1. Recent Hull Claim Trends The cause of recent claim trends: Crew, congestion and harder trade, or purely a matter of inflation? Astrid Seltmann CEFOR Analyst/Actuary Central Union of Marine Underwriters, Oslo, Norway

2. CEFOR – A Nordic Marine Insurance Association Marine Lines: ocean hull & machinery (H&M) coastal H&M protection and indemnity (P&I) transport / cargo freight, defence & demurrage (FD&D) war risk Members: Industriforsikring AS

3. CEFOR Mission Statement: CEFOR shall secure the interest of our Nordic members by promoting quality marine insurance 4 Core Activities: - Product Development & Clauses - Statistics & Analysis - Industry Policy & Framework Conditions - Education

4. CEFOR Statistics & Analysis Nordic Marine Insurance Statistics (NoMIS) –database for Hull & Machinery insurance –claims and premiums linked with ship details from LMIU and LR/Fairplay –data from underwriting years 1985 to 2008 –122,000 vessel years –37,000 claims –25% of world fleet (by numbers) –50% of world fleet (by tonnage)

5. IMSF 2008 - Recent claim trends Contents: 0. CEFOR overview & fleet 1.General claim trends 2.Special claim trends (including nautical, engine) 3.Cost-driving factors

6. 0. The CEFOR Marine Insurance Market

7. World CEFOR 0. CEFOR in the global context – Global Marine Hull Premium 2006

8. 0. CEFOR fleet - Number of vessels per type Total number of vessels 2002-2006: 47,171 2007: 11,412

9. 0. CEFOR fleet – Number of vessels per classification society Total number of vessels 2002-2006: 47,171 2007: 11,412

10. 0. CEFOR fleet – Evolution of average SI and Gross ton per vessel, by underwriting year

11. CEFOR General Claim Trends

12. 1. General claim trends – Claim frequency, by underwriting year

13. 1. General trends - Deductibles, by underwriting year

14. 1. General claim trends – Cost per claim

15. 1. General claim trends – Claim per vessel ?

16. 1. General claim trends - Partial claim per vessel

17. 1. Maximum individual claim

18. 1.General claim trends – Claim bands by underwriting year

19. 1. Claim per vessel – Quarterly development per underwriting year ? New underwriting year = new record? 2007

20. 1. Partial claim per SI as per 4th quarter against average SI development

21. Summing up general claim trends Claim per vessel doubled since 2003 (both overall and PA claim alone) Increase in maximum individual claim 2007 worse than any previous year Increase in PA claim per Sum Insured Increase in claims of all sizes but stable frequency

22. CEFOR Special Claim Trends

23. 3.a. General claim trends – Claims by type

24. Good luck?

25. 3.b. Nautical related claims – Frequency by type of claim, by date of loss

26. 3.b. Cost per claim by type of claim – Nautical & Engine, by underwriting year Cost of grounding claims rocketing +123% Change 2000->2007: +148% + 89% + 15%

27. 3.b. Cost per claim by type of claim – Weather-related, by underwriting year Change 2000->2007: +551% +528%

28. 3.b. Nautical-related claims – Max. single claim

29. 3.b. Claim per vessel by type of claim, by underwriting year Good luck? Bad luck?

30. 3.b. Nautical-related claims – Frequency by vessel type No overall increase in frequency. Individual sectors with increase in number of groundings: Chem./Product, OBO, Passenger

31. 3.b. Nautical-related claims – Cost per vessel

32. 3.b. Nautical-related claims – Av. claim cost Average claim up for all vessel types except Car/RoRo.

33. 3.b. Engine claims – Max. Individual claim

34. 3.b. Engine claims Average engine claim up for all vessel types except tank.

35. Summing up special claim trends Sharp cost increase of all claim types No frequency increase for any claim types Overall increase in claim per vessel for nearly all vessel types and claim types Congested waters, shortage of qualified crew, harder trade, etc.… => Should have had less homogenous effects and effected the frequency?

