AJG Marine P&I Commercial Market Review September 2015 (1)

MARINE P&ICOMMERCIAL MARKET REVIEW | SEPTEMBER 2015

FOUNDED BY ARTHUR GALLAGHER IN CHICAGO IN 1927, ARTHUR J. GALLAGHER & CO HAS GROWN TO BE ONE OF THE LARGEST, MOST SUCCESSFUL INSURANCE BROKERAGE AND RISK MANAGEMENT COMPANIES IN THE WORLD. WITH EXTRAORDINARY REACH AND DEPTH ACROSS INTERNATIONAL BORDERS, OUR PARENT GROUP EMPLOYS OVER 17,000 PEOPLE AND ITS GLOBAL NETWORK PROVIDES SERVICE IN MORE THAN 140 COUNTRIES.

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We work seamlessly across countries and international territories. Where we do encounter difficulties and complexities we meet them head on. We dismantle barriers never letting them get in the way.

We work tirelessly to provide solutions that drive value and competitive advantage for the benefit of all our clients and we liberate our people to do what they do best: promoting and protecting our clients interests. We just do not give up; whether its sourcing cover for the thatched cottage in England; cyber risks across European borders; complex coverage for the international supermarket chain; marine cargo in Australia; political risk coverage in developing economies; energy cover in extreme environments; or helping our banking partners with their comprehensive homeowner offer.

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1CONTENTSCOMMERCIAL P&I MARKET REVIEW 2015

Welcome from the Executive Director .... 05

The World of P&I According to AJG....... 06

Executive Summary .............................. 08

Fixed Premium P&I Insurance Explained . 16

P&I Market Facilty Variations ................ 17

Commericial P&I Market Today ............. 18

P&I Commercial Market News .............. 19

Commercial P&I Market Overview ......... 20

MARKET FACTS & FIGURES

Introduction to Facts & Figures ............. 22

British Marine ...................................... 24

Carina .................................................. 26

Eagle Ocean Marine ............................. 28

Hanseatic Underwriters ........................ 30

Hydor AS ............................................. 32

Ingosstrakh Insurance Co. .................... 34

Lodestar Ltd ........................................ 36

Navigators P&I ..................................... 38

Osprey Underwriting Agency Ltd ........... 40

Raetsmarine BV ................................... 42

Rosgosstrakh Ltd ................................. 44

NON-IG MUTUAL MARKET FACTS & FIGURES

Korean Shipowners Mutual P&I............. 46

NON-IG CHARTERERS FACTS & FIGURES

Charterama BV .................................... 48

Charterers P&I Club ............................. 50

Norwegian Hull Club ............................ 52

INDUSTRY STATISTICS

OWNERS MARKET

Introduction ......................................... 54

P&I Owned Premium

Income Development ............................ 56

P&I Owned GT Development ................. 58

P&I Owned Average P&I Rate

Per GT Development ............................. 60

CHARTERERS MARKET

P&I Charterers & Traders

Premium Income Development ............. 62

P&I Charterers & Traders Number

of Vessels Insured Development ........... 64

P&I Charterers & Traders Average

Premium Per Vessel Development ......... 66

NON-IG MUTUAL MARKET

Non-IG Mutual P&I

Premium Income Development ............. 67

Non-IG Mutual P&I GT Development ..... 68

Non-IG Mutual P&I Average

P&I Rate Per GT Development ............. 69

Rating Agency Analysis ......................... 70

MAJOR LIMITING CONVENTIONS

AND STATUTES AFFECTING P&I RISKS

Developments in the past 12 months .... 74

CONTACTS

Marine Division Contacts ...................... 88

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04

05

02

COMMERCIAL P&I MARKET REVIEW 2015

01

COMMERCIAL P&I MARKET REVIEW SEPTEMBER 2015

7

COMMERCIAL P&I MARKET REVIEW 2015

Arthur J. Gallagher is one of the leading global marine insurance brokers in the P&I industry sector. One of our key principles is transferring all pertinent market statistics, information and views on the various P&I insurers to our clients and business partners, which is essential to remain successful this competitive market environment.

The Arthur J. Gallagher Commercial P&I Market Review is the first in-depth review of its kind and compliments our mutual IG Club Annual Pre-Renewal P&I Review offering, which will be published later this autumn.

We closely monitor and analyse the P&I market, as it continues to evolve with its ever changing products, service, security, strength and flexibility. Our view at Arthur J. Gallagher is that the Non-IG market is an important part of the maritime insurance industry, offering products and services to the small ship sector, where in previous years IG-P&I Clubs have in the past lacked enthusiasm to participate in this risk profile.

As part of the markets evolution, we note however that some of the IG-Club managers have developed new fixed P&I facilities and moved into the commercial market to diversify their product range, in order to increase revenue streams to enhance their free-reserves further.

With the shipping market still continuing to struggle through this prolonged depressed trading environment, the commercial P&I markets may offer an opportunity for a segment of the worlds small ship operators to reduce their operational expenditure, which this review will offer more detail on. The AJG Commercial P&I Market Review will focus on the leading fixed premium, non-IG mutual and charterers liability facilities, which are generally accessed via London brokers.

Arthur J. Gallagher P&I remains at the forefront as industry leaders, this is something we are extremely proud of and demonstrates our unrivalled value added service and commitment to our clients and partners alike.

Yours sincerely,

Malcolm Godfrey Executive Director Marine Division | Specialty Risks

WELCOME TO OUR ANNUAL COMMERCIAL P&I MARKET REVIEW

MALCOLM GODFREY EXECUTIVE DIRECTOR


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THE WORLD OF P&I ACCORDING TO AJG

USA, NEW YORK

Eagle Ocean Marine

UK, LONDON

British Marine (QBE Group) Carina Lodestar Ltd Navigators P&I Osprey Underwriting Agency Charterers P&I Club

USA, NEW YORK

American Club

UK, LONDON

Britannia P&I Club London P&I Club Shipowners P&I Club Standard Club Steamship Mutual P&I The UK Club West of England

UK, NEWCASTLE

North of England

GREECE, ATHENS

Aigaion Insurance Co. SA

NORWAY, ARENDAL

Gard AS


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COMMERCIAL P&I MARKET NON-IG MUTUAL P&I CLUB

RUSSIA, MOSCOW

Ingosstrakh Rosgosstrakh Ltd

GERMANY, HAMBURG

Hanseatic Underwriters

NETHERLANDS, ROTTERDAM

RaetsMarine BV Charterama BV

NORWAY, BERGEN

Norwegian Hull Club

NORWAY, OSLO

Hydor AS

NORWAY, OSLO

Skuld P&I

JAPAN, TOKYO

Japan P&I Club

KOREA, SEOUL

Korea P&I Club

CHINA, BEIJING

China P&I Club

SWEDEN, GOTHENBURG

Swedish Club

INTERNATIONAL GROUP P&I CLUB


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OWNED TONNAGE +4.56% (2.1M GT)

TOTAL NON-IG SPENDING AT US$ 400M

OWNED P&I AVERAGERATE REDUCES BY

2.87%

OWNED P&I MARKET PREMIUM

+ 1.56% (US$ 4.6M)

AVERAGE RATE PER GT

US$ 6.516

COMMERCIAL P&I MARKET INDICATORS FINANCIAL HIGHLIGHTS 2014 YEAR

EXECUTIVE SUMMARY

Name your price! Underwriters operating within the commercial P&I market may as well forget rating models and underwriting guidelines, whilst the survival of the fittest trading environment continues. When will the boxing gloves really come off? Underwriters say they are in the middle of a rating war in an ever softening market, yet there are no victims or forced market exits in the commercial P&I arena. Every year we at AJG observe the new entrants win new business at cheaper prices and the established markets continue to mitigate their premium losses. Isnt it time for the established heavyweights to react and kill off the competition? You might say that underwriting principals must be upheld and that risks should not be underwritten at unsustainable levels, some underwriters will just say that we cannot justify and will not compete at those premium levels or may also criticise a particular market stating that they will not survive the next year as they are desperate for income yet a client will move to a facility who will buy in the business and market continues as if nothing has really changed.

The commercial P&I market continues to evolve as new entrants re-shape the market environment, feeding from the established market players who continue to see premiums diminish over a five year period.

What does this all mean? Well Shipping companies, charterers and operators continue to have more choice, buying power and can opt to save money in the fixed premium market some ship owners will ask why should a 20 year old panamax bulker pay in excess of US$ 150k in premium to an IG Mutual Club when a fixed market offering a U$ 1 billion limit can do it for a fraction of the cost, with A-rated security? There are pros and cons in this strategic scenario, the choice here needs to be carefully reviewed.

Collectively the non-IG commercial markets account for over $400 million in premium income (at 2014), which approximately makes up 10% of the total IG and non-IG market spend, if you add the IG Club fixed premium portfolios, we at AJG anticipate the total premium generated would be in the region of $700 million, which is certainly something not to be underestimated in terms of attention that should be given to this market sector.

