simon stonehousereport of the facts an figures committee committee members angelo ansaldo – italy...
TRANSCRIPT
Simon Stonehouse
Hull UnderwriterBrit Insurance plc
Issues
• IUMI Facts & Figures• Shipping Climate• Shipbuilding• Fleet• Crew• Maintenance and Repair• A few issues to watch out for!
Report of the Facts an Figures CommitteeCommittee members
Angelo Ansaldo – Italy
Paul Buyl – Belgium, replaced by Michel Van hoorickx
Cédric Charpentier – France, Chairman
Darren Farr – UK Lloyd’s
Pamela Frood – UK IUA
Patrizia Kern – Switzerland
Henry Newman – USA, replaced by James Craig
Astrid Seltmann – Norway / Secretary and Vice Chairman
Simon Stonehouse – UK Lloyd’s, replaced by Philip Graham 3
2002-2007: strongest growth of GDP for the last 20 years, BRIC countries biggest contributors
4
EVOLUTION OF GDP FOR THE PERIOD 1992-2007FOR SELECTED COUNTRIES (index 100 in 1992)
World 219133
China 658
291
India 389
173
Russia 262
71
0
100
200
300
400
500
600
700
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Inde
x
Source: ISL, UNCTAD, LMIU
… which has led to a booming global trade in volumes …
5Source: ISL, UNCTAD, LMIU
WORLD SEABORNE TRADE VOLUME Development 1997 - 2007 (in million tonnes) - Growth rate 1997-2007
+ 30 %
+ 77 %
+ 67%
+ 55%
900
1 400
1 900
2 400
2 900
3 400
3 900
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Maj
or tr
ades
(mT
onne
s)
4 000
5 000
6 000
7 000
8 000
Tot
al W
orld
Tra
de (m
Ton
nes)
Total World Trade
Crude oil
Other Cargoes
The 4 main Dry Bulk Cargoes*
*Iron ore, coal, grain, alumina
Demand for commodities reached sky high levels and led to strong rise in prices.
6Source: ISL, UNCTAD, LMIU
WORLD MARKET PRICE INDICES FOR SELECTED COMMODITIESAnnual Average (1993-2008) - Average in 2008 as at end of May 497
461
320
161,3
250,1
0
100
200
300
400
500
600
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Index 2000 = 100
IRON ORE
COAL
CRUDEAGRI RAW
NON FER.MET
Difficulties for the shipping market to absorb the booming global trade has led to massive
increase in freight rates.
7
FREIGHT MARKET (indices by month) - YEARS 1997 to 2008 (to May 2008) 1275
791
842
677
0
200
400
600
800
1000
1200
1400
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Time Charter Index (1 to 2 months)General Freight IndexGrain Freight Index Miscellaneous Freight Index
Index 1972 = 100
Source: ISL, UNCTAD, LMIU
The shipping market did react and increased massively transport capacity …
8
WORLD MERCHANT FLEET of ships of 300gt and overEvolution of the growth rates (GT, DWT and Number of ships) between 1995 and 2008
Nb ships + 7.6%
Nb ships + 23%
mGT + 68%
mGT + 18.8%
mDWT + 14.2%
mDWT+ 58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: ISL, UNCTAD, LMIU
…thanks to new buildings delivery and postponing scrap.
9Source: ISL, UNCTAD, LMIU
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
80 000
90 000
100 000
mD
wt
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
World Tonnage Additions and Reductions 1998-2007 (in mDwt)
Additions Reductions
Despite pressure on shipping, total losses show a positive trend…
10Source: ISL, UNCTAD, LMIU
0,00%
0,05%
0,10%
0,15%
0,20%
0,25%
0,30%
0,35%
0,40%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
% of World Fleet
Total Losses in Nb versus Fleet
Total Losses in GT versus Fleet
But serious losses show a very steep increase in number, well above fleet growth
11Source: ISL, UNCTAD, LMIU
0
200
400
600
800
1000
1200
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Total Loss
Serious ex TL
Total
Number of incidents
• Prices of raw materials going down• World trade of goods down in volumes and even more in
values• New buildings orders delayed or cancelled• Freight rates sliding• Possible increase of ships being laid up• Uncertainties on future quality of world fleet• Increase in number of attritional claims declared• …
We must prepare for difficult times !We must prepare for difficult times !
12Source: ISL, UNCTAD, LMIU
What change in our environment shall we expect and even started to notice ?
0 5000 10000 15000 20000 25000
USD (millions)
Total
Offshore / Energy
Marine Liability
Transport / Cargo
Global Hull20072006200520042003
Global premiums reported 2003 to 2007 (accounting years)
Stagnation 05 due to strengthening of USD against major European and Asian currencies.
Increase 01-04 & 05-07 partly due to weakening of USD against European and Asian currencies.
