Aon Risk Solutions Global Broking Centre Marine. Aon Marine Insurance Review Protection & Indemnity. Risk. Reinsurance. Human Resources.

Transcription

1 Aon Risk Solutions Global Broking Centre Marine Aon Marine Insurance Review 2014 Protection & Indemnity Risk. Reinsurance. Human Resources.

2 2 Aon Marine Insurance Review 2014

3 Contents Introduction...5 Mutual Clubs...8 Introduction P&I Comparative Data...36 P&I Club Market Reference...42 Specialist Markets...48 Mutual Clubs Specialist Markets P&I Club Market Reference P&I Comparative Data

4 4 Aon Marine Insurance Review 2014

5 Introduction Introduction The troubled shipping world has little to celebrate since our last review. Yes there are some gradual signs of recovery, but these are far from encouraging and at a time when we constantly see new tonnage entering the market place. The political unrest and ever increasing imposition of sanctions do little to ease the burden in many parts of the world. Last year s renewal was concluded late with few surprises and a final outcome of low single digit increases. We have little doubt this year will see similar posturing and outcome. Aon Marine Insurance Review

6 Due to the usual factors of churn, when new vessels entering the Club pay much less than those departing, increased convention limits and claims inflation, Aon expects general increases ranging from 0% to 7.5%. Back to mutuality In this review we highlight the performance of each Club and their financial results. The historical divide between the better and poorer performing Clubs is a continuing trend. What is clear, at least for those carrying an A rating, is that underwriting results are showing more of a consistent pattern with technical results hovering around 100%. With a greater emphasis in this area it negates to a certain extent the reliance on investment income. Whilst recent high profile claims have demonstrated how costs escalate following major casualties, the Group s solid reinsurance programme(s) has weathered this storm. Those Clubs affected will have the burden of future pool contributions (more of this later in our Review), but free reserves have stood firm. Whilst Solvency II and the all important Standard & Poor s rating have been constant companions for all Clubs, the financial strength of the Group has never been in better shape. There is little doubt Clubs have rather been a slave to free reserves and we wonder if it is not a time to look to utilise the mutual system. In recent years Britannia and Gard have performed well by not calling their full deferred calls. It begs the question, if Clubs feel a general increase is necessary to protect their financial position going forward, why not introduce a deferred call. When the claims picture is clearer, those Clubs performing well can opt to forgo that deferred call either in full or in part. At a time when shipowners are counting every penny it would make sense to lessen the burden of cost each year. It would also be a fairer method, as each member would be contributing the same percentage should the deferred call be made, rather than the all too often unequal application of the general increase. We are not suggesting the general increase disappears, but we believe there is not always a need to impose one every year. Due to the usual factors of churn, when new vessels entering the Club pay much less than those departing, increased convention limits and claims inflation, Aon expects general increases ranging from 0% to 7.5%. We suspect Clubs such as the Shipowners Club, performing very well but in a highly competitive environment, will opt for no general increase at all. We also expect Gard and Britannia to again not call their full deferred call this year and hope that others will follow suit in the future. Spirit of the Rules The recent Club newcomers to the fixed scene have certainly made some waves. Should there be a clear message from the Group on what is to be considered IGA bound and what is free business when quoting business from a holding to another s fixed P&I facility? There are mixed signals with some upholding the spirt of the rules and others taking a wholly different approach. Is this business free business after one year? At renewal a number of mutual Members are tempted by often favourable terms by one of the many well established fixed P&I providers. All too often the stumbling block to a move is release calls. We ask what happens when a member of an International Group Club seeks quotes from that same Club s fixed P&I facility. Are those release calls, still imposed? What message does this send to those Members unable to take advantage of another vehicle to offer renewal? It is also worth bearing in mind that those in a position to take advantage of their Club s fixed facility, avoiding release calls and being free business after one year, are sitting very comfortably indeed. 6 Aon Marine Insurance Review 2014

