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Global Cargo Insurance Report 2013
Mike Davies
Head of Marine, Asia Pacific
Zurich Insurance Company Ltd
Global Cargo Insurance Report 2013
• World Trade
• Cargo – market & results
• Cargo - accumulation &
catastrophe exposure
3
World Trade
• GDP forecast
• Exports v Premium
• Demand for transport
• Port Activity index
4
Developing economies remain
key engine of world growth
With the (public and private sector) debt overhang likely to constrain
aggregate demand in developed countries, growth in EMEs (especially
emerging Asia) essential to global recovery.
Source: Swiss Re Economic Research & Consulting
-8%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
2009 2010 2011 2012 2013 2014
GDP real growth forecast
United States
Euroland
United Kingdom
Japan
South & East Asia
World
Brazil
China
India
Level of world exports was well below trend reflecting legacy of financial crisis
and global recession
5
Level of exports remain well below trend
* Premium in 1.000.000 us$ source: WTO / IUMI
index 100=1990
0
50
100
150
200
250
300
350
5000
7000
9000
11000
13000
15000
17000
19000
21000
23000
25000
Merchandise Exports vs. Premium Volume *
Cargo Premium Volume Export Volume Trend (1990-2012)
6
China needs Steel
China's infrastructures building programme represents an increasing demand
of Iron Ore, and local supply is not enough to satisfy it.
Source: Bloomberg
0
10
20
30
40
50
60
70
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Chinese iron ore imports 10 million metric tonnes
7
Demand for transport: Seaborne trade
Source: Institute for Shipping Analysis
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Port Activity Index
Source: Institute of Shipping Analysis / HIS Fairplay
Sharp increase of bulk transportation after the crisis
9
Cargo Markets & Results
• Cargo premium by region
• Cargo ultimate loss ratio
• Cargo losses by vessel type, vessel age & cause
Europe42.3%
Asia/Pacific 32.9%
Latin America 10.5%
North America 5.1%
Middle East 6.1% Africa3.1% 2011
Cargo Premium 2012 – by region
Total: 18.5 USD billion Actual increase 2011-12: +7.5%
0%
20%
40%
60%
80%
100%
120%
140%
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
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Cargo – Gross* Ultimate Loss Ratio Underwriting years 1996 to 2011
* Technical break even: gross
loss ratio does not exceed
100% minus the expense ratio
(usually 20%-30% acquisition
cost, capital cost, management
expenses)
2011: No technical profit.
Since 2007: Deterioration of results .
2002 to 2006: Gross loss ratios stayed below 60% - technical profit.
..2012?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Cargo – Gross* Ultimate Loss Ratio Underwriting years 1996 to 2012
2012: Estimated including inpact of Sandy (red).
* Technical break even: gross loss
ratio does not exceed 100% minus
the expense ratio (usually 20%-
30% acquisition cost, capital cost,
management expenses)
0.00%
0.01%
0.02%
0.03%
0.04%
0.05%
0.06%
0.07%
0.08%
0-4 5-9 10-14 15-19 20-24 25+
Age
2001-2007 2008-2012
13
Total Bulker Losses by Age Percentage of World Bulker Fleet
Bulkers >10,000 DWT
Source: Fleet numbers : Clarkson Research Services
Losses: Lloyds List Intelligence
0.00%
0.01%
0.02%
0.03%
0.04%
0.05%
0.06%
0.07%
0-4 5-9 10-14 15-19 20-24 25+
Age
2001-2007 2008-2012
14
Total Tanker Losses by Age
Percentage of World Tanker Fleet
Tankers >500 DWT
Source: Fleet numbers : Clarkson Research Services
Losses: Lloyds List Intelligence
15
Serious and Total Losses 1996 - 2012 By age (vessels > 500 GT)
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
0 to 4 5 to 9 10 to 14 15 to 19 20 to 24 25+
Age
Com (Compromised TotalLoss)
CTL (Constructive TotalLoss)
ATL (Actual TotalLoss)
Serious ex TL
Source: Lloyds List Intelligence
16 Source: Lloyds List Intelligence
Total Losses 1998 – 2012 By Cause, All Vessel Type
(vessels > 500 GT)
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
Other
Machinery
Hull Damage
Collision/contact
Fire/explosion
Grounding
Weather
Frequency ( % of all total losses for the period)
1998 -2003
2003-2007
2008-2012
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Cargo Accumulation & Catastrophe Risk
• Superstorm Sandy - Port and Warehouse Accumulation
• Accumulations on Vessels
BIGGEST EXPOSURE TO CARGO UNDERWRITERS THIS DECADE
(in my opinion!!)
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Cargo Exposure: Superstorm Sandy( 1 / 2 )
• Superstorm Sandy struck on the evening of the 29th October 2012
southwest of Atlantic City, N.J.
• Total insured losses estimated between US$ 20 - 25 billion from
Superstorm Sandy and for marine (re)insurance community a potenial US$
2 – 3 billion
• Superstorm Sandy is estimated to be largest marine industry loss in history
due to the logistical infrastructure in New York, New Jersey and Connecticut
• Loss large compared to "weak" hurricane as Sandy had the largest
diameter of an Atlantic hurricane on record
• Marine underwriters of coffee and cocao were big hitters due to the storage
of the commodities in International Coffee Exchange- approved
warehouses in New York and New Jersey
• A big portion of the loss is also attributable to cars
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Cargo Exposure: Superstorm Sandy ( 2 / 2 )
Source: Business Insider
Source: Telegraph
Source: Bloomberg
20
Source: Wikipedia / Maersk Website
Accumulation on Vessels
Today: Maersk E- Series ( 14.700 TEU ) – potential value US$ 1.47 billion
Future: Maersk Triple E- Series ( 18.000 TEU )
- Potential value US$ 1.80 billion
21
Port Accumulation - Containers
Accumulation on Vessels:
Car Carriers – potential value US$ 120m
8,000 Cars
23
Port Accumulation – Motor Vehicles
Value of new motor vehicles in transit damaged during
Sandy – US$ 550m
Accumulation on Vessels:
LNG Carriers
266.000 m3
US$ 100 million
Accumulation on Vessels:
Bulkers
DWT: 400.000 75.000.000 US$
Accumulation on Vessels
VLCC
DWT: 441.000 385.000.000 US$
27
Thank You
Questions?
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