Lloyd & Partners Energy & Marine Newsletter Oct 2011

Energy & Marine Insurance NewsletterOctober 2011

Lloyd & Partners Limited

Expertise • Commitment • ServiceExceeding our clients’ expectations

We are pleased to provide our existing, and potential clients with our 4th Quarterly Newsletter of 2011.

In addition to our regular features, in this edition we have a ‘focus on’ Lloyd's 2012 Energy Liability

Business Plans.

We hope that readers will find this newsletter interesting and informative and would welcome any

feedback you may have, positive or negative, which you can email to: [email protected]

or pass on to any of your usual LPL contacts.

If you are reading this in hard copy or have been forwarded it electronically, and would like to be added

to our electronic mailing list please email [email protected].

REGULAR FEATURES

General State of the Market Overview Page 2

Recent Quotes Page 6

Market Moves / People in the news Page 9

‘What’s New?’ (New products and market developments) Page 10

‘Briefly’ (News snippets) Page 12

Update on Losses Page 14

Security Ratings update Page 17

Legal Roundup Page 18

SPECIAL ARTICLES

Kidnap & Ransom Resource Library Page 20

Atlantic Hurricane Season update Page 21

Political Risks update – the 'Arab Spring' Page 22

‘Focus on’: Lloyd's 2012 Energy Liability Business Plans Page 25

1

Index / Contents

2

3

GENERAL INSURANCE BACKDROP

The tragedies in Japan, Australia, New Zealand

and elsewhere make 2011 the second most

expensive year on record for insured losses,

which already stand at approximately

USD 70bn, and the most expensive ever when

measured by total economic loss (currently

USD 270 billion) with three months left to run

until the end of the year.

Against that stark background, the wider

insurance picture is one where interest rates

remain weak, and insurers are feeling the

impact of both the implications of the 2011

RMS model and the preparation for the

introduction of Solvency II.

At the annual Monte Carlo Reinsurance

conference in September, where major

reinsurance players meet just prior to the

opening of the traditional reinsurance season,

the message was one of business as usual.

Although the current state of play might

suggest a market hardening – high combined

ratios even at the half-year, depleted reserves,

and expected increase in capital

requirements – capacity remains plentiful and

is even expected to be at record levels by the

end of the year.

UPSTREAM ENERGY

With regard to reinsurance renewals for the

upstream energy sector specifically, we do not

expect any dramatic changes. There will be

pressure on pricing, of course, following the

direct market’s upstream energy losses in 2011,

and perhaps on retention levels as well.

Presuming a benign windstorm season in the

Gulf of Mexico, we expect pricing to remain

broadly flat with perhaps some modest rises

and windstorm capacity to continue to be tight

but pricing to be in line with 2011.

Capacity for non-windstorm events remains

plentiful – OIL have recently announced that

from 1st January its per occurrence limit will

be increased from USD 250mm to USD 300mm

for all events other than ‘Designated Named

Windstorm’ which will remain at USD 150mm

part of USD 250mm. The non-windstorm event

aggregation limit will also be increased to

USD 900mm.

The pricing in the upstream liability markets

continues the steady ascent that followed the

Macondo loss in April 2010, and has been

aggravated by resultant withdrawals or

reductions of capacity and the scrutiny of the

Lloyd’s Performance Management Directorate

(see "Focus on" elsewhere in this newsletter).

In addition to pricing pressures there are also

pressures from the Lloyd’s Performance

Management Directorate to tighten conditions

for Energy Casualty business (again, see "Focus

on" elsewhere in this newsletter).

General State ofthe Market Update

4

MIDSTREAM / DOWNSTREAM ENERGY

A glut of capacity remains in the Midstream /

Downstream market and outside of natural

catastrophe exposed areas and bespoke

locations rates will continue to be soft. This is

not cheery news for insurers when many are

faced with rising reinsurance costs further

eroding underwriting margins. As such a

number have voiced a need to take more pain in

order to flush out the excess market capacity

and move the rate cycle on.

Within the Downstream industry itself we are

seeing a number of sea changes. Following poor

refining margins in 2010 and a difficult global

outlook there has been a move by integrated oil

companies to split out their Upstream from

their Downstream operations. In some

circumstances this has meant the

establishment of separate sovereign identities

whilst others have looked to liquidate the

Downstream assets and focus their capital

more efficiently. This has been particularly

evident in the US where continuing

requirements for substantial capital

expenditure, a prevailing political ill wind and

thin returns are making refining the ugly child

of the Oil sector. However, some market

dynamics are now working in favour of refiners

who are being advantaged by market

differentials such as the discount on WTI

against Brent caused by the pipeline bottleneck

at Cushing. As such, 2011 will be considerably

more profitable for those refiners who are

positioned well both geographically and

operationally to take advantage of this stronger

dynamic which will likely continue through next

year and possibly 2013. With the increasing

amount of refineries being put on the market

for sale both formally and informally, the

insurance industry can expect more business

opportunities as independents and venture

capitalists look to take advantage. Within this

cameo there will, however, be a wide spectrum

of risk quality and many plants will inevitably

become redundant.

In terms of customer expectations the market

dynamics haven't changed. Those operations

with natural catastrophe exposures should

expect rates to increase particularly with large

sections of the market applying RMS v.11

modelling. No surprises that those with poor

loss history should also expect to pay more.

However, those with preferential risks can expect

flat to 5% increases on their renewal rates with

reduction in premium spend achievable through

program restructuring, vertical placements and

leveraging insurers on placements that do not

require market capacity limits. Members of OIL

will also be able to use the increase in OIL limit

at 1st January 2012 (see "What's New?" section

herein) to increase Physical Damage

attachment points on commercial programs

and mitigate pressure on rate increases in

that area.

MARINE

Capacity remains the catchword of the marine

hull market, to be specific, a surfeit of it. As we

have previously observed, rates remain soft

and show no sign of hardening. Discussion at

the recent 2011 IUMI conference returned to

the thorny subject of the fact that hull business

has failed to show an overall profit for more

than a decade. Once again, no conclusive

answer was identified.

5

Comments such as that from Mark Edmondson,

Chairman of the Joint Hull Committee, that

insurance is not a "commodity" may be entirely

on point, but it is no less apposite than the

recognition that some syndicates enjoy more

success than others, and that the financial

health of the hull market can be just as heavily

influenced by underwriting capacity as by world

fleet numbers, or by international trading

conditions in a recession, or by deductibles, or

by the need of new syndicates to reach for the

targets contained within their Lloyd's-approved

business plans. In other words, the market has

composite dynamics, whose present and recent

historical state is inclined against optimal

conditions for the underwriter. For the medium

term future, the current conditions look likely

to remain.

