P&I review

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1 P&I review

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3 Table of Contents About FP Marine Risks Data International Group of P&I s International Group s 2014 Review P&I Market Share 6 Standard & Poor s Rating of P&I s 7 History of General Increases (Announced) 8 History of General Increases (Effective ETC) 9 Deferred Call Record (Estimate/Actual) 10 Release Calls as at 20 July International Group Reinsurance Structure 11 History of International Group Reinsurance Costs 11 Average Expense Ratio Average Size and Number of Vessels Consolidated Free Reserves Free Reserves % of Call Income Free Reserves per Ton 14 Investment Yield 14 Information International Group of P&I s American Steamship Owners Mutual Protection & Indemnity Association, Inc. 16 The Britannia Steamship Insurance Association Ltd 17 Assuranceforeningen Gard 18 The Japan Ship Owners Mutual Protection & Indemnity Association 19 London Steamship Owners Mutual Insurance Association Ltd 20 The North of England P&I Association Limited 21 The Shipowners Mutual Protection and Indemnity Association Ltd (Luxembourg) 22 Assuranceforeningen Skuld 23 The Standard 24 Steamship Mutual Protection & Indemnity Association 25 The Swedish 26 The United Kingdom Mutual Steamship Assurance Association (Bermuda) Limited 27 The West of England Ship Owners Mutual Insurance Association (Luxembourg) 28 Alternative Markets Non International Group s and Fixed Facilities The Alternatives Review Alternatives Market Share 31 British Marine 32 Carina 33 Charterama B.V. 34 Charterers P&I 35 China Shipowners Mutual Assurance Association 36 Coastal Marine Services Ltd 37 Eagle Ocean Marine 38 Hanseatic Underwriters 39 Hydor AS 40 Ingosstrakh Insurance Co. 41 Korea P&I 42 Lodestar Marine 43 Navigators Management (UK) Ltd 44 Norwegian Hull PIDEF 45 Osprey Underwriting Agency Ltd 46 RaetsMarine BV 47 Rosgosstrakh Limited 48

4 About FP Marine Risks FP Marine Risks, a specialist marine insurance broker, has provided expertise across all classes of marine insurance since Headquartered in Hong Kong, the company has grown at a rapid pace and has expanded internationally, opening offices in London, Beijing, Taipei, Miami and Sydney. Fuelling such growth is the experience and clear understanding FP Marine Risks has of world marine insurance markets, in particular those of and London. As the first Asian-headquartered insurance broker to be accredited by Lloyd s, FP Marine Risks strategic positioning in international markets serves to strengthen and support the company s relationships with clients and insurance partners worldwide. This annual review has been produced to update our clients on the performance of the International Group clubs, as well as the fixed premium insurers, prior to the upcoming renewal season. We hope you will find it a useful source of reference both for renewal and the P&I year ahead. Please note that this review is intended to highlight issues on a general basis. FP Marine Risks has made every attempt to ensure the accuracy and reliability of the information provided. However, FP Marine Risks can not accept any responsibility or liability for the accuracy or completeness of the information.

5 Data International Group of P&I s P&I Review

6 International Group s 2014 Review The year ended 20 February 2014 saw the overall underwriting results improve and come within a whisker of actually breaking even. Call income rose 7.25% but this is as much to do with diversification bringing with it new sources of income as it is due to the effect of the 8% general increases. GT entered has also risen by almost 5%, so in terms of available premium to finance claims, the increased income is less substantial. Interestingly claims incurred have fallen in the year on a financial year basis, but some s have recognised substantial back year development gains in the financial year: on a policy year basis looking at development at 12 months, P&I claims have fallen by less than 2%. The churn continues to affect s attempts to increase average rates per GT, but the phenomenon has at least stabilised: the last three years have seen a 7% differential between premium growth attained and the average general increase. Whilst this is still an issue, it is a considerable improvement on the 16% differential seen in the two preceding years when the shipping industry felt the full impact of recession. Individual club commentaries suggest that some are suffering more than others from this influence generally those s that had an older average vessel age will suffer more. The differential is unlikely to change much in absence of a sustained recovery in the fortunes of the shipping industry, which would result in older vessels being pressed into more active service, but at least the prolonged slump in the industry fortunes is making the impact of churn more predictable. On the other hand, claims are exhibiting a mixture of unpredictable trends. Rising deductibles have undoubtedly cut into the frequency of attritional claims, and the number of such claims continues to fall. However the typical claim cost of an attritional claim continues to rise. In part the higher average cost is down to smaller claims being eliminated by rising deductibles, but also claims severity continues to rise. One comments that an average attritional claim costs 50% more than it did ten years earlier.

7 The greatest unpredictability is seen in large claims those over $1 million: be they within retention of those impacting the pool. Due to their random nature, these claims strike different clubs in different ways (in different years) and so we see volatility in individual s performance. The UK had a particularly bad year for large claims in and note that 1% of their claims by number account for 60% of their incurred claims cost. The s are entering a brave new world; will they all weather the storm in the same form as they are today? Will the International Group Agreement survive these changes or will individual ambitions begin to weaken the bonds that have held the s together? The next few years will be interesting. The last three years have all been bad years for pool losses, although, at the nine-month point, it appears that the pool year is showing an improvement. This claims volatility is becoming more and more influential on the system, especially since the s are retaining more and more risk, both individually and collectively. Hydra is retaining bigger lines within the first $100 million, and is taking a bigger share on the first layer of the group reinsurance programme. The characteristic of risk has changed markedly in the last ten years: retaining bigger shares of the more volatile and random losses. This naturally stresses the s individual finances and the changes all point to an increased risk based capital requirement when solvency 2 comes into force. This may in part explain the continued rush to diversify which brings with it solvency credits. Diversification continues apace, with almost all of the s jumping on the bandwagon. In part this may be because it is trendy, in part it may be due to the new generation of senior management wanting to make their mark. Whatever the cause, we see continued growth of product range from the Scandinavian s, the North of England bedding in Sunderland Marine, the Standard establishing a new Lloyd s syndicate, the Japan expanding its territorial scope and starting a new Class and almost all s now pressing forward into the small vessel arena. The London stands proudly alone as a bastion of traditional values, sticking to its core business whilst at the same time resisting the pressures to go interactive from S&P. International Group s Financial Year Results In millions of units Current Year 2014 Prior Year 2013 Owned GT 1,072 1,024 Call Income $4,110 $3,832 Acquisition Costs Reinsurance Claims Incurred 2,733 2,827 Administrative Expenses Total Costs $4,159 $4,109 Underwriting Result (49) (277) Investment Income Exchange Gains/(Losses) etc (31) (2) Taxation (21) (18) Net Investment Income $280 $406 Overall Result $231 $129 Cash and Investments 10,804 10,405 Net Assets Total Assets $11,029 $10,616 Net Outstanding Claims $6,714 $6,532 Net Assets $4,315 $4,084 Free Reserves 4,217 3,984 Debt Capital Consolidated Free Reserves $4,315 $4,084 P&I Review