THE CHASE FOR PREMIUM CONTINUES, PROMOTING

FURTHER MARKET VOLATILITY AND RATE REDUCTIONS

ALEX VULLO ASSOCIATE DIRECTOR


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OWNED TONNAGE +4.56% (2.1M GT)

TOTAL NON-IG SPENDING AT US$ 400M

OWNED P&I AVERAGERATE REDUCES BY

2.87%

OWNED P&I MARKET PREMIUM

+ 1.56% (US$ 4.6M)

AVERAGE RATE PER GT

US$ 6.516

OWNED RATE PER TON HITS A NEW LOW WITH OWNED GT RISING STEADILYContinued market competition and oversupply has again seen the commercial P&I market average owned rate per GT reduced by -2.87% in 2014. When analysing the compound effect since 2010 the average rate has fallen by -14.92% (or US$1.143 PGT) during this period. The owned market rate per ton has reduced further from the -9.84% average reported in our last 2013 market review. This new market low sees the average rate per GT at US$6.51, which is down from US$ 6.708 reported in 2013. The overall market owned premium increased by another 1.56%, up to US$ 300 million, which is 8.99% greater than the 2010 policy year overall premium position. The Owned GT development has also seen a progressive increase of 4.56% in 2014 (similar to 2013 at +4.9%) to 46.15 million GT, which is a 21.9% increase since 2010.

On the whole the commercial fixed premium P&I market has strengthened steadily in terms of premium and also tonnage underwritten over a five year period, a reflection that these markets continue to mature. However, in relative terms this growth over the period accounts for a modest $27.36M in gross premiums written. By way of comparison, this is equivalent to half of the annual fixed P&I premium from owned tonnage placed with RaetsMarine (at 2014) representing 10.1M GT, which is equivalent to the fixed P&I tonnage insured by the British Marine (at 2014). Whilst we can observe that the five year growth has been modest, it would suggest that the 13 International Group Clubs should not be overly concerned. One exception may be Shipowners P&I Club, with their core business focusing on smaller and specialised tonnage, who reported a 96% retention rate at the 2015 renewal. The theme therefore would appear to demonstrate that the fixed premium commercial insurers are more often than not competing against each other on existing business written. Likewise as a changing fixed premium market now looking at larger tonnage emerges this has also seen the majority of IG Clubs establishing their own defensive mechanisms through the creation of fixed premium products for specific vessel types. We anticipate greater use of such schemes, despite the IGs drive to promote mutuality and the pooling of risks, should the threat of losing tonnage to the fixed premium providers becomes more prevalent.

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

2008 2009 2010 2011 2012 2013 2014

$6,200

$6,400

$6,600

$6,800

$7,000

$7,200

$7,400

$7,600

$7,800

USD

Per

Ton

Tonn

age

(000

s)25,000

30,000

35,000

40,000

50,000

45,000

Average Rate PGT

2009 2010 2011 2012 2013

Total Owned GT

2008 2014$6,000

AVERAGE RATE PER GT VS OWNED GT

PREMIUM DEVELOPMENT USD (000s)

On the whole the commercial market has strengthened steadily in terms of premium and tonnage underwritten over a five year period


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COMMERCIAL MARKET CYCLICAL DEVELOPMENTThe commercial market prolonged soft market cycle continues in 2014, where AJG has observed the average reduction fall below the expiring premium level. In 2014 the average reduction was in the region of -2.87%.

The chart below indicates the annual average rate change per ton development, which provides an overview of the market cycle, demonstrating that business continues to be either won at lower premium levels or business that is being renewed at a cheaper premium to the prior policy year.

MARKET CYCLE

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2010 2011 2012 2013 2014

Percentage

2009

Continued market competition and oversupply has again seen the commercial P&I market average owned rate per GT reduced by -2.87% in 2014

TWELVE MONTH MARKET DEVELOPMENT BY OWNED P&I PREMIUM INCOME (USD 000)

# MARKET 2013 P&I owned income USD 000s

2014 Change # MARKET 2014 P&I owned income USD 000s

Result +/ (USD 000d

1 British Marine $100,000 1 British Marine $97,500 -$2,500

2 Raetsmarine $52,000 2 Raetsmarine $52,500 +$500

3 Osprey $30,000 3 Lodestar $30,000 +$5,000

4 Lodestar $25,000 4 Osprey $27,500 -$2,500

5 Ingosstrakh $21,800 5 Navigators $20,000 -$1,430

6 Navigators $21,430 6 Hanseatic $19,500 +$1,200

7 Hanseatic $18,300 7 Ingosstrakh $16,500 -$5,300

8 Hydor AS $9,000 8 Hydor AS $14,000 +$5,000

9 Carina $7,250 9 Carina $10,000 +$2,750

10 Eagle Ocean $6,500 10 Eagle Ocean $7,000 +$500

11 Rosgosstrakh $4,800 11 Rosgosstrakh $6,200 +$1,400


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$0.000

$2.000

$4.000

$6.000

$8.000

$10.000

$12.000

Navigators British Marine Lodestar Hydor AS Eagle Ocean Marine Hanseatic Ingosstrakh RaetsMarine Carina Rosgosstrakh Ltd

2014Average

2013 2014

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120.000

British Marine RaetsMarine Lodestar Osprey Underwriting

Agency

Navigators HanseaticUnderwriters

IngosstrakhInsurance Co

Hydor AS Eagle OceanMarine

Carina RosgosstrakhLtd

2013 2014

OWNED RATE PER GT DEVELOPMENTThe commercial market average owned P&I rate for 2014 stands at US$ 6.516 per GT. Navigators P&I has the highest rate per GT at US$ 10.53, however, this figure has fallen from US$ 11.51 (-8.54%) since 2008. The Navigators fixed premium average rate has been on the increase since 2011, where AJG has observed

that premiums and GT levels have reduced annually causing the average rate to maintain at a higher level. Ingosstrakh, RaetsMarine, Carina and Rosgosstrakh have the lowest average rate per GT values, which range between US$ 3.929 down to USD 3.033 and are therefore perceived to underwrite at more competitive premium levels.

OWNED MARKET DEVELOPMENT INDICATOR BY PREMIUM INCOMEThe 2014 policy year saw Lodestar take the third place spot, with a premium income of US$ 30 million. Osprey (4th) has continued to reduce their US market share in the fish boat sector taking their premium income down by US$ 2.5 million during the year. Ingosstrakh has moved

down from fifth place to seventh with Navigators (5th) and Hanseatic (6th) moving up, albeit both facilities have seen premiums reduce. British Marine still remains the largest fixed premium insurer with premiums in the region of US$ 97 million. The top four fixed premium providers (by income) make up 70% of the marketplace, with British Marine making up 32.4% alone.

RATE PER GT DEVELOPMENT 2014 VS 2013

PREMIUM INCOME DEVELOPMENT 2014 VS 2013

The top four fixed premium providers (by income) make up 70% of the marketplace


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BUSINESS ENVIRONMENTThe market is flooded with new business enquiries in the fixed premium sector; however the hit ratio for the majority of insurance providers is between 10% and 20%. The individual markets retention rate is, however, more important for insurers to have a reasonable level of stability in their portfolios. The chase for premium income continues to promote market volatility driving rates down further and therefore this portfolio volatility will prove to be a fundamental challenge for all insurers in the coming years.

CONSOLIDATION Market consolidation would help to drive the challenge, posing a threat to the IG P&I Clubs whilst, however, it would seem as if the majority of business transfer still remains within the commercial market itself. With fixed market underwriters grappling for market share, the focus for growth will predominately stay within the sector taking the immediate focus away from competing with the IG market. Once a commercial market reaches the established category we have observed that their premium income generally tends to fall each year, feeding the next group of new entrants diluting premiums further. Two examples of this are British Marine the largest fixed premium insurer underwrote US$ 133M in 2010 and in 2014 this dropped down to US$ 97M (-36.92%) and Osprey also have seen a 47.27% drop in premium income since 2010. The new entrant example however is Hydor AS starting with US$ 2 million in 2011 and in 2014 reporting premium an income of US$ 14 million. In more recent news, Mitsui Sumitomo has acquired Amlin for 3.5bn, market sources suggest that Amlin will remain as the go-to London syndicate at Lloyds. We at AJG do not expect to see any major changes at RaetsMairne.

BILLION DOLLAR LEAGUEIn our last commercial market review, we at AJG talked about the need for diversification becoming important for future success. Whilst there havent been any fundamental changes in respect of new products on offer, a number of fixed premium providers have joined the USD 1 billion league - having the ability to offer larger limits of liability in an attempt to challenge International

Group (IG) P&I Club business. Three market facilities Lodestar Ltd, Navigators P&I and RaetsMarine have joined forces to collectively purchase the additional US$ 500 million layer of reinsurance in order to satisfy the minimum and deposit premiums requested by the Lloyds market. The focus here, as we see it, is to offer cheaper fixed premium solutions using the USD 1 billion limit for vessels up to 40,000GT, however, the release call hindrance may still slow down business transfer, despite a number of Clubs having relatively low release call margins. It is our understanding from market sources that plans are afoot for some fixed premium facilities to offer a release call bank guarantee facility, as part of a package of leaving the IG Club system, which would certainly be attractive proposition for a number of shipowners who many not have access to an A-Rated Bank. Earlier in the year AJG called for the IG Club market to accept each others security guarantees as a provision for release calls, this is something we understand is now being discussed by the IG committee. The effective date of the limit change was the 20th February 2015; therefore the three fixed premium facilities were unable to compete during the IG Club 20th February 2015 renewal. AJG does envisage that a number of Mutual members may look elsewhere this year if Clubs continue to apply a further general increase in 2016. We at AJG however envisage the 20th February 2016 renewal to being relatively soft with lower general increases (if any) being applied, therefore it will remain to be seen whether the fixed premium insurers will be able to capitalise at the end of the IG Club hard market cycle in 2016.