PROTECTION & INDEMNITY

The issue of the European Commission's review

of the International Group of P&I Club's (IG)

cartel arrangement continues to be the

elephant in the P&I room. The EU review has

the capacity to cut through the heart of the

International Group, with its relative inhibitors

on tonnage movement. Whether the knife

comes out remains to be seen. All Clubs talk of

having been totally transparent with the

Commission in its investigation, and of not

having baulked at the many and various requests

for relevant data (some of which was of truly

historical nature). Clearly the discourse between

the IG and EU has been complex and full, and the

sense within the IG seems to be of a process

completed in compliance and cooperation.

The run-up to the 20th February annual renewal

will shortly begin, and the IG member Clubs

might perhaps be forgiven for looking over their

shoulder as they go. Whilst the hope is that the

EU will leave the foundations of the IG largely

untouched, such bodies as the EU have been

known to feel the need to reinvent the wheel

from time to time. The International Group

Agreement may be caught in the headlights.

The growth in number of fixed premium

P&I facilities in more recent years has ably

demonstrated that the market outside the

IG group remains strong and competitive.

The American Club's Eagle Ocean Marine fixed

premium facility is gathering some strength,

and in the process has seen the Club become

more closely involved on both a financial and

underwriting basis. British Marine, whilst

having suffered a loss of staff recently, still has

some experienced hands at the helm and can

be expected to sail into calmer waters soon.

The new Phoenix facility is showing signs of

coming "on line" in the very near future.

Not without a sense of humour, warm bodies

have been witnessed occupying space at the

previous BM location in Seething Lane.

These organisations may well benefit should

the International Group Agreement demise.

6

Recent Quotes

GENERAL

Richard Ward, Chief Executive of Lloyd's

"Lloyd's underwriters can not rely on

investment income to subsidise underwriting

and must decline under-priced risks. It has

been more difficult for new syndicates to bring

to us business plans that have a reasonable

chance of making profit. It is the market that

is impacting the ability of new entrants to come

in rather than us per se, but the conditions

remain the same. People that want to bring

business into the Lloyd's market have to have

a reasonable chance of making a profit and it

has to add to the overall Lloyd's franchise.

As profits are squeezed in the insurance sector

it is more difficult for someone to demonstrate

that to us. What we have seen is existing books

of business being transferred into Lloyd's where

they have a track record and where they can

demonstrate profitability."

Luke Savage, Finance, Risk Managementand Operations Director at Lloyd's

"To protect the central fund and the Lloyd's

brand, in a market of softening rates, Lloyd's will

only approve inherently profitable business plans.

If someone wants to write loss-making business

they can do so but not in Lloyd's. The softer the

rates are, the harder it is to convince us that

you can write profitable business. We don't want

loss making business here. Rates are soft so it

does make it harder for businesses to convince

us they can make a profit."

ENERGY

Bob Stauffer, President and ChiefExecutive of Oil Insurance Limited

"It is very unfortunate that various insurers have

come out and said high limits of coverage [for

oil spill clean-up / liability] are available before

any new liability legislation is introduced by the

US Government. The results of these efforts are

to create false expectation. Governments have

been misled into thinking such limits of

coverage are available in the commercial

insurance market."

Ed Noonan, Chief Executive of Validus

"Loss activity around the world has now put an

end to rate decreases in the market. Our marine

book is benefiting from rate increases in the

offshore energy market. Deepwater Horizon is

still resonating throughout the market and the

Gryphon loss is now approaching USD 1bn.

We saw rate increases of 30% to 60% for

offshore energy treaty accounts."

The following are ‘sound bites’ taken from speeches, statements orarticles by prominent market figures about the insurance market andwhilst we have tried not to take their words out of context, the excerptmay not be the entire speech or article.

7

Joe Roberts, Executive Vice-Presidentand Chief Financial Officer at Alterra

"The class [Offshore Energy] is now seeing early

and real signs of market correction.

This is manifesting itself in rate increases,

capacity shortages and, in some instances,

coverage restrictions. Also, as a tangible

indicator of market tightening, some of the

energy accounts we reviewed in the quarter

demonstrated inverted characteristics, with

better rates being obtained higher up the

coverage tower."

Stephen Catlin, Chief Executive of Catlin Group

“The marketplace as a whole [for offshore

energy following Macondo / Deepwater Horizon

loss] had too high expectations too soon. One of

the reasons for a delay in the change to market

conditions has been the limited drilling activity

that has taken place since the Deepwater

Horizon disaster in the Gulf of Mexico last year.

When drilling activity stops and the regulators

take time to decide what they are going to

regulate, it becomes difficult to predict what

will happen. There is very little drilling going on

at present but once the situation has been

resolved – and it will be resolved, as it’s a

commercial imperative for the US it is resolved

– it will become clearer what the risk appetite is

among oil companies and how much business

this will present to the insurance market.”

Simon Williams, Head of Marine andEnergy at Hiscox and Chairman of theJoint Rig Committee

"What we do have to accept is, if you look at

energy as a sector, there have been some very

significant risk losses. Larger risk losses are

trending upwards, as are attritional losses.

The 10-year overall gross record of the class

is close to 100% gross and yet again the

reinsurance market will also be significantly

impacted. People have to look at some of the

signs – exposures are significantly higher than

in the past. Added to this, new technology, new

environments and the political environment

are areas underwriters need to be aware of.

Clients are also now considering entering

areas such as the Arctic, which in itself will

bring new challenges which we as an insurance

sector need to understand and analyse."

Tom Bolt, Lloyd's PerformanceManagement Director

"Aggregations [in the offshore energy book]

are difficult to assess and manage owing to the

lack of transparency associated with package

policies. This approach is not sustainable,

there is a material imbalance between

premiums charged and exposures assumed.

The economics simply don’t work. It is not only

underwriters who have been left disappointed

by the offshore energy class, as capital

providers have received only modest returns for

what is a very capital intensive line of business.

Could better returns have been made had

capital been deployed elsewhere?"

8

Demian Smith, Global Head of Marine at Torus

“We have seen people piling into energy liability

because the results have been better in that line

than most. There are people who do not have the

necessary experience underwriting in that market

that will get their fingers burnt. We’ve had a

huge number of very large risk losses in the

energy sector, and people have forgotten in

their pricing how hard they can hit you.

Deepwater Horizon has had a great effect.

February’s Gryphon Alpha [North Sea PFSO]

was not a liability loss but a substantial offshore

energy physical damage loss. We had the West

Atlas removal of wreck in Australia [following

the November 2009 Montara oil spill], which

was a PD and liability loss. There’s also the

Jupiter accommodation platform, which rolled

over and sank in the Gulf of Mexico in April this

year, as a source for PD and liability claims."

MARINE

Demian Smith, Global Head of Marine at Torus

"There have been fewer ships trading, fewer

cargoes, and there have been fewer losses.