Reported change2006->2007
12.0%
11.7%
2.8%
2.5%
9.8%
Rough estimate of change2006->2007 withoutexchange rate impact
9%
5%
0%
0%
5%
Global Marine Premium 2000 - 2007
(USD Million), as reported
Total
Cargo
Hull
EnergyLiability
0
5,000
10,000
15,000
20,000
25,000
2000 2001 2002 2003 2004 2005 2006 2007
Accounting Year
Marine Hull – Evolution of Paid and Total Claims, Gross Premiums
as reported, U/W Year 2000 to 2007 (USD)
Totals of 9 IUMI members – Belgium, France, Germany, Italy, Netherlands, Norway, Spain, UK Lloyds, USA
Blue line = Gross Premium; Red line = Paid Claims, Yellow line = Paid+Outstanding claims
2000 underwriting year
end of 2000 2001 2002 2003 2004 2005 2006 2007 20080
500
1000
1500
2000
2500
3000
USD 2000 underwriting year
end of 2002 2003 2004 2005 2006 2007 2008 2009 20100
500
1000
1500
2000
2500
3000
USD 2002 underwriting year
end of 2001 2002 2002 2004 2005 2006 2007 2008 20090
500
1000
1500
2000
2500
3000
USD 2001 underwriting year
end of 2003 2004 2005 2006 2007 2008 2009 2010 20110
500
1000
1500
2000
2500
3000
USD 2003 underwriting year
end of 2004 2005 2006 2007 2008 2009 2010 2011 20120
500
1000
1500
2000
2500
3000
USD 2004 underwriting year
end of 2005 2006 2007 2008 2009 2010 2011 2012 20130
500
1000
1500
2000
2500
3000
USD 2005 underwriting year
end of 2006 2007 2008 2009 2010 2011 2012 2013 20140
500
1000
1500
2000
2500
3000
USD 2006 underwriting year
end of 2007 2008 2009 2010 2011 2012 2013 2014 20150
500
1000
1500
2000
2500
3000
USD 2007 underwriting year
0%
20%
40%
60%
80%
100%
120%
140%
12 24 36 48 60 72 84 96 108
120
132
144
Ultimate
199619971998199920002001200220032004200520062007
Ultimates based on 10 IUMI members: Belgium, France, Germany, Italy, Netherlands, Norway, Spain, UK Lloyds & IUA, USA
Marine Hull Gross Loss Ratio paid claims, Actual and estimated towards ultimate
U/W Year 1996 to 2007
1999
1998
2000
2002 2007/2001
20062004
2005/2003
Technical break even is achieved when the gross loss ratio does not exceed 100% minus the expense ratio (between 20% and 30%, acquisitioncosts, capital costs and management expenses)
New Construction
• Critical points for Underwriters– Know the Class Society
• IACS• Has class changed during construction or after delivery
– Know your Insured• Was the vessel started on “spec”• Has the owner monitored all phases of construction
– Know the yard• Established or “beach” yard• How many previous vessels of this type has the yard
completed. 17
Summing up Hull• Marine Hull
– 2004, 2005: • Few major claims, but increase in average repair cost
– 2006:• Increase in number and severity of major claims• Trend towards higher attritional claims cost continues• Strong impact on result by claims occured in 2007, but
attaching to 2006– 2007:
• Starts at high loss ratio level, expected to produce a technical loss again.
• Premium increases do not sufficiently balance cost inflation.
Issues
• Crew• Social responsibility• Repair and maintenance• Salvage• Credit Crisis• Image of Shipping• Insurance
Clarksea Index
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
1990-Q1
1990-Q3
1991-Q1
1991-Q3
1992-Q1
1992-Q3
1993-Q1
1993-Q3
1994-Q1
1994-Q3
1995-Q1
1995-Q3
1996-Q1
1996-Q3
1997-Q1
1997-Q3
1998-Q1
1998-Q3
1999-Q1
1999-Q3
2000-Q1
2000-Q3
2001-Q1
2001-Q3
2002-Q1
2002-Q3
2003-Q1
2003-Q3
2004-Q1
2004-Q3
2005-Q1
2005-Q3
2006-Q1
2006-Q3
2007-Q1
2007-Q3
2008-Q1
2008-Q3
$ Day
Values
Ship Building
Credit Crunch
The Fleet
Increase in Scrapping
Crew
Supply and Demand in 2005Supply000’
Demand000’
Balance000’
Officers 466 476 -10
Ratings 721 586 135
2005000’
%Surplus/deficit
2015000’
Balance000’
Officers -10,000 -2% -27,000
167,000
-5.9%
Ratings 135,000 19% 21.6
Supply and Demand in 2005
BA Air crash “Hebei Spirit”
“Hero” “Criminal”
Criminalisation
Insurance
Summary
• Freight rates• Ship Values under pressure• Shipping at breaking point in every area• Enhanced risk• Crew• Insurance capacity under pressure worldwide
Simon Stonehouse
Hull UnderwriterBrit Insurance plc