THE BILLION DOLLAR LEAGUEThe following facilities are able to offer limits of liability up to USD 1Billion:

British Marine Hydor AS* Ingosstrakh Korean P&I Club Lodestar Ltd* Navigators P&I* RaetsMarine BV*

*With effect from 20/02/2015


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$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

2008 2009 2010 2011 2012 2013 2014

$10,000

$10,200

$10,400

$10,600

$10,800

$11,000

$11,200

$11,400

$11,600

$11,800

$12,000

USD

Per

Ton

Tonn

age

(000

s)

30,000

34,000

32,000

40,000

38,000

36,000

42,000

48,000

46,000

44,000

2009

Average Premium per vessel

2010 2011 2012 2013 2014

Number of vessels on risk

AVERAGE PREMIUM PER VSL VS NO. VSL ON RISK CHARTERER & TRADERS The average premium per vessel fell by a substantial -14.98% in 2014, as the average premium per vessel hit a six year low to US$ 10,282 (2013PY US$ 11,823), which equates to a 30 day minimum of USD 845.09 per vessel on risk.

This significant average rate fall is mainly down to the sudden reduction of the Norwegian Hull Club average premium reducing by 21.39% in one year (2013: US$ 7,353 to 2014: US$ 5,780).

The total charters specialist premium income was reported at US$ 75.1 million in 2014, which is -0.99% down from the previous policy year, however, is 9.87% up from 2010. The other specialist charterers insurers saw a very small increase in average rate per vessel in the region of 0% and 1.96%. In the same year the number of vessels on risk increased by 1.25% (45,557 vessels). Looking back over the past five years to 2010, the number of vessels on risk was reported in the region of 39,501, therefore the growth over this period was 15.33%.

The Charterers P&I Club saw a modest growth in premium income by 0.35%, with RaetsMarine reporting increases in the region of 1.96%, whereas Charterama BV saw the largest increase in premium growth reporting an increase of 5%. The Norwegian Hull Club however has reported a deficit of -18.18%.

PREMIUM DEVELOPMENT USD (000s)

The average premium per vessel fell by a substantial -14.98% in 2014 (an average 30 day minimum period is in the region of US$ 845 per vessel)


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EXPECTATIONS FOR 2015We have previously written that the market is trading in a survival of the fittest environment. Therefore, if the market requires further income revenues the key growth will come from making serious inroads into the IG Club market. There appears, however, to be no fundamental change in the prevailing market conditions. Oversupply, mixed with increased competition and cheap reinsurance capacity will continue to allow rates to fall. Therefore there is an expectation at AJG for the market cycle to continue on this current trajectory with the average (owned) rate likely to reduce further in the region of 2% to 3% in 2015.

It will however remain to be seen what impact the billion dollar league will have on the 2016/17 IG P&I renewal to determine whether the collective strategy to buy bigger limits of reinsurance capacity will actually pay off. We do however expect to see some movement between the IG sectors to the commercial market; however we suspect that Owners considering a change will be operators with tonnage less than 10,000 GT.

MORE TRANSPARENCYWe at AJG believe now is the time for all commercial P&I markets to provide full and transparent reporting data. All of the International Group P&I Clubs provide a transparent overview in their annual report an account and the commercial P&I market still appears to be decades behind in providing accurate up-to-date information on a calendar year basis. The manner in which IG Club currently account for their fixed premium business is not always clear and this is something that we would also like to understand better. This will enable AJG to provide an even more comprehensive overview of both IG and commercial markets. We at AJG believe this to be significant as we anticipate the total fixed call income would account for almost 15%-17.5% of the entire P&I premium spend across all markets.

In particular AJG and our clients would like to see more information on claims trends, reinsurance costs as well as profitability in the non-IG market. We strongly feel that the more we and our clients know about a market the more confidence the buyer will have, along with giving the market as a whole further credibility.

NOTE: The Commercial P&I Market continues to play an important role in the marine insurance industry and as this market expands, so does awareness, credibility and desirability. All fixed facilities ultimately offer the same product and compete for the same business; however clients will need to be carefully guided on a suitable market candidate in the selection process. There are many factors and disparities offered by each carrier, such as service, reputation, flexibility at renewal, ability to put up a letter of security and more importantly a track record for reimbursing their clients on claims. With rate reductions and more capacity on the horizon clients will need to choose wisely to take advantage for this prevailing soft market. We at Arthur J Gallagher are certainly here to help!

There is an expectation at AJG for the market cycle

to continue on this current trajectory with the average

(owned) rate likely to reduce further in the region of 2%

to 3% in 2015.


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WHAT IS FIXED PREMIUM INSURANCE?

Fixed premium P&I insurance indemnifies ship owners, operators and charterers for third party liabilities arising from a fortuitous event or a marine peril.

Third party risks include a carriers liability to a cargo owner for damage to cargo, a ships liability after a collision, environmental pollution, the ships

liability to its crew, fines and war risks etc. The term fixed premium means exactly that, as the terms and conditions offered by a commercial insurance

company, do not expose clients to potential excess supplementary calls, unlike IG Group Clubs.

The premiums involved in this market sector are often more competitive, compared to an IG Group Club option, as insurance packages are specifically

tailored to meet the demands of the risk entailed, on a reduced limit of liability basis.

DO IG P&I CLUBS PROVIDE FIXED PREMIUM INSURANCE?

Fixed premium insurance contracts are typically provided by insurance companies or underwriting agents outside of the International Group of P&I Clubs,

however some of the IG P&I Clubs do provide Owners P&I fixed premium terms for some longstanding fleets, US flagged fleets and Government fleets,

which have been approved by the International Group.

A number of P&I Clubs, such as American, Gard, Skuld, SOP and Steamship Mutual also have fixed P&I premium facilities in place for smaller inland

craft and U.S. yachts. AJG will focus on these facilities in our AJG International Group Club P&I Review 2013 which will be published towards the end

of this year. All of the IG Clubs provide alternative fixed insurance products, such as Charterers Liability Insurance and other marine related products,

which do not fall under the conventional IG Group P&I product or IG group reinsurance programme.

DIFFERENCES BETWEEN COMMERCIAL P&I MARKETS AND IG

GROUP CLUB P&I INSURANCE?

GENERAL INCREASES - The fixed premium market does not adopt

the annual general increase philosophy, which is a tradition practiced

amongst most of the IG P&I Clubs. Renewals are instead underwritten

on the assureds individual merits and loss record, although there may

be increases sought on the basis of exposure, operating costs or the

overall performance of the insurers portfolio.

ANNUAL MANDATORY REQUIREMENTS - Over the last few years we

have seen many P&I Clubs insert annual mandatory uplifts/ requirements,

which are often non-negotiable, such as deductible increases etc.

This is a practice which the commercial market does not follow.

PROSPECTS FOR SUPPLEMTARY OR EXCESS CALLS - IG Group

Clubs have the power to make excess supplementary calls if there

is a need to raise funds, which are non-negotiable. The non-mutual

commercial insurance companies do not have this capability.

RELEASE CALLS The Commercial Market gives clients freedom

to change insurer without having to release themselves from future

liabilities to supplementary calls or excess supplementary calls, which

is inherent within the IG Club rules.

COMPETITION - The commercial insurance companies are able to

offer independent terms as well as competing with each other to win

business. All of the non-IG facilities are free from the constraints of

the International Group Agreement, something which the IG Clubs

voluntarily abide by.

SECURITY GUARANTEES IG P&I Clubs have an integral advantage

over the commercial insurance market, with the ability to put up an

immediate letter of guarantee to secure the release of an arrested vessel,

without additional cost. However, fixed premium insurers typically need to

contact their reinsurers to obtain security guarantees, which can take time

and may come with additional costs, which would ordinarily be passed

onto the assured. It is important to note that the ability of each individual

insurance company differs, when it comes to issuing letters of security.

THE OMNIBUS RULE - The fixed premium market does not benefit

from the IG Club Omnibus Rule, which allows the individual IG Club

boards to decide whether they can indemnify a Member in difficulty.

UNDERWRITING FOR PROFIT - IG Group Clubs are focused on

not for profit service, whereas a commercial insurance company

can be more profit focused, which is an important factor to consider,

when handling claims to ensure that the claimant is indemnified at an

appropriate level. This is where a strong broker like AJG will add value!