8 International Group of P&I s Market Share 2014 owned gross tonnage (000s) 16,500 American 108,000 Britannia 10 % 2 % 12 % 58,000 West of England 124,000 UK 187,000 Gard 91,800 Japan 17 % 2014 total gt 1,071.5m 4 % 6 % 9 % 38,000 Swedish 68,700 Steamship 101,000 Standard 9 % 4 % 43,100 London 12 % 2 % 8 % 81,400 Skuld 130,000 North of England 24,000 Shipowners 2014 POLICY YEAR P&I ESTIMATED TOTAL COST (ETC) usd 000s 98,096 American 195,292 West of England 274,892 Britannia 8 % 6 % 12 % 394,800 UK 581,957 Gard 176,693 Japan 96,600 London 321,281 North of England 17 % 2014 total etc 3,410m 9 % 7 % 9 % 9 % 9 % 100,000 Swedish 304,547 Steamship 325,000 Standard 243,848 Shipowners 297,041 Skuld 6 P&I Review

9 Standard and Poor s Ratings of P&I s Current American BBB- BBB- BB+ BB+ BB BB BB- Britannia A A pi A pi A pi A pi A pi A pi Gard A+ A+ A+ A A A A+ Japan BBB+ BBB+ BBB BBB pi BBB pi BBB pi BBB pi London BBB pi BBB pi BBB pi BBB pi BBB pi BBB pi BBB pi North of England A A A A A A A Shipowners A- A- A- BBB pi BBB pi BBB pi BBB pi Skuld A A A A- A- A- A- Standard A A A A A A A Steamship Mutual A- A- A- A- BBB+ BBB+ BBB pi Swedish BBB+ BBB+ BBB+ BBB BBB BBB BBB UK A A- A- A- A- A- A- West of England BBB BBB BBB- BB pi BBB pi BBB pi BBB pi pi ratings are based on public data only, others are based on a periodic review by S&P analysts. Ratings BBB or higher are regarded as having financial security characteristics that outweigh any vulnerabilities, and are likely to have the ability to meet financial commitments. AA: Very Strong financial security characteristics. A: Strong financial security characteristics, but is somewhat more likely to be affected by adverse business conditions than insurers with higher ratings. BBB: Good financial security characteristics, but is more likely to be affected by adverse business conditions than higher rated insurers. Ratings BB or lower are regarded as having vulnerable characteristics that may outweigh the strengths. BB: Marginal financial security characteristics. Positive attributes exist, but adverse business conditions lead to insufficient ability to meet financial requirements. B: Weak financial security characteristics. Adverse business conditions will likely impair the ability to meet financial commitments. + or signs show relative standing within the major rating category. P&I Review

10 History of General Increases (Announced) Announced GI American 4.5% 10.0% 10.0% 5.0% 2.0% 0.0% 7.5% Britannia 2.5% 2.5% 12.5% 5.0% 5.0% 5.0% 12.5% Gard 2.5% 5.0% 5.0% 5.0% 0.0% 0.0% 15.0% Japan 3.0% 7.5% 5.0% 3.0% 10.0% 12.5% 12.5% London 6.0% 10.0% 12.5% 5.0% 5.0% 5.0% 15.0% North of England 4.75% 7.5% 15.0% 5.0% 3.0% 5.0% 17.5% Shipowners 0.0% 5.0% 5.0% 0.0% 0.0% 5.0% 10.0% Skuld n/a n/a n/a n/a n/a 5.0% 15.0% Standard 5.0% 12.5% 7.5% 5.0% 3.5% 3.0% 15.0% Steamship Mutual 0.0% 10.0% 7.5% 5.0% 0.0% 5.0% 17.5% Swedish 2.5% 7.5% 7.5% 5.0% 2.5% 2.5% 15.0% UK 6.5% 10.0% 7.5% 3.0% 5.0% 5.0% 12.5% West of England 2.5% 7.5% 3.5% 5.0% 5.0% 5.0% 10.0% The above data is taken from the s circulars and is intended to illustrate each s announced General Increase percentage. Years when the deferred call rate also changed change in general increase (announced) % 10 % 10 % 10 % % % n/a 0 % American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England 8 P&I Review

11 History of General Increases (Effective ETC) Effective ETC GI American 4.5% 10.0% 10.0% 5.0% 2.0% 4.2% 29.0% Britannia 2.5% 8.1% 10.5% 5.0% 5.0% 5.0% 12.5% Gard 2.5% 5.0% 5.0% 5.0% 0.0% 0.0% 15.0% Japan 3.0% 7.5% 5.0% 3.0% 10.0% 12.5% 21.1% London 6.0% 10.0% 12.5% 5.0% 5.0% 5.0% 15.0% North of England 4.75% 7.5% 15.0% 5.0% 3.0% 5.0% 17.5% Shipowners 0.0% 5.0% 5.0% 0.0% 0.0% 5.0% 10.0% Skuld n/a n/a 8.5% 5.0% 0.0% 5.0% 15.0% Standard 5.0% 12.5% 7.5% 5.0% 3.5% 3.0% 15.0% Steamship Mutual 0.0% 10.0% 7.5% 5.0% 0.0% 5.0% 17.5% Swedish 2.5% 7.5% 7.5% 5.0% 2.5% 2.5% 15.0% UK 6.5% 10.0% 7.5% 3.0% 5.0% 5.0% 12.5% West of England 2.5% 7.5% 7.5% 5.0% 5.0% 5.0% 19.2% The above data is our estimate of the effect of the s announcements after taking into consideration all changes to the ETC, including increased/decreased Deferred Calls and Discounts at the time of the announcement. Any change announced subsequently is shown in the Deferred Calls table. change in general increase (effective etc) % 10 % 10 % 10 % 8.1 % % % 0 % n/a 0 % 0 % American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England P&I Review

