Global Marine Insurance Report 2010 Overview

Global Marine Insurance Report 2010 Astrid Seltmann Facts and Figures Committee, Vice Chairman Analyst/Actuary @ Cefor, The Nordic Association of Marine Insurers 12 TO 15 SEPTEMBER

Global Marine Insurance Report 2010 Global Marine Insurance Overview Global Cargo market Global Hull market Global Offshore Energy Market Addendum (in download only): Tables with underlying reported figures 12 TO 15 SEPTEMBER 2

Global Marine Premium 2009, by line of business Total reported: 22.9 USD billion 2009 12.9% 29.0% 6.6% Global Hull Transport/Cargo Marine Liability 51.5% Offshore/Energy Total estimated including not reported: 23.6 USD billion 12 TO 15 SEPTEMBER 3

Market Shares 2009 Europe Total reported: 22.9 USD billion Asia/Pacific North America 7.8% Rest of the world 9.5% 21.4% 61.3% Europe : Greece, Hungary, Ireland, Italy, Netherlands, Nordic (Cefor), Poland, Portugal, Romania, Russia, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom (IUA + Lloyds) Asia/Pacific : Australia, Chinese Taipei, Hong Kong, India, Japan, Korea DPR, South Korea , Malaysia, New Zealand, Singapore North America : Bermuda, Canada, USA Rest of the World : Bahrain, Brasil, Congo, Egypt, Israel, Kazakhstan , Kenya, Lebanon, Mexico, Morocco, Nigeria, South Africa, Tunisia, United Arab Emirates Albania, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Finland, France, Germany, 12 TO 15 SEPTEMBER 7 Countries in italics did not report in 2010

MARINE MUTUAL MARKET P&I Clubs International Group Gross Calls 2009 (Premium) Operational location 6% 4% 23% 67% UK Calls 2009: UK: Nordic: 0.86 Japan: 0.21 US: 0.14 Total: 3.68 (USD billion) 2.47 Nordic Japan US / +27% 12 TO 15 SEPTEMBER 10 Source: Standard & Poors P&I Highlights 2010

Global Cargo Premium by markets Total: 11.8 USD billion Belgium 3% Brasil 8% France 8% 2009 Other markets 27% Germany 12% USA 7% Italy 5% UK Lloyds 7% UK (IUA) 2% Japan 14% Russia 2% Spain Netherlands 5% 12 TO 15 SEPTEMBER 3% 12

Global Hull Premium by markets Total: 6.6 USD billion 2009 France 7% Italy 6% Japan 9% Other markets 26% Korea, Republic 5% Netherlands 5% USA 5% * Nordic (Cefor) 14% ** UK (Lloyds) 14% UK (IUA) 4% Spain 5% ** includes facultative and prop. reinsurance * Cefor members in Norway, Denmark, Sweden, Finland 12 TO 15 SEPTEMBER 14

World Seaborne Trade Volume and Trade Values, Global Cargo Premium, Index of evolution, 1995 = 100% 3.50 2009: reduction in cargo income due to less global trade, exchange rates, or soft market? 3.00 2.50 2010: upswing in trade, but probable further decrease of cargo premium due to time lag effects. Total World Trade Values 2.00 Total World Trade Volume 1.50 ? Global Cargo Premium 1.00 0.50 Cycle irregularities before 2008 mainly due to exchange rates. 0.00 1995 1998 1999 2001 2002 2004 2005 2008 2009 1996 1997 2000 2003 2006 2007 2010 12 TO 15 SEPTEMBER 16 Source: Indicators for World Trade Volume from ISL Bremen, 2010 figures based on IMF estimates

Index of Evolution of USD Exchange rate against selected currencies (exchange rates as of December each year, 2010 as of June 10) 180% 160% 140% EUR 120% GBP JPY 100% NOK Since Financial crisis less correlation between exchange rates 80% 60% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 12 TO 15 SEPTEMBER 17 Source: Norges Bank Exchange Rates Statistics

World Merchant Fleet and Global Marine Hull & Liability Premium, Index of evolution, 1995 = 100% 230% 210% Average insured value per vessel (Cefor - including new and renewed vessels) 190% 170% Gross tonnage (> 300 GT) 150% 130% No. Ships (> 300 GT) 110% 90% Global Marine Hull & Liab. Premium 70% 50% 1995 1996 1997 1998 1999 2000 2001 2005 2006 2007 2008 2009 2002 2003 2004 12 TO 15 SEPTEMBER 18 Sources: Indicators for World Fleet from ISL Bremen, Vessel value index: Cefor, as of 30.06.10

Change in insured values on renewed vessels, by year of renewal Average annual change in insured values for renewed vessels (= insured value on renewal / insured value previous year) 15.0% Insured values decrease from 4Q 2008 10.0% 8.3% 7.1% 5.6% 5.5% 5.0% 1.9% 0.0% 2004 2005 2006 2007 2008 2009 2010 -5.0% -10.0% -9.2% -15.0% -15.1% -20.0% 12 TO 15 SEPTEMBER 19 Source: Cefor, The Nordic Association of Marine Insurers, figures as of 30. June 2010