The seas are less congested and ships are not

being overused. An uptick in demand will lead

to an uptick in losses if that is reversed. It is

how you manage your way through that which

is important. Everyone says they’re turning a

profit, so you have to take that with a pinch

of salt. The hull market is soft and at low ebb –

the same goes for cargo. Recession has

resulted in fewer cargoes being shipped and

fewer ships trading. Ship values are dependent

on their utilisation and how much they can

charge in freight. Capacity has remained the

same but demand has reduced, exacerbating

the over-capacity in the insurance market over

the past three years. We’re seeing a bit of a

flight back to quality, which we think is being

driven by claims service. You can buy a policy,

and it can be as cheap as you like, but if it

doesn’t pay a claim, you haven’t really bought

anything. We’re beginning to see larger shares

coming back into the London market on

advantageous rates compared to local

domestic rates. That’s only this year – too early

to mark out as a trend – but we think it’s

interesting to watch out for.”

Paul Culham, Active Underwriter ofMarine and Special risks at Kiln.

"There is a general over-capacity in marine hull

and marine cargo, and capacity is a long lag

and will take time to change. If people are

getting reduced returns from a line of insurance,

then they may look for alternative investments.

However, a barrier to that happening is that so

many insurers see these lines as a way of

diversifying from their property-catastrophe

risk, and are attracted to the business for

that reason.”

9

John Swan is leaving Aon in London to join Zurich Global Energy’s

Upstream Energy operation in London.

Sam Pembroke is leaving Cooper Gay to join Axis Insurance Co.

Will Martin has resigned from Catlin to join Atrium.

Julia Aasberg has resigned from Allianz to join Chaucer.

Alison Clarke has resigned from the CV Star syndicate to join

Zurich Energy in London.

Oli Brown, Graeme Ivory, Derek Ratteray and Glen McCubbin have

left Zurich Global Energy to join the International (non-US) Casualty

team at Catlin.

Peter Graham has left QBE to join the Zurich Global Energy

International Casualty team.

Philip Sexton has resigned from Torus to join XL.

Rachel Weatherup is leaving Chaucer to join the Beazley syndicate.

Market Moves /People in the News

10

GCube, the renewable energy specialist

underwriting agency, has increased its

underwriting capacity to USD 680m (from

USD 500mm) for wind energy and solar

projects worldwide. Additionally, GCube has

launched a specialised workers compensation

insurance service, for the wind and

solar industry.

Oil Insurance Limited has announced that

their policy limit will increase at 1st January

2012 from a maximum of USD 250mm per

member to USD 300mm per member. At the

same time their overall aggregation limit over

all members combined from one event will

increase from USD 750mm to USD 900mm.

These changes do not apply to "Designated

Named Windstorm" events (the only area of

the world currently designated a windstorm

region by OIL being the Atlantic, with others to

be added following certain loss criteria in such

regions) where the limit remains USD 150mm

quota share part of USD 250mm with a

USD 750mm event aggregate. Two further

changes where announced by OIL at the same

time being firstly, the ability of OIL to impose a

quota share retention on the amount of

Designated Windstorm (DWS )that is pooled

through the general pool and therefore funded

by all members regardless of whether they

have wind exposures or not (for 2012 the quota

share retention of the current USD 300mm

aggregate that is pooled in the general pool

will be zero), and secondly to allow OIL to

require a member to have to post collateral in

advance of a loss in the event that their share

of a pool exceeds 30%.

The DWS quota share

in the general pool is

then pooled into the

excess windstorm

pools. The board of

OIL have the ability

to impose a quota

share of up to 25%

in any particular year by

giving 90 days prior notice to the

start of the relevant year.

We understand that both these moves are

designed to allow OIL to have the tools and

flexibility to continue to ensure that the burden

of wind losses are equitably shared by the

members and that no member poses a

significant credit risk relating to their size of

the pool they would have to fund following a

loss (through future premiums of through

withdrawal premium).

CatVest Petroleum Services LLC has launched

an insurance-linked securities (ILS), catastrophe

bond product, for oil spill risks, replicating the

capital markets securitization vehicles often

used by insurers to hedge catastrophe risks

such as hurricanes and earthquakes. An ILS

product packages portions of risk (usually in

the hundreds of millions of dollars), transforms

them into securities which are then sold to

investors who bear the risk. The contracts

have pre-set trigger parameters which if met,

activate the protection and investors can lose

their principal. Investors are willing to accept

portions of this risk in return for attractive

What’s New? (NEW PRODUCTS AND MARKET DEVELOPMENTS)

11

rates of interest in an asset class which has

low correlation to the wider financial markets.

According to CatVest, traditional catastrophe

bonds are not providing enough capacity for

investors appetite leaving many investors

frustrated and unable to access the market.

CatVest claim their oil spill experts have

created the world's only oil spill risk model

called SPILLRISK, which by taking into account

factors such as geographic location, proximity

to sensitive areas of coastline as well as spill

type, volume and spread, and is said to be the

only model able to accurately generate

exceedance curves and loss probabilities.

CatVest say they would welcomes discussion

with any firms having significant oil, gas,

chemical and hazardous substances spill risks

that are interested in first quantifying and then

transferring these financial risk exposures to

outside investors, such as oil platform and rig

operators, pipeline operators, shipping tanker

fleet owners and all other associated

companies, as well as with insurers and

reinsurers who hold significant amounts

of oil, gas, chemical and hazardous

substances spill risk and captive

insurers having similar risks to

transfer. For further details visit

www.catvestpetroleum.com

Torus has entered into an agreement

with Clal Insurance Enterprises Holdings

Limited to acquire London-based Lloyd’s

Syndicate 1301 and its corporate members

Broadgate Underwriting Limited and

Broadgate Underwriting 2010 Limited.

Subject to approval by Lloyd's, the acquisition

will enable Torus to write specialty business in

Lloyd’s effective 1st January 2012. Torus will

retain Broadgate’s current team of

underwriters, claims handlers and syndicate

management under the direction of Active

Underwriter, Bob Katzaros.

12

In their latest report "Piracy and Armed

Robbery against Ships", The International

Chamber of Commerce (ICC) International

Maritime Bureau’s (IMB) Piracy Reporting

Centre (PRC) has reported that pirate attacks

on the world’s seas totalled 266 in the first six

months of 2011, up from 196 incidents in the

same 2010 period. More than 60% of the attacks

were by Somali pirates, a majority of which were

in the Arabian Gulf, and as of 30th June, Somali

pirates were holding 20 vessels and 420 crew,

and demanding ransoms of millions of dollars

for their release. In the first six months, many

of the attacks have been east and north-east of

the Gulf of Aden, an area frequented by crude

oil tankers sailing from the Arabian Gulf, as well

as other traffic sailing into the Gulf of Aden.

