Hull Underwriting from a Reinsurer‘s Perspective

Guido J. Ammann

4th International Conference on Insurance and Marine Transportation

Aqaba, 13 to 15 May 2013

About me…Guido J. Ammann

■ Joined EchoRe in May 2009

■ Till October 2008, Senior Marine Underwriter at SwissRe for specific countries in Asia and the Middle East

(facultative and treaty; hull, cargo)

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DEVKOur parent company : A very strong backing

■ Leading German mutual insurance company based in Cologne

■ Founded in 1886 as an insurer for employees of the German Railways

■ 2012 premium income of € 2.6 billion and assets of € 13.7 billion

■ Personal lines only (Life, Health, Property & Casualty as well as reinsurance)

■ Over 4 million customers and more than 13 million policies

■ A+ (stable outlook) rating by Standard & Poor’s and Fitch

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EchoRe in a nutshellFinancial strength and professional dedication

■ Founded in November 2008 as a public limited company in Zurich, Switzerland

■ Wholly owned subsidiary of DEVK Group

■ Licensed and regulated by the Swiss supervisor FINMA (Financial Market Supervisory Authority)

■ Serves its clients through a team of dedicated and highly experienced underwriters

■ Strives to build sustainable, long-term and mutually beneficial partnership with all clients

■ Key figures 2012

■ Capital funds CHF 75.1 million

■ Premium income CHF 33.2 million

■ Investments CHF 63.6 million

■ Operating profit CHF 1.3 million

■ Solvency Ratio 687 %

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Our financial strengthA solid foundation

■ Strong capital funds/premiums ratio of over 2.2 (in 2012)

■ Composition of capital funds (as at 31/12/2012):

■ Share capital: CHF 50.0 million

■ Reserves: CHF 25.1 million

■ Fitch Rating “BBB+ positive outlook”

The outlook was reconfirmed in March 2013

■ Financial flexibility: Ability to rapidly deploy additional capital from the parent company, if and when needed

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Our portfolioDiversification across lines of business and regions

Split by class of business Split by territory Split by treaty type

* Mainly business ceded by DEVK

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Marine Hull UnderwritingFactors to consider

Age

Tonnage

Break-up

Trading

Propulsion

Reinsurance

Construction

Ownership

Statistics

Hull conditions

Flag

Type

Socio economic

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How come ships are always addressed as «She»?

“A ship is called a she because there is always a great deal of bustle around her, there is usually a gang of men about, she has a waist and stays; it takes a lot of paint to keep her good looking, it is not the initial expense that breaks you, it is the upkeep; she can be all decked out; it takes an experienced man to handle her correctly; without a man at the helm she is absolutely uncontrollable. She shows her topsides, hides her bottom and, when coming into port, always heads for the buoys!”

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Age

■Year of Construction■Refitting of vessel

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Types of vessels

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Types of vessels

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Types of vessels

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Types of vessels

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Flag

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Socio-economic environment

■Human element/moral hazard■Working conditions/environment■Motivation■Language

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Human element (1)…

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Human element (2)…

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Human element (3)…

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Statistics 1/2

■„The marine hull market is facing challenges on all sides with a steady stream of losses, rising reinsurance rates and results that continue to disappoint.“

■„The loss frequency has shown no signs of slowing down in 2012. The Rena, Costa Concordia (on its way to becoming the largest insured loss in maritime history) MSC Flaminia, MT Bunga Alpinia, bulk freighters Flash and Ocean Breeze are just some of the claims to have hit the market in 2012.“

(Source: London broker)

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Statistics 2/2

■Total Losses: more than 50% of the dry cargo capacity lost was from bulkers older than 25 years (period 2008–2012)

■Major Single Cause of Serious Losses with 35% remains from incidents occurring to the machinery and in the engine room.

(Source: IUMI 2012 Shipping Statistics)

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Conclusion

■There are many different factors to be considered when writing a profitable book of hull risks.

■Unfortunately, and generally speaking, the results are often rather disappointing.

■Despite the above I‘m of the opinion that it is possible for a reinsurer to write a profitable book of marine hull, provided there is a sound technical approch to the risk itself in combination with a trustworthy relationship with the insurance company.

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Thank You!

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Contacts

Echo Reinsurance LimitedBrandschenkestrasse 18-208001 Zurich

T +41 44 283 16 16F +41 44 283 16 19

info@echore.chwww.echore.ch