SERVICE PHILOSOPHY - In an IG Group Club, the managers are

the servants of the Club, the overall control of the Clubs are in the

hands of its Members and its ship owner boards, who decide on policy

changes, scope of cover, claims payments and premiums calls.

LIMITS OF LIABILITY - Without access to the International Group

Pool, fixed premium coverage will be limited to a specific limit of

liability, however clients may still be exposed to catastrophes, which

could potentially exceed smaller limits. Choosing the appropriate level

of cover is something that AJG can help you with.

BLUE CARDS - Some fixed premium insurance companies issue

blue cards which are not approved by a number of flag states or port

authorities. It is vital to ensure that Bunker Blue Cards and/or

CLC Blue Cards are accepted by the shipping authorities prior to trading.

CERTIFICATES OF FINANCIAL RESPONSIBILITY (COFR) A

requirement under the US OPA 90 Act (United States Oil Pollution

Act), where any vessel over 300 GT requires a valid COFR and COFR

guarantee cover in place. Guarantee coverage is provided by several

COFR guarantee companies, which require letters of undertaking by an

International Group P&I Club, most of the fixed premium facilities are

not approved by these guarantee companies. Therefore it is important

to check this prior to trading to U.S. waters.

DIVIDENDS - Some of the P&I Clubs pass back dividends, in the form

of premium returns or not calling budgeted supplementary calls in full to

the Membership if the Club has experienced a good underwriting year.

FIXED PREMIUM P&I INSURANCE EXPLAINED


19

FIXED PREMIUM P&I PROVIDERSThere are three facility types that offer fixed premium P&I insurance, as follows:

THE INTERNATIONAL GROUP OF P&I CLUBSAll of the International Group of P&I Clubs offer alternative fixed premium solutions for their clients. These may include non-pooled insurance products such as charterers liabilities, offshore P&I, contractual liabilities, specialist operations etc., however, some of the IG P&I Club managers can provide fixed premium P&I covers aimed at smaller tonnages on a limited liability basis.

INSURANCE COMPANIESInsurance companies are business entities that generally look at multiple lines of insurance, be it marine or non-marine related risks. Insurance companies that provide marine insurances typically can provide hull and machinery, cargo, ports and terminals, kidnap

and ransom covers etc. some of these companies also provide fixed cost P&I insurance. In the past some of the demutualised P&I facilities and managing general agents have been purchased by independent insurance companies.

MANAGING GENERAL AGENTS (MGA)An MGA is an individual or business entity appointed by an insurance company to conduct and arrange insurance contracts on their behalf. An MGA generally acts as a fronting company for the insurer, as well as providing the insured with evidence of cover within the defined underwriting authority. MGAs also service policies and most importantly handle claims. Traditionally MGAs were formed where insurance companies wanted to expand their markets, but did not have their own resources or technical knowledge to open and staff offices, therefore utilising the services of an MGA.

P&I MARKET FACILTY VARIATIONS

The following table identifies the current facilities that are able to provide fixed premium P&I insurance:

International Group P&I Club Insurance Company Managing General Agent

Gard OffshoreBritish Marine (a brand of QBE Europe)

Carina (Lloyds of London)

Japan Club Naiko (Coastal) Class Japan Club Gaiko (Ocean Going) Class

Navigators P&I (Navigators)

Charterama BV (Royal Sun Alliance)

North of England and Sunderland Marine

Ingosstrakh Insurance Co.Charterers P&I Club (Munich Re)

Shipowners P&I ClubRaetsmarine BV (Amlin Europe)

Eagle Ocean Marine (American Club)

Skuld P&I Club Rosgosstrakh LtdHanseatic P&I (Lloyds of London)

Standard P&I ClubHydor AS (Brit Syndicate)

Steamship Yacht FacilityLodestar Marine Ltd (Royal Sun Alliance)

Swedish Club OffshoreNorwegian Hull Club (Lloyds of London)

West of England P&I ClubOsprey Underwriting Agency (Lloyds of London)


20

MORE CAPACITY AND MORE COMPETITION THAN EVER BEFOREThe commercial P&I market has more than doubled in size since 2009, with seventeen non-IG P&I fixed premium and charterers liability specialist markets competing for business. With the over-supply of choice, we at AJG have observed P&I fixed rates reducing year on year, providing owners, operators and traders with an opportunity to reduce operating expenditure annually. In the last three years the market has seen more of the IG-P&I Clubs awaken in their attempts to diversify into this market sector, to increase revenues and free-reserves. In response to this change in appetite, the well-established commercial market facilities claim not to be intimidated by this change in stance, however they generally see it as an opportunity for the shipping community to become more aware of alternative P&I products and markets available.

The commercial market is still aimed at the smaller vessel operators, short-trade vessels, principally operating in coastal or inland waters typically within a tonnage range below 10,000 GT. Market facilities are available for vessels up to 40,000 gross tons (higher GT caps and limits are also available depending on the facility). For charterers liabilities, there are no vessel type or size restrictions among the specialist charterers liability facilities. Limits up to USD 1 Billion are available, however typically the larger limit of choice is USD 500

million, where the majority of assureds are usually insured below USD 50 Million. All fixed premium facilities target ship owners, operators, charterers and traders emanating from all geographical areas (subject to EU/US Sanctions), however certain facilities tend to shy away from passenger, cruise and U.S. flagged, trans-Atlantic and trans-Pacific business. Coverage for over-age and non-IACS classed tonnage is also available from the majority of fixed premium facilities.

WHY CHOOSE FIXED PREMIUM?We at Arthur J. Gallagher believe that some of the key advantages of insuring with a fixed premium insurer are that they can offer certainty of cost and lower, more accessible limits of liability, with no liabilities for unbudgeted supplementary calls or annual general increases. Not all of the alternative non-IG facilities offer fixed premium covers, some are mutual. In addition to this there are also exclusive charterers liability specialist insurers, which cater for charterers and traders. The fixed premium P&I market has continued to evolve considerably over the last five years, with more new entrants than exits from this industry sector. This is perhaps to be expected given the IG Group systems workings and the competitive nature of the commercial market.

The following table provides a snapshot for the last five years market development:

COMMERICIAL P&I MARKET TODAY

ESTABLISHED MARKET (10yrs +)

INTERMEDIATE (5-10yrs)

NEW ENTRANT (


21

COMMERCIAL P&I MARKET NEWS REVIEW OF THE LAST 12 MONTHS

2014

2015

OCTOBER Navigators P&I announce the recruitment of Jason Riley from the UK P&I Club

MSA of P.R. China approves Blue Cards issued by Hanseatic P&I. Chinese flagged vessels may now be underwritten by Hanseatic P&I accordingly.

NOVEMBER

DECEMBER Royal Sun Alliance provides the first USD 500M of cover for Lodestar Underwriting Agency, where previously only offered the first USD 100M.

JANUARY Lodestar announce ability to offer coverage up to Panamax size vessels (40,000GT/75,000 DWT)

Mr Bay Moon appointed as Chief Operating Officers of the Korean P&I Club

FEBRUARY Navigators P&I announce their ability to offer USD 1 Billion limit of liability

Lodestar Ltd announce their ability to offer USD 1 Billion limit of liability

RaetsMarine BV announce their ability to offer USD 1 Billion limit of liability

Jason Riley joins as the International Head of Navigators P&I

MARCH Lodestar Post Renewal Report: Pleasingly the hard work has once again paid off with premium retention exceeding 97%. Weve also welcomed 36 new Assureds and 213 new vessels, pushing us over the 2,000 insured vessels mark for the first time.

APRIL Hanseatic Underwriters changed to a 100% Lloyds of London consortium.

MAY

JUNE The Norwegian Hull Club is upgraded by the Standard & Poors (S&P) to an A rating.

JULY Hanseatic Underwriters and its corporate body ZAM, the German fixed premium facility announce that Mr Tobias Braun will assume the role as Managing Director and joins the Board of Directors with effect from 1st July 2015.

AUGUST -

SEPTEMBER Mitsui Sumitomo acquires Amlin for 3.5bn, market sources suggest that Amlin will remain as the go-to London syndicate at Lloyds. We at AJG do not expect to see any major changes at RaetsMairne.


22

COMMERCIAL P&I MARKET OVERVIEW

FACILITY CARRIER ANNUAL PREMIUM INCOME 2014 (USD)

TONNAGE/VESSELS INSURED

AVERAGE RATE PER GT/ PER VESSEL

MAXIMUM LIMIT

MAX SIZE VESSEL COVER AMENDMENTS IN 2014

LOCATION

BRITISH MARINE QBE Insurance (Europe) Ltd

S&P: A+

US$ 97,500,000 10,600,000 GT US$ 9.20 PGT 7,300 VSL

US$ 1 Billion No Cap. However focus on small & medium GT

LONDON, UK

RAETSMARINE BV Amlin Europe N.V.