12 Deferred Call Record (Estimate/Actual %) American 0/0 0/0 0/0 0/0 25/25 25/25 20/20 0/25 0/30 0/35 Britannia 45/45 45/40 45/45 40/40 40/40 40/40 40/ /40 30/30 30/30 Gard 25/25 25/25 25/15 25/15 25/20 25/15 25/10 25/25 25/25 25/20 Japan 40/40 40/40 40/40 40/40 40/40 40/50 40/40 30/30 30/30 30/60 London 0/0 0/0 0/0 0/0 0/0 0/0 40/40 40/75 40/89 40/89 North of England 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Shipowners 0/0 0/0 0/0 0/0 0/0 10/0 10/0 25/0 25/0 25/0 Skuld 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Standard 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Steamship Mutual 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/20 0/14 0/12.5 Swedish 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/35 0/35 UK 0/0 0/0 0/0 0/0 0/-2.5 0/0 0/0 0/20 0/25 0/20 West of England 35/35 35/35 35/35 30/30 30/30 30/30 30/30 20/65 20/55 20/55 under-called original estimate over-called original estimate Release Calls as at 20 July American 20% 20% 20% 10% Britannia n/a 17.5% 10% 7.5% Gard 20% 20% 5% 5% Japan 5% 5% 5% 5% London 15% 15% 12.5% 5% North of England n/a 20% 5% 5% Shipowners 0% 0% 0% 0% Skuld 15% 15% 0% 0% Standard n/a 8% 4% 3% Steamship Mutual 25% 25% 10% 5% Swedish 20% 15% 10% 7.5% UK 15% 15% 10% 5% West of England 25% 30% 15% 5% 10 P&I Review

13 International Group Reinsurance Structure Cumulative Value Layers $6,250m Uninsured Overspill: reverts to Pooling Approximately $3,170m $3,080m Collective Overspill Layer $1,000 million General Tower Only. One Reinstatement $2,080m 3rd Excess Layer $1,000 million General Tower Only. Unlimited Reinstatements 1,080m 2nd Excess Layer $500 million Towers: General & Oil Pollution. Unlimited Reinstatements $580m 1st Excess Layer $500 million Towers: General & Oil Pollution Unlimited Reinstatements 30% Coinsured by Hydra 5%* $80m Upper Upper Pool $20m, reinsured by Hydra $60m Upper Pool $15m, reinsured by Hydra 10% ICR $45m Lower Pool (B) $15m, reinsured by Hydra $30m Lower Pool (A) $21m $9m Individual Retention ( ICR ) $9m *5% of the first and second excess layers have been placed on a three-year fixed premium basis between $100m and $1,100m History of International Group Reinsurance Costs Type of Vessel Excess Point $80m $70m $60m $60m $50m $50m $50m Dirty tanker Clean tanker Dry Passenger P&I Review

14 Average Expense Ratio % % % 11.3% 12.1 % % 5.7 American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England The average expense ratio is based on the rolling average of the last five policy years up to and including Average Size and Number of Vessels 42,255 Average Tonnage Number of Vessels 1,205 13,693 3,100 7,600 4,553 1,020 3, ,367 10,654 9,480 7,779 8,831 1,403 3,500 2,920 20,163 18,640 19,863 24,605 27,085 34,839 33,402 33,899 35,429 American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England 12 P&I Review

15 Free Reserves 2014 Consolidated Free Reserves (USD 000s) $57,344 $471,898 $156,012 $160,644 $312,274 $298,855 $334,548 $368,500 $301,199 $164,758 $528,342 $216,196 $944,586 American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England 2014 Free Reserves % of Call Income 172 % 166 % 134 % % 88 % 97 % % 96 % 111 % 58 % American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England P&I Review

16 2.68 % 2.49 % 2014 Free reserves per ton (USD) $12.45 $3.37 $4.37 $1.7 $3.73 $2.4 $4.11 $3.65 $4.38 $4.26 $3.73 American n/c Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual n/c Swedish UK West of England Gard and Swedish figures are not comparable (n/c) because the free reserves support both their H&M and P&I figures. Investment Yield 3.81 % 3.83% 3.18 % % 1.89 % 1.62 % 1.42 % 0.9 American Britannia Gard Japan London North of England Shipowners Skuld Standard Steamship Mutual Swedish UK West of England The above data is a seven-year rolling average based on investment income compared to total assets, excluding reinsurance recoveries. 14 P&I Review

17 Information International Group of P&I s P&I Review

18 American Steamship Owners Mutual Protection & Indemnity Association, Inc. Managers: Shipowners Claims Bureau, Inc. S&P rating: BBB- Following the resignation of Ian Farr a year ago and the retirement of Stuart Todd during the current year, the has decentralised their underwriting onto a regional basis: North America, & the Middle East, China & North Asia and South/Southeast Asia. Entered GT by Vessel Type Entered GT by Region GT Owners 16.5m Chartered 0.3m 4 7 % 4 Bulker 31st Dec 13 1, % 48 % 9 % Americas Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 107, , , , ,691 Reinsurance Cost 18,581 18,585 16,438 9,362 12,282 Net Claims Incurred 65,064 83,265 72,986 69,236 75,918 Operating Expenses 35,250 31,995 33,045 34,691 35,378 Net Underwriting Result (10,936) (21,719) (10,359) 1,342 (7,887) Investment Income 14,260 16,089 7,361 13,884 20,752 Gross Outstanding Claims 225, , , , ,154 Total Assets 328, , , , ,110 Free Reserves 57,344 54,229 60,219 63,612 48,331 General Increase 29 % Announced GI 10 % 10 % 10 % 10 % Effective ETC GI % 2 % 0 % 4.2 % P&I Review