7 Against the background of the good loss record since Costa Concordia and the reasonably significant additional retentions taken by the Pool and Hydra we would be disappointed to see any further premium increases at this renewal. Introduction Consolidation We are frequently asked if there will be some consolidation within the group. It is well known approaches have been made by a few over the years. At Aon we welcome choice, giving opportunities to our clients. However, this has to be tempered with cost and sustainability. Presently the costs and expenses of running the 13 International Group Clubs is eye catching. Our thoughts are there will be little change, at least for the present, but this subject remains in clear view, if on the horizon. The 2015 Group reinsurance renewal The last two years have seen extremely difficult renewals for International Group excess of loss reinsurance contracts that have ultimately ended up causing a lot of financial pain for Club members at a time when they can ill afford it. As everyone in shipping knows the reasons for the increases from reinsuring underwriters were for both years an unprecedented deterioration in the wreck removal costs for both Costa Concordia and Rena. Approaching the 20 February 2015 renewal we are still commenting on the same issues. Costa Concordia has now reached her final resting place but since writing the Aon P&I Review this time last year the loss has deteriorated from USD 1.2 billion to USD 1.4 billion. The Rena claim has also deteriorated further with the estimate at the time of writing approximately USD 425 million having moved from USD 350 million at the start of the year. The Rena wreck removal is ongoing and could deteriorate further if there is more government intervention. On the positive side since the Costa Concordia in early 2012 there has not been a major disaster to hit the reinsurance contract. The one claim large enough to exceed the Pool has been the Smart wreck removal off the coast of South Africa and this is currently estimated at USD 110 million and not expected to move much from this figure. Barring any major claims before the reinsurance renewal is concluded we therefore expect a much easier negotiation this year. There is no doubt reinsuring underwriters will ask for increases in view of the deterioration on those two large claims however it should be argued that significant rises have been paid over the last few years and reinsurers cannot continue to push for increases on the back of the same two claims year after year. Particularly against the background of the good loss record since Costa Concordia and the reasonably significant additional retentions taken by the Pool and Hydra we would be disappointed to see any further premium increases at this renewal. In previous years we have mentioned the potential of splitting the four vessel categories currently used, with particular attention on whether container ships should form part of the dry cargo category and ferries along with cruise ships. On the dry cargo side much of this has died down despite the increase in the Rena estimates. This is partly due to there being no container ship losses since then being big enough to reach the reinsurance market and also thanks to the Smart claim being the wreck removal of a bulk carrier and although nowhere as expensive as Rena, still a significant loss. Ferry operators still argue they represent a very different risk to cruise ships and they certainly have a point. However they have also had their losses with the total loss of Amadeo I this year likely to cost tens of millions of dollars to remove. We do not expect to see any changes to the vessel categories this year. In recent years we have seen the individual Club retention and the retention of the Pool and Hydra as a whole creep upwards. This has partly been through necessity to ameliorate the increases demanded by market underwriters, but also part of a long term strategy to increase the International Group s involvement in reinsurance with the aim of relying less on the commercial market. We expect this to continue in the short to medium term and would not be surprised to see increased individual Club retentions and/or Hydra involvement at this renewal. Aon Marine Insurance Review

8 Mutual Clubs 8 Aon Marine Insurance Review 2014

9 American Club...10 Britannia...12 Gard...14 Japan Club...16 London Club...18 North of England...20 Shipowners Club...22 Skuld...24 Mutual Clubs Standard Club...26 Steamship Mutual...28 Swedish Club...30 UK P&I Club...32 West of England...34 Commentary on individual Clubs has been supplied by the Clubs themselves. Balance sheet data includes combined P&I and FD&D figures if applicable. Aon Marine Insurance Review

10 American Club American Steamship Owners Mutual Protection and Indemnity Association, Inc. Shipowners Claims Bureau, Inc., 1 Battery Park Plaza, 31st Floor, New York, NY 10004, USA american-club.com t Manager s comment Entered GT by vessel type The American Club strengthened its service capabilities by establishing a liaison office in Hong Kong during This supports the diversity of the Club s membership, which is 46% Asia, 41% Europe, 9% North America with 4% for the rest of the world by GT. Positive investment returns buoy a modest underwriting deficit for the 2013 financial year. At twelve months development, 2013 policy year figures show increased cost of crew and passenger claims as a proportion of total claims compared to recent years, whereas cargo claims have been cumulatively lower than experienced for any of the past six years. The Club, and quota share reinsurers in Lloyd s, continue to support the fixed premium P&I facility Eagle Ocean Marine. The facility is now offering a limit of cover up to USD 100 million. Entering its third year, results continue to be positive and steady premium and tonnage growth is expected. Entered GT by vessel type Tankers 44.6% Bulk carriers 45.3% Unitised/ pax/roro 7.7% Tugs/barges/ small craft 2.4% Number of ships (owned entries only) 1,260 1,341 1,319 Total owned entered GT 16,700,000 15,100,000 16,100,000 Asia 46% Europe 40.5% Total chartered GT 1,000, ,000 1,000,000 Breakdown of investment by type Rest of world 4.5% North America 9% 10 Aon Marine Insurance Review 2014

11 Whilst the Club s underwriting results have improved and free reserves are marginally up, it is noticeable last year s premium was lower despite an increase in tonnage. We anticipate the Club will take a reasonably hard approach at renewal to maintain their steady improvement. Aon Comment Income Statement (year ending December) Breakdown USD of investment 000s by type Breakdown of investment by type Income Calls and premiums , ,126 Excess Calls 0 0 Fixed income securities 67.1% Mutual Clubs Reinsurance Premiums -18,581-18,585 Total Income 89,378 93,541 Net claims incurred -65,064-83,265 Equities 32.1% Expenditure Net operating expenses Total expenditure -35,250-31, , ,260 Cash/cash equivalents 0.8% Underwriting result pre investment /other financial income and tax -10,936-21,719 Investment/other financial income 14,290 16,089 Tax/interest charged S&P Rating Aug 2014 Aug 2013 Overall result 3,115-5,990 Rating BBB- BB+ Free reserves 57,344 54,229 Outlook Stable Stable Policy year General Increase % Supplementary Call Record % /70 20/56 0/0 0/20 0/35 0/30 0/25 20/20 25/25 25/25 0/0 0/0 0/0 Aon Marine Insurance Review

