UK P&I CLUB Houston Marine Insurance Seminar 2002 U.S. Gulf Claims More Predictable Than Ever September 23rd, 2002

UK P&I CLUB Mutual Insurance - what is it?  It is essentially co-operative self-insurance (a “Club”)  The insured are also the insurers  The insured's own the insurance fund  The aim of a mutual is to cover losses, not make a profit Mutual insurance is different from commercial insurance

UK P&I CLUB The Clubs in the Maritime Field  The Clubs insure 95% of all ocean-going ships  The Clubs have cooperated for over 100 years (Pooling Agreement 1899)  The Clubs’ boards of directors comprise a hugely influential body of ship-owners  The Clubs have consistently acted in the interests of the maritime community

UK P&I CLUB Typical Club Structure

UK P&I CLUB Function Of Club Managers  Underwriting Arrange cover; process entries, allocate calls, draw up/dispatch debit notes:  Claims Handle and reimburse claims, provide advice, approve some contracts/indemnities, decide on deviation cover, approve costs/fees;guarantees  Investment Generate investment income on Club funds within delegated guidelines  Loss Prevention Legal/technical publications, claims analysis

UK P&I CLUB Club Financial Structure OBJECTIVE Premiums + Investment Income = Claims + Expenses Transfer to Reserves Return to Members DEFICIT = Premiums + Investment Income < Claims + Expenses Transfer from Reserves/ Reinsurance Further call on Members SURPLUS = Premiums + Investment Income > Claims + Expenses

UK P&I CLUB RISKS: Protection & Indemnity  P&I Insurance is insurance in respect of 3rd party liabilities  P&I Insurance is not  hull and machinery insurance,  war risk insurance,  loss of profit/freight insurance,  detention insurance,  strike insurance  defence

UK P&I CLUB Core Covers in P&I  Injury, illness or loss of life of passengers  Loss or damage to personal effects  Injury, illness or loss of life of crew  Pollution and environmental damage Third Party Liabilities in respect of:

UK P&I CLUB Core Covers in P&I (cont.)  Collision  Dock and other Property Damage  Fines  Legal costs  “Omnibus cover” Third Party Liabilities in respect of:

UK P&I CLUB The World’s Largest P&I Club International Group - Owned & Chartered - February 2002 Figures in millions GT

UK P&I CLUB May 2002 Miscellaneous Bulk Carrier Chemical Gas Carrier Reefer Passenger Ro/Ro Vehicle Carrier Container Specialist General Cargo Tanker 1.6 % 27.3 % 1.0 % 7.0 % 1.1 % 5.1 % 2.4 % 3.8 % 8.7 % 0.5 % 3.2 % 38.5 % Trade Sector Market Share (2002) Gas Carriers32%RoRo 16% Reefer 11% Chemical 7% Passenger30%Bulk 14% Combis 10% Tankers22%Container 12% Dry Cargo 9% Members by Trade Type - Tonnage

UK P&I CLUB Global Membership Club: 11.4% World: 11.2% 62.3% 55.1% 26.3% 33.7%

UK P&I CLUB Age Profile of the Club  The Club’s tonnage age profile has reduced in the critical year age band from 24% to 19% to 17%.  Tonnage under 10 years old increased from 31% to 40% to 41%

UK P&I CLUB UK Club Reinsurance Structure Club Retention Pool Retention Group’s excess R/I UK Club’s Overspill Reinsurance Overspill pool with other Clubs - cover available from UK Club catastrophe reserve & Swiss Re contract US$ 5m US$ 30m US$ 530m US$ 2,030m US$ 3,030m US$ 4.5bn Oil Pollution US$ 1,000m US$ 1500m US$ 500m US$ 25m US $ 1470m US$ 1000m

UK P&I CLUB Safeguarding Member Quality  Six full-time inspectors conduct 500 ship visits a year.  Over 5,000 ships inspected since  Only 3% of inspections led to adverse report and the number of inspections generating a high rating with no comment was up from 51% to 53%  Unsatisfactory findings lead to independent condition surveys and restricted cover.  Surveys leading to a repair being required fell from 45% in 2000 to 40% in 2002

