Market Structure The Nordic Association of Marine Insurers.

Market Structure

The Nordic Association of Marine Insurers

Business modelA. Scandinavian

Ship owner/Management

company(Assured)

Broker

Claims leader

Co-insurers

CoverClaim informationClaim payment

Business modelB. Non-Scandinavian


company(Assured)

Broker

Claim leader

Co-insurers




company (Assured)

Adjuster

Claims Leader

Co-insurers


Survey



company(Assured)

Broker

Claims Leader

Co-insurers


Adjuster

Distribution of risk

Insurer

Foreign capital

Capital / assets

BrokerShip owner

Reinsurance

Market structure - overview

Ship owner

Broker

Insurer

Reinsurer

Market structure - overview

Ship owner

Broker

Insurer

Reinsurer

Risk information

Premium and

claim payment

Terms

Syndicated risks –

• Two or more underwriters / insurers subscribe to the same risk against their portion of the premium, risk and claims = Spread of risk

• Used in• Marine, energy, transport and aviation insurance

• Reinsurance

• Larger non-marine risks


Syndicated risks

Co-insurance

• Two or more insurers each have part of the risk under a single insurance

• In practice, the insurer with the largest line acts as «lead», but the co-insurers is not obligated to follow a «lead» if they not want to

• Chapter 9 in the Plan regulates relationship between the claims leader and the co-insurers


The Global Marine Insurance Market

Premium Volume 2011 (USD billions) –

• Marine liability (non-P&I Clubs) 1.8 ( 5.7%)

• Offshore / energy 4.5 (14.2%)

• Hull & Machinery 8.4 (26.2%)

• Cargo / transport 17.2 (54.0%)

• Total 31.9

• Mutual P&I Clubs 3.4

Estimated global premium volum USD 34 billion (IUMI Sep 2012)



Premium Volume 2011 (USD million) – Hull & Machinery

• Nordic / Cefor 933 11%• UK ILU/IUA 294 4%• UK Lloyd’s 1243* 15%• China 932 11%• Japan 697 8%• France 512 6%• Italy / US / Netherlands 361 each 4% each• Korea / Spain 300 each 3% each• Rest 2,167 26%

8,400*incl fac reinsurance premium



Premium Volume 2011 (USD million) – Cargo / transport

• Japan 1.961 11%• China 1.548 9%• Germany 1.204 7%• UK Lloyd’s 1.170 7%• France 860 5%• US 774 5%• Brasil 688 4%

- - -• Nordic 378 2%• Rest 8.600 50%

17.200



Results – Gross ultimate loss ratios %

(Technical break even is achieved when the gross loss ratio does not exceed 100% minus expense ratio, usually 20 – 30%)

(IUMI Sep 2012 – Net premium vs. net claims)


Uwr yr H&M Cargo

2004 72 59

2005 71 63

2006 88 58

2007 82 76

2008 81 75

2009 76 63

2010 76 69

2011 96 73


Premium Volume 2011 (USD million) – Offshore Energy

• UK Lloyd’s 2.615 58%• US / Brasil / Nigeria / Malaysia 210 4 – 5% each• Nordic 135 3%• Rest 945 21%

(4.500)


The Global Marine Insurance MarketClaim trends (by policy years) –

• H&M

• 2007 Starts at high loss ration level, - expected to produce technical loss, premium increases do not balance cost inflation

• 2008 Fewer major claims, but uncertainty iro the effect of change in market conditions and repair cost

• 2009 Continued improvement on major losses (i.e. fewer)

• 2010 Claim costs and loss ratio stabilize at high level

• 2011 Impact of major claims

• Cargo / transport

• 2002 – 2007 Overall stable results

• 2005 Slightly worse than average – Katrina

• 2007 Signs of worsening trend

• 2008 Worsening trend confirmed

• 2009 Impact of catastrophe losses

• 2010 Worsening trend confirmed, loss ratio stabilize at high level

• 2011 Impact of natural catastrophes and increased GA claims



Claim trends –

• Offshore• Volatile business• Rates, terms and conditions improved after 2000 • Long time lag between accident and claim payment• No regular claims patterns• Increasing effect of single loss events• Events with high liability cost in 2009 and 2010


Market conditions mid 2013

Important issues –• Flat world / global market place• Financial crisis: Most insurance buyers are influnced by

reduced financial activity, - rebounced 2009/10 and then to cool off again, - light at the end of the tunnel?

• Amount of cargo transported is increasing but values are diminishing

• Vessel values are reduced• Offshore Energy proceeds at high pace and with new risk

challenges (more advanced tecnologies)• Capital crunch and reduced (lack of) financial income

increases focus on technical results for underwriters• Regulatory issues / moral hazards(Subjective views of the lecturer)


Market conditions going forward from mid 2013

• Important issues listed will influence the insurance market

• Survival based on long term sustained profitable underwriting

• Financial income important but not to be relied upon • Service providers vs. capital providers• Distribution

(Subjective views of the lecturer)


Market Structure The Nordic Association of Marine Insurers.

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