Simon Stonehouse. Hull Underwriter Brit Insurance plc

Transcription

1 Simon Stonehouse Hull Underwriter Brit Insurance plc

2 Issues IUMI Facts & Figures Shipping Climate Shipbuilding Fleet Crew Maintenance and Repair A few issues to watch out for!

3 Report of the Facts an Figures Committee Committee members Angelo Ansaldo Paul Buyl Cédric Charpentier Darren Farr Pamela Frood Patrizia Kern Henry Newman Astrid Seltmann Italy Belgium, replaced by Michel Van hoorickx France, Chairman UK Lloyd s UK IUA Switzerland USA, replaced by James Craig Norway / Secretary and Vice Chairman Simon Stonehouse UK Lloyd s, replaced by Philip Graham 3

4 : strongest growth of GDP for the last 20 years, BRIC countries biggest contributors EVOLUTION OF GDP FOR THE PERIOD FOR SELECTED COUNTRIES (index 100 in 92) China Index India 389 Russia World Source: ISL, UNCTAD, LMIU

5 which has led to a booming global trade in volumes WORLD SEABORNE TRADE VOLUME Development (in million tonnes) - Growth rate Total World Trade % Major trades (mtonnes) Other Cargoes Crude oil + 67% + 30 % + 77 % Total World Trade (m Tonnes) The 4 main Dry Bulk Cargoes* *Iron ore, coal, grain, alumina Source: ISL, UNCTAD, LMIU 5

6 Demand for commodities reached sky high levels and led to strong rise in prices Index 2000 = 100 WORLD MARKET PRICE INDICES FOR SELECTED COMMODITIES Annual Average ( ) - Average in 2008 as at end of May IRON ORE 250,1 200 COAL 161,3 100 CRUDE NON FER.MET AGRI RAW Source: ISL, UNCTAD, LMIU 6

7 Difficulties for the shipping market to absorb the booming global trade has led to massive increase in freight rates Index 72 = 100 FREIGHT MARKET (indices by month) - YEARS 97 to 2008 (to May 2008) Time Charter Index (1 to 2 months) General Freight Index Grain Freight Index Miscellaneous Freight Index Source: ISL, UNCTAD, LMIU 7

8 The shipping market did react and increased massively transport capacity 80% 70% 60% 50% WORLD MERCHANT FLEET of ships of 300gt and over Evolution of the growth rates (GT, DWT and Number of ships) between 95 and 2008 mgt + 68% mdwt + 58% 40% 30% 20% mgt % Nb ships + 23% 10% 0% mdwt % Nb ships + 7.6% Source: ISL, UNCTAD, LMIU 8

9 thanks to new buildings delivery and postponing scrap World Tonnage Additions and Reductions (in mdwt) Additions Reductions mdwt Source: ISL, UNCTAD, LMIU 9

10 Despite pressure on shipping, total losses show a positive trend 0,40% % of World Fleet 0,35% 0,30% 0,25% Total Losses in Nb versus Fleet 0,20% 0,15% 0,10% 0,05% Total Losses in GT versus Fleet 0,00% Source: ISL, UNCTAD, LMIU 10

11 But serious losses show a very steep increase in number, well above fleet growth 1200 Number of incidents 1000 Total Serious ex TL 200 Total Loss Source: ISL, UNCTAD, LMIU 11

12 Prices of raw materials going down World trade of goods down in volumes and even more in values New buildings orders delayed or cancelled Freight rates sliding Possible increase of ships being laid up Uncertainties on future quality of world fleet Increase in number of attritional claims declared What change in our environment shall we expect and even started to notice? We must prepare for difficult times! Source: ISL, UNCTAD, LMIU 12

13 Global premiums reported 2003 to 2007 (accounting years) Reported change 2006->2007 Rough estimate of change 2006->2007 without exchange rate impact Global Hull Transport / Cargo Marine Liability Offshore / Energy 12.0% 11.7% 2.8% 2.5% 9% 5% 0% 0% Total 9.8% 5% USD (millions) Increase & partly due to weakening of USD against European and Asian currencies. Stagnation 05 due to strengthening of USD against major European and Asian currencies.

14 Global Marine Premium (USD Million), as reported 25,000 20,000 Total 15,000 10,000 5, Accounting Year Cargo Hull Energy Liability

15 Marine Hull Evolution of Paid and Total Claims, Gross Premiums as reported, U/W Year 2000 to 2007 (USD) 000 SD 2000 underwriting year 3000 USD 2001 underwriting year 3000 USD 2002 underwriting year 3000 USD 2003 underwriting year end of end of end of end of SD 2004 underwriting year 3000 USD 2005 underwriting year 3000 USD 2006 underwriting year 3000 USD 2007 underwriting year end of end of end of Blue line = Gross Premium; Red line = Paid Claims, Yellow line = Paid+Outstanding claims 0 end of Totals of 9 IUMI members Belgium, France, Germany, Italy, Netherlands, Norway, Spain, UK Lloyds, USA

16 Marine Hull Gross Loss Ratio paid claims, Actual and estimated towards ultimate 140% U/W Year 96 to % Technical break even is achieved when the gross loss ratio does not exceed 100% minus the expense ratio (between 20% and 30%, acquisition costs, capital costs and management expenses) 100% 80% 60% 40% / / % 0% Ultimate Ultimates based on 10 IUMI members: Belgium, France, Germany, Italy, Netherlands, Norway, Spain, UK Lloyds & IUA, USA

17 New Construction Critical points for Underwriters Know the Class Society IACS Has class changed during construction or after delivery Know your Insured Was the vessel started on spec Has the owner monitored all phases of construction Know the yard Established or beach yard How many previous vessels of this type has the yard completed. 17

18 Summing up Hull Marine Hull 2004, 2005: Few major claims, but increase in average repair cost 2006: Increase in number and severity of major claims Trend towards higher attritional claims cost continues Strong impact on result by claims occured in 2007, but attaching to : Starts at high loss ratio level, expected to produce a technical loss again. Premium increases do not sufficiently balance cost inflation.

19 Issues Crew Social responsibility Repair and maintenance Salvage Credit Crisis Image of Shipping Insurance

20 Clarksea Index 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50, Q1 90- Q3 91- Q1 91- Q3 92- Q1 92- Q3 93- Q1 93- Q3 94- Q1 94- Q3 95- Q1 95- Q3 96- Q1 96- Q3 97- Q1 97- Q3 98- Q1 98- Q3 99- Q1 99- Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q3 $ Day

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23 Values

24 Ship Building

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26 Credit Crunch

27 The Fleet

28 Increase in Scrapping

29 Crew

30 Supply and Demand in 2005 Supply 000 Demand 000 Balance 000 Officers Ratings

31 Supply and Demand in % Surplus/d eficit Balance 000 Officers -10,000-2% -27, % Ratings 135,000 % 167,

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33 Criminalisation Hero Criminal BA Air crash Hebei Spirit

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35 Insurance

36 Summary Freight rates Ship Values under pressure Shipping at breaking point in every area Enhanced risk Crew Insurance capacity under pressure worldwide

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38 Simon Stonehouse Hull Underwriter Brit Insurance plc