Marine Hull and Cargo/Transport Gross* Ultimate Loss Ratio, U/W Years 1998 to 2009 140% 2007 / 2008: Changing frame and market conditions provoke increase in claims reserves for both cargo and hull. 120% 100% 2009: signs of improvement, but 80% Marine Hull Cargo/Transport uncertainty as to effect of unstable environment on ultimate results. 60% 40% 20% * Technical break even: gross loss ratio does not exceed 100% minus the expense ratio (usually 20%-30% acquisition cost, capital cost, management expenses) 0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 12 TO 15 SEPTEMBER 21

Macroeconomic parameters/ Claims cost Market conditions Income Insurance results Market predictability? Change Change Change 12 TO 15 SEPTEMBER 22

Marine Hull - Gross* Loss Ratio Underwriting years 2003 to 2009 as reported after 1, 2, 3, 4 and 5 years From 2007: Repair cost driven up by changing frame conditions. Extraordinary upwards adjustment of claims reserves. 90% Currently to be expected loss ratio level 80% 80+%? Previous loss ratio level 2003 70% 70+%? 2004 => Change in typical claims pattern! 2005 2006 2007 2008 2009 60% 2009: Price-driving factors turn back to more normal level, but no stable frame conditions => uncertain effect on claim level. 50% 2009 40% 1 2 3 4 5 12 TO 15 SEPTEMBER 23

Marine Cargo - Gross* Loss Ratio Underwriting years 2003 to 2009 as reported after 1, 2, 3, 4 and 5 years 2007 / 2008: Changing frame conditions demand extraordinary upwards adjustment of claims reserves. 80% Currently to be expected loss ratio level 2003 70+%? 70% 2004 2005 Previous loss ratio level 62%? => Change in typical claims pattern! 2006 60% 2009 2007 2008 2009: uncertain effect of unstable market conditions on final outcome. 50% 2009 40% 1 2 3 4 5 6 12 TO 15 SEPTEMBER 24

Summing up Hull in a changing world Frame conditions swing in various directions: steel prices / repair yard capacity / exchange rates / world trade / commodity prices / vessels in lay-up /... Changes influence both income (vessel values) and cost (claim frequency and repair cost). Repair cost and claims frequency increased until 2008. In 2009 signs of returning to more normal levels. But too early to tell, strongly depending on further development of frame conditions / price-driving factors in an unstable economical and trade environment. Strong major claims impact in 2006/07, improvement in 2008/09, but major claims may occur at any time! 12 TO 15 SEPTEMBER 25

Summing up Hull in a changing world Hull technically at loss for 14 consecutive years! So not everything is changing after all Future Global Hull Market depends on Better understanding of dependencies between macroeconomic parameters and repair cost Improved models to estimate expected claim cost (= risk premium) Trade / Fleet development Market discipline / capacity and as always: the impact of major claims 12 TO 15 SEPTEMBER 26

Summing up Cargo in a changing world From 2008 reduction in insured values, with respective effect on cargo income. Strong upwards adjustment of 2007/2008 claims reserves. If claims reserves prove to be correct, this produces a technical loss for the first time since 2000. Uncertainties as to the profitability of 2009. The future: Claim amounts unlikely to decrease because of increased risk of accumulation, moral hazard, theft frequency. 12 TO 15 SEPTEMBER 27

Global Offshore Energy Premium by markets Total reported: 2.95 USD billion Other markets 9.9% 2009 Japan 3.9% Italy 3.7% UK (IUA) 3.2% Malaysia 3.9% Nigeria 5.8% USA 7.8% * UK (Lloyds) 61.9% * includes facultative and prop. reinsurance No data: Nordic region, Russia, Kazakhstan. 12 TO 15 SEPTEMBER 28

Energy Mobiles, Day rates, Oil Price Global Offshore Energy Premium, Index of evolution, 2000 = 100% 500% 450% Average Day Rates 400% 350% Global Offshore Energy Premium 300% 250% Oil price, Brent Crude 200% 150% No. Contracted Rigs 100% 50% 0% 2000 2001 2003 2004 2005 2006 2007 2008 2010 2002 2009 12 TO 15 SEPTEMBER 29 Sources: No. Contracted rigs, day rates: RigZone, Oil price: Energy Information Administration (US), 2010 figures as of 31.07.10

Offshore Energy Gross Reported Loss Ratios U/W Years 1996 to 2009, as reported at 31 December 2009 2009: no major hurricane activity, but severe physical risk losses not wind- related -> 2009 loss ratio will increase! 350% 2005 Katrina & Rita 300% outstanding paid 12th year 250% paid 11th year Soft market 2004 Ivan paid 10th year 200% paid 9th year 2008 Ike paid 8th year paid 7th year 150% paid 6th year paid 5th year 100% paid 4th year paid 3rd year 50% paid 2nd year paid 1st year 0% 1998 1999 2003 2004 2005 2008 2009 1996 1997 2000 2001 2002 2006 2007 12 TO 15 SEPTEMBER 30

Summing up Offshore Energy Volatile business, results depend strongly on hurricane impact, but trend towards self-insurance in Gulf of Mexico. But no hurricanes does not mean no losses! Rates and Terms & Conditions improved after 2000, following hurricane activity in Gulf of Mexico. Long time lag between accident and claims payment, due to technical complexity of the insured objects. No regular claims patterns. Claims reserves are set depending on knowledge about individual claims. Deepwater Horizon estimate > 2 USD bill., impact on 2009 & 2010 uw year. 2009: more physical damage losses not related to wind! 12 TO 15 SEPTEMBER 31