UK P&I CLUB Crew Risk Management Programme  Enhanced pre-employment medical examinations (PEME)  Significant pre-existing illnesses and repatriation avoided  Available in ten crew-supply countries  Unique cost-saving service  Development into post- repatriation care

UK P&I CLUB Publications & Videos  VIDEOS  Tanker Matters  Bulk Matters  Container Matters  Any fool can stuff a container....  BOOKS & MULTIMEDIA  Major Claims Analysis  The Human Factor  Port State Control  Carefully to Carry  Loss Prevention News  UK Club News

UK P&I CLUB Loss Prevention  Seminars & Workshops around the world  Weekly Loss Prevention Bulletins  Books, magazines & videos  Full-time department in London & specialist regional managers

UK P&I CLUB Advice & Information  Concentration of expertise available to all members regardless of size or premium contribution  Databases - Pollution legislation, conventions and procedures, legal and technical enquiries etc.  Past Projects - Millennium Bug (Ship 2000), ISM, STCW etc.

UK P&I CLUB Loss Prevention Developments  New website area  Benchmarking  Good Practice  Technical Reports  “How To” guides  ISM Analysis

UK P&I CLUB Worldwide Statistics

UK P&I CLUB Stable Claims Trend

UK P&I CLUB Claims 20/2/ US$ millions Year 0002

UK P&I CLUB 10 Most Frequent Claims Producers

UK P&I CLUB Major and Minor Claims Percentages By Value By Number Minor Claims % Major Claims %

UK P&I CLUB Main Types of Major P&I Claims 39% 8% 10% 5% 2% 23% 8% 1% 2% Cargo Collision Property Damage Pollution Fines Crew Injury Wreck Removal Non-Crew Injury Other Unrecoverable GA

UK P&I CLUB Main Causes of Major P&I Claims

UK P&I CLUB Human Factors  Fatigue  Morale  Motivation  Loyalty  Training  Standards of Certification  Experience  Conditions  Environment  Language  Management Policies

UK P&I CLUB Causes of Crew Injury Claims % Number Value

UK P&I CLUB Location of Crew Injuries Number Value

UK P&I CLUB Collisions - Visibility and Sea State Visibility Sea State

UK P&I CLUB Tanker Claims A number % of all large claims in each particular country)

UK P&I CLUB US Claims Statistics

UK P&I CLUB THOMAS MILLER (AMERICAS) INC. Full Claims Handling Service 24 Hours a day in YOUR time zone New Jersey, Miami and San Francisco

UK P&I CLUB AMERICAS REGION 25 experienced claims handlers in New Jersey, Miami and San Francisco Full authority for Claims and Guarantees Immediate response on major casualties Monitoring attorney performance & cost Contact with agencies (e.g. Coast Guard) Loss Prevention on board Cruise Ships

UK P&I CLUB Claims Exposure in USA -The reason for local service 25% Industry claims in USA $ncreasing exposure of Ship-owners in USA $ 14m a year in legal / survey fees

UK P&I CLUB Major Claims ($100,000 +) in USA 1987/2002  1014 Claims -- $422M  20% of all Major Claims  40% Personal Injury, 25% Cargo  5%Pollution, Collision, Dock Damage  Numbers Decreasing - Average Value Increasing

UK P&I CLUB US Seamen Accident Type ThousandsThousands %

UK P&I CLUB US Seamen – Type of Injury ThousandsThousands %

UK P&I CLUB US Gulf Claims Since February 2000  1,532  Month

UK P&I CLUB Claim Since February 2000 cont..,  1,532 - CLAIMSLAWSUITS  TEXAS  FLORIDA  LOUISIANA  ALABAMA  MISSISSIPPI ,

UK P&I CLUB Mediation  TEXAS  FLORIDA  LOUISIANA  ALABAMA  MISSISSIPPI 2- 0

UK P&I CLUB 4 Factors Influencing Claims Trends In The US Gulf A New Type of Owner 2. Legal Is it possible to try a case? 3. The Insurance Market Hard or soft Market….. Does It Really Make A Difference? 4. Personalities How so few influence so much? 2. Legal 1. Corporate