12 Britannia The Britannia Steam Ship Insurance Association Limited 45 King William Street, London, EC4R 9AN, UK britanniapandi.com t +44 (0) Manager s comment Entered GT by vessel type While claims incurred in the year to 20 February 2014 were once again at a disappointingly high level, there are some encouraging signs that in the current year the claims position may have returned to more normal levels. Despite the heavy claims experienced in 2013/14, the Association achieved a positive underwriting result for the year, although the 7.5% premium discount given to Members at the 2013/14 renewal, which was funded from reserves, created a small deficit on the technical account. The investment return achieved was just under 5%, with particularly strong performances from equities and corporate bonds. Overall, the Association s reserves grew by USD 26.2 million and the surplus assets in Boudicca, which are available to meet future claims, also grew, by USD 7.7 million. The Association s overall financial strength therefore continues to provide a high degree of security and certainty for its Members. Entered GT by vessel type Bulk carriers/general cargo 39% Tankers 31% Containers 29% Others 1% Number of ships (owned entries only) 2,924 2,925 2,951 Total owned entered GT 108,000, ,500, ,100,000 Asia Pacific 53% Europe 38% Total chartered GT 23,000,000 25,000,000 28,900,000 Breakdown of investment by type Others 3% Americas 6% 12 Aon Marine Insurance Review 2014

13 The past two renewals have been difficult for the Club. However, that steely approach, despite losing a few well-known names, has enabled the Club to maintain an impressive level of free reserves, despite a negative underwriting result. The Club enjoys a lofty position and we anticipate a softer stance at renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Income Calls and premiums ,167* 294,057 Excess Calls 0 0 Equities 21% Cash 10% Government bonds (short) 23% Mutual Clubs Expenditure Reinsurance Premiums -48,616-48,910 Total Income 235, ,147 Net claims incurred Net operating expenses -230, ,816-26,811-29,317 Corporate bonds 18% Government bonds (medium) 14% Inflation linked bonds 14% Total expenditure Underwriting result pre investment /other financial income and tax -257, ,133-21, Investment/other financial income 56,772 48,200 S&P Rating Current rating Oct 2013 Tax/interest charged ,174 Rating A A Overall result 33,881-22,960 Outlook n/a n/a Free reserves including Boudicca 471, ,017 Type of rating Interactive Pi Policy year General Increase % Supplementary Call Record % 28.8** ** *** /25 40/40 40/30 40/30 30/30 30/30 40/40 40/ /40 40/40 40/40 45/45 45/45 * Calls and premiums for year ending 20 February 2014 include the 7.5% P&I discount offered to renewing tonnage for the 2013/14 policy year and the waiver of half of the deferred call for the 2012/13 FD&D policy year. ** Includes the effect of an increase in budgeted supplementary call. *** Includes the effect of an increase in budgeted supplementary call however increase applied to members accounts was 10.5% due to 7.5% rebate on advance call. Aon Marine Insurance Review

14 Gard Assuranceforeningen Gard Gard AS, Kittelsbuktveien 31, NO-4836 Arendal, Servicebox 600, NO-4809 Arendal, Norway gard.no t Manager s comment Entered GT by vessel type Gard reported strong results to 20 February 2014, with a surplus after tax of USD 89 million on an ETC basis, a CRN of 97% across the group and a return on investments of 4.3%. Gard has a contingency reserve of USD 944 million, after the reduction in deferred call for the 2013 policy year, amounting to USD 35 million. This cut 15% compared to an original estimate of 25%, was the fifth consecutive year in which we reduced the deferred call demonstrating the value we deliver, year on year. For P&I, GWP was USD 621 million, following a competitive but satisfactory renewal season in which we made tonnage gains and attracted new Members. Over the last 12 months, the gross tonnage increased by seven per cent to 187 million GT. Gross claims to 20 February 2014 totalled USD 445 million, with no new P&I claim above USD 10 million compared to six in the previous year. Passengers 2% Entered GT by vessel type Others 26% Containers 18% Tankers 30% Bulk carriers/ General cargo 24% Number of ships (owned entries only) 6,050 5,900 5,700 Europe 68% Total owned entered GT 169,800, ,700, ,800,000 Total chartered GT Americas 6% Asia Pacific 24% 57,500,000 57,500,000 51,000,000 Other 1% Total MOU Entered GT Breakdown of investment by type 16,900,000 15,700,000 15,800, Aon Marine Insurance Review 2014

15 Improved underwriting results coupled with a significant increase in free reserves bears testament to Gard s philosophy of diversification. The likelihood is owners can look forward to the deferred call being reduced and a rather benign renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Calls and premiums , ,681 Mutual Clubs Income Excess Calls -34,808-30,708 Bonds 80% Reinsurance Premiums -141, ,994 Total Income 444, ,979 Equities 16% Net claims incurred -444, ,632 Expenditure Net operating expenses Total expenditure -43,397-75, , ,823 Cash 1% Real Estate 3% Underwriting result pre investment /other financial income and tax -43,744-92,844 Investment/other financial income ** ** S&P Rating Aug 2014 Aug 2013 Tax/interest charged ** ** Rating A+ A+ Overall result 49,332 69,174 Outlook Stable Stable Free reserves 944,123* 894,792 Type of rating Interactive Interactive * After reduction in deferred call of USD 35 million. ** No longer allocated across individual lines of business. Policy year General Increase % Supplementary Call Record % /25 25/25 25/25 25/20 25/20 25/25 25/25 25/10 25/15 25/20 25/15 25/15 25/25 Aon Marine Insurance Review

