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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
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
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
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)
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
0. The CEFOR Marine Insurance Market
CEFOR - Gross written premium (USDm) 2007Total sum = 1,748.4 USDm
Cargo72.1 / 4.1%
P&I633.0 / 36.2%
Hull1043.3 / 59.7%
Energy figures are not reported in 2007.
France7.6%
Italy6.4%Japan
9.0%Korea5.4%
Spain4.1%
USA5.9%
Rest of the World24.9%
UK (IUA)5.7%
UK (Lloyd's)13.7%
CEFOR17.3%
Bluewater 7.7%
Coastal Marine Clubs3.5%
Gard28.3%
Gerling7.3%
Gjensidige3.0%
If1.9%
NEMI6.0%
Norwegian Hull Club19.8%
Swedish Club7.1%
Vesta6.0%
Codan9.4%
World CEFOR
0. CEFOR in the global context – Global Marine Hull Premium 2006
Inner ring: 2002-2006Outer ring: 2007
21.8%
5.3%
13.5%
11.6%17.9%
3.8%0.8%3.5%
3.8%
7.0%
10.8%
21.4%
4.3%
13.9%
12.6%
21.7%
3.6%0.4%3.9%
3.7%
6.0%
8.3% Bulk
Car/RoRo
Cargo
Chem./Prod.
Container
LNG/LPG
OBO
Other
Passenger
Suppl./Off.
Tank
0. CEFOR fleet - Number of vessels per type
Total number of vessels 2002-2006: 47,1712007: 11,412
Sum Insured per Vessel (excl. Passenger)
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
2002
2003
2004
2005
2006
2007
Bulk
Cargo
Cont./Car/RoRo
Tank
Supply/Off
Car/RoRo
all
Inner ring: 2002-2006Outer ring: 2007
12.3%
8.5%
16.7%
20.9%
9.6%
23.0%
9.1%
11.5%
9.3%
20.3%
18.8%
9.5%
20.8%
9.8%
American Bureau
Bureau Veritas
Germanischer Lloyd
Lloyd's Register
Nippon Kaiji Kyokai
Det Norske Veritas
others
0. CEFOR fleet – Number of vessels per classification society
Total number of vessels 2002-2006: 47,1712007: 11,412
0. CEFOR fleet – Evolution of average SI and Gross ton per vessel, by underwriting year
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
2000 2001 2002 2003 2004 2005 2006 2007
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
Average SI Average GT
CEFOR General Claim Trends
1. General claim trends – Claim frequency, by underwriting year
Claim frequency underwriting year Claims xs a certain % of SI
0.00%
0.20%
0.40%
0.60%
0.80%
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
Claims > 25% SI Claims > 50% Claims > 75% SI
Claim frequency - Claims xs a certain amount
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
0.00
0.01
0.01
0.02
0.02
0.03
0.03
All claims Claims > 10,000 Claims > 500,000 Claims > 2 MUSD
Average Standard Deductible DevelopmentAll business, 100%, in USD
0
50,000
100,000
150,000
200,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Average Std. Deductible Av.Std. Ded. <= 500,000 USD
1. General trends - Deductibles, by underwriting year
1. General claim trends – Cost per claim
Average claim amount per claim, by date of loss
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Date of loss
US
D
1. General claim trends – Claim per vessel
Claim per vessel, by date of loss
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
110,000
2000 2001 2002 2003 2004 2005 2006 2007
Date of loss
US
D
Claim per vessel as reported per 31.12.2007 Ultimate claim per vessel incl. IBNR
?
1. General claim trends - Partial claim per vessel
Partial claim per vessel, by date of loss
20,000
40,000
60,000
80,000
100,000
2000 2001 2002 2003 2004 2005 2006 2007
Date of loss
US
D
Partial claim per vessel as reported per 31.12.2007
Ultimate claim per vessel incl. IBNR
Maximum individual claim per date of loss year
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
1. Maximum individual claim
1. General claim trends – Claim bandsby underwriting year
USD Claim per vessel
010,000
20,00030,000
40,00050,000
60,00070,000
80,00090,000
100,000
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
>= 30 MUSD
10-30 MUSD
5-10 MUSD
1-5 MUSD
<= 1 MUSD
Marine Hull Claim per vessel per U/W year - accumulated quarterly development
0
20,000
40,000
60,000
80,000
100,000
1 2 3 4 5 6 7 8 9 10 11 12 13
2001
2002
2003
2004
2005
2006
2007
1. Claim per vessel – Quarterly development per underwriting year
?
New underwriting year = new record?