Since 20th May there have been 14 vessels

attacked in the Southern Red Sea. Although

Somali pirates are more active – 163 attacks

this year up from 100 in the first six months of

2010 – they managed to hijack fewer ships, just

21 in the first half of 2011 compared with 27 in

the same period last year. This, the report says,

is both thanks to increased ship hardening and

to the actions of international naval forces to

disrupt pirate groups off the east coast of Africa.

Somali pirates took 361 sailors hostage and

kidnapped 13 in the first six months of 2011.

Worldwide, 495 seafarers were taken hostage.

Pirates killed seven people and injured 39.

Ninety-nine vessels were boarded, 76 fired

upon and 62 thwarted attacks were reported.

Ships, including oil and chemical tankers, are

increasingly being attacked with automatic

weapons and rocket propelled grenade launchers.

Whereas five years ago pirates were just as

likely to brandish a knife as a gun, this year

guns were used in 160 attacks and knives in 35.

The IMB PRC is the only manned centre to

receive reports of pirate attacks 24 hours a day

from across the globe. IMB strongly urges all

shipmasters and owners to report all actual,

attempted and suspected piracy and armed

robbery incidents to the IMB Piracy Reporting

Centre. IMB offers the latest piracy reports free

of charge which can be downloaded from

http://www.icc-ccs.org. Latest attacks may also

be viewed on the IMB Live Piracy Map at

http://www.icc-ccs.org/livepiracymap.

According to the latest marine loss statistics

from the Nordic Association of Marine Insurers

(Cefor) Nordic Marine Insurance Statistics

(NoMIS) database, the average cost of claims

per vessel continues at the high 2010 level

ending a downward trend from the peak years

2007/2008. Part of the reason for this appear to be

the more stable market conditions with higher

utilisation rates and repair costs following the

sudden decline in the world economy as well as

the shipping sector. The value of newbuildings

are also generally increasing due to more

advanced technologies and vessel sizes, making

each vessel more expensive to insure and the

potential claims cost much higher. A new

increase in average cost for nautical-related

claims such as grounding, contact and

collisions are of particular concern, according

to the Association, who also say that more

advanced ships and the introduction of new

technologies represents a particular challenge

in recruiting competent crew and providing

them with proper training, pointing to human

error as a direct or indirect cause in most

incidents at sea. The 2011 claim cost to date is

somewhat above 2009 and 2010 levels. This is

mainly due to a few major claims occurring in

‘Briefly’

13

the first quarter 2011. Frequency offers a more

positive picture with a downward trend both for

partial (attritional) and total losses after a peak

in 2007 / 8. Deductible increases may have had

an influence on the partial losses, and the

downward trend has now stabilized at 2010 level

in the first two quarters of 2011.

Recent figures from the International Union of

Marine Insurance (IUMI) show that the marine

hull insurance market recorded a 15th straight

year without making a profit in 2010 as the

sector continued to suffer from claims inflation

that was not offset by an increase in rates (we

will include a more detailed analysis of these

figures in a later edition of this newsletter).

The International Tanker Owners Pollution

Federation (ITOPF) has just published its Annual

Review for the year ending 20th February 2011.

In the Review, ITOPF’s Chairman, Bjorn Moller,

reflects on a year in which the Deepwater

Horizon drilling rig explosion turned the

spotlight once again to oil spills. As stricter

legislation is being sought, the shipping

industry has found itself having to remind

regulators of its own improving safety trends, its

preparedness to deal with oil spills and the

appropriateness of compensation limits that

apply to shipping. While much attention has

been given to the negative consequences of the

spill in the Gulf of Mexico, Mr Moller notes how

this serious event has, nonetheless, inspired

innovative thinking and produced a multitude of

new ideas for responding to oil spills at depth

and far from shore. The full review can be

accessed at www.itopf.com.

The Oil Spill Prevention and Response

Advisory Group (OSPRAG) set up in the UK

following the Macondo incident last year has

announced that their members have designed and

constructed a well capping device which is now

ready for deployment in the North Sea. The UK

Energy Minister, Charles Hendry MP, stated

that: "Having this equipment ready to deploy in

the United Kingdom Continental Shelf (UKCS)

significantly enhances our ability to deal with

any incident should any occur in the basin.

Prevention is always the best course however,

which is why we strive for the best regulation and

procedures in any basin anywhere in the world".

OSPRAG have reported that the well capping

device was built in order to seal off an

uncontrolled subsea well in the unlikely event of

a major well control incident, minimising

environmental damage and buying valuable time

for engineers to develop a permanent solution to

seal the well. The cap, constructed specifically

for subsea wells in the UKCS, works by shutting

in and holding pressure on an uncontrolled well

and uses a choke and a series of valves which

close down and stop the flow of hydrocarbons

into the marine environment. The device's

modular design means it can be attached to

various points of subsea equipment and

deployed to the widest possible range of subsea

well types and oil spill scenarios which could

occur – including in the deep waters and harsh

conditions west of Shetland. The cap is rated for

deployment in water depths up to 10,000ft on

wells flowing up to 75,000 barrels per day at

15,000 psi. This is a much greater depth than any

of the deepest wells in the UKCS. Its portable

size and weight also makes it relatively easy to

deploy quickly from a wide range of vessels,

even during short weather windows.

14

Update on Losses

2011 Energy losses of USD 10 million or more that we are aware of at the time of writing are

as follows.

We also show the total of all claims under USD 10 million (with a minimum claim USD 1mm) to

give an overall total for the year so far.

2011 MAJOR UPSTREAM ENERGY LOSSES (IN EXCESS OF USD 10,000,000 GROUND-UP)

Jan Blowout Gulf of Mexico Gas Well USD 22,000,000

Feb Heavy Weather Mooring Damage on North Sea FPSO USD 960,000,000

Feb Blowout Louisiana Onshore Gas Well USD 16,000,000

Feb Physical Damage North Sea Well Drilling equipment USD 35,216,000

Mar Mechanical Failure Gulf Of Mexico FPSO riser USD 150,000,000

Mar Earthquake/Tsunami Drillship thruster damage in Japan USD 12,430,000

Mar Blowout Texas Onshore Gas Well USD 13,000,000

Mar Fire / Explosion Jack-up rig offshore Africa USD 10,000,000

Mar Fire Gulf Of Mexico Platform *

Apr Capsize/Sinking Floating accommodation unit offshore Mexico USD 230,000,000

Apr Damage Brazilian FPSO USD 25,000,000

Apr Blowout Nigerian Onshore Oil Well USD 22,400,000

Apr Blowout Texas Onshore Gas Well USD 18,800,000

May Tornado Oklahoma Land Rig *

May Blowout Israeli Offshore Oil & Gas Well USD 100,000,000

May Fire & Explosion Fracing Trucks USD 32,000,000 (est)