16 Japan Club Japan Shipowners Mutual P&I Association Nihonbashi-Ningyocho, Chuoh-ku, Tokyo , Japan piclub.or.jp t Manager s comment Entered GT by vessel type In 2013, the frequency of large claims occurring reduced and the loss record remained at a good level throughout this year by strengthening our loss prevention activities. In terms of the investment income earned, we gained higher returns than expected by purchasing additional fund assets and investment bonds. In addition, there was a 7.5% General Increase for oceangoing vessels, Charterers Liability and FD&D entries by focusing on strengthening our financial soundness. Ultimately, overall reserves under the Association s new financial strategy climbed up to 16,057 million in total, 1,240 million up from last year. These attributed to our steady progress of the new financial strategy this year. Another highlight was opening of our Singapore Branch. We will use the base of the branch in order to promote our business in the Asia-Pacific region to increase our entries. Entered GT by vessel type Bulk carriers/ General cargo 59% Containers 9% Others 16% Passengers 0.12% Number of ships (owned entries only) 2,356 2,399 2,449 Others 5% Total owned entered GT 89,311,735 89,370,000 87,250,000 Americas 72% Asia Pacific 21% Europe 2% Total chartered GT 11,362,017 12,724,767 12,610,000 Breakdown of investment by type 16 Aon Marine Insurance Review 2014

17 Whilst the combined ratio has improved free reserves have not shown the growth of others. There is no doubt the Club s attempt to widen their appeal outside of home soil will offer the Club greater opportunities. We feel the Club will take a reasonably hard line at this renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Income Calls and premiums , ,555 Excess Calls 0 0 Cash and deposits at banks 30.81% Other securities 7.88% Mutual Clubs Reinsurance Premiums -56,264-44,545 Total Income 181, ,010 Stocks 0.02% Corporate bonds 17.06% Foreign securities 34.02% Expenditure Net claims incurred Net operating expenses Total expenditure Underwriting result pre investment /other financial income and tax -168, ,893-24,052-29, , ,306-11,126-26,296 Japanese local government bonds 6.29% Japanese government bonds 1.38% Money trusts 2.54% Investment/other financial income 30,217 35,582 Tax/interest charged -4,147-1,088 S&P Rating Aug 2014 Aug 2013 Overall result 14,944 8,198 Rating BBB+ BBB+ Free reserves 156, ,546 Outlook Stable Stable Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /10 30/10 30/30 30/30 30/60 30/30 30/30 40/40 40/50 40/40 40/40 40/40 40/40 Aon Marine Insurance Review

18 London Club The London Steamship Owners Mutual Insurance Association Limited A Bilbrough & Co Ltd, 50 Leman Street, London E1 8HQ, UK londonpandi.com t +44 (0) Manager s comment Entered GT by vessel type During 2013/14 there was growth in the Club s reserves, income and membership. The reserve grew to USD million; there was an 8% year on year increase in income, net of reinsurance costs; and there was growth in the mutual membership of 2 million GT which stood at 43.1 million GT moving into the new policy year. There were also signs of mounting claims costs, especially from the high severity end of the retained layers - serving as a reminder of the importance of the Club s financial strength and it s attention to strengthening operating performance going forward. A high quality service to Members is central to the Club s strategy; and there were further recruits to the teams in London, Hong Kong and Piraeus during the year drawn from legal, seafaring, insurance and other relevant backgrounds. The aim is to ensure that there are strong resources across the Club, to provide Members with first class, dedicated P&I support. General Cargo 2% Entered GT by vessel type Bulk Carrier 57% Tankers 22% Containers 16% Gas Carriers 3% Number of ships (owned entries only) 1,014 1,174 1,081 Total owned entered GT 43,100,000 41,390,000 40,777,050 Southern Europe 46% Northern Europe 16% Asia Pacific 34% Total chartered GT 5,000,000 5,060,000 Breakdown of investment 3,428,024 by type Americas 4% 18 Aon Marine Insurance Review 2014

19 Once again investment income has nullified a sombre underwriting performance. The Club enjoys a loyal following no doubt as a result of the service they provide. Still we feel the Club must address their underwriting and that is likely to result in a tough stance at renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Calls and premiums , ,951 Equities 25.2% Mutual Clubs Income Excess Calls 0 0 Reinsurance Premiums -20,754-22,175 Total Income 86,141 79,776 Fixed income 62.4% Cash and cash equivalents 12.2% Net claims incurred -92,956-82,691 Expenditure Net operating expenses Total expenditure -11,921-11, ,877-94,174 Alternatives 0.2% Underwriting result pre investment /other financial income and tax -18,736-14,398 Investment/other financial income 25,532 23,838 S&P Rating Aug 2014 Aug 2013 Tax/interest charged Rating BBB BBB Overall result 6,615 9,360 Outlook BBB BBB Free reserves 160, ,029 Type of rating Pi Pi Policy year General Increase % Supplementary Call Record % /40 40/40 40/40 40/40 40/89 40/89 40/75 40/40 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

