IUMI 2018 REPORT ON WORLD MERCHANT FLEET AND WORLD TRADE

IUMI 2018 REPORT ON WORLD MERCHANT FLEET AND WORLD TRADE Donald Harrell Chairman IUMI Facts & Figures Committee, Head of International Insurance and Global Head of Marine - Aspen Insurance September 17, 2018

IUMI Facts & Figures Program Update on Facts & Figures Committee Report on World Merchant Fleet and World Trade Don Harrell, Chairman IUMI Facts & Figures Committee Major Claims Database Pilot David Matcham, Chief Executive, IUA Global Marine Insurance Report Astrid Seltmann, Analyst/Actuary, CEFOR Sub-Saharan Africa: Medium term opportunities and risks Thea Fourie, Senior Analyst, Sub-Sahara Region, IHS Markit Cargo / Hull / Energy Facts Sheets 2

Facts & Figures Committee Members Donald Harrell Chairman London, United Kingdom Astrid Seltmann Vice Chair Oslo, Norway Philip Graham Vice Chair London, United Kingdom Marika Svalskulla Secretary Stockholm, Sweden Mathieu Daubin Paris, France David Matcham IUA London, United Kingdom Jun Lin London, United Kingdom Lars Lange Executive Committee Liaison Hamburg, Germany Erika Schoch Armonk, NY USA Li Zhang Beijing, P.R. Of China Javier Alonso Puente Madrid, Spain Paul Hackett Singapore Andrea Mazza Genova, Italy Jesse DeCouto Pembroke, Bermuda Ben Chung Hong Kong Tetsuya Watanabe Tokyo, Japan Lisa Yu London, United Kingdom

Key Data & Content Providers 4

IUMI Major Claim Database Project Create a large and consistent loss database (hull and cargo) with standardized data from member companies in order to analyze major losses with respect to loss severity, frequency, location and cause

Managing Emerging Risks & Exposures Think the Unthinkable Artificial Intelligence Smart devices Tracking / monitoring Robotics Smart Logistics Autonomous Shipping Pre underwriting surveys InsureTech Risk Modelling Claims mitigation / Claims escalation Internet of Things Block Chain Predictive Analytics Autonomous Ships & Trucks 6

Global Marine Market Snapshot 7

Marine Premium 2017 by line of business Total estimate 2017: 28.5 USD billion / Change 2016 to 2017: +2% NB: Exchange rate effects! 2017 12% 24% 7% Global Hull Transport/Cargo Marine Liability Offshore/Energy 57% Hull & offshore energy share reduced 1%, Cargo share up 2%. 8

Marine Premiums 2017 by region 9.7% 5.6% 4.0% 2.4% 2017 49.2% Europe Asia/Pacific Latin America North America Middle East Africa 29.2% Total: 28.5 USD billion 9

Macro Economic Outlook 10

Key Issues for the Global Economy 2018 US policy shifts on trade, regulations and taxes T & O Potential sharper than expected inflation T Global trade is still growing despite Brexit and Trump O Extent of US dollar appreciation/ depreciation T & O Imbalances in China's Credit, Housing and Industrial markets T Path and final status of the UK's exit from the EU T & O Political instability and banking problems in the Eurozone T Conflicts in the Middle East, Africa and Korean Peninsula T Changing Technology landscape T & O Global economic growth on track to be the fastest since 2011 O Predicted high levels of energy consumption O Relatively Stable Oil prices T & O Extreme weather events and natural disasters T Source: PWC https://www.pwc.com/gx/en/issues/economy/global-economy-watch/economic-predictions-2018.html 11

Global real GDP is growing at its fastest pace since 2010 Projected 2.7% growth in 2018 and 2.9% in 2019, in line with the expansion of global GDP Real GDP Source: IHS Markit 2018 IHS Markit 12

Emerging Markets lead global real GDP Growth Estimated 3.1% average GDP growth in the subsequent five years (2019-23), before gradually easing off in the longer term Real GDP Source: IHS Markit Economics and Country Risk 13

Asia-Pacific (excluding Japan) will achieve the fastest growth rate in real GDP Europe Real GDP expanded 2.5% in 2017 its strongest pace since 2007 Real GDP Source: IHS Markit Economics and Country Risk 14

China s massive debt will constrain future monetary policy, credit growth, and investment Real GDP and industrial production Source: IHS Markit 2018 IHS Markit 15