19 The Britannia Steamship Insurance Association Ltd Managers: Tindall Riley (Britannia) Ltd S&P rating: A Two consecutive years of above average general increases have taken their toll on Britannia s membership, although inherent growth in their core membership and new business have balanced the losses. The low 2015 general increase, coupled with a return on the 2014 year, should stem this tide, but it seems that large claims are not abating. Entered GT by Vessel Type Entered GT by Region GT Owners 108m Chartered 23m 31 % 34 % 34 % Bulker 1 % 20th Feb 14 3, % 5 6 % Americas Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 284, , , , ,605 Reinsurance Cost 74,866 66,820 63,681 74,468 83,568 Net Claims Incurred 195, , , , ,508 Operating Expenses 26,811 29,317 29,389 27,877 25,530 Net Underwriting Result (13,326) (61,774) (29,832) 19,719 28,999 Investment Income 48,619 39,924 38,213 59,009 68,248 Gross Outstanding Claims 1,122,485 1,147,253 1,010, , ,465 Total Assets 1,499,487 1,499,103 1,326,366 1,203,366 1,085,413 Free Reserves 471, , , , ,893 Including Boudicca General Increase Announced GI Effective ETC GI % P&I Review

20 Assuranceforeningen Gard Managers: Gard AS S&P rating: A+ Despite a change of Chairman and CEO it was business as usual for Gard with a 5th consecutive year of reduced deferred calls following a small to mid-range general increase. The half year results for point to more of the same with a $129 million surplus pushing free reserves, perhaps temporarily, over the billion dollar mark. Entered GT by Vessel Type Entered GT by Region 3 GT Owners 187m Chartered 60m 18 % 29 % Bulker 2 % Passenger/Ferry 12 % Offshore 20th Feb 14 7, % 2 9 % Americas 4 % Financial Year Data (USD 000s) Calls/Premium 581, , , , ,807 Reinsurance Cost 140, ,832 95,550 77,356 75,124 Net Claims Incurred 431, , , , ,723 Operating Expenses 43,396 69,296 41,330 43,899 88,304 Net Underwriting Result (33,237) (175,501) (24,610) (7,005) 20,656 Investment Income 75, ,511 57, , ,154 Gross Outstanding Claims 1,375,264 1,344,151 1,370,242 1,277,702 1,221,835 Total Assets 2,628,490 2,531,374 2,494,246 2,352,141 2,111,037 Free Reserves 944, , , , ,411 Consolidated General Increase 1 1 Announced GI Effective ETC GI % % 0 % 0 % 18 P&I Review

21 The Japan Ship Owners Mutual Protection & Indemnity Association Managers: Self-Managed S&P rating: BBB+ The weakening of the yen against the US dollar in the last two years has made the Japan s results quite contradictory: generally a positive performance in original currency, yet falling free reserves in US dollars. Given their predominant Japanese book of business, the probably is somewhat stronger than its US dollar balance sheet suggests. The has announced a new Gaiko Class aimed at short haul Asian business on a fixed premium basis. Entered GT by Vessel Type Entered GT by Region GT Owners 91.8m Chartered 11.4m 20 % 11 % 56 % Bulker 1 20th Feb 14 4, % Financial Year Data (USD 000s) Calls/Premium 237, , , , ,081 Reinsurance Cost 56,264 44,545 46,228 49,652 43,368 Net Claims Incurred 144, , , , ,559 Operating Expenses 24,122 29,914 29,290 28,070 25,091 Net Underwriting Result 13,308 (26,797) 3,957 20,852 (937) Investment Income 10,664 9,296 10,233 5,335 6,857 Gross Outstanding Claims 391, , , , ,986 Total Assets 680, , , , ,019 Free Reserves 156, , , , ,369 General Increase 21.1 % 10 % 10 % Announced GI Effective ETC GI P&I Review

22 London Steamship Owners Mutual Insurance Association Ltd Managers: A Bilbrough & Co Ltd The London remains stoically true to its roots, eschewing the diversification seemingly much loved by its peer group. This can be both a positive and a negative the is perhaps characterised as traditional yet lacking innovation. Perhaps the only true mutual left in the market, another high end general increase reflects the problems the has in growing a static premium base. S&P rating: BBB Entered GT by Vessel Type Entered GT by Region GT Owners 43.1m Chartered 5.2m 2 18 % 57 % Bulker 20th Feb 14 1, % 34 % 4 % Americas Financial Year Data (USD 000s) Calls/Premium 106, , , , ,011 Reinsurance Cost 20,754 22,175 21,216 22,549 20,292 Net Claims Incurred 92,956 82,691 93, , ,076 Operating Expenses 11,921 11,483 11,367 11,021 11,103 Net Underwriting Result (18,736) (14,398) (16,731) (21,464) (16,460) Investment Income 24,403 23,891 16,689 24,785 42,743 Gross Outstanding Claims 322, , , , ,245 Total Assets 491, , , , ,980 Free Reserves 160, , , , ,426 General Increase 10 % 10 % Announced GI Effective ETC GI 6 % 6 % P&I Review

