HULL & MACHINERY Tron Nummedal Bjørn Skaar

Learning goals Able to identify and understand the main H&M objectives. Able to review a broker’s H&M presentation. Able to structure received information. Able to take an underwriting decision. How to follow up the business.

Agenda The H&M business model. The H&M risk aspects. The H&M underwriting decisions. The H&M service and follow up work.

The H&M scream of our time? The Nordic Association of Marine Insurers

- Underwriting guide lines - Insurance Conditions The business model - Four C’s - Risk distribution - Underwriting guide lines - Insurance Conditions

Other insurance products for vessels? TYPES OF INSURANCES: HULL AND MACHINERY COVERS DAMAGE TO THE HULL. DAMAGE TO MACHINERY DAMAGE TO OTHER VESSELS DAMAGE TO FIXED AND FLOATING OBJECTS. P&I (PROTECTION AND INDEMNITY) COVERS OIL SPILL CARGO CLAIMS CREW INJURIES Other insurance products for vessels?

The Nordic Association of Marine Insurers

The H&M insurance market The Nordic Association of Marine Insurers

The Nordic Association of Marine Insurers

Gross written H&M premium The Nordic Association of Marine Insurers

Hulls runs red as it sails into the 17th year of losses Hulls runs red as it sails into the 17th year of losses. Tradewinds 11th September 2013 The Nordic Association of Marine Insurers

TradeWinds article 11th September 2013 Hull runs red as it sails into 17th loss year The hull market shows all the signs of being stuck in a deep rut It has become an annual tradition for the chairman of IUMI’s Ocean Hull Committee to warn underwriters that the market is in the red for yet another year. This year, the task falls to Lars Rhodin, managing director of the Swedish Club, who took over the chairmanship of the committee midterm. The Nordic Association of Marine Insurers

2007 CEFOR Nordic Marine Insurance Statistics – Part 3 As of 31 December 2007 To be continued!

Source :IUMI article TradeWinds 21.09.12.

Increasing risk exposure to high-value vessels Cefor Hull Claims Trends Update as of 30 June 2013: Claim frequency and cost back to pre Costa Concordia levels Increasing risk exposure to high-value vessels The claim frequency shows a positive to stable trend after the peak in 2008. The frequency of total losses shows a long-term positive trend after some increase in 2012. The average repair cost, excluding total losses, reached in 2012 its lowest level since 2004. Some increase in 2013 is mainly due to two major losses in the first half year of 2013, which were no total losses. But despite a further decrease of insured value, the risk exposure to major losses remains high, due to an increasing share of high-value vessels in the portfolio.  The Nordic Association of Marine Insurers

TradeWinds article 18th September 2013 Underwriters admit to hull pricing problems. About three-quarters of underwriters believe hull insurance is priced significantly below the level that business models suggest is necessary. The International Union of Marine Insurance (IUMI) conference this week took advantage of electronic voting technology to run the first ever poll of delegates’ perception of the market. One-quarter voted that hull and machinery premiums were 50% below the level required. A further 48% said rates were 25% below the necessary price. And 15% voted that pricing was 10% too low. So 88% of those who voted acknowledge hull premiums are too low, but sadly there was no follow-up question on whether underwriters are minded to do anything about it. The Nordic Association of Marine Insurers

Profiling Risk? “underwriters to price risk based on their overall portfolios.”

Are the Deductibles the solution?

“Underwriting oversupply haunts the hull markets” TradeWinds 13.09.2013 “Underwriting oversupply haunts the hull markets” The Nordic Association of Marine Insurers

How are our clients doing? The Nordic Association of Marine Insurers

How is the shipowners’ freight market? The Nordic Association of Marine Insurers

The Nordic Association of Marine Insurers

The Nordic Association of Marine Insurers

The current situation! “Underwriting oversupply haunts the hull markets” “Clients have been through the worst shipping market ever” Poison cocktail! The Nordic Association of Marine Insurers

■ Det Norske Veritas (DNV) PARIS MOU 2012 REPORT Port State Control - Taking port State control to the next level Performance of Recognized Organizations For several years the Committee has closely monitored the performance of classification societies acting as Recognized Organizations for flag States. The poorest performing flags are Bolivia, Tanzania and Togo. Among the best performing recognized organizations were: ■ American Bureau of Shipping (ABS) ■ Det Norske Veritas (DNV) ■ Lloyd’s Register (UK) (LR) The lowest performing organizations were: ■ Phoenix Register of Shipping (Greece) (PHRS) ■ INCLAMAR (Cyprus) ■ Register of Shipping (Albania) (RSA) The Nordic Association of Marine Insurers

From a DNV vessel a few weeks ago!

Guess which class? The Nordic Association of Marine Insurers

PARIS MOU 2012 REPORT Performance of Recognized Organizations Port State Control - Taking port State control to the next level Performance of Recognized Organizations For several years the Committee has closely monitored the performance of classification societies acting as Recognized Organizations for flag States. The poorest performing flags are Bolivia, Tanzania and Togo. Among the best performing recognized organizations were: ■ American Bureau of Shipping (ABS) ■ Det Norske Veritas (DNV) ■ Lloyd’s Register (UK) (LR) The lowest performing organizations were: ■ Phoenix Register of Shipping (Greece) (PHRS) ■ INCLAMAR (Cyprus) ■ Register of Shipping (Albania) (RSA)

Broker’s Competitive edge? SMA – Scandinavian Marine Agency AS Broker’s Competitive edge? This Guy or this guy? Or maybe she?