World Trade Volumes Excellent world trade outlook with solid trade growth in the first quarter of 2018 following robust expansion in 2017. Commodity prices forecast to increase Year Trade Tonnes 2016 $13.6 billion 2017 $14.1 billion 2018 $14.5 billion 2019 $14.9 billion Year Trade Real Value 2016 $21.7 trillion 2017 $22.7 trillion 2018 $23.6 trillion 2019 $24.6 trillion Source: IHS Markit World Trade Service Commentary WTO World Trade Outlook Indicator 12 February 2018 16

World Trade Volumes expected to grow Trade volumes are expected to grow 3 times as quickly as in 2016 Source: IHS Markit World Trade Service Commentary RBC Economic Research 17

World Seaborne Trade Source: Clarksons Research, March 2018 18

World Seaborne Trade By Industry Energy Crude Oil Products Steam Coal Gas Energy 38% Seaborne Trade in 2017 11.6 billion tonnes Metal Industry Iron Ore Coking Coal Other Ores Steel Products Metal Industry 25% Agricultural Agriculture 11% Container Container 16% Other Cargo Other Dry Chemicals Other 10% 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 5 000 Million Tonnes of Cargo, 2017 September 2018 19 Source: Clarksons Research, March 2018

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 (f) 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018 (f) World Seaborne trade still growing Growth: Seaborne Trade vs World GDP Seaborne Trade per Capita 12% 8% 4% 13 12 11 10 9 bn tonnes Seaborne Trade (LHS) Trade per Capita (RHS) Milestone 2 2013: Trade reaches 10bn tonnes tonnes pp 1.7 1.6 1.5 1.4 1.3 0% -4% -8% Seaborne Trade Growth World GDP Growth 8 7 6 5 4 Milestone 3 2017: Trade reaches 1.5 tonnes per person 1.2 1.1 1.0 0.9 0.8 85% of trade is seaborne and growth historically has been well correlated to global economic growth. 3 2 1 Milestone 1 2000: Trade passes 1 tonne per person 0.7 0.6 0.5 Sea trade cycles generally follow cycles in world GDP but not precisely. 0 0.4 2018 3.9% GDP growth and 3.1% growth in trade? 12bn tonnes in 2018 forecast Source: Clarksons Research, September 2018 20

U.S. China trade TEU Volumes: % Growth Forecasted Values Chinese Imports from U.S. U.S. Imports from China Source: IHS Markit World Trade Service 21

Inflation outlook revised higher Stronger global demand will bring a quicker acceleration in prices Source: IHS Markit Economics and Country Risk OECD, November 2017 22

Purchasing Manager Index signals pick up in economic growth Global economy starts 2018 on a solid footing with PMI highest since September 2015 as emerging market growth hits five-year high Global economic growth Developed vs emerging market output Source: IHS Markit Economics and Country Risk 23

Stronger economic expansion in USA while modest expansion in China & Japan and slowdown in Europe Purchasing Managers Indices, monthly data Source: Swiss Re Institute Datastream, Bloomberg 24

Slowdown in regional population growth through 2030 Total population, Compound annual growth rate Source: IHS Markit Economics and Country Risk 25

Maritime Industry Outlook 26

World Fleet Growth Easing Source: Clarksons Research, September 2018 27

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* Million GT Million GT Global Fleet Development Global Fleet, End Period Growth (GT) Deliveries Demolitions 1 400 10% 120 1 200 1 000 800 600 400 200 9% 8% 7% 6% 5% 4% 3% 2% 1% 100 80 60 40 20 0-20 -40 0 0% -60 Source: Clarksons Research, August 2018 Note (1): Includes all vessels above 100 GT. Note (2): 2018* = year to date. 28

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Average Age Average Age Average Age of the World Fleet 27.5 Total Bulkcarrier Gas Tanker Containership/MPP Others 30.0 Global Fleet <2,000GT Global Fleet >=2,000GT 25.0 22.5 25.0 20.0 17.5 20.0 15.0 15.0 12.5 10.0 10.0 7.5 5.0 5.0 Source: Clarksons Research, August 2018 Note (1): Includes all vessels in these categories above 100 GT. Note (2): Average age is calculated using number of vessels. Calculations are based on year and month of build. 29

