- does it have a future?- does it have a future?

Simon BealeSimon BealeMarine Divisional Underwriter, AmlinMarine Divisional Underwriter, Amlin

AMLIN

Hull Insurance in the 21st CenturyHull Insurance in the 21st Century

22

Shipping StatisticsShipping Statistics

Market ResultsMarket Results

Current MarketCurrent Market

Future MarketFuture Market

AgendaAgenda

33

Shipping StatisticsShipping Statistics

4

World Merchant FleetWorld Merchant Fleet of ships of 300gt and overEvolution of the growth rates (GT, DWT, and Number of ships) between 1993 and 2004

38,500 ships (+ 10.8%)

39,665 ships + 14.2%

570,325 m GT + 38.9%

488,032 mGT (+ 18.8%)

840,355 m DWT + 26.8%

743,611 mDWT (+ 12.2%)

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Source: Indicators issued from various sources such as ISL Bremen for World fleet and trading figures (as at May 2004) and Clarkson Research Studies for shipbuilding and scrapped vessels (as at June 2004).

5

Total Merchant FleetTotal Merchant Fleet DWT 1993 - 2003

2003 DWT 816,384

1993 DWT 662,553

500,000

550,000

600,000

650,000

700,000

750,000

800,000

850,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

DWT

Source: Institute of Shipping Economics & logistics.

2003

=

+23%growth on

1992

66

Since 1993Since 1993Strong growth (13%) in numbers of vesselsStrong growth (13%) in numbers of vessels

Stronger growth (23%) in world fleet sizeStronger growth (23%) in world fleet size

Average size increased Average size increased

19,100 DWT – 20,700 DWT (9% growth)19,100 DWT – 20,700 DWT (9% growth)

? increased values? increased values

? increased premiums? increased premiums

Fleet GrowthFleet Growth

7

Freight RatesFreight RatesClarksons Index 1990 - 2004

Source: Clarksons Freight Index

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1990 1992 1994 1996 1998 2000 2002 2004

Year

Fre

igh

t In

dex

8

Cargo Shipowners’ EarningsCargo Shipowners’ Earnings

-40,000,000

-20,000,000

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

1999 2000 2001 2002 2003

$ '000 Income

Expense

Profit

99

International Market ResultsInternational Market Results

10

0%

20%

40%

60%

80%

100%

120%

140%

12 24 36 48 60 72 84 96

Ultim

ate

1996

1997

1998

1999

2000

2001

2002

70%

2003

Ultimate calculation based on figures of 6 Member Organisations: France, Germany, Italy, Norway, UK Lloyds, UK IUA (6 for 1996 – No Germany)

Marine Hull – Evolution of Gross Loss Ratio,Marine Hull – Evolution of Gross Loss Ratio, actual and estimated towards ultimate U/W Year 1996 to 2003

Assuming a 30% expense ratio (acquisition and management expenses), technical break even is achieved when the gross loss ratio does not exceed 70%

1999

1998

2000/ 2002

1997 / 20012003

1996

11

Global Marine Hull Premium Global Marine Hull Premium ($m)($m) 1992 - 2003

0

1,000

2,000

3,000

4,000

5,000

6,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Pre

miu

m I

nc

om

e (

$m

)

2003

=

69%of

1994

12

Global Marine Hull Premium ($m)Global Marine Hull Premium ($m) v’s Merchant Fleet (DWT) between 1992 - 2003

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Year

Me

rch

an

t F

lee

t (D

WT

)

0

1,000

2,000

3,000

4,000

5,000

6,000

Pre

miu

m I

nc

om

e (

$m

)

1994

$8.3 / DWT

2003

$4.7 / DWT

1999

$3.7 / DWT

2003

=

56%Of

1994

1313

International Market International Market ResultsResults

Lost money / inadequate profits since 1995Lost money / inadequate profits since 1995

Recent Premium increases inadequateRecent Premium increases inadequate

compared to 1994compared to 1994

Current Premium wholly inadequate forCurrent Premium wholly inadequate for

world fleetworld fleet

9 Minutes!9 Minutes!

SEXSEX

1515

Current International MarketCurrent International Market

16

0

200

400

600

800

1,000

1,200

1,400

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Accounting Year

France

Italy

Japan

Norway

Spain

UK (ILU/ IUA)

UK (Lloyd's)

USA

Global Hull Premium - Major Global Hull Premium - Major Markets 1992 - 2003Markets 1992 - 2003 (USD Million)

17

Underwriting StatisticsUnderwriting StatisticsRelative Rating 1995 – 2003(Sample 1)

0

6

12

18

24

30

36

1995 1996 1997 1998 1999 2000 2001 2002U/W Year

Average Value ($m) & Average Age

0

1

2

3

4

5

6

$/Dwt Overall

Average Values Average Age $/Dwt Overall

Source: Broker Portfolio (1) for Joint Hull Committee

18

International Market PremiumsInternational Market Premiums’Discounted’ Fleet

$1,234,906

$1,037,860

$827,044 $820,445

$621,313 $607,145

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

A B C D E F

Market

$ P

rem

ium

Source: Broker Research

Cla

ims

Lea

d

51%

of

Claims

Lead

Price

19

International Market PremiumsInternational Market Premiums’Discounted’ Fleet’Discounted’ Fleet

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

A B C D E F

Market

$ P

rem

ium

0

5

10

15

20

25

Ord

er

Source: Broker Research

Total Price Paid (100% order)

68%

Of Claims Lead Price

2020

Current International MarketCurrent International Market

Dearth of technical understanding in Dearth of technical understanding in global underwriting communityglobal underwriting community

Total lack of disciplineTotal lack of discipline

Too many underwriters and brokersToo many underwriters and brokers

2121

Requirement for InsuranceRequirement for InsuranceLarger world fleetLarger world fleet

Significant assetsSignificant assets

Cruise vessels to fishing vesselsCruise vessels to fishing vessels

‘‘Rewrite’Rewrite’

Capital requires profitCapital requires profit

Shipowner better served by stabilityShipowner better served by stability

Future MarketFuture Market

2222

CaptivesCaptives

Reinsurance MarketReinsurance Market

MutualsMutuals

ConsortiumsConsortiumsMarketing Marketing Underwriting ExpertiseUnderwriting ExpertiseClaims serviceClaims service

OptionsOptions

2323

ConclusionConclusion

World Fleet GrowthWorld Fleet Growth

Inadequate returnsInadequate returns

‘‘Rewrite’ – a question of whenRewrite’ – a question of when

Price / Profit is keyPrice / Profit is key

““Niceties”, if at all, come laterNiceties”, if at all, come later