Current Events in Marine & Energy
CAS 2006 Annual Meeting-Session C8
Chris Steinbach, FCAS, MAAA
Chief Actuary
Navigators Insurance Group
Henry Newman, ACAS, MAAA
Head of Pricing
Navigators Insurance Group
AIMU
American Institute of Marine
Underwriters
AIMU
American Institute of Marine Underwriters
• Industry trade association
• US insurers and reinsurers, International
trade
• Marine industry advocate, educator,
information center
– Surveyors (claims handling)
– Maritime matters, media, legislation,
courts
– Congressional testimony
– Safety
– Crime prevention
AIMU
Current Industry Data
• Operating ratios
– By class (Cargo, Hull, Yacht, etc.)
– Calendar year
• Hull, Cargo Income
• Cargo losses, 2001
AIMU
Data Issues
• Calendar year
– Reserve distortions
– Pricing cycle
• Class definitions
• Net vs. gross
AIMU
Facts and Figures Committee
• Actuaries, underwriters, other marine
experts
• Accident year data
– Paid, incurred
– Triangles
– Gross
– Annual statement “equivalent”
AIMU
Needs for Additional Data
• Underwriting predictability via Fair
premiums (loss, profit, risk load)
• Reserving issues
– Establishing claims departments
– Insured loss control (mitigate and reduce
losses)
• Insured’s protection of assets via
effective insurance
• Manage the business better
Katrina Liability Claims
PEMEX’s PSS Chamul
• Rig was at Bender Shipyard for repairs
• During storm, rig broke lose and
crashed into a dock and a bridge
• Government is suing PEMEX and
Bender for damage to dock and bridge
• PEMEX is suing Bender for damage to
rig and their liability to the government
Industrial Canal Levee Failure
• Ingram Barge #4727 in the custody & control
of Lafarge Boat Yards
• Barge in the Industrial Canal next to a levee
for safe berth during storm
• After the storm, the barge was on the wrong
side of the levee
• Did the barge contribute to the failure of the
levee?
Mississippi River Gulf Outlet
(MRGO)
• Army Corp of Engineers built the canal in the
1960s by dredging wetlands
• The assertion is that the canal contributed to
the loss of wetlands, which exacerbated the
storm damage
• It is an environmental claim, which permits a
continuous trigger
• Both the Corp and private dredging
contractors are named
Katrina still has a tail left...
• Most lawsuits still in the discovery phase
• Even the simplest motions have yet to be
ruled upon
• Class actions are proceeding first and optouts will follow
• Pollution claims are only being filed now
PAY ATTENTION
• While many of these suits appear to be
longshots...
• These are the nation’s best plaintiff lawyers
• People need compensation
• and this is Louisiana
How the Market Responded
• Rate increases of 50%+
• Wind sublimits
• Business Interruption coverage now
excluded (must be purchased separately)
Current Events in London
Why does London Market Exist?
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Technical Expertise
Responsiveness
Capacity
Low Price
Central Fund Guarantee
Rate & Form Flexibility
World Wide Licenses
Capital Advantages
Ease of Entry & Exit
London is fun to visit
Lloyds Franchise Committee
• Business plans must be
filed and approved
• Business plans are being
refused by Lloyds
• You must stick to your
business plan or re-file it
• Enhanced reporting
requirements – especially
for rate monitoring
• Enhanced audits by
Lloyds
Internal Capital Assessment (ICA)
• Required by the UK
regulator (FSA)
• Consists of an ERM-style
identification of risks
followed by an actuarial
DFA-style quantification
of the risks
• No guidance provided as
of yet
• Our rating agencies are
promoting something
similar in the US