S&P: A+

US$ 52,500,000 (P&I) US$ 26,000,000 (CL)

15,500,000 GT US$ 3.39 PGT US$ 1 Billion


23

FACILITY CARRIER ANNUAL PREMIUM INCOME 2014 (USD)

TONNAGE/VESSELS INSURED

AVERAGE RATE PER GT/ PER VESSEL

MAXIMUM LIMIT

MAX SIZE VESSEL COVER AMENDMENTS IN 2014

LOCATION

BRITISH MARINE QBE Insurance (Europe) Ltd

S&P: A+

US$ 97,500,000 10,600,000 GT US$ 9.20 PGT 7,300 VSL

US$ 1 Billion No Cap. However focus on small & medium GT

LONDON, UK

RAETSMARINE BV Amlin Europe N.V.

S&P: A+

US$ 52,500,000 (P&I) US$ 26,000,000 (CL)

15,500,000 GT US$ 3.39 PGT US$ 1 Billion

The information contained in the Arthur J. Gallagher P&I facts and figures pages has been compiled by the various insurance providers contained in this report. As part of our assessment in choosing an appropriate fixed premium insurer(s) for our clients, amongst other key factors such as claims service, pricing, flexibility etc. AJG also considers the following parameters as essential indicators in the selection process. Reinsurance Carrier: The underlying security or insurance company providing the market capacity. Standard and Poors (S&P) Rating: Arthur J. Gallagher operates a market security policy which sets a minimum standard for insurance markets which can be included on its acceptable market security list. A number of criteria are utilised to evaluate the financial condition of these markets and one of the criteria used is the ratings allocated by either Standard & Poors (S&P) or A M Best. The AJG (UK) security policy sets a minimum rating level of A- from these agencies as an indicator of acceptable security. See Page 70 for more information on this policy. The specified rating attached to each facility is a credit rating based on S&Ps independent opinion regarding the ability of an issuer, corporation or association to meet its financial obligations. Such ratings are provided by organisations such as S&P and AM Best, also known as credit rating agencies. Each organisation applies its own merits in measuring credit and use a rating scale to publish their individual findings. Ratings are expressed as a letter grade for example AAA being the highest level.

Maximum Limit of Liability Available: It is very common to see a limit of liability in insurance contracts, which stipulate limitations on the maximum amount payable under the contract. Further, the cost of defence, supplementary payments, and punitive damages may or may not be paid in addition to the limits. Separate limits often apply to claims for pollution and/or passenger or seamen claims. An annual aggregate limit may also be offered, which puts a maximum on the amount an insurer must pay in any one policy period.

Vessel Type/ Size (GT) Cap: This is the maximum size (gross ton) of vessel that can be insured by the facility.

Facility Location(s): The primary business location of the facility and various support and claims offices available. Local claims liaison offices are important to ensure that clients in different time zones can access claims or loss prevention assistance in a timely manner.

Geographical Spread of Business: This is an indicator to show where business revenues derive from a geographical overview.

Type of Entered Vessel: This indicator demonstrates what type of vessel a facility tends to write.

Annual Premium Income, Gross Tonnage and Premium Per GT Development Indicators: AJG analyses three key performance indicators over a twelve month period to determine a financial year result. Historical information can be in the industry statistic pages 54-69.

INTRODUCTION TO FACTS & FIGURES


02


26

INTRODUCTION Established in 1876, British Marine is a specialist hull & machinery, protection and indemnity and legal expenses insurer for small to medium sized vessels. At the turn of the 21st Century British Marine was de-mutualised and more recently in 2005 the privately held fixed premium insurer was successfully acquired by the QBE Group. With effect from 31st March 2010, all of British Marines assets and liabilities, including its current and past contracts of insurance and reinsurance were transferred to QBE Insurance (Europe) Limited. The British Marine brand name has now become a trading name for QBE.

Today British Marine provides fixed cost P&I insurance solutions, as well as H&M and charterers liability insurance products, offering P&I limits up to USD 500 million (limits up to USD 1 Billion are also available). The insurer typically writes vessels up to 10,000 GT, with 90% of their portfolio consisting of medium size merchant vessels and the balance of the portfolio being made up of fishing vessels and super yachts. On the Charterers Liability side, limits for P&I are available up to USD 100 million with Charterers Damage to Hull being limited up to USD 50 million. There is however a guideline tonnage maximum level of 30,000 GT.

BRITISH MARINE SAYSThe proliferation of fixed premium providers following the British Marine business model has gathered pace and a number of new P&I facilities surfaced during 2013 to compete in the small and medium-sized ships sector. British Marines renewing business, and other tonnage within our appetite considering a change of insurer was strongly contested and, with most ship owners continuing to experience difficult trading conditions, price was often a decisive consideration. We were well satisfied with a successful renewal. Business retention was at its long-term historical level, with overall renewing premium flat. We were disappointed not to renew the cover for a number of owners, predominantly because we considered that the competitive terms we were asked to match in order to retain the business were unsustainable. We welcomed 32 new Assureds, and 10 existing Assureds added tonnage to their British Marine placement. In all, a further 194 vessels and 680,000 GT was introduced. Pleasingly, among our new Assureds were two large fleets and a number of small operations which returned to British Marine following an interlude insured elsewhere.

GEOGRAPHICAL SPREAD OF BUSINESS TYPE OF ENTERED VESSEL

BRITISH MARINEwww.britishmarine.com

Reinsurance Carrier: QBE Insurance (Europe) LtdStandard and Poors Rating: A+

Maximum Limit Offered: USD 1 BillionVessel Type/ Size Cap: Up to 10,000 GT and Charterers up to 30,000 GT

Facility Location: London, United Kingdom

34% Northern Europe

12% North America

19% Far East

13% Southern

Europe

11% Middle East

5% South America

3% Australia

3% Africa

23% General Cargo

28% Others

22%Bulkers

8%Tugs & Barges

8%Fishing

7%Tankers

3% Yatchs

1% Dredgers


27

Policy Year: 2008 2009 2010 2011 2012 2013 2014

P&I Premium Income 93,007,720 125,000,000 133,500,000 125,000,000 106,000,000 100,000,000 97,500,000

OWNED P&I PREMIUM INCOME USD

Policy Year: 2008 2009 2010 2011 2012 2013 2014

Gross Tonnage 11,000,000 13,500,000 13,520,000 12,600,000 12,000,000 11,000,000 10,000,000

ENTERED GROSS TONNAGE USD

150,000,000

100,000,000

50,000,000

0

TONNAGE DEVELOPMENT

20

08

20

09

20

10

20

11

20

12

20

13

20

14

PREMIUM INCOME (US$)2013 PY: 100,000,0002014 PY: 97,500,000

GROSS TONNAGE (GT)2013 PY: 11,000,0002014 PY: 10,000,000

AVERAGE RATE PER GT (PGT)2013 PY: US$ 9.092014 PY: US$ 9.20

TWELVE MONTH DEVELOPMENT PERFORMANCE INDICATORS

+1.2%-2.5% -9.1%

120%

100%

80%

60%

40%

20%

0%P&I

BUSINESS PORTFOLIO SPREAD

10.50

10.00

9.50

9.00

8.50

8.00

7.50

AVERAGE RATE PER GT

20

08

20

09

20

10

20

11

20

12

20

13

20

14

130,000,000

120,000,000

110,000,000

100,000,000

90,000,000

80,000,000

P&I PREMIUM INCOME

20

08

20

09

20

10

20

11

20

12

20

13

20

14


28

INTRODUCTION Carina is one of the most recent fixed premium new entrants starting in the early part of 2013. The facility is managed by Tindall Riley Marine (UK) Limited (who are the managers of the Britannia P&I Club), trading as Carina Managers. This facility offers fixed premium P&I coverage for Owners and Charterers of smaller vessels ranging up to 5,000 gross tons, operating in domestic or inland waters, worldwide. Policy limits of up to USD 500 million are available for Owners, whereas Charterers will be able to purchase limits up to USD 50 million.

The focus of the facility targets small ship sector operators only. Legal Defence Cover is also available together with additional ancillary covers that may be required. Carina will benefit from Tindall Riley Marine Limiteds vast experience in underwriting, claims and support services. Carinas polices are backed by Lloyds of London syndicates, which hold an S&P A+ rating.

CARINA SAYSOver the past 12 months, the facility has seen its book of business grow by 50 % in terms of tonnage. This has been due to existing insureds adding to their existing fleets and new insureds purchasing cover from Carina. The products offered include owners and charterers P&I cover of up to USD500 million and a variety of ancillary covers. Last year we launched the Carina Yachts P&I Cover, which is a fixed-premium product for yacht owners, managers and charterers. Once again, all policies are backed by underwriters at Lloyds.

The vast majority of shipowners insured by Carina trade regionally. Around 75% of insured ships are below 500 g.t.; most of these ships are harbour craft or operate in inland waterways.

We are very pleased with Carinas excellent renewal retention rates in a market that is extremely competitive. Our aim continues to be the provision of a first class service to insureds and their brokers.