2007
1. Partial claim per SI as per 4th quarter against average SI development
Partial claim per Sum Insured as reported per 4th quarter & Average Sum Insured,
by underwriting year
0
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
2000 2001 2002 2003 2004 2005 2006 2007
0.000%
0.020%
0.040%
0.060%
0.080%
0.100%
0.120%
0.140%
Average Sum Insured Partial claim per Sum Insured
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
CEFOR Special Claim Trends
3.a. General claim trends – Claims by type
Numbers (%)Inner ring: 2002-2006Outer ring: 2006
36%
2%12%19%
11%
4%1%15%
37%
2%13%
20%
10%
3%0%
15% Engine
Fire and explosion
Collision
Contact
Grounding
Heavy weather
Ice
Other
3.a. General claim trends – Claims by type
Costs (%)Inner ring: 2002-2065Outer ring: 2006
28%
11%
13%8%
25%
4%0%11% 28%
4%
10%
15%
23%
5%0%
15% Engine
Fire and explosion
Collision
Contact
Grounding
Heavy weather
Ice
Other
Good luck?
3.b. Nautical related claims – Frequencyby type of claim, by date of loss
Claim frequency
0.00
0.05
0.10
0.1519
96
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Engine Collision, Contact, Grounding, IceFire/Explosion Heavy weatherOther
Average claim cost per type of casualty (excluding fire/explosion)in USD 1,000
0
200
400
600
800
1,000
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
Collision
Contact
Engine
Grounding
3.b. Cost per claim by type of claim – Nautical & Engine, by underwriting year
Cost of groundingclaims rocketing
+123%
Change 2000->2007:
+148%
+ 89%
+ 15%
3.b. Cost per claim by type of claim – Weather-related, by underwriting year
Average claim cost per type of casualty (excluding fire/explosion)in USD 1,000
0
200
400
60019
95
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Ice
Heavy w eather
Change 2000->2007:
+551%
+528%
Maximum individual claim by date of loss - Collision, Contact, Grounding
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,0001
99
5
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
3.b. Nautical-related claims – Max. single claim
3.b. Claim per vessel by type of claim,by underwriting year
USD Claim per vessel
0
20,000
40,000
60,000
80,000
100,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Engine Collision, Contact, Grounding, IceFire/Explosion Heavy weatherOther
Good luck?
Bad luck?
Collision, Contact, Grounding, Ice - Claim frequency
0.00
0.05
0.10
0.15
0.20
2001-2003 0.11 0.16 0.14 0.11 0.15 0.07 0.08 0.09 0.10 0.06 0.06 0.11
2004-2006 0.10 0.18 0.14 0.10 0.14 0.06 0.13 0.05 0.13 0.05 0.06 0.11
1995-2006 0.11 0.17 0.13 0.11 0.15 0.08 0.12 0.07 0.11 0.05 0.07 0.11
BulkCar/RoRo
Cargo
Chem./Prod
Container
LNG/LPG
OBO OtherPassenger
Suppl./Off.
Tank all
3.b. Nautical-related claims – Frequency by vessel type
Grounding - Claim frequency
0.00
0.01
0.02
0.03
0.04
0.05
2001-2003 0.05 0.02 0.04 0.02 0.03 0.01 0.02 0.01 0.01 0.01 0.02 0.03
2004-2006 0.04 0.02 0.03 0.03 0.02 0.01 0.03 0.01 0.03 0.01 0.01 0.03
BulkCar/RoRo
Cargo
Chem./Pro
Container
LNG/LPG
OBO OtherPassenge
Suppl./Off.
Tank allNo overall increase in frequency.
Individual sectors with increase in number of groundings: Chem./Product, OBO, Passenger
Collision, Contact, Grounding, Ice - Claim per vessel
0
20,000
40,000
60,000
80,000
2001-2003 33,93363,622 15,83014,169 25,231 5,009 8,599 4,687 24,021 10,10134,969 26,068
2004-2006 48,59644,531 28,55522,536 52,05642,586 47,31411,89479,490 11,16039,131 39,097
1995-2006 36,04037,325 22,17320,979 36,07418,623 23,14211,76159,633 7,988 33,353 30,291
BulkCar/RoRo
CargoChem./Prod.
Container
LNG/LPG
OBO OtherPassenger
Suppl./Off.
Tank all
3.b. Nautical-related claims
– Cost per vessel
Grounding - Claim per vessel
0
20,000
40,000
60,000
2001-2003 23,31 29,99 8,728 8,365 9,358 233 2,061 962 6,381 1,531 26,00 14,59
2004-2006 28,83 9,805 14,78 7,863 23,42 37,84 6,153 5,782 55,22 6,378 21,11 20,31
BulkCar/RoRo
Cargo
Chem./Pro
Container
LNG/LPG
OBO OtherPassenge
Suppl./Off.