Jun Blowout Indian onshore gas well *

Jul Blowout North Dakotas onshore gas well *

To date Total under USD 10,000,000 (Minimum of USD 1mm) USD 125,109,000

Total (known) for year (excess of USD1mm) USD 1,771,955,000

Source: Willis Energy Loss Database/LPL market knowledge (as of 15 September 2011)Figures shown as "(est)" are estimates from various press or market sources.Figures do not take into account the effect of any self insured retention, deductible or policy limit and therefore lossesare not necessarily those which insurance markets have actually suffered but give a rough guide to the overallmagnitude of industry loss.* Reports would suggest in excess of USD 10 million

15

2011 MAJOR DOWNSTREAM / MIDSTREAM ENERGY LOSSES (IN EXCESS OF USD 10,000,000 GROUND-UP)

Jan Fire & Explosion Canadian Oil sands Facility USD 1,310,000,000

Jan FloodOnshore Algerian pipeline (underconstruction)

USD 23,000,000

Jan Fire & Explosion Louisiana Petrochem Plant USD 128,000,000

Feb Fire & Explosion Texas Gas Processing Plant USD 50,000,000

Feb Mechanical Failure Texas Gas plant USD 29,000,000

Feb Ice / snow / freeze Texas Refinery USD 43,300,000

Feb Supply Interruption Brazilian Petrochem plant USD 25,000,000

Feb Fire & Explosion South Carolina Chemical Plant *

Feb Fire & Explosion Texas Gas Plant USD 50,000,000

Feb Fire & Explosion Philadelphia onshore Gas Pipeline USD 25,000,000

Mar Earthquake Japanese Chemical Plant USD 173,600,000

Mar Earthquake Japanese Chemical Plant USD 71,000,000

Mar Collapse Texas Chemical Plant USD10,000,000

Apr Windstorm Alabama Gas Plant USD 13,000,000

Apr Mechanical Failure Louisiana Petrochem plant USD 25,000,000

May Fire & Explosion Venezuelan Refinery USD 10,000,000

May Tornado Oklahoma Gas Plant USD150,000,000

May Tornado Missouri Gas Plant USD10,000,000

June Fire & Explosion UK Refinery *

Aug Fire & Explosion Argentinean Refinery *




16

The following are some Marine Losses that have made the press this year.

2011 MAJOR POWER LOSSES (IN EXCESS OF USD 10,000,000 GROUND-UP)

Jan Hydro Tunnel collapse Panama UtilityUSD 100,000,000

(est)

Jan Fire & explosion South African Coal powered Turbine USD 150,000,000

July Fire & Explosion Cyprus Power PlantUSD 840,000,000

(est)




2011 MARINE TOTAL LOSSES

Jan Kang Bong Cargoship sank off China

Jan Seiyoh Chemical Tanker sank off Japan

Jan Mapinduzi General cargo ship sank off the Seychelles

Jan AB 9 Asphalt tanker sank off Singapore

Feb Gregoriy Petrovskiy Cargoship sank off Georgia

Mar Helga Cargoship sank off Belize.

Mar Oliva Bulker sank off Tristan da Cunha Islands

Apr Hyang Ro Bong General cargo ship sunk off Bangladesh

June Deneb Containership capsized Spanish port.

July B Oceania Bulk carrier sank off Pulau Pisang following collision

July Asia Malaysia Ro Ro ferry sank off Philippines

Aug Rak Carrier Bulk carrier sank off India

Aug Wising Cargo vessel sank off Bangladesh

17

The following rating changes affecting Insurers writing Energy & Marine business have occurred

in the past three months or so.

Note: The above are rating moves we thought warrant mention but are not necessarily all rating

changes that have occurred in the past three months effecting Insurers that write Energy and

Marine business and do not include changes in individual Lloyd’s syndicate's rating (as Lloyd’s

as a whole continues to be rated as an overall entity).

Security RatingChanges

INSURER’S NAMEPREVIOUSRATING

UPGRADE /DOWNGRADE

NEW RATINGEFFECTIVEDATE

Groupama Group ofCompanies

S&P BBB+ Downgrade S&P BBB23 September2011

18

UK COURT RULING ON MEANING OF“100%” IN LIMITS / EXCESS CLAUSES

Although a reinsurance case, the ruling in Gard

Marine v Lloyd Tunnicliffe and Others [2011]

reinforces the recognised meaning of "100%" in

a limits / excess clause in Offshore Energy

insurance contracts (being that the limit and

excess scales to the Insured's Interest in a loss).

The Claimant, Gard Marine & Energy Limited

("Gard"), subscribed to a share under an Energy

Package Insurance policy (the "Original Policy")

purchased by an oil company (the Original

Insured), Gard reinsured part of their share

through facultative reinsurance (the

"Reinsurance Policy") with various Lloyd's

syndicates and insurance companies.

The Original Insured suffered a loss as a result

of damage caused by Hurricane Rita which was

paid by Gard and Gard subsequently made a

claim against its reinsurers, which resulted in a

dispute between the parties as to the point at

which the reinsurance policy attached, with the

use and meaning of "100%" being the principal

issue in dispute.

The Sum Insured clause in the Reinsurance

Policy read "To pay up to Original Package

Policy limits / amounts / sums insured excess

of USD 250 million (100%) any one occurrence

of losses to the original placement".

Gard argued that "100%" meant that the excess

of USD 250mm related to the total gross loss,

arguing that the excess relevant to the

Reinsurance Policy was to be reduced or

"scaled" in proportion to Original Insured's

interest in the total gross loss, in this case

being 45.6%, and so the relevant deductible was

45.6% of the USD 250mm (i.e. USD114mm).

Reinsurers however argued that Gard's

interpretation was incorrect and that "100%"

referred to the losses paid by the full (100%)

market of insurers on the Original Policy and

therefore the relevant excess was the full

USD 250mm, and reinsurers were only obliged

to Gard's proportion of the amount paid to the

Original Insured above the USD 250mm excess.

The Court heard evidence from a wide range of

fact witnesses (all experienced brokers /

underwriters in the energy field) and from

expert witnesses in underwriting and insurance

broking, and found that the "evidence

overwhelmingly supports the conclusion that

the notations “(100%)” or “(100% for interest)”

have a specialised and recognised meaning in

the energy market", which was in line with

Gard's understanding, and applied equally to

the policy excess and policy limit (in each case

if used), in both direct insurance of offshore

energy risks and facultative reinsurance.

OPA POLICY RULING OVERTURNED ATAPPEAL AGAINST INSURERS DUE TOAMBIGUITIES IN WORDING

A US Appeal Court has reversed the District

Court’s decision in Jefferson Block v. Aspen

Insurance, holding that, under applicable

New York law, the Original Court erred in not

applying the contra-insurer rule, (i.e. that an

ambiguous clause in an insurance policy must

be construed in favour of the Insured).