Typical Request. Alfa Runner Beta Swimmer From: Peter Smart Sent: 2. april 2008 09:16 To: Haakonsen, Mona GIS N; Basthus, Morten GIS N Cc: Tony Ascot Subject: Blue Shipping, Greece. Dear Mona / Morten We are pleased to give you the opportunity to quote for the above account which renews for 12 months with effect from 1st of May. The fleet used to be 4 vessels and is now 2 vessels. They are both Panamax bulkers and are valued USD 85m and 25m respectively. The owner is Mr . Tuscot Papalacis. This is a very long standing small but high quality account which we are particularly keen to win and very much hope that you will share our enthusiasm for. Blue Shipping have confirmed in writing that they have had a clean loss record for 17 years on vessels managed by them. They had a generator damage 18 years ago. We have attached a spreadsheet that lists two vessel schedule and our rating suggestion \ target. It is important that we maintain the existing deductible and that you pitch your indication per (or as close as possible) our target. We are aware of the existing price so the target (incl returns) is set at a level where we can achieve an order. Vessel details : Alfa Runner 2004 bulk carrier. LR class. Flag Panama. Hull value $ 68m and IV $ 17m. ITC clauses and amendments to be advised. Ex collision liability. Hull deductible USD 75k. Beta Swimmer 1984 bulk carrier. ABS class. Flag Cyprus. Hull value $ 20m and IV $ 5m. Hull deductible USD 90k. The current broker is H Merit and the risk is placed into Lloyds (we think Beazley) plus London companies : Aspen, Wurt and HCC. We very much look forward to receiving your indication as soon as possible. Best Regards Peter Smart

Typical Request. Alfa Runner Beta Swimmer From: Peter Smart Sent: 2. april 2008 09:16 To: Haakonsen, Mona GIS N; Basthus, Morten GIS N Cc: Tony Ascot Subject: Blue Shipping, Greece. Dear Mona / Morten We are pleased to give you the opportunity to quote for the above account which renews for 12 months with effect from 1st of May. The fleet used to be 4 vessels and is now 2 vessels. They are both Panamax bulkers and are valued USD 85m and 25m respectively. The owner is Mr . Tuscot Papalacis. This is a very long standing small but high quality account which we are particularly keen to win and very much hope that you will share our enthusiasm for. Blue Shipping have confirmed in writing that they have had a clean loss record for 17 years on vessels managed by them. They had a generator damage 18 years ago. We have attached a spreadsheet that lists two vessel schedule and our rating suggestion \ target. It is important that we maintain the existing deductible and that you pitch your indication per (or as close as possible) our target. We are aware of the existing price so the target (incl returns) is set at a level where we can achieve an order. Vessel details : Alfa Runner 2004 bulk carrier. LR class. Flag Panama. Hull value $ 68m and IV $ 17m. ITC clauses and amendments to be advised. Ex collision liability. Hull deductible USD 75k. Beta Swimmer 1984 bulk carrier. ABS class. Flag Cyprus. Hull value $ 20m and IV $ 5m. Hull deductible USD 90k. The current broker is H Merit and the risk is placed into Lloyds (we think Beazley) plus London companies : Aspen, Wurt and HCC. We very much look forward to receiving your indication as soon as possible. Best Regards Peter Smart

Our Reply -----Original Message----- From: Haakonsen, Mona GIS N Sent: 2. april 2008 09:35 To: Peter Smart ;Basthus, Morten GIS N Cc: Tony Ascot, Subject: RE: Blue Shipping, Greece. Dear Peter, Reference is made to your e-mail earlier today. Regret to inform you that in respect of this account there is not much enthusiasm from our side. We used to write this account until 2005 when we were cut off without any explanation. We would also strongly suggest that you reapproach your Client and ask them about the following incidents: 28/10/06 Papa Jogger Maine Engine dmg USD 307.207 11/10/05 Captain Sleeper Collision USD 202.280 This Client seems eager to play games, changing brokers and withhold claims information and we do not want such Clients in our portfolio. Trust you can understand our position. Best regards, Mona

“This is not a business for the average guy” Conclusion? “This is not a business for the average guy” Lars Rhodin Tradewind 21.09.12. The Nordic Association of Marine Insurers

-Premium calculations. * Scale. *Burning costs. The risk -Information, “Need to have and nice to have”. (Hand out, exercise) -Premium calculations. * Scale. *Burning costs. * Deductible and bonuses.

The final underwriting decisions. -Premium, -Deductible. -Conditions. -Share

The final underwriting decisions -Premium, -Deductible. -Conditions. -Share

The follow up work -Claims handling and adjusting. -Loss Prevention. -Underwriting service. -Claims handling and adjusting. -Loss Prevention.

“Miso Rakan” December 2010 – March 2011 Encounter ice Problems Engine Damage Dec 2010 Jan 2011 Vessel Repaired