GLOBAL MARINE INSURANCE REPORT Astrid Seltmann, Vice Chair F&F, Cefor

Transcription

1 GLOBAL MARINE INSURANCE REPORT 2015 Astrid Seltmann, Vice Chair F&F, Cefor 1

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3 THIS YEAR S ADVICE Before you enjoy 2014 results Check impact of recent 2015 events (Tianjin explosion)! Before you believe in sustainable improvement 2015 economic & global environment: Substantial changes with impact on marine market is history. Focus on 2015 (& 2016) risks and conditions.

4 GLOBAL MARINE INSURANCE REPORT Global Marine Insurance Overview Ø Focus: The exchange rate rollercoaster Cargo Market & results Ø Focus: Aggregation risk Hull Market & results Ø Focus: 2015 trends Offshore Energy Market & results Ø Focus: A changed market Tables: Premiums by country & Loss ratios triangulations

5 MARINE PREMIUM BY LINE OF BUSINESS 18.2% % Total: 32.6 USD billion Change 2013 to 2014: -3.2% Reduction due to strong USD! In most local currencies, income stable or increased. 6.6% Global Hull Transport/Cargo Marine Liability Offshore/Energy 51.9%

6 MARINE PREMIUM 2014 BY REGION 9.8% 6.4% 3.1% 3.0% 2014 Europe Asia/Pacific Latin America North America Middle East Africa 52.6% 25.0% Total: 32.6 USD billion

7 BUILDING UP DATA - PREMIUMS Start date Area Association Data from 1993 IUMI members IUMI, with Cefor Russia RUMI more market data China Research Vivian Asia non-iumi Research Vivian 2010 Latin America complete ALSUM 2010 Middle East complete GAIF UK IUA IUA complete IUA market Africa FANAF countries 2012 FANAF/CESAM USA AIMU Increase US market coverage ongoing Premiums change also backwards!

8 MARINE PREMIUM AS OF ,000,000 18,000,000 16,000,000 14,000,000 12,000,000 10,000,000 8,000,000 6,000,000 4,000,000 2,000,000 0 UK-IUA New data survey 2008: China 2010: non-iumi Asia Latin America, Middle East, Africa: complete data : strong USD «reduces» income in most currencies Europe Asia/Pacific Latin America North America Middle East Africa Global premium: 2013: 33.7 USD bill. 2014: 32.6 USD bill. (both as of 2015)

9 USD EXCHANGE RATE AGAINST SELECTED CURRENCIES, INDEX, 2000=100% 160% 150% 140% 2014: strong USD! Many currencies with double-digit % devaluation. 130% CNY (China) 120% JPY (Japan) 110% EUR (Euro) 100% NOK (Norway) 90% GBP (UK) 80% 70% Source: Norges Bank exchange rates, as of December each year. BRL (Brazil) Exchange rates not necessarily correlated, but in 2014 weakened most against USD.

10 USD EXCHANGE RATE UNTIL 2015 AGAINST SELECTED CURRENCIES, INDEX, 2000=100% 160% 150% 140% 2015: even stronger USD! 130% 120% 110% CNY (China) JPY (Japan) 100% EUR (Euro) 90% NOK (Norway) 80% GBP (UK) 70% BRL (Brazil) 60% * 2015 rates as of August

11 P&I CLUBS INTERNATIONAL GROUP GROSS CALLS (PREMIUM) 2014 OPERATIONAL LOCATION 6% 3% 29% 62% Calls 2014: UK: 2.27 Nordic: 1.08 Japan: 0.24 US: 0.09 Total: 3.69 (USD billion) Stable (+0.06) UK Nordic Japan US

12 GLOBAL MARINE INSURANCE REPORT Global Marine Insurance Overview Ø Focus: The exchange rate rollercoaster Cargo Market & results Ø Focus: Aggregation risk Hull Market & results Ø Focus: 2015 trends Offshore Energy Market & results Ø Focus: A changed market environment

13 CARGO PREMIUM BY REGION 6.4% 5.6% 3.4% Total: USD billion Change 2013 to 2014: -7.1% Reduction 2014 = effect of strong USD! 12.7% 43.0% 28.9% Europe Asia/Pacific Latin America North America Middle East Africa