In the original case coverage was in dispute

over whether a USD 10mm Oil Pollution Act

Legal Roundup

19

(OPA) Policy covered costs and expenses incurred

following an oil pipeline leak in the Gulf of Mexico

in 2007. The defendant (Jefferson Block 24 Oil &

Gas LLC) spent nearly USD 3mm in clean-up

and removal of the leaked oil. Aspen denied

coverage on multiple grounds, the most salient

being that the particular pipeline was not an

asset covered by the Policy. Jefferson claimed

the Policy clearly provided coverage for all of

their facilities located in the High Island area of

the GOM. Aspen contended that the Policy only

covered facilities scheduled in the MMS 1021

(the form used by lease block applicants to

identify to the MMS their covered facilities).

The Oil Pollution Act only requires applicants

to have insurance (or other form of financial

guarantee) for facilities that have a worst case oil

spill potential of more than 1,000 barrels of oil.

MMS 1021 is a companion form to MMS 1019 (the

MMS Insurance Certificate) that can be either

on a "general option" or "scheduled option".

In this case the scheduled option was selected.

The pipeline in question started at one of the

lease block numbers shown on the MMS 1021,

but crossed six other lease blocks in which the

Insured had no interest before reaching the

shore (approx three-quarters of the pipeline

length was said to be outside of its origin block).

It is not clear from the original judgement papers

whether the leak occurred inside or outside of

the covered lease but one would assume it was

outside or the plaintiff would have used such an

argument to support their case. According to

expert testament MMS 1021 can include a

pipeline that crosses multiple leases by

recording its "right-of-way" number, but in this

case it did not. It also transpires in this case

that the pipeline had a worst case spill

discharge potential of under 1,000 barrels of oil.

The original court concluded that Jefferson had

purchased the policy solely to comply with

issuing a Certificate to the MMS and due to a

facility with under 1,000 barrels worst case

discharge not having to have coverage certified,

and the fact the schedule did not specifically list

the pipeline, it was not covered by the Policy,

and granted Aspen a summary judgement for

dismissal of Jefferson's case.

The Appeal Court however found that the OPA

Policy language was ambiguous and capable of

various interpretations. The ambiguity of the

policy language arose because the policy’s

listing of insured facilities referred to a separate

regulatory form which included only the

locations of offshore facilities covered and did

not specifically list any pipelines. Whether the

pipeline, which undisputedly started at one of

the locations designated on the form, but

crossed many others that were not so designated,

was a covered offshore facility could not be

determined through reference to the plain

language of the policy alone. Additionally, none

of the extrinsic evidence submitted by the

Underwriters was deemed by the Appeal Court

to adequately resolve the ambiguity. The Appeal

Court held that since the policy language

addressing covered offshore facilities was

ambiguous it should be construed in favour

of the insured, under the contra-insurer rule.

And accordingly, adopted the ‘reasonable

interpretation of the policy’ and held that the

pipeline was a “covered offshore facility”

designated on the regulatory form and thus

included within the scope of coverage afforded

by the OPA Policy.

20

Demand for Kidnap & Ransom (K&R) Insurance continues to become more widespread as companies

increasingly look to overseas markets in high risk territories for new business opportunities where volatile

political, economic and social situations can often lead to a deteriorating security situation.

Energy companies are common targets for kidnappings and the past year has seen a steady flow of such

incidents in Mexico, Nigeria, Pakistan, Colombia and Venezuela, amongst others.

The maritime industry remains at extreme risk as the threat of piracy continues unabated in the Indian Ocean

and increasingly off the coast of West Africa.

To understand the risks they face and how K&R can provide value, LPL clients can now access (through JLT's

dedicated K&R team) a K&R Resource Library including a variety of information such as brochures, application

forms, summaries of cover, wordings and periodical K&R Bulletins.

If you would like access to the Library or have any other questions relating to K&R Insurance, please contact

your usual LPL Account Executive who will be able to arrange for you to have access to the online library.

Kidnap & RansomResource Library

21

The Atlantic Hurricane season so far has seen its fair share of

named storms, but so far the number of storms reaching hurricane

strength are much less than forecast.

Like the prior two years, although the overall number of storms are

not too far out of line with forecasters' estimates, they have so far

not tracked through regions where they would be likely to cause

damage to offshore oil and gas assets, the exception to this being

Tropical Storm Lee which led to more than a third of platforms and

rigs in the Gulf of Mexico being evacuated, according to the US

Bureau of Ocean Energy Management, Regulation and Enforcement

(BOEMRE), although its relatively weak strength over this region

appears to have caused very little, if any, damage.

The following chart shows the number of storms to date (up to and

including Tropical Storm Philippe) against the major forecasters'

June estimates and the 61 year norm.

0

5

10

15

20

Intense HurricanesHurricanesTropical Storms

Actual61 Year NormColorado State

University

(mid range)

Tropical

Storm Risk

14.1

7.6

2.7

6.2

10.5

5

9

16

3.5

12

14

2011 ATLANTIC HURRICANE PREDICTIONS (JUNE 2010)

AtlanticHurricaneSeason Update

22

The 'Arab Spring' has reshaped the risk environment for all

countries and investors in the Middle East and nowhere is

the impact felt more keenly than in Israel. Although Israel

has not experienced internal upheaval, political instability

in neighbouring Egypt and Syria, has a profound impact on

the regional security environment.

For more than 30 years Israel has grown accustomed to

calling the shots as the regional power broker. The security

threat posed by Egypt was neutralised by the US-brokered

peace agreement in 1978 and former president Hosni

Mubarak could be relied upon to abide by the terms. In

Syria, despite the absence of a peace treaty, the Assads

could be relied upon to prevent protestors and terrorists

infiltrating the Golan Heights, thereby ensuring stability

along Israel's border.

The rise of populist movements has changed this security

dynamic and revealed the weakness of Israel's security

structure; one based on alignments with the ruling elites,

military commanders and intelligence communities of

neighbouring states; not the Arab public who remain

broadly hostile to the existence of a Jewish state in

their midst.

As more democratic forms of government develop, Israel

will find itself increasingly isolated, as new leaders come

under pressure to take a stand against Israeli-US

hegemony and in support of Palestinian rights. Already

Israel’s efforts to isolate Gaza, which is controlled by

Hamas, have been undermined by the opening of the

Rafah border crossing into Egypt and its embassy in

Cairo being attacked by protestors.

CHALLENGES TO ISRAEL'S ENERGY SECURITY

Israel's energy security – Egypt supplies an estimated

40 percent of Israel's gas – has also been compromised

by the uprisings both in the Egyptian courts and by acts of

Political Violence.