CARINAwww.carinapandi.com

Reinsurance Carrier: Lloyds of London Standard and Poors Rating: A+

Maximum Limit Offered: Up to USD 500 MillionVessel Type/ Size Cap: Up to 5,000 GT



4% Tug

2% Fishing

4% Passenger

9% Tankers

4% General Cargo

75% Barges

2% Others7% South America

4% Northern Europe

58% Southern Europe

26% Far East

5% Russia & Ukraine


29

Policy Year: 2011 2012 2013 2014

P&I Premium Income 7,250,000 10,000,000

PREMIUM INCOME DEVELOPMENT USD

Policy Year: 2011 2012 2013 2014

Gross Tonnage 2,000,000 3,000,000

GROSS TONNAGE DEVELOPMENT USD

3,500,000

3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

GROSS TONNAGE

20

13

20

14



AVERAGE RATE PER GT (PGT)2013 PY: 3.622014 PY: 3.33


+50% +8%+37.9%

11,000,000

10,500,000

10,000,000

9,500,000

9,000,000

8,500,000

8,000,000

7,500,000

7,000,000

6,500,000

6,000,000

P&I PREMIUM INCOME

20

13

20

14

3.70

3.60

3.50

3.40

3.30

3.20

AVERAGE RATE PER GT

20

13

20

14


120%

100%

80%

60%

40%

20%

0%P&I


30

INTRODUCTION Eagle Ocean Agencies, Inc. is an affiliated company of The Shipowners Claims Bureau, Inc., who are the managers of the American P&I Club, and Atlantic Marine Associates, Inc., which is a general marine adjusting and claims handling company. In 2010, the Directors of the American P&I Club formed a separate fixed premium facility, namely Eagle Ocean Marine, offering Protection and Indemnity and Freight, Demurrage and Defence insurance solutions. The facility is primarily focused on operators of smaller ships, below 12,500 gross tons, operating in regional waters, with policy limits being available up to $500 million for P&I and $2 million for FD&D. P&I coverage is available to operators on a worldwide basis; however coverage is not available to operators based in the U.S.A. or trading exclusively in U.S. waters (this is however dealt with by Eagle Ocean Agencies the sister company of SCB). At present the facility is more Far East focused, with 70% of their portfolio emanating from this region. The agency re-structured its insurance and reinsurance arrangements, with American Steamship Owners Mutual Protection and Indemnity Association, Inc. providing the primary security. This in turn will allow Eagle Ocean to put up American Club security guarantees up to its primary limits, as well as providing American Club blue cards.

EAGLE OCEAN MARINE SAYSEOM continues to make steady progress. The market remains soft, not assisted by the continued increase in capacity and the weak freight market. Fixed price P&I insurance appeals to an increasingly large number of operators who like the certainty of cost and who are now attracted to the higher limits of liability on offer. Since February 2015 EOM has increased its capacity to offer cover up to $ 500m. This gives EOM the ability to compete for accounts requiring higher limits. The drive for higher limits is primarily fuelled by commercial pressure placed on ship operators by their contracting partners. The outlook for the fixed premium facilities remains bright and EOM is well placed to compete in what remains a challenging market. EOM remains fully committed to providing a first class product at sustainable rates.

EAGLE OCEAN MARINEwww.eagleoceanmarine.com

Reinsurance Carrier: American P&I Club Standard and Poors Rating: BBB-

Maximum Limit Offered: Up to USD 500 Million Vessel Type/ Size Cap: Up to 25,000 GT

Facility Location: New York, United States of America


6% South America

6% Southern Europe

70% Far East

15% Africa

3% Middle East

5%Others

32% Tugs & Barges

10% Tankers

35%General Cargo

10%Bulkers

7%Containers

1% Fishing


31

Policy Year: 2010 2011 2012 2013 2014

P&I Premium Income 500,000 5,000,000 6,000,000 6,500,000 7,000,000P&I Claims Incurred 50,000 3,000,000 5,500,000 1,000,000 800,000


Policy Year: 2010 2011 2012 2013 2014

Gross Tonnage 50,000 461,000 601,000 760,000 898,000


120%

100%

80%

60%

40%

20%

0%P&I FD&D


1,000,000

800,000

600,000

400,000

200,000

0

TONNAGE DEVELOPMENT

20

10

20

11

20

12

20

13

20

14


GROSS TONNAGE (GT)2013 PY: 760,0002014 PY: 898,000



+7.6% +18.2% 8.8%

8,000,000

6,000,000

4,000,000

2,000,000

0

P&I PREMIUM INCOME

20

10

20

11

20

12

20

13

20

14

12.00

11.00

10.00

9.00

8.00

AVERAGE RATE PER GT

20

10

20

11

20

13

20

14

20

12


32

INTRODUCTION Hanseatic P&I celebrate its 10th anniversary this year. The insurance consortium was originally supported by five German insurance companies but has developed substantially in recent years and as of April 2015 the primary USD50m layer became a 100% Lloyds placement. The facility writes up to a limit of USD500m with A+ or AA security throughout.The consortium is managed under the brand name Hanseatic Underwriters by Zeller Associates Management Services GmbH of Hamburg. Hanseatic P&I provide ship owners and charterers liability as well as inland craft P&I cover. The consortium also provides FD&D legal expenses insurance, either as an additional or a separate cover, under the brand name Hanseatic Defence.

The core risk appetite of Hanseatic P&I is small and medium size general cargo and container vessels, as well as liquid cargo and dry bulk. Additionally Hanseatic has expertise in traditional, offshore and specialist vessels of any type. The underwriting philosophy at Hanseatic was originally focused on German and Northern European interests and expanded its operation with regional offices in London and Shanghai. At present, Hanseatic P&I core business emanates from all parts of Europe, Far East, Middle East, Africa, Australia and South America.

HANSEATIC SAYSThe business continues to grow on the back of sensible and sustainable pricing and the on-going development of our geographical presence has been highly encouraging. We have managed a growth in written business of over 10% in 2014 and anticipate another 15% overall in 2015.

The underwriting result has also developed exceptionally well. We have always believed that a cautious and technically sound approach to our operations would reward our participants, a view reflected in their continued support. Being able to offer a fully Lloyds-backed product, with a team which adds benefit for our clients by both its general marine expertise as well as specific insurance pedigree, bodes well in the actual market environment. We are the only international P&I insurer to have been approved by China beyond the International Group clubs which tells its own story. This is a good year to be celebrating the 10th anniversary of Hanseatic Underwriters Made in Germany.

HANSEATIC UNDERWRITERSwww.hanseatic_pandi.com

Reinsurance Carrier: Allianz Global Corporate & Speciality AG and Lloyds of London

Standard and Poors Rating: AA or A+ Maximum Limit Offered: Up to USD 500 Million

Vessel Type/ Size Cap: Up to 25,000 GT Facility Location: Hamburg, Germany


15%Containers

2% Others3% Offshore

1% Dredgers

3% Fishing1% Tankers

7% Tugs & Barges

22%Bulkers

46% General Cargo

45% Northern Europe

4% Australia

24% Southern

Europe

8% Middle East

14% Far East

5% South America


33

Policy Year: 2008 2009 2010 2011 2012 2013 2014

P&I Premium Income 7,700,000 11,200,000 14,700,000 15,800,000 19,700,000 18,300,000 19,650,000P&I Claims Incurred 7,900,000 7,200,000 12,900,000 14,700,000 13,700,000 8,700,000 8,250,000Surplus/ Deficit -200,000 4,000,000 1,800,000 1,100,000 6,000,000 9,600,000 11,400,000


Policy Year: 2008 2009 2010 2011 2012 2013 2014

Charterers Premium Income 1,200,000 850,000 900,000 950,000 1,000,000 1,200,000 1,350,000Charterers Claims Incurred 1,800,000 700,000 200,000 150,000 170,000 154,000 355,000Surplus/ Deficit -600,000 150,000 700,000 800,000 830,000 1,046,000 995,000

CHARTERERS LIABILTIY INCOME USD

Policy Year: 2008 2009 2010 2011 2012 2013 2014

Gross Tonnage 1,400,000 1,600,000 1,900,000 2,100,000 2,400,000 2,700,000 2,850,000


90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

P&I FD&D H&MWarCharterers/ DTH

Ports & Terminals

SOL to Cargo

Other Risks


3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

TONNAGE DEVELOPMENT

20

08

20

09

20

10

20

11

20

12

20

13

20

14





+7.4% +5.6% +1.6%

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0

P&I PREMIUM INCOME

20

08

20

09

20

10

20

11

20

12

20

13

20

14

8.50

8.00

7.50

7.00

6.50

6.00

5.50

5.00

4.50

AVERAGE RATE PER GT

20

09

20

10

20

11

20

12

20

13

20

14

20

08


34

INTRODUCTION Established in 2010, Hydor is an underwriting agent on behalf of the Brit Syndicate 2987 (Lloyds of London) offering fixed premium Owners Protection & Indemnity, Charterers P&I, FD&D and other marine related insurance products. Hydor is licensed and regulated by the Financial Supervisory Authority (FSA) of Norway.

Through Lloyds of London the Brit Syndicate 2987 holds security ratings from Standard & Poors A+ (Strong). The fixed premium facility looks at vessels up to 25,000 GT, providing limits up to USD 1 billion for P&I and Charterers Liabilities. Whilst Hydor is an underwriting agent for the Brit Syndicate, the claims service is provided by C Solutions Limited, which is a legal and claims consultancy staffed by lawyers from the major UK shipping law firms, former P&I Club Senior Managers, Master Mariners and Engineers. C Solutions have been authorised by Hydor to handle all claims exclusively.