23 The North of England P&I Association Limited Managers: North Insurance Management Limited S&P rating: A After a couple of years of consolidation, the has finalised the acquisition of Sunderland Marine and taken the opportunity to overhaul its entire management structure under the guise of North Group. The results were badly hit by a large one off pension fund contribution which has meant free reserves have been static for four years in a row, a situation that will no doubt be reversed with the consolidation of Sunderland Marine into the figures. Entered GT by Vessel Type Entered GT by Region GT Owners 130m Chartered 50m 30 % 24 % 37 % Bulker 1 % Passenger/Ferry 8 % 20th Feb 14 3, % 3 7 % Americas 10 % Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 383, , , , ,051 Reinsurance Cost 77,885 70,788 55,432 59,738 47,619 Net Claims Incurred 231, , , , ,469 Operating Expenses 91,522 50,877 51,617 43,721 35,811 Net Underwriting Result 22,189 (9,830) (6,773) 54,828 11,152 Investment Income 13,875 12,364 13,447 15,008 8,543 Gross Outstanding Claims 964, , , , ,236 Total Assets 1,361,357 1,249,306 1,167,453 1,029,157 1,028,994 Free Reserves 312, , , , ,262 General Increase Announced GI Effective ETC GI % P&I Review

24 The Shipowners Mutual Protection and Indemnity Association Ltd (Luxembourg) Managers: The Shipowners Protection Limited S&P rating: A- The has almost completed its transition to becoming a fixed premium facility in all but name. Release calls have been abolished, deferred calls are set at 0% and general increases dwindle in significance. Half year results have added another $15 million to free reserves. The Vancouver office was closed during the year, although the impact of this on premium income has already been overcome. Entered GT by Vessel Type Entered GT by Region GT Owners 24m Chartered 0.5m 14 % 1 4 % Passenger/Ferry 24 % Offshore 4 20th Feb 14 33, % 44 % 11 % Americas 2 Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 243, , , , ,190 Reinsurance Cost 30,664 21,795 19,927 22,998 24,186 Net Claims Incurred 158, , , , ,790 Operating Expenses 52,255 44,321 43,030 40,510 34,409 Net Underwriting Result 2,334 8,938 28,560 26,157 (2,195) Investment Income 23,081 38,233 52,200 20,469 35,911 Gross Outstanding Claims 414, , , , ,456 Total Assets 779, , , , ,018 Free Reserves 298, , , , ,340 General Increase Announced GI 10 % 10 % Effective ETC GI 0 % 0 % 0 % 0 % 0 % 0 % P&I Review

25 Assuranceforeningen Skuld Managers: Self-managed S&P rating: A Another with imminent changes at the helm as CEO Douglas Jacobsohn is to be replaced by Stale Hansen post renewal. The has reported another healthy half year result, increasing free reserves by $20 million and anticipate an unprecedented 12th consecutive year of underwriting profits by February The Skuld London office can now offer all of the Group s insurance coverages, some of which were only previously available via Oslo. Entered GT by Vessel Type Entered GT by Region GT Owners 81.4m Chartered 54m 39 % 18 % 32 % Bulker 2 % Passenger/Ferry 9 % 20th Feb 14 4, % 21 % 11 % Americas 1 % Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 379, , , , ,386 Reinsurance Cost 56,557 40,244 38,482 32,312 26,507 Net Claims Incurred 245, , , , ,035 Operating Expenses 73,321 64,556 56,109 44,435 39,217 Net Underwriting Result 3, ,658 30,609 10,627 Investment Income 33,817 19,194 16,395 28,110 54,913 Gross Outstanding Claims 523, , , , ,963 Total Assets 909, , , , ,095 Free Reserves 334, , , , ,505 General Increase 1 1 Announced GI 8. Effective ETC GI n/a n/a n/a n/a n/a n/a n/a % P&I Review

26 The Standard Managers: Charles Taylor & Co (Bermuda) S&P rating: A Standard completes the triumvirate of s with changes at CEO level, with Jeremy Grose replacing Alistair Groom following the last renewal. The created a storm when proposing to issue US COFRs, a situation they backed away from following strong opposition by the Group. Instead their innovative spark has been satisfied by the proposed new Lloyd s syndicate 1884 in which the will participate. Entered GT by Vessel Type Entered GT by Region 26 % GT Owners 101m Chartered 30m 26 % 2 Bulker 11 % Passenger/Ferry 9 % Offshore 20th Feb 14 9, % 31 % 18 % Americas 9 % Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 336, , , , ,291 Reinsurance Cost 82,900 62,900 65,500 66,334 52,517 Net Claims Incurred 230, , , , ,035 Operating Expenses 26,500 41,100 38,900 29,478 24,212 Net Underwriting Result (4,200) (39,600) (44,100) 17,760 1,341 Investment Income 10,500 52,200 52,200 58,963 62,887 Gross Outstanding Claims 986,900 1,005, , , ,068 Total Assets 1,395,800 1,429,900 1,261,600 1,002, ,623 Free Reserves 368, , , , ,807 General Increase Announced GI Effective ETC GI % 3.5% P&I Review

27 Steamship Mutual Protection & Indemnity Association Managers: Steamship Mutual Management (Bermuda) Limited The s recent decline in free reserves was arrested in the latest year, with reserves rising back above the $300 million mark, although static on a per GT basis. The s overall performance continues to be stymied by its ultra conservative investment strategy with no equity investment being made. This pressurises premium requirements and must lead to their being less competitive when quoting new business. S&P rating: A- Entered GT by Vessel Type Entered GT by Region GT Owners 68.7m Chartered 45m 24 % 21 % 39 % Bulker 1 Passenger/Ferry 20th Feb 14 8, % 39 % 24 % Americas 7 % Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 345, , , , ,431 Reinsurance Cost 61,169 44,323 51,470 48,543 43,935 Net Claims Incurred 232, , , , ,855 Operating Expenses 42,823 38,456 44,922 40,417 37,543 Net Underwriting Result 9,289 (33,775) (40,940) 21,111 21,098 Investment Income 5,139 24,353 36,674 27,908 33,604 Gross Outstanding Claims 1,205,156 1,281, , , ,678 Total Assets 1,532,919 1,600,477 1,276,585 1,051,945 1,016,696 Free Reserves 301, , , , ,562 General Increase Announced GI 10 % 10 % Effective ETC GI % 0 % 0 % % P&I Review