From a legal perspective, the gas deal between Egypt and

Israel is highly controversial. The contract was agreed by

East Mediterranean Gas (EMG), an Egyptian company

owned by Hussein Salam, a cohort of Mubarak, and was not

subject to parliamentary approval. The terms of the deal

have always been kept secret and even the amount Israel

pays for the gas, believed to be well below market price,

has never been made public. Egypt's transitional

government has pledged to review all gas contracts signed

under such circumstances and Salam has been arrested on

corruption charges.

In a reflection of the unpopularity of the deal and negative

public sentiment towards Israel, the gas pipeline has been

subjected to a number of attacks since February. Several

explosions along the pipeline have disrupted supply and

further attacks are to be expected.

The fluid security situation has reinforced the importance

of Israel developing its own recently discovered Tamar and

Leviathan gas fields. The Tamar field is estimated to have

reserves of 8.4 trillion cubic feet, while the reserves of the

nearby Leviathan field are thought to be closer to 16 trillion

cubic feet.

It is anticipated that the Tamar field has sufficient reserves

to meet Israel's gas needs for the next 20 years, while gas

from the Leviathan field can be sold externally, developing

a new revenue stream for the Israeli government.

INVESTMENT RISKS IN ISRAEL'S GAS SECTOR

Despite the potential of the gas finds, investment in Israel's

gas sector presents a number of challenges to investors.

First political instability and insecurity will add a risk

premium to development costs. Natural gas facilities could

become a terrorist target. The risk may be neutralised by

the uncertainty surrounding the capabilities of regional

terrorists to carry out such an attack and whether these

Political Risks Update:The ‘Arab Spring’

23

groups would consider an attack on these facilities to be in

their interest. However, it cannot be discounted as the

capacity of terrorist groups to stage attacks may become

more sophisticated.

Second, maritime and other border disputes could result in

legal action and possible military confrontation. Many of the

countries in the eastern Mediterranean lack defined

maritime boundaries, mainly because of unresolved

military disputes. The most important involve Lebanon,

where Hezbollah claims that part of the offshore Leviathan

field lies within its exclusive economic zone. Beirut has

asked the UN to help resolve its dispute with Israel, but the

UN has shied away from any involvement.

Third, and perhaps the bigger risk for investors, is Israel's

response to the gas finds. The size of the discoveries has

prompted a review of taxes and royalties governing the

sector and has sparked a battle with environmental

lobbyists over development of the sites.

The terms of operating in Israel have become more onerous

following the passage through the Knesset (parliament) in

April 2011 of a tighter royalty structure for gas operations.

The Knesset voted to raise taxes and royalties from

33 percent to between 52 percent and 62 percent, depending

on qualifying factors. Ambiguity surrounds the application of

the taxes and whether any would be applied retrospectively.

In April 2011, firms involved in discovering the fields, lost

their vociferous campaign to prevent any change in the tax

environment. It was also unclear whether the new fees

would be applied retroactively. Energy companies

campaigned vociferously against the changes on the

grounds that they had spent years exploring in Israel and

its territorial waters and tax increases would constitute a

breach of contract and deter future investors.

A further obstacle to developing these fields is posed by

Israeli bureaucratic and public opinion. Opposition to the

build up of infrastructure needed to export natural gas to

major demand centres, specifically Europe, is fierce.

Noble Energy has faced significant difficulties in trying to

build gas pipelines and an LNG facility and the Israeli

government bowed to public and environmentalist

pressures and rejected Noble Energy's infrastructure plans.

These issues have combined to sour the outlook for the

swift development of the offshore fields.

The challenges of investing in Israel's offshore gas fields

are demonstrative of the risks faced by all companies

operating in the energy sector, even when working with

liberal, democratic and capitalist host governments.

Whilst businesses cannot manage all aspects of political

risk, they do have influence on the political risk

environment in which they operate and a robust political

risk management strategy can make all the difference.

Organisations with more advanced risk assessment

capabilities experience fewer cases of expropriation,

government payment default, import / export licence

cancellation or currency restrictions as they are able to

devise effective strategies to help manage risk.

Political Risk Insurance (PRI) plays a significant part in any

political risk management strategy by addressing the

financial consequences of those elements of political risk

that cannot be managed. Today the PRI market is strong

and whilst political risk is always written with some caution

underwriter appetite is good. The markets' total current

theoretical capacity for a single equity PRI placement is in

region of USD 1.5bn for a period of up to 3-5 years, with as

much as one-third of this amount available for policy

periods up to 10 years.

24

WORLD RISK REVIEW

JLT's World Risk Review (WRR) ratings provide a

key strategic decision making tool that delivers,

quickly and easily, a real understanding of

political risk in any given country upon which a

management strategy can be built.

Recent international events have reinforced the

myriad ways in which political risk can pose a

threat to trade and investment, particularly in

emerging markets where risk can often be seen

as an investment constraint. Research has

shown that organisations with more advanced

risk assessment capabilities experience fewer

cases of expropriation, government payment

default, import / export licence cancellation or

currency restrictions as they are able to devise

effective strategies to help manage risk.

JLT has developed the World Risk Review (WRR)

to meet client demands for a more comprehensive

risk assessment tool. Nine perils are rated in

197 countries and territories under the broad

categories of Political Violence, Trading

Environment and Investment Environment.

This provides a starting point for clients to

devise effective strategies to manage these

risks with greater granularity, rigor

and sophistication.

The newly launched WRR website includes:

• Your personal ratings table

• Historical ratings

• Country comparisons

• Key insights & country reports

• Heat mapping

• User opinion and discussion blog

For more information go to

www.worldriskreview.com

25

‘Focus on’:Lloyd's 2012 EnergyLiability Business Plans

In July this year Tom Bolt, Director, Performance Management atLloyd's wrote to all CEOs and Active Underwriters at Lloyd’sunderwriting entities under the heading of “Energy Liability: PlanApproval Requirements and Best Practice 2012” to set out howLloyd’s expects Energy Liabilities to be underwritten at Lloyd's forthe 2012 year of account.

The letter sets out a "precondition" of Lloyd’s approval ofSyndicate Business Plans for Energy Liability (that EnergyLiability risks are no longer included in package policies and arewritten on a stand-alone basis), and also states that Lloyd’s hasidentified a number of areas of underwriting “Best Practice”,adding that “Managing agent’s ability to manage their EnergyLiability books in accordance with the Best Practice Statements...will be taken into account when approving Syndicates BusinessPlans”, which would seem to imply Lloyd's would try to enforcethese as mandatory, rather than just "best practice".

26

The precondition (first bullet) and "best practice

statements" (subsequent bullets) are as follows,

with our views on each in red.

• Energy Liability risks to be written on a

stand-alone basis (and not in package

policies).

If this were to happen (which Lloyd's seems

adamant should be the case) we see either

Lloyd's underwriters losing out to company

markets who may still be willing to include

liabilities in packages, or where Lloyd's

capacity is still required, prices could rise

where stand-alone liability books dictate

minimum premiums higher than those

previously charged in packages.