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 No. of vessels Tanker, Bulker, Containership and MPP Fleets Tanker Fleet Containership/MPPs Fleets Bulkcarrier Fleet Deliveries (RHS) Scrapping (RHS) 36 000 2 500 32 000 28 000 24 000 20 000 16 000 12 000 8 000 4 000 2 000 1 500 1 000 500 0 0 Source: Clarksons Research, September 2018 Note (1): Includes all vessels in these categories above 100 GT. Note (2): All fleet totals are on the left-hand axis and deliveries and scrapping figures are on the right hand axis. Fleet totals are as at start year; deliveries and scrapping figures are full year totals. 30

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* No. of Vessels million DWT Demolition Levels Historical Global Demolition Totals (No.) Historical Global Demolition Totals (DWT) 1 800 Others Bulkcarriers Tankers 70 Others Bulkcarriers Tankers 1 600 60 1 400 1 200 50 1 000 40 800 30 600 400 20 200 10 0 0 Source: Clarksons Research, August 2018 Note (1): Includes all vessels above 100 GT. Note (2): 2018* = year to date 31

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Ship earnings improving but still competitive 50 45 40 35 30 25 20 15 10 The ClarkSea Index, 2008 - Present US$ 000/day 24 th August 2018 US$12,478/day Average since crisis $11,676/day Annual Average ClarkSea Index (US$/day) OPEX Index (US$/day) 2008 32,659 6,483 2009 11,331 6,289 2010 15,480 6,480 2011 12,314 6,504 2012 9,577 6,691 2013 10,263 6,543 2014 11,743 6,509 2015 14,410 6,395 2016 9,441 6,347 5 2017 10,767 6,391 0 2018* 11,239 6,379 2018* = year to date Note: OPEX Index basis Moore Stephens published statistics, weighted using ClarkSea assumptions. Source: Clarksons Research, September 2018 32

Historical Shipbuilding shares (GT) % Global deliveries Other Countries US China Korea Japan Europe Source: Clarksons Research, March 2018 33

Shipbuilding deliveries by Country Million CGT Output in 2017 0 2 4 6 8 10 12 14 China P.R. 105 yards 11.7 South Korea 15 yards 10.6 Japan 61 yards 6.8 Philippines 0.9 3 yards Italy 0.5 5 yards Germany Taiwan 0.4 0.3 3 yards 2 yards The number of yards refers to yards that have delivered a vessel of 1,000 GT and above in 2017 Romania Vietnam United States 0.3 0.2 0.2 5 yards 7 yards 16 yards 313 yards are reported to have delivered a vessel of 1,000 GT or above in 2017. This compares to 2016 when 353 yards output at least one vessel >1,000 GT, including 119 Chinese yards, 15 South Korean yards and 67 Japanese shipyards Other 1.6 91 yards Source: Clarksons Research, March 2018 34

Environmental Regulation timeline accelerating Source: Clarksons Research, August 2018 35

OFFSHORE ENERGY OUTLOOK

Offshore & Energy Shipping & Trade 2017(e) 17% of energy, 25.5m bpd and 115bn cfpd 2017(e) 11.6bn tonnes, 84% of world trade Nuclear, 4% Hydro, 7% Renewables, 3% Bioenergy, 1% Oil Onshore, 24% Crude Oil 17% Gas & Chemicals 6% Oil Products 9% Iron Ore 13% Coal 10% Oil Offshore, 9% Coal, 30% Gas Offshore, 8% Gas Onshore, 16% Other Dry 8% Containers 16% Other Dry Bulk 21% Source: BP Statistical Review, Clarksons Research Source: Clarksons Research, March 2018 37

Offshore: Potentially brighter future? 1986 Downturn 2006-08, 2011-2014 2015-2017 2018 Forecast Overproduction by the Saudis caused a major downturn in the offshore industry. This resulted in significant stacking of assets (Invergordon, Cromarty shown above). Record high oil prices stimulate investment in ever-more sophisticated assets capable of ultra- Deepwater operations Overproduction by the OPEC members Significant rise in US Shale Gas Increased number of rigs stacked and large inventory of rigs Increase in price of oil has increased activity in the oil & gas exploration and production sectors Demand for crude is expected to remain healthy

Crude oil prices Crude oil prices increase rapidly in response to strong global demand Source: IHS Markit Economics and Country Risk 39

Dayrates Worldwide 500 $ 000/day 450 400 Average Floaters Worldwide Average Jack-Up Worldwide 350 300 250 200 150 100 50 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data Source: Clarksons Research 40