28 The Swedish Managers: Self-managed S&P rating: BBB+ Strong half year results to 30th June 2014, with an overall surplus of $10.3 million build on last year s good results, but the continues to be affected by high pooling loss contributions a legacy of several large claims in the past decade. This has left them with the highest pool cost per entered GT in the Group and also pressurises premium requirements when quoting for new business. Entered GT by Vessel Type Entered GT by Region 20 % GT Owners 38m Chartered 18m 40 % 31 % Bulker Passenger/Ferry 31st Dec 13 1, % 6 % Financial Year Data (USD 000s) Calls/Premium 100,000 91,742 91,356 85,280 78,742 Reinsurance Cost 32,035 24,354 19,038 16,920 17,321 Net Claims Incurred 60,314 78,023 68,599 52,081 54,494 Operating Expenses 13,825 13,376 12,675 11,644 9,824 Net Underwriting Result (6,174) (24,011) (8,656) 4,635 (2,897) Investment Income 9,164 21,672 4,018 13,181 8,639 Gross Outstanding Claims 318, , , , ,457 Total Assets 547, , , , ,959 Free Reserves 164, , , , ,364 General Increase 1 1 Announced GI Effective ETC GI P&I Review

29 The United Kingdom Mutual Steamship Assurance Association (Bermuda) Limited Managers: Thomas Miller Bermuda Limited S&P rating: A A small number of large claims has made one of the most expensive years in the last 20 years. The current year is performing more at expectation but despite this, the has only reported a breakeven result for the half year. Consequently, the has still required a market high 6.5% general increase for the forthcoming renewal. On a positive note, the s pooling contributions continue to fall, easing the underwriting result somewhat. Entered GT by Vessel Type Entered GT by Region GT Owners 117.8m Chartered 80m 40 % 1 38 % Bulker 4 % Passenger/Ferry 20th Feb 14 3, % 38 % 9 % Americas Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 396, , , , ,183 Reinsurance Cost 93,502 73,190 70,685 70,218 75,935 Net Claims Incurred 268, , , , ,964 Operating Expenses 40,942 41,133 42,109 40,621 44,113 Net Underwriting Result (7,069) (20,052) 4,459 3,524 7,171 Investment Income 42,226 23,697 6,126 53,890 56,883 Gross Outstanding Claims 1,065,334 1,046,420 1,109,910 1,105,013 1,131,010 Total Assets 1,624,107 1,563,075 1,620,547 1,609,705 1,562,143 Free Reserves 528, , , , ,345 Including Hybrid Capital General Increase % 10 % % % Announced GI Effective ETC GI P&I Review

30 The West of England Ship Owners Mutual Insurance Association (Luxembourg) Managers: The West of England Ship Owners Insurance Services S&P rating: BBB The s fortunes continue to improve since they bit the bullet in 2011 and revamped their book of business. This de-risking caused a substantial decline in premium at the time, but subsequent results would appear to justify the decision, and the continues to strengthen its capital base. This view is reinforced by a positive result at the half year, with a surplus of $11.6 million being reported. Entered GT by Vessel Type Entered GT by Region GT Owners 58m Chartered 20m 28 % 28 % 39 % Bulker Passenger/Ferry 2 % 31st Dec 13 2, % 38 % 6 % Americas 6 % Africa/Middle East/India Financial Year Data (USD 000s) Calls/Premium 203, , , , ,589 Reinsurance Cost 36,369 29,187 33,008 39,831 45,641 Net Claims Incurred 133, , , , ,471 Operating Expenses 34,854 35,264 36,492 35,532 35,157 Net Underwriting Result (1,397) (4,136) (15,544) (36,669) (55,680) Investment Income 22,165 26,580 16,458 48,230 63,220 Gross Outstanding Claims 549, , , , ,243 Total Assets 790, , , , ,141 Free Reserves 216, , , , ,109 General Increase 19.2 % Announced GI 10 % Effective ETC GI P&I Review

31 Alternative Markets Non International Group s and Fixed Facilities P&I Review

32 The Alternatives Review The preceding pages have examined the financial strengths of the International Group s, but it is important to give due prominence to the alternative markets predominantly offering fixed premium options which afford a wider degree of choice for insurance buyers. The following pages look at some of the key features of a number of such alternative facilities, but this is not intended to be a comprehensive list of companies offering P&I cover. In addition to local companies offering cover to vessel owners operating in their own regions mainly in the Far East and Eastern there are also a number of facilities which are more global in their reach, such as British, an & Overseas P&I, East of England P&I and British Steamship P&I. Whilst the facilities discussed in this section of our review are predominantly focused on the small ship sector there are also specialist facilities targeting charterers business as well as larger regional trade. These markets are evolving in what they offer to shipowners five years ago there were fewer facilities, offering significantly lower limits of liability and with restrictive underwriting guidelines. Today there are more facilities which are more hungry for risk and typically offering higher limits either on a retained basis or via excess P&I coverage arranged by the facility managers. It is not just that the Alternatives are increasing the scope of their coverage: the International Group is also treading on the toes of the alternative market by offering more specialist small vessel covers, either within the framework of the main or in sponsored complementary facilities. In the main these offerings tend to be on a fixed premium basis and do not require release calls. The recent developments at Eagle Ocean and Carina mean that only UK and London s are not active in the small ship sector. Indeed the International Group still insure more small vessels than the Alternative market, albeit largely down to Shipowners, but Standard and Steamship insure over 10,000 small craft between them. What does this mean for the buyer of insurance: the shipowner? Clearly a greater range of choice, with maybe 25 plausible insurers in the market. Also a range of choice of service standards and choice in response to the question mutual or fixed. The marketplace continues to become more crowded and there is strong empirical evidence that prices are still falling for the small shipowner. This points to immediate term benefits being available to the owner who shops around (subject to the chains of release calls) but will these be long lasting? Traditionally the Alternative market has been seen as more ephemeral, with exits from the market being as normal as new entrants. The last five years have rather refuted this argument, although in the last 12 months we have seen the fledgling Hellenic P&I fold into its former host company Aigaion Insurance. Also the future of the Indian Ocean P&I seems to be in doubt, but there is no question that the newcomers and growth in the existing facilities will more than compensate for the loss of a couple of the smaller players. The argument proposed last year that there is too much capacity chasing too little business remains valid, and this situation does not look likely to disappear in the immediate future. The battle for the hearts of the small shipowner may yet result in a few dead bodies in the field of combat. 30 P&I Review