14 CARGO PREMIUM BY MARKETS Total: USD billion 2014 Other 33.3% Belgium 1.7% Brazil 5.4% China 9.2% France 4.7% Germany 6.9% Italy 2.6% * USA 5.9% * AIMU ocean marine UK (Lloyds) 8.3% ** ** incl. proportional and facultative reinsurance UK (IUA) 4.1% Spain 1.3% Russia 2.3% Nordic 1.8% Mexico 2.2% Netherlands 2.3% Japan 8.0%

15 CARGO PREMIUM SELECTED MARKETS 2014: strong USD «reduces» 2,500,000 2,000,000 income in most countries. Difficult to identify «real» market development (not only one currency in local figures ) China 1,500,000 1,000, ,000 Japan UK (Lloyds) Germany USA Brazil France UK (IUA)

16 CARGO PREMIUM / WORLD TRADE VALUES & EXPORTS 400% 350% 300% 250% 200% Index of evolution, 1995=100%? IMF estimate April 2015? World Trade Values World Trade Volume 150% Global Cargo Premium 100% 50% Exchange rate influence on USD cargo premium! 0% Source (World Trade Volume & Values): IMF, World Economic Outlook, April 2015

17 CARGO ULTIMATE* LOSS RATIOS EUROPE/USA**, UNDERWRITING YEARS 1996 TO % 120% 100% 80% 60% 2012 Sandy peak August 2015 Tianjin port explosion: Which impact on 2014 uw year result?? Since 2007: Most years expected to end > 70% gross loss ratio. 40% 20% 0% 2014: Seeming improvement may deteriorate due to Tianjin explosion * Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (acquisition cost, capital cost, management expenses) ** Data: Belgium, France, Germany, Netherlands, Italy, Spain (until 2007), UK, USA

18 CARGO ULTIMATE LOSS RATIOS EUROPE/USA**, UNDERWRITING YEARS , AS AT 1, 2, 3, 4, 5 YEARS 80% 70% 60% 50% : Start at similar level. Gross loss ratio expected to end above 70%. 2014: Starts lower than 2012/2013, but deterioration expected due to Tianjin explosion! 40%

19 CARGO CONCLUSIONS Market: Ø Strong USD hides local market growth. Ø Market growth and results differ by region. Results: Ø Seeming improvement probably outweighed by Tianjin port explosion (2014 and 2015 underwriting years, various countries). Claims: Ø Tianjin port explosion potentially largest single cargo loss event ever. Ø Auto industry major contributor to cargo/stock losses. Ø Risk of costly cargo claims expected to increase: - Natural catastrophes (Thailand floods, Sandy) - Increased accumulation risk (Tianjin port) Outlook: Ø Impact of China/world economy and oil price on trade. Ø Further strengthening of USD. Euro crisis solved? Ø Difficult to predict combined impact of changing economic environment.

21 HULL PREMIUM 2014 BY REGION 5.1% 5.3% 1.1% 1.0% Total: 7.6 USD billion 2014 Change 2013 to 2014: -5.8% 34.6% 53.0% Europe Asia/Pacific Latin America North America Middle East Africa

22 HULL PREMIUM 2014 BY MARKETS Other 20.0% 2014 China 11.9% France 3.9% Italy 4.0% Latin America 5.1% Japan 7.6% USA 4.7% * * AIMU ocean marine UK (Lloyds) 17.1% ** ** includes proportional and facultative reinsurance UK (IUA) 6.2% Spain 1.8% Nordic 11.2% Korea, Republic 3.6% Netherlands 3.0% * * Norway, Denmark, Finland, Sweden

23 HULL PREMIUM SELECTED MARKETS 1,600,000 1,400,000 Lloyds: increase in original currencies UK (Lloyds) 1,200,000 1,000,000 Nordic 800, , , ,000 China Japan: -7% in JPY (-18,5% in USD) Japan Latin America: various influences Latin America Before 2010: only Mexico and/or Brazil 0 UK (IUA) From 2012: extended data survey

24 USD EXCHANGE RATE AGAINST SELECTED CURRENCIES, INDEX, 2000=100% 160% 150% 140% 130% 120% 2014: strong USD! CNY (China) JPY (Japan) 110% EUR (Euro) 100% NOK (Norway) 90% GBP (UK) 80% BRL (Brazil) 70% Exchange rates not necessarily correlated, but in 2014 weakened most against USD.