20 North of England North of England P&I Association Limited The Quayside, Newcastle Upon Tyne, NE1 3DU, UK nepia.com t +44 (0) Manager s comment Entered GT by vessel type Overall this has been a positive year for North with a strong technical underwriting result and further progress in achieving the Club s strategic objectives; in particular our merger with Sunderland Marine is key to our strategy of diversification to develop further financial stability for Members. The key themes contributing to the result were: High gross claims value for 2013 policy year, including two large pool claims. Entered GT by vessel type bulk carrier/general cargo 38.10% Containers 19.78% Low retained claims value (net of reinsurance and pool recoveries) for 2013 policy year. Steady improvement in claims values on prior policy years. Tanker 31.67% Others 10.03% Small positive investment result. Exceptional item for the 2013/14 financial year (a mandatory change in accounting policy requiring the full adoption Entered GT of by region the pension scheme deficit onto the Club s balance sheet). Passengers 0.42% Overall an underwriting surplus of USD 20 million and a combined ratio of 90.1% indicate that the 2013/14 financial year was a positive underwriting year for North. Southern Europe 29% Asia Pacific 28% Number of ships (owned entries only) 3,500 3,500 4,000 Total owned entered GT 130,801, ,510, ,000,000 Breakdown of investment by type Total chartered GT 49,000,000 43,000,000 40,000,000 Northern Europe 20% Scandinavia 3% South America 1% Middle East 11% North America 7% 20 Aon Marine Insurance Review 2014

21 An excellent underwriting performance, easing the way for the Club to address their pension deficit. We wait to see how the integration of Sunderland Marine performs over the next year. A common theme is the Club s rather rigid approach to renewal and we expect little difference this year. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Income Calls and premiums , ,347 Excess Calls 0 0 Reinsurance Premiums -77,885-70,788 nongovernment bonds 14.96% Equities 6.86% Short dated US treasuries and cash 40.20% Mutual Clubs Total Income 305, ,559 Government bonds 37.98% Net claims incurred -231, ,512 Expenditure Net operating expenses Total expenditure -53,660-51, , ,874 Underwriting result pre investment /other financial income and tax 20,362-10,315 Investment/other financial income 13,237 8,825 Tax/interest charged S&P Rating Aug 2014 Aug 2013 Recognition of defined benefit pension scheme liability -33,451 0 Rating A A Overall result 38-1,777 Outlook Stable Stable Free reserves 312, ,236 Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /25 25/25 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

22 Shipowners Club The Shipowners Mutual Protection and Indemnity Association St Clare House, Minories, London EC3N 1BP, UK shipownersclub.com t +44 (0) Manager s comment Entered GT by vessel type With over 6,600 Club members totalling just fewer than 34,000 vessels we continue to weather the storm of increased market competition in our sector. The Club remains focused towards the smaller, specialist and regionally trading vessels hence the Club s average tonnage of 700 GT. An Owner and their brokers support in this competitive environment remains essential and that can only be achieved through the Club s commitment to offering the widest cover, a dedicated and understanding approach to claims, insurance solutions at cost, plus certainty of premium through a stated policy of zero supplementary and release calls matched by the Club s consistent combined ratio over the last six years of 90.6%. As the Club seeks to enter into a partnership of trust with its members and their brokers we know that there remains an ever increasing choice when it comes to marine liability insurance. At a time when we are witnessing the cost of claims increase with a greater number of claims in the USD 1 million to USD 5 million range our members and their brokers also need to be reminded as to the importance of the stability of the mutual system especially as the Club seeks to maintain its recognised traditional virtues of a mutual club offering continuity, stability and security. Entered GT by vessel type Harbour 28.46% Offshore 14.28% Canada and USA 9% Passengers 12.80% Barges 18.19% South East Asia and Far East 25% Dry cargo 6.65% Fishing 9.73% Yachts 4.94% Tankers 4.94% Number of ships (owned entries only) 33,899 32,781 31,341 Total owned entered GT 26,613,022 21,920,725 19,792,062 Total chartered GT Breakdown of investment by type N/A N/A N/A Europe 31% Central and South America 11% Africa 2% Australia, New Zealand and South Pacific 10% Worldwide 6% Middle East and India 6% 22 Aon Marine Insurance Review 2014

23 The Club are no strangers to competition making their underwriting performance even more impressive. With no release calls to aid the Club they continue to set the standard. Ever mindful of those around them we expect a soft renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Income Calls and premiums , ,925 Excess Calls 0 0 Fixed interest investments 70.24% Mutual Clubs Reinsurance Premiums -30,664-21,795 Total Income 213, ,130 Net claims incurred -158, ,871 Equities 27% Expenditure Net operating expenses Total expenditure -52,255-44, , ,192 Deposits with credit institutions 2.76% Underwriting result pre investment /other financial income and tax 2,334 8,938 Investment/other financial income 21,818 33,027 S&P Rating Aug 2014 Aug 2013 Tax/interest charged ,092 Rating A- A- Overall result 23,222 40,873 Outlook Stable Stable Free reserves 298, ,333 Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /0 25/0 25/0 25/0 25/0 25/0 25/0 10/0 10/0 10/0 10/0 0/0 0/0 Aon Marine Insurance Review

24 Skuld Assuranceforeningen SKULD (Gjensidig), Ruseløkkvn. 26, 0251 Oslo, Norway skuld.com t Manager s comment Entered GT by vessel type Skuld continues to follow a growth strategy, where diversification and innovation are key words. Over the last years we have developed our marine portfolio to meet our customers requirements for a full insurance package. The diversified product range is provided by Skuld P&I and our Syndicate at Lloyd s, Skuld By using the synergies between the two we can tailor make new products for our members and clients. In addition to our traditional P&I offerings, the offshore market and the commercial operations have delivered significant growth in line with Skuld s plans. With a long-term strategy of controlled growth and financial strength, we continue to deliver positive results and to maintain a combined ratio below 100%. No release calls or general increases are part of this picture. We will continue to support our members and clients needs and throughout Skuld our ambition is to deliver service and competence they can rely on. Entered GT by vessel type Tanker 40.15% General cargo 7.71% Others 8.32% Bulk carrier 31.95% Container 10.40% Passengers 1.47% Number of ships (owned entries only) 4,354 3,856 3,792 Total owned entered GT Europe 30% Far East 37% 81,700,00 75,600,000 69,900,000 Total chartered GT Americas 7% Nordic 23% n/a n/a n/a Others 2% Total MOU Entered GT Breakdown of investment by type 5,100,000 3,600,000 1,500, Aon Marine Insurance Review 2014