33 Alternatives Market Share 2014 GT entered (000s) 31,730 21,100 15,400 11,000 7,500 5,000 British Marine 2,000 Carina Charterama 2,700 2,800 2,000 1,050 1, n/a n/a n/a Charterers China Shipowners Coastal Eagle Ocean Hanseatic Hydor Ingosstrakh Korea P&I Lodestar Navigators Norwegian Hull Osprey RaetsMarine 1,400 Rosgosstrakh 2014 premium income (usd 000s) 100,000 77,500 69,100 21,800 28,200 19,500 31,800 25,000 21,400 30,000 10,000 5,000 7,000 9,000 11,000 4,800 British Marine n/a Carina Charterama Charterers China Shipowners Coastal Eagle Ocean Hanseatic Hydor Ingosstrakh Korea P&I Lodestar Navigators Norwegian Hull Osprey RaetsMarine Rosgosstrakh P&I Review

34 British Marine S&P rating: A+ British Marine in London have joined forces with QBE in Asia to produce a unified P&I product for the Far East market based in Singapore. This should enable the company to stabilise its business where P&I premium has fallen by some 25% in the last three years. Tonnage by Type Geographic Distribution 6 % 2 44 % GT Entered 11m 4 Bulker 7 % Tug & Barge 10, % 12 % Americas 8 % Fishing 14 % Africa/Middle East/India 11 % CLUB data Facility Name British Marine Status Fixed Premium Underwriting Security QBE Insurance () Ltd Facility Established 1876 demutualised 2000 Specialism Capability Owners P&I Freight, Demurrage & Defence, Hull & Machinery, Charterers Liability Premium Income $100m Rating of Carrier S&P: A+ Standard Limit Offered $500m Excess Cover Offered $500m in excess of $500m Restrictions on writing business By tonnage size By trading area By ownership By vessel type Owners to 10,000 GT but will consider larger; Charterers to 30,000 GT Avoids transatlantic and transpacific risks and all Turkish business Avoids US trading vessels Avoids dirty tankers, passenger and reefer vessels 32 P&I Review

35 Carina Managers: Tindall Riley Marine Limited S&P rating: A+ The facility is somewhat reluctant to disclose certain key data, particularly premium information. It has however put 4,200 vessels on the books in a mere 18 months, and, with a combined ratio of 72%, appears to have achieved this by underwriting on a conservative basis. Tonnage by Type Geographic Distribution 8 % 24 % 6 GT Entered 2m 14 % Passenger/Ferry 37 % Tug & Barge 4, % 7 % Americas Fishing 12 % CLUB data Facility Name Carina Status Fixed Premium Underwriting Security Lloyd's Facility Established 2013 Specialism Capability Owners & Charterers P&I for small craft Legal Assistance & Defence + miscellaneous non standard covers # Accounts Charterers 1,000 Rating of Carrier S&P: A+ Standard Limit Offered Excess Cover Offered $50m Owners & Charterers $450m in excess of $50m owners only Restrictions on writing business By tonnage size By trading area Up to 5,000 GT Domestic or inland waters worldwide P&I Review

36 Charterama B.V. RSA S&P rating: A The facility was formed as a breakaway from Raets in 2009 and is a specialist charterers liability facility. It has recently opened an office in Hong Kong and some 25% of its business is now of Far Eastern origin. Market share is steadily increasing as are the number of vessels insured. Tonnage by Type Geographic Distribution GT Entered 7.5m Bulker 2 % Tug & Barge 10, % 30 % 1 Americas Africa/Middle East/India CLUB data Facility Name Charterama Status Fixed Premium Underwriting Security Reinsurance Royal Sun Alliance; (to October 2012 REAAL Schadeverzekeringen NV) Munich Re, Chartis & Lloyd's Facility Established 2009 Specialism Capability Charterers P&I Freight, Demurrage & Defence, Cargo Owners Legal Liability Premium Income $10m Rating of Carrier Standard Limit Offered RSA S&P: A Up to $100m P&I; $2m FD&D 34 P&I Review

37 Charterers P&I Managers: Michael Else & Company Ltd S&P rating: AA- The original stand-alone charterers liability facility was formed in 1986 as a mutual club, but demutualised in 1999 as a fixed premium facility. 75% of its business is bulkers, broadly split one-third, one-third Far East and one-third Rest of World. The facility recently moved its service centre to Dubai. Tonnage by Type Geographic Distribution GT Entered n/a 76 % 21 % 12, % 5 Americas 14 % Africa/Middle East/India CLUB data Facility Name Charterers P&I Status Fixed Premium Underwriting Security Great Lakes/Munich Re Group Facility Established 1986 demutualised 1999 Specialism Capability Premium Income Rating of Carrier Charterers P&I Freight, Demurrage & Defence $28.2m S&P: AA- Standard Limit Offered Up to $50m Excess Cover Offered Up to $450m in excess of $50m P&I Review

38 China Shipowners Mutual Assurance Association The has yet to publish its financial report, and so figures herein are truncated. The has not had an excess call since Tonnage by Type Geographic Distribution 1 GT Entered 31.73m 2 61 % Bulker 1, % 1 % CLUB data Facility Name Status Underwriting Security Reinsurance China Shipowners Mutual Assurance Association Mutual China Shipowners Mutual Assurance Association Co-insured into International Group s Facility Established 1984 Specialism Capability Premium Income Free Reserve (if mutual) Rating of Carrier Standard Limit Offered Owners P&I Freight, Demurrage & Defence, Hull & Machinery, War, Strikes, Charterers Liability $69.1m $1,092m Unrated As per International Group 36 P&I Review

