also booking year) = Insurance figures, regardless of their original source date, are booked into that year of account which is open at the time of actually entering the figures in the books. Contrary to the underwriting and accident year, the accounting year is closed at some point in time, usually at the end of one calendar year, such that figures do not change any more once the accounting year is closed. These give the insurance results usually published in companies’ annual reports.

EXPLANATION OF TECHNICAL TERMS

GLOBAL MARINE INSURANCE REPORT 2015 - IUMI · PDF file1 GLOBAL MARINE INSURANCE REPORT 2015...

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