25 HULL PREMIUM / WORLD FLEET INDEX OF EVOLUTION, 1995 = 100% 275% 250% 225% 200% 175% 150% Drop in 2014 hull premium can not only be explained with strong USD (global hull often written in USD). Gross tonnage (> 300 GT) Av. insured vessel value (Renewals & newbuilds - Cefor) Global Marine Hull Premium 125% 100% No. Ships (> 300 GT) 75% 50% Data source: Insured vessel values: Cefor NoMIS statistics as of June 2015; No. Ships & tonnage: ISL Bremen, as at January 2015.

26 HULL ULTIMATE LOSS RATIOS* EUROPE/USA**, UNDERWRITING YEARS 1996 TO % 120% 100% 80% 60% 40% Costa Concordia peak Since 2009: Repair cost relative stable. Volatiliy by major loss impact (strong until 2011). 2014: Record-low major loss impact. Technical profit for first time in years? 20% 0% 2013 also improved (USD effect, when repairs not in USD?) * Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (acquisition cost, capital cost, management expenses) ** Data: Belgium, France, Germany, (Netherlands), Italy, Spain (until 2007), UK, USA

27 HULL ULTIMATE LOSS RATIOS* EUROPE/USA**, UNDERWRITING YEARS 1996 TO % 90% Costa Concordia peak : Unprecedented total loss impact. 80% 70% : Similar to pre- Costa Concordia years. 60% /2014 Improved results. 50% 40% Sustainable change? * Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (acquisition cost, capital cost, management expenses) ** Data: Belgium, France, Germany, (Netherlands), Italy, Spain (until 2007), UK, USA

29 HULL CLAIMS TRENDS Drawing by Dagfinn Bakke

30 TOTAL LOSS FREQUENCY TOTAL LOSSES AS % OF WORLD FLEET Long-term downwards trend Vessels > 500 GT) Sources: Lloyds List Intelligence (Casualty stats) Clarkson Research (World Fleet)

31 CLAIMS FREQUENCY AS OFJUNE 2015 CEFOR NORDIC MARINE INSURANCE STATISTICS Claim frequency, by date of loss 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Claims frequency all claims Total loss frequency (right axis) 0.30% 0.25% 0.20% 0.15% 0.10% 0.05% 0.00% Overall claims frequency: Downwards trend continues. Total loss frequency: Long-term positive trend but do we see a new increase in 2015? partial claims (left axis) TLO claims (right axis)

32 CLAIM COST PER VESSEL (USD) 120,000 Ultimate partial and total claim cost per vessel (USD), by date of loss CEFOR NORDIC MARINE INSURANCE STATISTICS 100,000 80,000 60,000 40,000 20,000 Including total losses Excluding total losses 2014: Next to no total loss impact. 2015: Renewed total loss impact. Excluding total losses: Claim cost per vessel stable since Ultimate claim per vessel incl. IBNR Ultimate partial claim per vessel incl. IBNR

33 MAJOR Claims CLAIMS in excess IMPACT: of 10 MUSD as % of total claim cost CLAIMS XS 10 USD MILLION AS % OF TOTAL CLAIMS COST 60% 54% 50% 40% 30% 20% 10% 28% 25% 16% 10% 6% 35%36% 28% 29% 19% 13% 19% 26%20% 18% 10% 30% 19% 41% 2015: Renewed impact of major claims. 0% Accident year Cefor Nordic Marine Insurance Statistics as of June 2015 (claims costs reflect 100% of each vessel).

34 HULL CLAIMS TRENDS Claims frequency: Long-term positive trend, only interrupted by peak in Total loss frequency: Long-term positive trend, but some increase in Claims cost excluding total losses: Stable since Influence of strong USD on recent results? (If hull premium written in USD, repairs done elsewhere) Major losses: stay volatile. 2014: Unusually few major claims. 2015: Impact back to expected level.

