THE MARINE INSURANCE MARKET 2002

Houston Marine Insurance Seminar September 22, 2002

International Union of Marine Insurance

 Founded in Berlin in 1874  55 Member Associations  Purpose: To represent, safeguard and develop insurers’ interests in marine and transport insurance  Fosters cooperation and exchanges information with international governmental and non-governmental organizations  IUMI Organization and Annual Conference

“The Market”

“ The area of economic activity in which buyers and sellers come together and the forces of Supply and Demand affect Prices” - Webster’s Dictionary

What Factors Drive the Market?

   Capital Economic Activity Reinsurance    Return on Investments Management Decisions Intangibles

The 1992 –2002 Cycle

      Peak Years of 1992-1994 Booming World Trade Robust World Economic Growth Favorable Investment Environment Growing Order Book for New Vessels Falling Insurance Rates

U.S. Marine Insurance Results 2001 Highlights

       12% growth in Direct Written Premium to $2.34 billion 102% Combined Ratio Second Consecutive Year of Improvement Stellar Cargo Results – 86.1% Combined Ratio Excellent Yacht Results – 15% Growth / 93.4% Combined Ratio Solid Liability Results – 88.9% Combined Ratio No Cat’s

U.S. Marine Insurance Results 2001 Lowlights

     Energy & Offshore 89% Growth / 152.9% Combined Ratio Ocean Hull Premiums grew 3.5 X’s / 113.1% Combined Ratio Other Hull / P&I – 116% Combined Ratio Liabilities – 9% decline in Direct Written Premium / Deteriorating Trend Marginal ROE

U.S. Marine Calendar Year Financials

Ocean Marine (prem. In '000s)

2001 2000 1999 1998 1997 1996 1996-2001 Direct Written Premium

2,337,177 2,088,894 2,012,515 2,048,602 2,130,752 2,164,591 12,782,531

Net Written Premium

1,945,736 1,709,095 1,715,408 1,833,240 1,900,012 2,001,409 11,104,900

Net Earned Premium

1,835,111 1,703,924 1,713,813 1,839,712 1,892,112 1,990,449 10,975,121

Loss and Loss Adj. Exp.

72% 75% 80% 77% 68% 57% 71%

Underwriting Expense

30% 34% 35% 34% 35% 33% 33%

Combined Ratio

102% 108% 116% 110% 103% 90% 105%

Operating Ratio

96% 101% 107% 103% 96% 84% 97%

* Return on Equity

-1% -15% -27% -19% -2% 25%

Data Source: AMBest * Estimated

Global Marine Premiums

Global Marine Premiums

Global Marine Premiums

Major Marine Markets

       Japan United Kingdom USA France Germany Norway Italy

2000

$2,087 $1,766 $1,554 $ 972 $ 964 $ 584 $ 509

Global Cargo Premiums

Global Hull Premiums

Major Marine Markets 2000 % Change 1998-2000

       Japan United Kingdom USA France Germany Norway Italy $2,087 $1,766 $1,554 $ 972 $ 964 $ 589 $ 509 -9.2% +3.9% +4.7% -10.2% -24.5% -12.2% -36.2%

Where Do We Go From Here?

    The 2002-2012 Cycle Market Consolidation New Capital Management Decisions

The Blame Game Who’s responsible?

    The Underwriter The Broker/Agent The Reinsurer The Customer