25 Another excellent underwriting result, with free reserves mirroring those results. Whilst the mutual Club opts for renewal based heavily on individual member s performance, we expect some form of across the board increase but one likely to be better than many of its peers. Aon Comment Income Statement (year ending February) USD 000s Breakdown of investment by type Income Calls and premiums , ,936 Excess Calls 0 0 Reinsurance Premiums -56,557-40,244 Total Income 322, ,692 Fixed income 66% Equities 23% Cash 6% Mutual Clubs Net claims incurred -245, ,167 Expenditure Net operating expenses Total expenditure Underwriting result pre investment /other financial income and tax -73,321-64, , ,723 3, Hedge fund 1% Private equity 3% Commodities 1% nvestment by type Investment/other financial income 27,062 18,739 S&P Rating Aug 2014 Aug 2013 Tax/interest charged -1,964-2,189 Rating A A Overall result 29,058 17,518 Outlook Stable Stable Free reserves 334, ,425 Type of rating Interactive Interactive Policy year General Increase % n/a n/a n/a n/a tered GT by region Supplementary Call Record % 20/20 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

26 Standard Club The Standard Steamship Owners P&I Association (Bermuda) Limited 12/13 Essex Street, London WC2R 3AA, UK standard-club.com t +44 (0) Manager s comment Entered GT by vessel type The Standard Club s strategy is to provide members with sustainable cover for P&I and related risks at a reasonable cost, with first class service and financial security. The Club has always prioritised the operating quality of its fleet over its scale, with ratings that reflect exposure. This approach has driven steady growth over time and has led to one of the strongest financial positions in the International Group. In recent years, the Club held back from increasing rates at the same pace as many competitors, to support members during difficult times. As a result, a general increase slightly above market was necessary in 2014 to keep pace with the cost of cover. As at every renewal, the Club declined to renew some members that did not meet its quality standards or would not pay rates commensurate with exposure. Owned tonnage increased overall year-on-year, consistent with the focus on quality and modest growth appetite. Others 0.46% Entered GT by vessel type Container and general cargo 25.35% Dry bulk 25.81% Tankers 27.19% Offshore 15.21% Passenger and ferry 5.99% Number of ships (owned entries only) 8,743 8,007 7,511 Americas 20% Total owned entered GT 108,500, ,000,000 96,000,000 Other 7% Asia Pacific 25% Europe 47% Total chartered GT 22,500,000 30,000,000 29,000,000 Total MOU Entered GT Breakdown of investment by type 7,500,000 6,400,000 7,500, Aon Marine Insurance Review 2014

27 A significantly improved combined ratio is a welcome return following two years of below par results but was slightly undermined by a less than successful investment return. However, the Club are still amongst the strongest and we expect a gentler approach at this renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Calls and premiums , ,100 Bonds 75.70% Mutual Clubs Income Excess Calls 0 0 Reinsurance Premiums -82,900-62,900 Expenditure Total Income 253, ,200 Net claims incurred Net operating expenses Total expenditure Underwriting result pre investment /other financial income and tax -230, ,700-26,500-26, , ,800-4,200-39,600 Gold 1.10% Cash 2% Alternative assets 6% Equities 15.20% Investment/other financial income 10,200 50,900 S&P Rating Aug 2014 Aug 2013 Tax/interest charged ,300 Rating A A Overall result 5,900 10,000 Outlook Negative Stable Free reserves 368, ,600 Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /25 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

28 Steamship Mutual The Steamship Mutual Underwriting Association (Bermuda) Limited Aquatical House, 39 Bell Lane, London E1 7LU, UK simsl.com t +44 (0) Manager s comment Entered GT by vessel type The Club has been able to report a good financial performance for the year. The free reserves increased by USD 14.9 million to USD million. Importantly the result was mainly due to a good underwriting performance, the financial year combined ratio was 96.7%. With investment returns likely to continue to be modest, it is important that premium levels are sufficient to cover the anticipated level of claims and costs. The Club continues to enjoy good support from existing members and is succeeding in attracting high quality new members, the entered owned tonnage increased by over 5% during the year and total tonnage now stands at million tons as of February Others 3.20% Entered GT by vessel type Container 15.20% Passenger 12.80% Tankers 23.60% Bulker / general cargo 45.20% Number of ships (owned entries only) 8,831 8,782 9,327 Americas 15% Others 16% Total owned entered GT 68,727,878 65,294,099 62,600,000 Asia Pacific 39% Europe 30% Total chartered GT 45,000,000 37,000,000 30,000,000 Breakdown of investment by type 28 Aon Marine Insurance Review 2014