35 HULL PORTFOLIO TRENDS Drawing by Dagfinn Bakke

36 CHANGE IN VALUES ON RENEWAL = VALUE ON RENEWAL Average / VALUE annual PREVIOUS change in UW insured YEAR FOR values SAME VESSELS on renewed vessels 15.0% 10.0% 5.0% 6.0% 5.7% 2.7% 8.5% 4.9% Financial crisis effect Some reduction expected due to aging of vessels. 0.0% -5.0% % % -9.3% -6.3% -5.6% -6.0% -8.4% -15.0% -14.3% -20.0% Source: Cefor Nordic Marine Insurance Statistics as of June 2015

37 THE RISK EXPOSURE INFLOW OF HIGH-VALUE VESSELS CONTINUES 6% Portfolio share of ships with values xs 100 USD million Vessels with values xs 100 USD million as % of total insured portfolio: 5% 4% 3% 2% > 300 MUSD MUSD 1% 0% Source: Cefor Nordic Marine Insurance Statistics as of June 2015

38 HULL PORTFOLIO TRENDS World fleet: Continues to grow, especially in tonnage. Insured values: Ø Renewals: some value reduction expected due to aging. Ø Newbuilds: Inflow of high-value vessels continues. Ø Overall fleet: Inflow of high-value vessels outweighs value reduction on renewals to a certain degree. Global hull premium: Reduction since (Strong USD only partial explanation.)

39 STAYING IN CONTROL Drawing by Dagfinn Bakke

40 ISSUES TO MONITOR (AND PRICE) High-value risks Oil price, fuel quality, effect of ECA s? Climate changes Law and liability changes The human factor/ Qualification Astrid Seltmann Arctic risks Accumulation Dagfinn Bakke New technology Astrid Seltmann Navigation Astrid Seltmann

41 HULL CONCLUSIONS World fleet continues to grow, insured risk increases. Global hull premium reduced. Claims frequency improved. Major claims risk stays volatile and follows exposure. Technical results improved. For 2014 technical profit expected due to extraordinary absence of major claims. Economical environment is rapidly changing. For sustainability: All risk aspects must be considered.

43 OFFSHORE ENERGY PREMIUM 2014 Malaysia, 3.1% Mexico, 3.6% India, 1.9% Egypt, 1.9% Nordic, Japan, 2.5% 2.4% USA, 1.3% Italy, 1.5% Other, 3.8% Total: USD billion Change 2013 to 2014: 11.1% (major part written in USD; two units with substantial increases) Nigeria, 3.8% Brazil, 4.4% (large bi-annual renewal) UK (IUA), 22.3% UK (Lloyds),* 47.4% * incl. proportional and facultative reinsurance No data: No data: Kazakhstan. Kazakhstan.

44 OFFSHORE ENERGY PREMIUM ,000,000 Other 6,000,000 USA Nordic (2011) 5,000,000 Nigeria (2008) * 4,000,000 3,000,000 Mexico (2010) Malaysia Japan * * 2,000,000 Italy 1,000,000 India Brazil Nordic, Nigeria, Mexico: no data available before indicated year; UK- IUA: from 2012 extended data survey; Kazakhstan: no data available; UK- IUA (2012) UK- Lloyds *

45 600% 500% OFFSHORE ENERGY PREMIUM ENERGY MOBILES, DAY RATES, OIL PRICE Index of evolution, 2000 = 100% 400% 300% 200% 100% Average Day Rates Global Offshore Energy Premium Oil price, Brent Crude No. Contracted Rigs 0% Source: Day rates, contracted rigs: Rigzone

46 OFFSHORE ENERGY INTO 2015 ENERGY MOBILES, DAY RATES, OIL PRICE 600% 500% Index of evolution, 2000 = 100% Different business mix Influx of drillships with higher day rates. By rig type, day rates stable. 400% 300% 200% 100% Average Day Rates Global Offshore Energy Premium Oil price, Brent Crude No. Contracted Rigs 2015 drop in oil price will have substantial impact on market. 0% Source: Day rates, contracted rigs: Rigzone

47 Offshore Energy Loss Ratios (incl. liability) Underwriting years 1996 to 2014 / data from UK, US and (new!) Nordic 350% As of December % 250% 2004 Ivan 2005 Katrina & Rita outstanding paid 12th year paid 11th year paid 10th year 200% 150% 100% 2008 Ike no major hurricane activity paid 9th year paid 8th year paid 7th year paid 6th year paid 5th year paid 4th year paid 3rd year 50% paid 2nd year paid 1st year 0%

48 OFFSHORE ENERGY AS OF 2014 Hurricane/weather impact little in recent years (Gulf of Mexico). Some large single loss events (physical loss and liability) in recent years. Recent years still develop due to long time lag until cost is fully known, but no severe loss events in Positive results in recent years.

