Transcript AMLIN Group Plc - Marine Claims Conference

Hull Insurance in the 21st Century
AMLIN
- does it have a future?
Simon Beale
Marine Divisional Underwriter, Amlin
Agenda
Shipping Statistics
Market Results
Current Market
Future Market
2
Shipping Statistics
3
World Merchant Fleet
of ships of 300gt and over
Evolution of the growth rates (GT, DWT, and Number of ships) between
1993 and 2004
45%
570,325 m GT
+ 38.9%
40%
35%
840,355 m DWT
+ 26.8%
30%
25%
488,032 mGT
(+ 18.8%)
20%
39,665 ships
+ 14.2%
743,611 mDWT
15%
(+ 12.2%)
10%
38,500 ships
(+ 10.8%)
5%
0%
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
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).
2004
4
Total Merchant Fleet
DWT 1993 - 2003
2003 DWT
816,384
850,000
2003
800,000
=
750,000
DWT
700,000
1993 DWT
662,553
600,000
+23%
550,000
growth on
650,000
1992
500,000
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Year
Source: Institute of Shipping Economics & logistics.
5
Fleet Growth
Since 1993
Strong growth (13%) in numbers of vessels
Stronger growth (23%) in world fleet size
Average size increased
19,100 DWT – 20,700 DWT (9% growth)
? increased values
? increased premiums
6
Freight Rates
Clarksons Index 1990 - 2004
35,000
Freight Index
30,000
25,000
20,000
15,000
10,000
5,000
0
1990
1992
1994
1996
1998
2000
2002
2004
Year
7
Source: Clarksons Freight Index
Cargo Shipowners’ Earnings
120,000,000
100,000,000
80,000,000
$ '000
60,000,000
Income
40,000,000
Expense
Profit
20,000,000
0
1999
2000
2001
2002
2003
-20,000,000
-40,000,000
8
International Market Results
9
Marine Hull – Evolution of Gross Loss Ratio,
actual and estimated towards ultimate
U/W Year 1996 to 2003
140%
120%
1999
1998
100%
1997
1997 / 2001
2003
80%
1996
1998
1999
2000
60%
2001
2002
40%
70%
2003
20%
lti
m
at
e
96
84
72
60
48
36
24
0%
12
Ultimate calculation based on figures of 6 Member Organisations:
France, Germany, Italy, Norway, UK Lloyds, UK IUA (6 for 1996 – No Germany)
U
Assuming a 30%
expense ratio
(acquisition and
management
expenses), technical
break even is
achieved when the
gross loss ratio does
not exceed 70%
1996
2000/ 2002
10
Global Marine Hull Premium ($m)
1992 - 2003
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
6,000
2003
5,000
=
4,000
69%
of
1994
3,000
2,000
1,000
0
11
Premium Income ($m)
1992
Global Marine Hull Premium ($m)
v’s Merchant Fleet (DWT) between 1992 - 2003
2003
900,000
Merchant Fleet (DWT)
800,000
$8.3 / DWT
2003
$4.7 / DWT
6,000
=
5,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
4,000
56%
3,000
$3.7
Of / DWT
1,000
1999
1994
2,000
Premium Income ($m)
1994
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Year
12
International Market Results
Lost money / inadequate profits since 1995
Recent Premium increases inadequate
compared to 1994
Current Premium wholly inadequate for
world fleet
13
SEX
9 Minutes!
Current International Market
15
Global Hull Premium - Major
Markets 1992 - 2003 (USD Million)
1,400
1,200
France
1,000
Italy
800
Japan
Norway
600
Spain
UK (ILU/IUA)
UK (Lloyd's)
400
USA
200
0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Accounting Year
16
Underwriting Statistics
Relative Rating 1995 – 2003
(Sample 1)
Average Value ($m) &
Average Age
36
$/Dwt Overall
6
Average Values
Average Age
$/Dwt Overall
30
5
24
4
18
3
12
2
6
1
0
1995
0
1996
1997
1998
1999
U/W Year
2000
2001
2002
17
Source: Broker Portfolio (1) for Joint Hull Committee
International Market Premiums
’Discounted’ Fleet
1,400,000
51%
$1,234,906
1,200,000
of
$1,037,860
Claims
$827,044
800,000
600,000
400,000
Claims Lead
$ Premium
1,000,000
Lead
$820,445
Price
$621,313
$607,145
E
F
200,000
0
A
B
C
D
Market
18
Source: Broker Research
International Market Premiums
’Discounted’ Fleet
1,400,000
25
1,200,000
Total Price Paid
1,000,000
(100%
order)
15
800,000
Order
$ Premium
20
600,000
68%
400,000
Of Claims Lead Price
10
5
200,000
0
0
A
B
C
D
E
F
Market
19
Source: Broker Research
Current International Market
Dearth of technical understanding in global
underwriting community
Total lack of discipline
Too many underwriters and brokers
20
Future Market
Requirement for Insurance
Larger world fleet
Significant assets
Cruise vessels to fishing vessels
‘Rewrite’
Capital requires profit
Shipowner better served by stability
21
Options
Captives
Reinsurance Market
Mutuals
Consortiums
Marketing
Underwriting Expertise
Claims service
22
Conclusion
World Fleet Growth
Inadequate returns
‘Rewrite’ – a question of when
Price / Profit is key
“Niceties”, if at all, come later
23