IUMI International Union of Marine Insurance Marine Insurance in a Challenging Economic Environment Deirdre Littlefield Starr Marine 12 August 2010

IUMI International Union of Marine Insurance

“Marine Insurance in a Challenging Economic Environment”

Deirdre LittlefieldStarr Marine12 August 2010


Agenda

IUMI

Current Environment and Trends

Shipping and Insurance Statistics

Future Success

Page 2


Established 1874

Member Associations from 54 countries

Annual Conference attracts 500 marine professionals

Main Pillars: Education, Lobbying, Membership

International Union of Marine Insurance

Page 3


IUMI Technical Committees

Cargo

Ocean Hull

Energy & Offshore

Legal & Liability

Inland Hull, Fishing Vessels & Yachts

Loss Prevention

Facts & FiguresPage 4



Page 5


Page 6

“Marine Insurance – Meeting the Challenge of the New Decade”



Education

IUMIIUMI

Lobbying

Mem

bership

Page 7


The worldwide Maritime industry, ravaged by the economy and financial crisis over the last 30 months, has passed through its darkest hour.

Page 8

Economic Outlook


Forecast Growth for 2010

Global GDP Growth 4.6%

U.S. 3.3% Euro Countries 1.0% China 10.5% India 9.4% Middle East 4.5% LAC 4.5%

Source: IMFPage 9



Source: Global Financial Stability Report & IMFPage 10

LAC GDP Growth 4.5%

Brazil 7.3% Mexico 5.0% Argentina 3.5% Bolivia 3.3% Chile 4.7% Colombia 2.3% Peru 6.3% Uruguay 5.7% Venezuela -2.8%



Global Activity

2010 2011

Production/Trade 9.0% 6.3%

Oil 75.27* 77.50*

Non-fuel commodity prices 15.5%

Source: IMF

*USD price per barrel

Page 11



“the recovery remains largely policy-driven and faces significant challengesas policy makers look to unwind the unprecedented fiscal, monetary and financial support they provided to keep their economies and financial markets from collapsing”

Source: Global Financial Stability Report & IMFPage 12


Obstacles to Recovery

China

New Tonnage

Page 13


Asset Impairment for 2009

20 Billion (USD)

11 Billion (USD)

Ocean Carriers

Air Carriers

Page 14 Source: Journal of Commerce, New York Times


Unprecedented recession but the worst of the slump may now be past

Page 15Source: IMF / IUMI


So, as expected, a severe drop in world trade volumes…

Page 16


Page 17

…combined with commodities prices tumbling…


… is leading to a collapse of world trade values.

Page 18

9%


World transport capacity: “irrational exuberance”

Page 19 Source: Clarkson


Clarksea Index

The Clarksea Index is a weighted average of earnings for all the main commercial vessel types, where the weighting is based on the number of vessels in each fleet sector.

Dec-2007: $49,841/day. 1H 2008: $38,396/day. Between the end of May 2008 and

mid-April 2009, the Index fell from almost $50,000/day to an all-time low of $7,350/day before recovering slightly. The dry bulk market has provided some support to the Index in 2009.

As of 8th January 2010, it stood at $16,783/day.

Source: Clarkson


Mobiles - Fleet Size by Region – All Rigs

Page 21


Mobiles – Utilisation Rates by Region

Page 22


Global Marine Premium 2008by line of business

Page 23


Global Marine Premiums2006 to 2008, as reported per accounting year

Page 24


Global Marine Premiumsby line of business, 2000 – 2008

(USD Million), as reported

Page 25


Market Shares 2008

Page 26


Global Cargo Premium by Market

Page 27


Page 28

Global Hull Premium by Market


Page 29

Global Offshore Energy Premium by market


Marine Hull and Cargo/Transport Gross* Ultimate Loss Ratio

U/W Years 1997 to 2008

Page 30


Offshore EnergyGross Reported Loss Ratios

U/W Years 1996 to 2008

Page 31


Serious and Total Losses 1994 – 2008By Number

(vessels > 500 GT)

Page 32 Source: LMIU


Serious and Total Losses 1994 – 2009By Cause, All Vessel Type

(vessels > 500 GT)

Page 33 Source: LMIU, total losses as report by Llody’s List


Serious and Total Losses 1994 – 2009By Cause, All Vessel Type

(vessels > 500 GT)

Page 34 Source: LMIU


Challenges

Protectionism

Piracy

Redeployment After Lay-Up

Reduced Steel Weight

Crew Recruitment and Training

Vessel Maintenance/Slow Steaming

Page 35


On the Positive Side

Insurance industry strong and resilient

Successful fund raising by shipping industry

More ship repair capacity

Crewing crisis eases

Younger world fleetPage 36


Global P&C Industry –orderly transfer of risk continues

Insurance CompaniesPay claims

Renew policies

Write new business

New products

Competition

BanksBanks disappear

Eliminate lines of credit

Turn away customers

Scale Back products

ConsolidationPage 37 Source: iii, ISO


Fewer Problems in the P&C Industry

Because of emphasis on

Underwriting

Transparency

Page 38 Source: iii, ISO


Insurance Industry Challenges for 2010

Top line growth

Reduced investment earnings

Expected loss trends

ROE

Page 39 Source iii, ISO


Impact of Interest Rate Levels on Returns on Surplus

Page 40

Combined Ratio

100%

4.5%

Return

9.6%

Return

15.9%

Return

Source: iii, ISO

2009

6%10%

16%

2005 1979


Insurance Industry Challenges for 2010

Top line growth

Reduced investment earnings

Expected loss trends

ROE

Access to capital

Regulatory spillover

Page 41 Source iii, ISO


Top line growth will suffer

Bottom line focus

Marine tied to global economy

< 95% combined very challenging

Underwriting, underwriting, underwriting

Strong Head Winds

Page 42


Thank you.

For information about IUMI

www.IUMI.comPage 43

Documents

IUMI International Union of Marine Insurance Marine Insurance in a Challenging Economic Environment Deirdre Littlefield Starr Marine 12 August 2010