49 OFFSHORE ENERGY 2015 Strong drop in oil price Ø Downturn in activity Ø Costly new projects postponed (deep-water, Arctic) More risk retained in captives Series of high-profile losses in 2015 (Mexico: platform fire&jackup total loss; Brazil: FPSO fire; US: sinking of spar mooring tendons) Low interest rates / stock market instability Many mobiles currently idle. Weather: little hurricane activity predicted for 2015, but a single event can produce significant losses.

50 OVERALL CONCLUSIONS Seeming improvement in 2014 underwriting year results probably outweighed by 2015 event impact (cargo!). Trend towards unprecedented large losses continues Ø 2012 Costa Concordia Ø 2012 Sandy Ø 2015 Tianjin explosion largest marine claim ever? Market environment and conditions change rapidly. Focus on 2015 / 2016 risks and conditions!

51 2015: A CHALLENGING ENVIRONMENT Low oil price (reduced offshore activity; fuel price and quality) Low interest rates / stock market volatility (investment income) Where is China & the World economy heading? (influence on global trade) Strong USD (various impact) High values, new technology, increasing accumulation, Arctic risks, climate, K

52 A SAMPLE OF THE GLOBAL F&F TEAM New York: Henry Hong Kong: Vivian ALSUM/ Latin America: Erika Zurich: Patrizia Admin support Hamburg: Lars Bermudas: Jesse France: Mathieu Oslo: Astrid The cap-provider: Joachim from Hanover London: Darren & Dave & Phil Japan: Tetsuya Madrid: Javier Milano: Laura USA II: Donald

53 F&F Guest speaker 2015: Graham Slack Chief Economist A.P.Møller-Mærsk Group

54 Thank you! Astrid Seltmann Vice chairman F&F Committee The Nordic Association of Marine Insurers (Cefor) astrid.seltmann@cefor.no

55 EXPLANATION OF TECHNICAL TERMS Gross premium = Premium for insurance including the provision for an5cipated losses (the pure premium) and for the an5cipated expenses (loading), including also commission and brokerage but excluding taxes and other contribu5ons on insurance premiums. Before deduc5on of any ceded reinsurance. Wri-en premium = Complete premium due for insurance policies which start, i.e. are wriben, in a specific year (= the underwri5ng year of the policy). Does not give any informa5on on actual premium payments/instalments, i.e. the cash flow. Paid claims = Amounts the insurer has paid for known and registered claims less recoveries. Outstanding claims reserve = Claims reserve for reported, but not yet (fully) paid claims, of which the insurer has an es5ma5on of the total amount to be paid. Includes loss adjustment expenses = Sum of total claims es5mates minus any amounts already paid for these claims. Total claim = Paid amounts + outstanding claims reserve for all reported claims. IBNR = Incurred but not reported = addi5onal claims reserve on top of the outstanding claims reserve, and which for claims incurred, but not yet known or registered in the insurer s system. The necessary IBNR reserve is derived by sta5s5cal methods based on historical claims ladder sta5s5cs. Loss ra>o = Claims divided by premiums. Indicator of whether premiums are calculated correctly to match claims and other expenses. Gross loss ra>o (in this presenta>on) = Sum of total claims (and IBNR reserves), divided by gross wriben premiums Underwri>ng year basis = Insurance figures are registered with the calender year in which the insurance policy starts, and to which the covered risks accordingly abach to. Example: a policy with cover period has underwri5ng year Both claims occuring in 2006 and 2007 for risks abaching to this policy are thus abributed to underwri5ng year The underwri5ng year is not closed, so underwri5ng year figures change as long as there are payments related to policies with this underwri5ng year. Accident year = Claims are registered with the calendar year in which an accident happens. Claims abaching to the same policy may thus be abributed to different accident years. Example: for the policy with cover period a claim occuring in 2007 has accident year 2007, but underwri5ng year The accident year is not closed, so figures will change as long as there are claims payments related to claims occured in that accident year, e.g. a claim payment made in 2009 for an accident which happened in 2007 will be abributed to accident year Accoun>ng year (also booking year) = Insurance figures, regardless of their original source date, are booked into that year of account which is open at the 5me of actually entering the figures in the books. Contrary to the underwri5ng and accident year, the accoun5ng year is closed at some point in 5me, usually at the end of one calendar year, such that figures do not change any more once the accoun5ng year is closed. These give the insurance results usually published in companies annual reports.