Tank all
3.b. Nautical-related claims – Av. claim cost
Collision, Contact, Grounding, Ice - Average claim amount
0
200,000
400,000
600,000
800,000
2001-2003 312,7 390,0 117,0 130,8 172,6 72,27 106,0 49,53 250,3 156,8 559,1 241,9
2004-2006 488,6 249,9 206,2 221,3 363,5 666,2 376,8 234,4 626,9 246,8 709,1 363,3
1995-2006 321,5 218,2 170,7 187,9 243,6 228,5 194,0 168,2 525,2 145,7 464,5 272,2
BulkCar/RoRo
Cargo
Chem./Prod
Container
LNG/LPG
OBO OtherPassenger
Suppl./Off.
Tank all
Average claim up for all vessel types except Car/RoRo.
Maximum individual engine claim by date of loss, per 31.12.07
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
3.b. Engine claims – Max. Individual claim
Engine - Average claim amount
0
100,000
200,000
300,000
400,000
500,000
2001-2003 187,5 121,7 131,1 127,5 135,9 308,1 125,8 145,9 236,5 91,69 262,0 162,8
2004-2006 232,4 176,2 155,8 182,6 180,1 469,6 236,6 370,4 378,7 179,4 238,0 217,2
BulkCar/RoRo
Cargo
Chem./Pr
Container
LNG/LPG
OBOOthe
rPassenge
Suppl./Off
Tank all
3.b. Engine claims
Average engine claim up for all vessel types except tank.
Engine - Claim per vessel
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2001-2003 9,55416,1313,84 11,4920,2431,536,80316,8729,33 10,4517,8815,70
2004-2006 12,2026,3714,78 15,2322,9440,7120,4937,5766,29 19,9813,4520,18
BulkCar/RoR
Cargo
Chem./Pr
Container
LNG/LPG
OBOOthe
rPassenge
Suppl./O
Tank all
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?
Cost-driving factors
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, 24th September 2007
3.c. Cost driving factors – Exchange rates
60%
80%
100%
120%
140%
160%
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
EUR
GBP
JPY
NOK
- 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 USD weaker
3.c. World Market Price Indices for selected commodities
Annual Average (1993-2006) – Average in 2007 as at end of May (*)
301.6
202.1 213.1
152.2
278.5
0
50
100
150
200
250
300
350
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007(*)
Iron ore, scrap metals Coal
Crude oil Agricultural raw material
Non ferrous metal
Index 2000 = 100
Source: « Global Shipping Market Trends », IUMI Conference 2007
3.c. World Trade Values
Development 1996-2006 (in million USD) – Growth rate in 2006
+ 27.1 %
+ 14.5 %
+ 15.7 %
+ 16.9 %
-
500,000
1,000,000
1,500,000
2,000,000
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (*)
Oil & Dry Bulk
4,000,000
6,000,000
8,000,000
10,000,000
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
3.c. World Seaborne Trade Volume
Development 1996-2006 (in million tonnes) - Growth rate in 2006
estimates
+ 2 %
+ 7 %
+ 6 %
+ 5 %
900
1,400
1,900
2,400
2,900
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 (*)
Major trades
4,000
5,000
6,000
7,000
Total World Trade
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
43% growth in seaborne trade
volume from1996-2006
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%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: « Global Shipping Market Trends », IUMI Conference 2007
3.c. Cost driving factors inflation index
Cost driving factors inflation index, 2000 = 100%
162.5%
144.0%
301.6%
180.1%
75.0%
100.0%
125.0%
150.0%
175.0%
200.0%
225.0%
2000 2001 2002 2003 2004 2005 2006 2007
USD against EURShip operating costs, tankIron ore & scrap metals, world market price and raw priceClaim per vessel, by date of loss
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…?
2007 CEFOR Nordic Marine Insurance Statistics – Part 9As of 31 December 2007
CEFOR marine insurance statistics publications, all at 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
• The 2007 CEFOR NoMIS Reporthttp://www.cefor.no/statistics/documents/2007%20CEFOR%20The%20NoMIS%20report.ppt
• The 2007 CEFOR Report on Hull claim trendshttp://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
• IUMI (International Union of Marine Insurance): Statistics issued by IUMI’s Facts & Figures Committee:http://www.iumi.com/index.cfm?id=7165