39 Coastal Marine Services Ltd S&P rating: AA- Coastal Marine Services was formed in 2011 and entered into a coverholder partnership with Chaucer Syndicate 1084 in The facility offers both P&I and H&M insurance on behalf of Chaucer. Its pre-existing book of business was transferred to the partnership at the time of formation. Tonnage by Type Geographic Distribution GT Entered 1.05m 8 % 42 % Tug & Barge 20 % Fishing 2 1, % 4 % 2 Americas 2 % Africa/Middle East/India CLUB data Facility Name Status Coastal Marine Services Ltd Fixed Premium Underwriting Security Lloyd's - Chaucer Syndicate 1084 Facility Established 2011 Specialism Capability Owners P&I Hull & Machinery # Accounts 485 Premium Income $5m Rating of Carrier S&P: AA- Standard Limit Offered Up to $50m Restrictions on writing business By tonnage size By trading area Vessels up to 5,000 GT No US flag, ownership or management P&I Review

40 Eagle Ocean Marine Managers: Eagle Ocean Agencies Inc S&P rating: BBB- The slow but steady development of this facility reflects its conservatism as much as it does the rapid escalation of competition since its establishment in The estimates that the small craft market has doubled its capacity since 2008 and is not prepared to ride the market down. Tonnage by Type GT Entered 0.59m Geographic Distribution 22 % 17 % 59 % Bulker 42 % Tug & Barge 1 % Fishing 1 n/a 2 % Americas 3 Africa/Middle East/India Rest of World CLUB data Facility Name Status Underwriting Security Reinsurance Eagle Ocean Marine Fixed Premium The American 85% QS Reinsurance with Lloyd's & Hannover Re Established 2010 Specialism Capability Owners P&I Freight, Demurrage & Defence, Charterers Liability Premium Income $7m Rating of Carrier Standard Limit Offered Excess Cover Offered S&P: BBB- Up to $25m P&I; $2m FD&D P&I: $25m in excess of $25m with Lloyd's & Companies Restrictions on writing business By tonnage size By ownership Up to 25,000 GT No US domiciled risks 38 P&I Review

41 Hanseatic Underwriters Allianz S&P rating: AA Hanseatic has its roots in the management of various pools in the mid noughties and has gradually established a quality pool of underwriters backing the facility. The opening of a London office in 2013 has exposed it to more international business. The facility operates at the larger end of the smaller ship market. Tonnage by Type Geographic Distribution 2 % 5 72 % GT Entered 2.7m 26 % Bulker Offshore n/a 11 % 4 % Americas 8 % Tug & Barge 1 Africa/Middle East/India Fishing CLUB data Facility Name Status Underwriting Security Reinsurance Hanseatic Underwriters Fixed Premium Pool led by Allianz Global Swiss Re, Lloyd's Facility Established 1997 Specialism Capability Premium Income Rating of Carrier Owners & Charterers P&I Freight, Demurrage & Defence via Hanseatic Defence $19.5m Allianz S&P: AA Standard Limit Offered $50m Excess Cover Offered $450m in excess of $50m with Lloyd's and London Companies Restrictions on writing business By tonnage size Up to 20,000 GT tankers; 30,000 GT dry cargo P&I Review

42 Hydor AS S&P rating: A+ Started by former Skuld executive Johan Gjernes, the facility has steadily increased its market presence since It underwrites on behalf of Brit Syndicate at Lloyd s. Claims handling and servicing have been outsourced to C Solutions Ltd. Tonnage by Type Geographic Distribution 71 % Bulker 7 GT Entered 1.3m 1 % Tug & Barge 1 Fishing n/a 8 % 19 % Americas 10 % CLUB data Facility Name Hydor AS Status Fixed Premium Underwriting Security Lloyd's Syndicate 2987 (Brit) Facility Established 2010 Specialism Capability Premium Income Owners P&I Hull & Machinery, Charterers Liability, Energy, Cargo $9.0m Rating of Carrier S&P: A+ Standard Limit Offered Up to $500m Restrictions on writing business By tonnage size Up to 10,000 GT 40 P&I Review

43 Ingosstrakh Insurance Co S&P rating: BBB- The company offers marine insurance solutions encompassing cargo, first party and third party liability risks. Whilst it has an international portfolio, preferred risk remains Russian, FSU state and Eastern an business. Tonnage by Type Geographic Distribution 11 % 3 4 GT Entered 5m Bulker 1 % Passenger/Ferry n/a 3 Americas 19 % Tug & Barge 17 % Africa/Middle East/India 20 % Fishing 11 % CLUB data Facility Name Status Underwriting Security Ingosstrakh Insurance Co Fixed Premium Ingosstrakh Insurance Co Facility Established 1947 Specialism Capability Premium Income Rating of Carrier Owners P&I Cargo, Hull & Machinery, Freight, Demurrage & Defence, Charterers Liability $21.8m S&P: BBB-; Expert Ra (local rating): AA+ Standard Limit Offered Up to $500m Restrictions on writing business By tonnage size No limit but mostly under 10,000 GT P&I Review

44 Korea P&I AM Best rating: A- Despite its nomenclature as mutual, the facility offers fixed premium insurance, nonetheless it has a mutual structure with shipowning board members. Whilst it can count most of the Korean shipping community amongst its insured, many of these only place a limited number of vessels with KPI. As a result it is looking to expand its business into other Asian markets. Tonnage by Type Geographic Distribution 8 % 24 % GT Entered 21.1m 22 % Bulker 9 % Tug & Barge % 16 % Fishing 21 % CLUB data Facility Name Korea P&I Status Underwriting Security Reinsurance Mutual Structure, Fixed Premium Korea P&I Retains 50% of primary $500,000, Korean Re, Kuwait Re, Lloyd's Facility Established 2000 Specialism Premium Income Free Reserve (if mutual) Owners P&I $31.8m $36.9m Rating of Carrier AM Best: A- Standard Limit Offered Excess Cover Offered Up to $1,000m $3.08 billion where coinsured with IG Restrictions on writing business By tonnage size Up to 10,000 GT tankers; up to 100,000 GT other 42 P&I Review