Rig Utilisation Further increases in mobile offshore drilling unit (MODU) utilization are anticipated Projected available at year end Current Utilisation Jack-Ups: 66% Floaters: 67% Projected supply at year end Source: Clarksons Research 41

1957 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020+ Number of Deliveries $ (bbl) Rig Age Profile Floater Orderbook Jack-Up Orderbook Floater Fleet Jack-Up Fleet 80 Oil Price ($/bbl) 3 rd generation 70 6 th generation Large orderbook but slippage likely 140 120 60 50 40 2 nd generation 5 th generation 100 80 30 20 4 th generation 60 40 10 20 0 0 2018 oil price is an average year to date August 2018 Data Source: Clarksons Research, August 2018 42

Rig Removals Rig Demolitions Rig Cold Stacking 50 No. Units No. Units 180 Drillship 45 40 35 30 Drillship Semi-Sub >5,000ft Semi-Sub <=5,000ft Jack-Up >300ft Jack-Up <=300ft 160 140 120 100 Semi-Sub >5,000ft Semi-Sub <=5,000ft Jack Up >300ft Jack Up <=300 25 20 80 15 60 10 40 5 20 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Data Source: Clarksons Research 43

MACRO MARITIME LOSS, PORT ACCUMILATION, HIJACK & TERRORISM STATISTICS

Total Losses 2001-2017 As a % of World Fleet (Vessels > 500 GT) Downward trend in total losses as a percentage of World Fleet Source: Fleet numbers : Clarkson Research Services Losses: LLI, total losses as reported in Lloyds List Source: IUMI 2018 Casualty and World Fleet Statistics Clarksons Research 45

Losses By Vessel Type 900 000 GT Other Dry Cargo Non-Cargo Bulkcarriers Gas Carriers Tankers Losses as % of Fleet % of Start Year Fleet (GT) 0.16% 800 0.14% 700 0.12% 600 500 400 300 0.10% 0.08% 0.06% 200 0.04% 100 0.02% 0 2018 ytd = Jan-August 2018 September 2018 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 ytd 0.00% Data Source: Clarksons Research, August 2018 46

Marine Top Risk Accumulation in Ports Not just the biggest container hubs have a high risk of loss, but also smaller ports due to their cargo type and the natural hazards they face No strong correlation between port s size and catastrophe loss potential. 500 year loss. $2 500 000 000 Ports at risk for highest losses due to natural perils $2 000 000 000 $1 500 000 000 $1 000 000 000 $500 000 000 $- The modeling takes into account: cargo type (e.g. autos, bulk grains, electronics specie), precise storage location (e.g. coastal, estuarine, waterside or within dock complex), storage type (e.g. open air, warehouse, container stacked or ground level), dwell time (which can vary due to port automation, labor relations and import/export ratios) Source: RMS Risk Management Solutions 47

Frequency of successful and attempted hijacks - Somalia, Gulf of Guinea and Malay Peninsula Source: IHS Markit 48

Successful & attempted hijacks by attack area Source: IHS Markit 49

Terrorism Risk one year outlook Source: IHS Markit 50

The Global Outlook Summary Global economic growth expected to increase from 3.2% to 3.4% in 2018 and 2019. Fastest pace since 2010 US economy will experience robust growth, thanks to tax cuts and increased government spending Eurozone growth is slowing, but remains above trend UK growth is being undermined by the uncertainty regarding Brexit. Japan s growth is decelerating after a strong run China s growth is holding steady, but will gradually slow as the government aims to reduce excesses in industrial capacity, debt, housing, and shadow banking. Asia s other emerging markets will sustain robust growth. Russia and Brazil will continue to recover from 2015 16 recessions Sub-Saharan African economies continue to record strong growth 51

The Global Outlook Summary Businesses remain upbeat, despite policy and political risks. Trade is again an engine of growth. Commodity prices will rise only gradually if at all during the next two years. Given closing output gaps, inflation will move up but probably slowly. Most central banks will take their time in reducing stimulus (Fed Reserve) US dollar is likely to strengthen in the near term, but then weaken as the growing current-account deficit exerts downward pressure. Policy mistakes remain among the biggest threats to the current expansion. Oil price projected to stabilize through 2019 52

THANK YOU Donald Harrell Chairman IUMI Facts & Figures Committee, Head of International Insurance and Global Head of Marine - Aspen Insurance September 17, 2018