29 Entered It is good to see the Club enjoy a positive underwriting result with free reserves increasing; not particularly aided by their conservative investment policy. The Club s careful underwriting philosophy is beginning to show returns and we feel a steady if somewhat firm approach will be adopted at renewal. Aon Comment Income Statement (year ending February) USD 000s Breakdown of investment by type Calls and premiums , ,265 Mutual Clubs Income Excess Calls 0 0 Reinsurance Premiums -61,169-44,323 Bonds 26.98% Cash and deposits 60.37% Expenditure Total Income 284, ,942 Net claims incurred Net operating expenses Total expenditure Underwriting result pre investment /other financial income and tax -232, ,261-42,823-38, , ,717 9,289-33,775 Equities 3.64% Property 1.13% Alternative investments 7.88% Equities 3.64% Breakdown of investment by type Investment/other financial income 5,712 24,146 S&P Rating Aug 2014 Aug 2013 Tax/interest charged -9-2 Rating A- A- Overall result 14,992-9,631 Outlook Stable Stable Free reserves 301, ,207 Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /0 0/0 0/0 0/0 0/12.5 0/14 0/20 0/0 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

30 Swedish Club Swedish Club Gullbergs Strandgata 6SE Göteborg, Sweden swedishclub.com t Manager s comment Entered GT by vessel type The Swedish Club s financial strength increased in 2013, with investment earnings and a positive underwriting outcome, producing an overall result of USD 17 million. The net combined ratio of 94% is satisfactory and the free reserves increased to USD 168 million. The P&I tonnage grew by 8% and continues to increase. The progress in recent years is a measure of market confidence in our operational performance, financial strength and service capabilities. The Swedish Club had no pool claims during the policy year. The entries in the Marine business sector increased from 1,500 to more than 2,000 vessels. Two major strategic decisions were taken: to reinforce our commitment to the Norwegian market, and to accelerate the uptake of Maritime Resource Management (MRM) issuing free licences to members over a two year period. This demonstrates our belief in MRM as the most effective tool to reduce exposure to accidents. Entered GT by vessel type Bulker /general cargo 40% Container 31% Tanker 20% Others 1% Passenger 3% Number of ships (owned entries only) 1,040 1,013 1,035 Total owned entered GT 37,100,000 34,800,000 34,400,000 Asia Pacific 40% Europe 60% Total chartered GT 14,000,000 15,900,000 16,000,000 Breakdown of investment by type 30 Aon Marine Insurance Review 2014

31 A noticeable improved swing in underwriting results has been a boost to the Club. It performed solidly as it looks to other areas to further diversify its book. We expect the Club will look to consolidate their latest results by holding a strong line at renewal. Aon Comment Income Statement (year ending December) Breakdown USD of investment 000s by type Breakdown of investment by type Income Calls and premiums ,000 91,742 Excess Calls 0 0 US core bonds 56% Mutual Clubs Reinsurance Premiums -32,035-24,354 Equities 24% Total Income 67,965 67,388 Expenditure Net claims incurred Net operating expenses Total expenditure Underwriting result pre investment /other financial income and tax -60,154-71,276-13,825-13,376-73,979-84,652-6,014-17,264 Euro Soverign bonds 4% Emerging market bonds Euro 4% Sovereign bonds 4% Alternative Investment 2% Euro Corporate bonds 6% Investment/other financial income 7,320 17,878 S&P Rating Aug 2014 Aug 2013 Tax/interest charged 0 0 Rating BBB+ BBB+ Overall result 1, Outlook Stable Stable Free reserves (includes reserves available to non P&I business) 168, ,000 Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /0 0/0 0/0 0/0 0/35 0/35 0/0 0/0 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

32 UK P&I Club The United Kingdom Mutual Ship Assurance Association (Bermuda) Limited Thomas Miller P&I Ltd, 90 Fenchurch Street, London, EC3M 4ST, UK ukpandi.com t +44 (0) Manager s comment Entered GT by vessel type The Club has produced a surplus this year of USD 30 million, which, together with gains on foreign exchange contracts, takes the Club s total free reserves and hybrid capital to USD 528 million; this is made up of underlying free reserves of USD 430 million and hybrid capital of USD 98 million. The year benefited from a favourable release of claims reserves from previous policy years, but this was partly offset by a more costly 2013 policy year. In addition there was a healthy investment return of USD 44 million (4.5%). The Club s return to the top level of our industry, has been recognised by Standard & Poor s in their decision to restore the Club s full A (Stable) rating. Having restored the Club s financial position, we have now to make sure that we put a similar level of effort into maintaining our reputation for best in class service. Entered GT by vessel type Tankers 27% Bulker / general cargo 39% Others 17% Container 14% Passengers 3% Number of ships (owned entries only) 3,569 3,455 3,346 Americas 9% Total owned entered GT 124,000, ,000, ,000,000 Asia Pacific 38% Europe, Middle East & Africa 53% Total chartered GT 80,000,000 80,000,000 80,000,000 Breakdown of investment by type 32 Aon Marine Insurance Review 2014