36. Cost-driving factors

37. 3.c. Cost driving factors – Ship operating costs How Moore Stephens index of ship operating costs has increased. Ship operating costs continued on a relentless upward path through last year with the average increase across all vessel types running to 8.5%. Tradewinds, 24 th September 2007

38. 3.c. Cost driving factors – Exchange rates - Hull policies / premium payments often in USD. - Repair costs paid in local currency at site of repair yard or affected by spare parts, labor costs etc. paid in other currencies than USD => weaker dollar = higher repair costs in USD USD weaker

39. 3.c. World Market Price Indices for selected commodities Annual Average (1993-2006) – Average in 2007 as at end of May (*) Source: « Global Shipping Market Trends », IUMI Conference 2007

40. 3.c. World Trade Values Development 1996-2006 (in million USD) – Growth rate in 2006 12,000,000 Total World Trade & Other cargoes Crude oil and oil products The 4 main Dry Bulk Cargoes (Iron Ore, Coal, Grain, Bauxite/Alumina) Other Cargoes Total World Trade (*) Source: « Global Shipping Market Trends », IUMI Conference 2007

41. 3.c. World Seaborne Trade Volume Development 1996-2006 (in million tonnes) - Growth rate in 2006 estimates The 4 main Dry Bulk Cargoes (Iron Ore, Coal, Grain, Bauxite/Alumina) Other Cargoes Total World Trade (*) Source: « Global Shipping Market Trends », IUMI Conference 2007 43% growth in seaborne trade volume from 1996-2006

42. World Merchant Fleet of ships of 300gt and over Evolution of the growth rates (GT, DWT, and Number of ships) between 1995 and 2007 39,008 ships (+ 7.6%) 42,872 ships (+ 18.3%) 685,738 mGT (+ 56.4%) 520,913 mGT (+ 18.8%) 778,758 mDWT (+ 14.2%) 1,009,524 mDWT (+ 48.1%) 0% 10% 20% 30% 40% 50% 60% 70% 1995199619971998199920002001200220032004200520062007 Source: « Global Shipping Market Trends », IUMI Conference 2007

43. 3.c. Cost driving factors inflation index

44. Summing up cost driving factors ÷ Increase in ship operating costs ÷ Increase in steel prices -> repair costs ÷ Weakening of USD -> premiums paid in USD, claims affected by other currencies -> increase in repair costs (or reduced repair quality)? ? Increase in global trade volume and values -> ships driven harder, less time for maintenance – or compensated by a larger and more effective world fleet? ? Is slack and off-hire good…?

45. 2007 CEFOR Nordic Marine Insurance Statistics – Part 9 As of 31 December 2007 CEFOR marine insurance statistics publications, all at http://www.cefor.no :http://www.cefor.no CEFOR Annual Report 2007, p.18-25, Nordic Marine Insurance Statistics http://www.cefor.no/news/CEFOR%20&%20Annual%20Report/CEFOR_AnnualReport2007.pdf http://www.cefor.no/news/CEFOR%20&%20Annual%20Report/CEFOR_AnnualReport2007.pdf The 2007 CEFOR NoMIS Report http://www.cefor.no/statistics/documents/2007%20CEFOR%20The%20NoMIS%20report.ppt http://www.cefor.no/statistics/documents/2007%20CEFOR%20The%20NoMIS%20report.ppt The 2007 CEFOR Report on Hull claim trends http://www.cefor.no/statistics/documents/2007%20CEFOR%20Hull%20Claim%20Trends.pdf http://www.cefor.no/statistics/documents/2007%20CEFOR%20Hull%20Claim%20Trends.pdf Links to other marine insurance statistics: CEFOR website, Statistics section: (CEFOR and IUMI statistics for download, including historical data) http://www.cefor.no/statistics/statistics.htm http://www.cefor.no/statistics/statistics.htm IUMI (International Union of Marine Insurance): Statistics issued by IUMI’s Facts & Figures Committee: http://www.iumi.com/index.cfm?id=7165 http://www.iumi.com/index.cfm?id=7165