HYDOR SAYSHydor AS has the past year further positioned themselves as a professional fixed priced Owners and Charterers P&I facility, providing customized solutions for clients internationally. Hydor AS continues to shape their competitive edge, thus working with the client, rather than for the client to sustain in a highly competitive market. We have seen a shift in focus towards fixed P&I and we attract new segments which traditionally have been placed 100% in the IG system. Our aim is to be complimentary to IG and attract those who wants an alternative with 1st class service and security outside the IG.

HYDOR ASwww.hydor.no

Reinsurance Carrier: Brit Syndicate 2987 Lloyds of London Standard and Poors Rating: A+

Maximum Limit Offered: USD 1 Billion Vessel Type/ Size Cap: Up to 25,000 GT, Unlimited for Charterers Liability

Facility Location: Oslo, Norway


17% Fishing

27% General Cargo

16%Bulkers

19%Containers

8%Tankers

5%Offshore

8% Tugs & Barges

65% Northern Europe

9% South America

8% Far East

3% Africa

3% Southern

Europe

1% Middle East

1% North America

10% Russia


35

Policy Year: 2011 2012 2013 2014

Gross Tonnage 1,000,000 1,200,000 1,300,000 1,657,000


150%

100%

50%

0%P&I


2,000,000

1,000,000

0%

TONNAGE DEVELOPMENT

20

11

20

12

20

13

20

14

Policy Year: 2011 2012 2013 2014

P&I Premium Income 2,000,000 5,000,000 9,000,000 14,000,000P&I Claims Incurred 250,000 750,000 6,000,000 5,000,000Surplus/ Deficit 1,750,000 4,250,000 3,000,000 9,000,000






+55% +27.5% +22.1%

15,000,000

10,000,000

5,000,000

0

P&I PREMIUM INCOME

20

12

20

13

20

14

20

11

10.00

8.00

6.00

4.00

2.00

0.00

AVERAGE RATE PER GT

20

11

20

12

20

13

20

14


36

INTRODUCTION Ingosstrakh Insurance Co. is a private federal level Insurance Company, which was founded in 1947, based in Moscow, Russia. The facility offers P&I, FD&D, H&M and other marine related insurance solutions.

The insurer has an international portfolio, however it holds a leading share of the Russian P&I Market giving particular preference to ship owners from Russia, CIS and East European Countries. The facility offers limits up to USD 1 Billion for P&I and US$ 1 Million for FD&D.

Ingosstrakh covers in excess of 1,000 units, handling a large range of vessels from smaller inland and coastal craft, to larger ocean going vessels in excess of 20,000 GT. The company is rated BBB- by Standard & Poors and a National Scale rating of ruAA++.

INGOSSTRAKH SAYSIngosstrakh continues to apply a particularly thorough approach to risk assessment, conservative selection of clients, regular monitoring, purge of portfolio and implementing preventive measures, which enables Ingosstrakh to maintain the leading position in the Russian marine market.

INGOSSTRAKH INSURANCE CO.www.ingos.ru

Reinsurance Carrier: Lloyds of London Standard and Poors Rating: BBB-

Maximum Limit Offered: Up to USD 1 Billion Vessel Type/ Size Cap: No Limit, but 97% of

vessels covered are below 10,001 GT Facility Location: Moscow, Russia


2% Northern Europe

5% South America

1% Middle East

7% Southern Europe

32% Far East

53% Russia

3% Offshore

25% General Cargo

17% Tugs & Barges

27%Fishing

13%Others

11%Tankers

3% Dregers

2% Bulkers


37

Policy Year: 2008 2009 2010 2011 2012 2013 2014

P&I Premium Income 25,400,000 27,250,000 23,000,000 19,228,453 23,523,685 21,800,000 16,500,000P&I Claims Incurred 19,500,000 25,000,000 16,200,000 16,075,518 17,326,411 14,000,000 15,800,000


Policy Year: 2008 2009 2010 2011 2012 2013 2014

Gross Tonnage 7,895,016 5,879,400 6,024,524 4,730,800 5,001,155 5,001,155 4,200,000


10,000,000

8,000,000

6,000,000

4,000,000

2,000,000

0

TONNAGE DEVELOPMENT

20

08

20

09

20

10

20

11

20

12

20

13

20

14

120%

100%

80%

60%

40%

20%

0%Charterer/DTH FD&D P&I






24.3% 16% 9.88%

30,000,000

25,000,000

20,000,000

15,000,000

P&I PREMIUM INCOME

20

08

20

09

20

10

20

11

20

12

20

13

20

14

5.00

4.50

4.00

3.50

3.00

AVERAGE RATE PER GT

2009

2010

2011

2012

2013

2014

2008


38

INTRODUCTION Lodestar Marine Limited (Lodestar) was established in 2012, providing fixed premium P&I insurance solutions. Lodestar is a partnership, backed by Tawa Plc, part of Groupe Artmis, a family owned investment company with consolidated assets in excess of Euro 27 Billion. Lodestar comprises of a team of experienced underwriters and claims executives plus in-house surveyors, supported by further administration staff based in Gloucester, under contract with Pro Insurance Solutions Limited. The facility will write Fixed Premium P&I risks, with limits up to USD 500 Million in co-operation with RSA and other A rated insurers who will provide security. Typical vessels insured by Lodestar will not exceed 10,000 gross tons.

A global network of over 250 Correspondents has been established. In the event of a claim, security can be provided by either a letter of undertaking or bank guarantee. Furthermore, Lodestar is in the process of finalising Flag State approval for the issuance of Blue Cards with acceptance already received from a number of Authorities including United Kingdom, Netherlands, Hong Kong and Australia etc. Lodestar is authorised and regulated by the FSA as an appointed representative of Pro Insurance Solutions Limited.

LODESTAR SAYS3 years in to our adventure we are delighted with our progress in a very tricky market. We continue to grow at a steady pace focusing on quality business aided by sensible pricing and a robust loss prevention survey program. We maintain that price is not always the defining factor when choosing Lodestar, demonstrated by a +95% retention record of renewing business. Whilst we continue to provide a quality service with A rated security (RSA) we cant afford to stagnate and have been busy developing our offering over the last 12 months. Headline improvements include the ability to insure dry cargo/bulker vessels up to 40,000GT and to offer limits of liability up to USD 1 Billion. We listen to our clients and act on their requests! We are very excited about the next 12 months having reached a point of maturity and have plenty of more improvements in the pipeline which we hope will benefit current and new clients wishing to insure with Lodestar.

LODESTAR LTDwww.lodestar-marine.com

Reinsurance Carrier: Royal Sun Alliance Group Standard and Poors Rating: A

Maximum Limit Offered: USD 1 Billion Vessel Type/ Size Cap: Up to 40,000 for non-tanker

vessels and up to 10,000 GT for tankers Facility Location: London, United Kingdom


43% Dry Cargo

7% Tankers

12%Offshore

19%Tugs & Barges

4% Yachts

4% Others

2% Dredgers

9% Fishing

23% Far East7%

Middle East

19% South

America

14% Northern

Europe

6% Africa

29% Southern Europe

1% Australia1% North America


39





5.51%+20% +27%

Policy Year: 2008 2009 2010 2011 2012 2013 2014

P&I Premium Income - - - - 16,500,000 25,000,000 30,000,000


Policy Year: 2008 2009 2010 2011 2012 2013 2014

Gross Tonnage - - - - 1,777,512 2,756,154 3,500,518


40,000,000

30,000,000

20,000,000

10,000,000

0

P&I PREMIUM INCOME

20

11

20

12

20

13

20

14

9.50

9.00

8.50

8.00

AVERAGE RATE PER GT

20

12

20

13

20

14

100%

80%

60%

40%

20%

0%


Other Risks FD&DCharterers/DTH P&I

4,000,000

3,000,000

2,000,000

1,000,000

0

TONNAGE DEVELOPMENT

20

12

20

13

20

14


40

INTRODUCTION Established in 2004, the Navigators Insurance Group set up a fixed premium P&I facility protecting ship owners, managers and charterers against liabilities arising out of operating their vessels. Today Navigators P&I, based in London, offers fixed-cost Protection & Indemnity cover to vessels in coastal, short-sea and limited Ocean trades. The facility offers limits up to USD 1 billion and looks to insure vessels up to 10,000 gross tons. Navigators underwriting profile looks at all types of vessels, excluding passenger vessels and those with U.S. Flag, cover is also available on a worldwide trading basis, excluding U.S. waters. In addition to Owners P&I, Navigators can also offer contractual liabilities as an extension of the main P&I coverage. Charterers Liability is also available to vessels below 10,000 GT. Furthermore, in addition also offers coverage for bunker convention and MLC 2006 risks. Navigators have office locations in US, London, Antwerp, Stockholm, Copenhagen and Lloyds representative offices in Shanghai and Rio. More recently Navigators have opened office locations in Rotterdam and Milan and also looking to shortly expand in Paris and Dubai. Furthermore, as part of the companys expansion strategy Navigators is in the process of establishing a separate European Insurance Company in London enabling the acceptance of business from any EU country.