33 Another excellent underwriting performance resulting in a pleasing return to S&P s A rating (from A-). The Club have shown a marked improvement seeing them back at top table. The difficult part is to stay there and with that we expect to see a firm hand at renewal. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Income Calls and premiums , ,181 Discount n/a -7,231 Gross Premium 396, ,950 Excess Calls 0 0 Fixed interest 66.72% Equities 19.20% Cash 7.18% Mutual Clubs Reinsurance Premiums -93,502-73,190 Total Income 302, ,760 Expenditure Net claims incurred Net operating expenses -268, ,679-39,876-41,545 Absolute return funds 6.9% Total expenditure -308, ,224 Underwriting result pre investment /other financial income and tax -6,003-20,464 S&P Rating Aug 2014 Aug 2013 Investment/other financial income 44,368 38,973 Rating A A- Tax/interest charged -8,250-9,000 Outlook Stable Stable Overall result 30,115 9,309 Type of rating Interactive Interactive Free reserves including Hybrid capital Free reserves excluding Hybrid capital 528, , , ,056 Policy year General Increase % Supplementary Call Record % /0 0/0 0/0 0/0 0/20 0/25 0/20 0/0 0/0 0/0 0/0 0/0 0/0 Aon Marine Insurance Review

34 West of England West of England Ship Owners Mutual Insurance Association (Luxembourg) Tower Bridge Court, 226 Tower Bridge Road, London, SE1 2UP, UK westpandi.com t +44 (0) Manager s comment Entered GT by vessel type Key performance indicators reflect a continued strong performance, with a combined ratio of 100.8% and free reserves increasing to a record level of USD 216 million. Entered GT by vessel type Lower levels of Members claims have again had a positive impact on the Club s overall financial performance and the trend of the last three years appears to be continuing into 2014 at the half year point. In addition, claims projections on older policy years have also reduced. This continuing strong financial performance, together with our commitment to service has led to significant growth in tonnage from existing and from new Members in 2014, with the Club s Mutual GT increasing to over 63 million. Bulk cargo carriers 39.2% Tanker & OBOs 27.5% General cargo & reefers 12.6% Container 15.8% Passengers 2.9% Other 2.0% Number of ships (owned entries only) 2,917 2,870 3,030 Other 6.3% Total owned entered GT 58,900,000 53,100,000 50,900,000 Total chartered GT 21,200,000 est. 21,800,000 est. 15,000,000 est. Breakdown of investment by type Other Europe 33.8% Americas 5.8% Asia Pacific 38.4% Greece 15.8% 34 Aon Marine Insurance Review 2014

35 Another good year for the Club which has seen a significant turnaround in the Club s finances and one we trust will catch the eye of Standard & Poor s. A great deal of work has been done and to continue in that vein we expect a firm renewal stance. Aon Comment Income Statement (year ending February) Breakdown USD of 000s investment by type Breakdown of investment by type Calls and premiums , ,483 Mutual Clubs Income Excess Calls 0 0 Reinsurance Premiums -36,369-29,187 Fixed income 50.5% Cash 26% Total Income 166, ,296 Net claims incurred -133, ,168 Property 8.3% Equities 14.5% Expenditure Net operating expenses -34,854-35,264 Total expenditure Underwriting result pre investment /other financial income and tax -168, ,432-1,397-4,136 Absolute return 0.7% Investment/other financial income 20,766 24,287 S&P Rating Aug 2014 Aug 2013 Tax/interest charged ,086 Rating BBB BBB Overall result 18,775 18,065 Outlook Stable Stable Free reserves 216, ,421 Type of rating Interactive Interactive Policy year General Increase % Supplementary Call Record % /20 20/20 20/20 20/35 20/55 20/55 20/45 30/30 30/30 30/30 30/30 35/35 35/35 Aon Marine Insurance Review

36 P&I Comparative Data 36 Aon Marine Insurance Review 2014

37 Combined Ratio...38 Free Reserves...39 Gross Call / GT...39 Net Claims / Net Call Income...40 Free Reserves / Net Call Income...40 Net Claims/ Net Call Income...41 Pooling Contributions...41 P&I Comparative Data Data based on information supplied by the Clubs themselves Aon Marine Insurance Review

38 P&I Comparative Data Traditionally the popular method of comparing the financial health of the Clubs has been to generate key performance indicators around Gross Tonnage (GT), call income, claims and reserves. Although we have used GT as part of our analysis, we do not consider it the most useful constant. A Club with a high USD per GT ratio is not necessarily an expensive or conservative Club; one with a low figure, likewise, is not necessarily competitive, as GT does not give any allowance for the type of vessels within the Club nor the individual retentions or loss records they may carry. We have always said that since premium is the underwriter s assessment of risk it is more valid to use annual call income to generate comparative analytical data. Over the last few years a small number of Clubs have called less than their originally estimated deferred calls. Variations from the estimated total call tend to be rare and give a distorted view of a Club s financial position. We therefore do not include these adjustments in analysis and use the original estimated total call for comparisons. In the past when conducting this analysis we have not included the effect of unbudgeted supplementary calls as this would similarly distort the findings. Conversely, any adjustment will be evident in a Club s free reserves and therefore these adjustments have been included. Notes 1. Net annual call income excludes the cost of reinsurance and the product of an excess call. 2. UK Club free reserves include Hybrid capital. 3. The reduction in Gard s 2012/13 and 2013/14 deferred call has been reinstated. 4. American Club s ratios and free reserves are in respect of the years 12 months at 1st December 2013 and Combined Ratio Combined ratio 140% 120% 100% 80% 60% 40% 20% % American Britannia Gard Japan London North Shipowners Skuld Standard Steamship Swedish UK West Year end February 2014 NB: (incurred claims + expenses) / (premium - reinsurance) Net claims / GT 38 Aon Marine Insurance Review 2014