1. The Impact of September 11 th 2001 on the Protection and Indemnity Market John Garthwaite

2. Intertanko legitimate interest in P&I Club’s reinsurance purchasing. Questions to address: 1. What reinsurance capacity will be Shipowners through the P&I Clubs in the post September 11th Reinsurance market? 2. At what price? 3. How much risk should Shipowners underwrite?

3. 2002 Reinsurance Programme, third year of a three year deal struck in 1999 with a 20% increase on the 2001 rate

4. International Group Reinsurance Program 2002 US$5m US$20m US$30m US$500m US$1,000m US$1,500m US$2,000m US$70m Club Retention Pool International Group General Excess Loss Reinsurance First and Second Layers International Group General Excess Loss Reinsurance Upper Layers US$5m US$15m US$10m US$500m Overspill (where purchased) POLLUTION NON POLLUTION 10% 75% US$1,000m 15% 75% US$1,000m 10% Clubs retain up to US$4,500m Lower pool Upper pool

5. Reinsurance Allocation to Ship Owners Rates per Gross Ton US$

6. International Group Reinsurance Program 2002 US$5m US$20m US$30m US$500m US$1,000m US$1,500m US$2,000m US$70m Club Retention Pool International Group General Excess Loss Reinsurance First and Second Layers International Group General Excess Loss Reinsurance Upper Layers US$5m US$15m US$10m US$500m Overspill (where purchased) POLLUTION NON POLLUTION 10% 75% US$1,000m 15% 75% US$1,000m 10% Clubs retain up to US$4,500m Lower pool Upper pool

7. Insurance market losses – September 11th related and unrelated –Lloyd’s, the major market 10th April 2002 results: –2001 loss est. £3.11bn including September 11th –2000 loss est. £1.72bn –1999 loss est. £1.95bn (on 3 year accounting policy) –Representative of 140% loss ratio for 2001, similar to other major insurers

8. Non concurrency problem Effects capacity Major Lloyd’s Syndicates underwrote up to $100m gross each Syndicate Net retained on annual reinsurance protection typically less than $5m 2002 whole account reinsurance unavailable Expensive, specific reinsurance up to a maximum of $20-30m Retained 2002 un-reinsured up to $70m for large Syndicates

9. 2003 Capacity What capacity will be available?  Lloyd’s capacity has risen but capacity to the Clubs has reduced  New carriers e.g:  Axis, Arch Re, Ascot  Conclusion - Capacity is available for the Group programme up to $1.5bn  Clubs may need to retain $100m

10. At what price? Best estimate a further 30% increase for a reduced limit and increased excess point Underwriter’s own reinsurance costs have increased by more than 100% over the period Club’s existing price relates back to 1999 pricing (noting the increase in 2002)

11. How much risk should Shipowners underwrite in the post September 11 th market? What are Shipowners underwriting in 2002?

12. P & I Club Limit Approximately US$4.5bn 2002 Club & Market US$4,500m US$2,030m US$30m US$5m SHIPOWNERS IN A SINGLE CLUB UNDERWRITE SHIPOWNERS IN ALL CLUBS UNDERWRITE MARKET REINSURERS UNDERWRITE US$2BN EXCESS US$30M SHIPOWNERS IN ALL CLUBS UNDERWRITE US$500m 10% 15% US$100m

13. How much risk should Shipowners underwrite in the post September 11 th market? What are Shipowners underwriting in 2002? What may Shipowners be underwriting in 2003?

14. 2003 Position?… if P&I Club limit remains US$4.5bn US$4,500m US$1,500m US$100m US$6m SHIPOWNERS IN A SINGLE CLUB UNDERWRITE SHIPOWNERS IN ALL CLUBS UNDERWRITE MARKET REINSURERS UNDERWRITE US$2bn EXCESS US$30m SHIPOWNERS IN ALL CLUBS UNDERWRITE US$1,000m 10% US$100m

15. Conclusions

16. The Protection and Indemnity Market 2002 Conclusion