NAVIGATOR SAYSNavigators P&I division celebrated our 10th anniversary in November, confirming us as one of the more established Fixed Premium providers in the Market. We remain one of the few non-MGA providers, giving us long-term stability that few in the marketplace enjoy; we are fully in control of our own destiny. With the recent hire of Jason Riley from the UK Club, to head up the operation, our P&I product is undergoing a series of enhancements. There are a number of projects in the pipeline that will take us forward in line with the changing needs of our clients. Now being able to offer cover up to $1bn, we are becoming a very credible threat to the P&I Clubs, although for the time being we will stick to our core vessel tonnage category of around 10,000 GT. The soft market conditions make it difficult in a very crowded Market, especially as most of the P&I Clubs themselves have woken up the threat on their doorsteps, and Owners still look to price being a significant factor in their insurance decision making. More owners realise that in their particular trade they may not need to pay for such high limits, so our bespoke cover offers a sensible option. Whilst Navigators has not grown in market share over the last few years, we are confident that if we stick to our principals, and do not get into growth for growths sake, we will prevail as one of the stronger Fixed Premium providers.

NAVIGATORS P&Iwww.navpandi.com

Reinsurance Carrier: Navigators Insurance Company Standard and Poors Rating: A

Maximum Limit Offered: Up to US$ 1 Billion Vessel Type/ Size Cap: Up to 10,000 GT



31% General Cargo

44% Tugs & Barges

4% Bulker

6% Tankers

10% Fishing

2% Container

3% Others

10% Europe

51% Far East

15% North America

8% South America

16% Other


41

Policy Year: 2008 2009 2010 2011 2012 2013 2014



Policy Year: 2008 2009 2010 2011 2012 2013 2014

Gross Tonnage 2,450,000 2,300,000 2,100,000 2,200,000 2,100,000 2,000,000 1,900,000


120%

100%

80%

60%

40%

20%

0%P&I


3,000,000

2,500,000

2,000,000

1,500,000

1,000,000

500,000

0

TONNAGE DEVELOPMENT

20

08

20

09

20

10

20

11

20

12

20

13

20

14





0.5% 1.8%6.6%

12.00

11.50

11.00

10.50

10.00

9.50

AVERAGE RATE PER GT

20

08

20

09

20

10

20

11

20

12

20

13

20

14

29,000,000

28,000,000

27,000,000

26,000,000

25,000,000

24,000,000

23,000,000

22,000,000

21,000,000

20,000,000

P&I PREMIUM INCOME

20

08

20

09

20

10

20

11

20

12

20

13

20

14


42

INTRODUCTION Established in 1991, Osprey Underwriting Agency is a specialist P&I fixed premium insurance provider and is the oldest P&I fixed premium insurer in London. The Agency provides insurance services to ship owners on a variety of vessel types and operations, with a focused portfolio of tugs, barges and fishing vessels. The facility caters for vessels of up to 25,000 GT, engaged in the carriage of dry cargoes and up to 10,000 GT for all other vessel types. Osprey avoids writing tankers carrying persistent cargoes and passenger vessels. For business emanating from the USA the policy limit is USD 1 Million.

Coverage can be provided on a worldwide basis, which is backed up by an extensive global network of correspondents and Lloyds agents. Osprey is actively looking to expand its non-US book of business with a focus on Asia, whilst maintaining its leading position as providers of U.S. Primary P&I Insurance.

OSPREY SAYSThe past year has continued to be a competitive environment for the development of new business, with competing markets more determined on market share at any price. That said we have been successful in positive expansion, albeit with high regard for risk and exposure. Our proportion of Non US business has increased as we have sought to continue the development of this part of

our account. We are fortunate to have the backing of our Lloyds Syndicate support firmly behind our longer term aims and ambitions. Fortunate also to be unique in the market as a Lloyds Cover Holder offering the excellent A+ rated security and a name that is recognised worldwide. In addition to P&I, the Agency continues to offer P&I war risks, Hull & Machinery to USD5m value, Marine General Liability and Maritime Employers liability coverage. We offer an MLC financial guarantee product that is already compliant with the proposed amendments due to be implemented by December 2016 as well as the provision of Blue Cards that Owners are required to provide in respect of Wreck Removal and Bunker Pollution conventions, all secured by Lloyds. In the US we have continued to reduce our market share in the fish boat account due to the performance of certain sectors of the industry, though it still remains a significant proportion of our US business. We of course also have the benefit of a Claims Service office in the U.S. providing dedicated local claims support to all of Ospreys U.S. Clients and also those who may visit/trade to the U.S. Our US account remains the most significant part of our overall account, which does set us apart from our fixed premium peers and allows Osprey to offer a truly worldwide spread of account. Market conditions remain soft across all classes and we continue to see what we perceive as unsustainable premium rating for long term commercial success in certain sectors.

OSPREY UNDERWRITING AGENCY LTDwww.special-risks.co.uk

Reinsurance Carrier: Lloyds of London (various syndicates) Standard and Poors Rating: A+

Maximum Limit Offered: Up to US$ 500 Million Vessel Type/ Size Cap: Up to 25,000 GT (dry bulk)

and 10,000 GT all other vessel types Facility Location: London, United Kingdom


6% Europe

6% South America 54%

North America

32% Asia/

Middle East

2% Other

40% Tugs & Barges

16% Fishing

18% Offshore

24% Others

2% General Cargo


43


GROSS TONNAGE (GT)2013 PY: 1,8002014 PY: 2,100

AVERAGE RATE PER GT (PGT)2013 PY: 16,6672014 PY: 13,095


26.5%21.8% +6.3%

Policy Year: 2008 2009 2010 2011 2012 2013 2014



Policy Year: 2008 2009 2010 2011 2012 2013 2014

Number of Vessels On-Risk 2,350 2,660 2,849 3,095 2,450 1800 2100

VOLUME OF BUSINESS UNDERWRITTEN USD

4,000

3,000

2,000

1,000

0

VOLUME OF BUSINESS UNDERWRITTEN

20

08

20

09

20

10

20

11

20

12

20

13

20

14

50,000,000

45,000,000

40,000,000

35,000,000

30,000,000

25,000,000

P&I PREMIUM INCOME

20

08

20

09

20

10

20

11

20

12

20

13

20

14

18,000

17,000

16,000

15,000

14,000

13,000

AVERAGE PREMIUM PER VSL

20

08

20

09

20

10

20

11

20

12

20

13

20

14

100%

80%

60%

40%

20%

0%H&M Other Risks P&I



44

INTRODUCTION RaetsMarine BV was founded in 1993, initially writing charterers liability insurance. RaetsMarine BV were independent underwriting agents of Amlin Corporate Insurance BV before they were absorbed by Amlin Europe N.V. in 2013, RaetsMarine continues to be responsible for P&I, FD&D, Charterers Liability insurances. The Owners P&I facility targets small to medium sized vessels, up to 40,000 GT, as well as supply vessels, fishing boats, tugs and barges and other specialist units. For Charterers Liability, RaetsMarine has no restrictions on vessel type, size, age or territory. The facility currently serves over 1,000 charterers, including traders, operators, NVOCCs and others chartering vessels, offering limits up to US$ 500 Million (for both owned and chartered business). RaetsMarine BV owned is a cover holder at Lloyds, where RaetsMarine writes on the Amlin Syndicate 2001 which is A+ rated by S&P.

RAETSMARINE SAYSFixed premium P&I has developed into our mature market and has become a real alternative to the IG Clubs for small to medium size tonnage. The best proof of this is the

diversification of some members of the International Group into fixed premium. The question to be answered in the near future is how the members of these Clubs will react on the fixed premium placements within these Clubs. IG Clubs will have to come up with an explanation why some are in the mutuality and others are fixed premium as they are servicing both markets. Our clients are facing a difficult economic environment and an increasing complexity of marine risks. This next to the increasing limits on conventions and the increasing cost of casualties. Our solution to that is to work closely together with our clients on risk management and tailor-made insurance solutions in order to keep the insurance cost as low as possible and at the same time give our clients seamless cover. Despite pressure on the rates and increased competition we see plenty of opportunities of growing in our markets as clients are looking for service and solutions to their problems. RaetsMarine will continue to develop new products and tailor-made solutions, together with our service proposition to our clients. This has always been the approach of RaetsMarine and is in our DNA. This approach has proven to be rewarded by our clients and is reflected by high retention rates.

RAETSMARINE BVwww.raetsmarine.com

Reinsurance Carrier: Amlin Europe N.V. Standard and Poors Rating: A-

Maximum Limit Offered: Up to US$ 1 Billion Vessel Type/ Size Cap: Up to 40,000 GT. Unlimited for Charterers Liability

Facility Location: Rotterdam, Netherlands





2.3%+0.9% +0.02%

GEOGRA

AJG Marine P&I Commercial Market Review September 2015 (1)

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