• All offshore pollution including seepage and

pollution in OEE, OPOL and OPA / COFRs is

written into the liability policy / account.

We see this as being the main area of

concern with the PMD's latest position and

think this is the area that will receive the

most push back from syndicates who will

not want to see "traditional" OEE business

haemorrhage from their books as non-

Lloyd's markets continue to offer a product

that Insured's want to purchase. Insured's

will likely find stand-alone pollution from

well products more restrictive and more

expensive (as OEE underwriters are unlikely

to grant significant premium credits to

exclude pollution), whilst underwriters will

face the challenge of having to dedicate

additional capacity without the protection of

an OEE policy's “Combined Single Limit".

There will also be issues surrounding the

current "first party" clean-up granted by

OEE polices. Our view here is that the

market will find a way to maintain S&P

in OEE polices, but watch this space.

• Pollution cover is written on a sudden

and accidental (time element) basis and

not gradual.

We see little change to current practice

here as gradual pollution has not been

readily available in the market anyway.

• Syndicates do not write contractors

contingent OEE in the liability policies and

address contingent OEE requests in the

OEE book.

Again we see little change to current

practice here as most contingent OEE is

written already into OEE books (with some

exceptions of course).

• Syndicates do not write ‘first party’ Removal

of Wreck / Debris in the liability policy

unless coverage provided for removal of

wreck is limited to legal liability at law.

Where statutory removal of first party

property is given, consideration of this

exposure is accounted for in pricing

methodology, included in aggregations

arising out of catastrophe events.

Again we see little change to current

practice here as most syndicates have been

excluding 'first party' ROW / D from liability

policies post Hurricanes Katrina/Rita.

27

• Syndicates write 100% limits scaled for

interests, subject to a joint venture clause.

Following the Macondo incident the market

had already strengthened its resolve not to

write "for interest" polices but had been

doing so sparingly where the exposures

to other Joint Venture partners could be

defined and accounted for. We see "for

interest" policies becoming even less

available now.

• Policies have an overall each accident and

in the annual aggregate limit for the

coverages provided.

This was already being pushed for by the

market on most polices and we see this

being the norm going forward.

• All policies are written on a CSL (combined

single limit) basis for all Insured, Named

Insureds and Additional Insured combined.


market on most polices and we see this

being the norm going forward.

• Limits are inclusive of legal costs.


market on most polices and again we see

this being the norm going forward.

Lloyd & Partners have spoken to all the key

liability underwriters at Lloyd's and it is clear to

us that there is in fact very little support to this

edict from the syndicates themselves, with

many underwriters saying they will challenge

the Performance Management Directorate's

ability to impose such stringent rules on how

they underwrite their business.

No mention was made in the PMD's letter of

any consultation with clients or brokers and nor

are we aware of any. A number of brokers have

however subsequently given their thoughts

against this edict from Lloyd's, and we are

aware of several meetings with Bolt and his

team and senior individuals in the broking

community who have challenged the PMD's

position on this issue.

The PMD are yet to respond publicly or to issue

any further guidelines, and it will be interesting

to see now whether individual syndicates

incorporate these new "rules" into their

business plans for 2012 or whether they

challenge the PMD to demonstrate that a

business plan with flexibility to ignore these

rules, where sound underwriting dictates, is a

threat to Lloyd's profitability as a whole.

Bolt had an opportunity when speaking at the

Houston Mariners conference in late September

to address underwriters' and brokers' concerns

about his mandate to syndicates, but took the

opportunity to fire another broadside at

underwriters about the inadequacy of pricing in

the energy sector. However we understand that

there is now a tacit acceptance from the PMD

that the proposed separation of Energy

liabilities from packages is now considered

“best practice”, and where syndicates choose to

continue to write liabilities (including S&P in

OEE) in packages, they will be required to

evidence sufficient controls in their business

plans relating to aggregation and pricing.

28

About Lloyd & Partners

Headquartered in the City of London, Lloyd & Partners is an independent specialist insurance

broker at the forefront of the insurance industry.

We operate in four main sectors offering in-depth sector expertise and an extensive range of

insurance solutions for:

• Cargo, Specie & Fine Art

• Casualty, Healthcare & Professional

• Energy & Marine

• Property

Lloyd & Partners is organized into client-facing business teams and is housed in One America

Square, enjoying a prime City of London location. With Lloyd's of London in close proximity, we are

in a perfect position to take advantage of one of the most well established insurance markets in

the world.

Every broker and client we serve receives the ongoing benefit of our whole-team approach. This

approach is unusual in our industry. Most insurance broking firms of our size and position assign

clients to a single contact. But from the start, we give you access to every member of the sector

team you work with. This means you can tap into a far wider network of knowledge and assistance.

It also means our teams can be more easily available to you when you need them.

This high standard of service flows through our entire organisation: our shared goal is to always

exceed your expectations. In accordance with this principle, we only focus on sectors where we can

develop and maintain market leadership. And we will only take on projects and clients for which we

know we can do the best job possible.

Lloyd & Partners is also responsible for the management of JLT Park Ltd, the Bermudian broking

operation, which has expertise in the fields of Property, Casualty and Professional Liabilities,

Healthcare and Construction.

Lloyd & Partners is a wholly owned subsidiary of Jardine Lloyd Thompson Group plc. In addition to

the broking operations listed above, we provide wholesale services for JLT-owned operations in

Australasia, Asia, Canada and Latin America.

Please visit our website www.lloydandpartners.com for more details.

29

This newsletter is compiled and publishedfor the benefit of clients of Lloyd &Partners Limited. It is intended only tohighlight general issues relating to thesubject matter which may be of interestand does not necessarily deal with everyimportant topic nor cover every aspect ofthe topics with which it deals. It is notdesigned to provide specific advice on thesubject matter.

Views and opinions expressed in thisnewsletter are those of Lloyd & PartnersLimited unless specifically statedotherwise.

Whilst every effort has been made toensure the accuracy of the content of thisnewsletter, neither Lloyd & PartnersLimited nor its parent or affiliated orsubsidiary companies accept anyresponsibility for any error, omission ordeficiency. If you intend to take any actionor make any decision on the basis of thecontent of this newsletter, you should firstseek specific professional advice and verifyits content.

Registered Office:

One America Square London EC3N 2JL

Registered in England No. 02005745

Vat No. 244 2321 96

T: 44 (0) 20 7466 6500F: 44 (0) 20 7466 6565

www.lloydandpartners.com

A Jardine Lloyd Thompson company.

Lloyd’s Broker.A company incorporated with liabilitylimited by shares.Authorised and regulated by theFinancial Services Authority.© Lloyd & Partners October 2011. All rights reserved. 264293

Documents

Lloyd & Partners Energy & Marine Newsletter Oct 2011