P&I Commercial Review 2013 - AS Marine Ltd.

BUSINESS WITHOUT BARRIERS

www.ajginternational.com

MARINEP&I COMMERCIAL MARKET

REVIEW 2013

1

Welcome from the Executive Director 3

Fixed Premium P&I Insurance Explained 4

The Commercial P&I Market Today 7

The Commercial P&I Market Outlook & Financial Commentary 9

Review of the last 12 Months 16

Non-IG P&I Market Overview 18

Commercial P&I Market Facts & Figures 21

Aigaion Insurance Company SA 22

British Marine 24

Eagle Ocean Agencies Inc 26

Hanseatic Underwriters 28

Hydor AS 30

Ingosstrakh Insurance Co 32

Lodestar Marine Limited 34

Navigators Insurance Company 36

Osprey Underwriting Agency Limited 38

RaetsMarine BV 40

Rosgosstrakh Ltd 42

Non International Group P&I Mutual Market Facts & Figures 45

China Shipowners Mutual Assurance Association 46

Hellenic Mutual P&I & War Risks Association 48

Korea Shipowners Mutual P&I Association 50

Non-IG Charterers Specialist Facilities Facts & Figures 53

Charterama BV 54

Charterers P&I Club 56

Norwegian Hull Club 58

Industry Statistics & Major Limiting Conventions

& Statutes Affecting P&I Risks 61

Fixed Market Premium Development & Gross Tonnage Development 62

Non-IG Chartered Premium Development & Volume Development 65

Non-IG Mutual Premium Development & Gross Tonnage Development 66

Global Premium Analysis (2012 Policy Year) 68

Commercial P&I Market Share (2012 Policy Year) 69

Rating Agency Analysis 70

Major Limiting Conventions & Statutes Affecting P&I Risks 73

Arthur J. Gallagher Marine Contacts 85

CONTENTS

3

MARINE P&I COMMERCIAL MARKET REVIEW 2013 WWW.AJGINTERNATIONAL.COM

WELCOME TO THE ANNUAL COMMERCIAL P&I MARKET REVIEW

MESSAGE FROM THE EXECUTIVE DIRECTOR MALCOLM GODFREY

Gallagher London is one of the leading global marine insurance brokers in the P&Iindustry sector. One of our core beliefs is transferring all information to our clients and business partners, which we believe is essential in this competitive environment.

The Gallagher London “Commercial P&I Market Review” (CMR) was the first of its kind, where we have receivedtremendous support from the industry. The CMR will be published annually, in addition to our Annual P&I Review and Mid-Year P&I Review Update, which will continue to focus on the International Group Clubs. In addition to this our monthly newsletter “P&I Confidential” has now been split into three new sections, “Viewpoint”, “Technical” and“Educational” focusing on all aspects of the P&I industry, keeping our clients and business partners abreast of all P&I related market intelligence.

The P&I market has become broader and varied when it comes to its products, service, security, strength and flexibility.Our view at Gallagher London is that the non-IG market is an important part of the maritime insurance industry, offeringproducts and services, where some of the “blue water” P&I Clubs lack enthusiasm to participate in this risk profile.

With the shipping industry continuing to struggle through this prolonged depressed trading environment, the fixedpremium market may offer opportunity for a segment of the Worlds operators to reduce their operational expenditure,which this review will offer more detail on.

There are a number of P&I facilities, which fall outside of the International Group of P&I Clubs’, that offer covers aimed at specific types of vessel operators, charterers and traders. The AJG Commercial P&I Market Review will focus on theleading fixed premium, non-IG Mutual and Charterers Liability facilities, which are generally accessed via London brokers.

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

Sincerely,

Malcolm GodfreyExecutive Director – Gallagher London

4

MARINE P&I COMMERCIAL MARKET REVIEW 2013

WHAT ARE THE DIFFERENCES BETWEEN COMMERCIAL MARKET AND IG GROUP P&I INSURANCE?

• GENERAL INCREASES - The fixed premium market does not adopt the annual general increase philosophy, which isa tradition practiced amongst most of the IG P&I Clubs. Renewals are instead underwritten on the assured’s individualmerits and loss record, although there may be increases sought on the basis of exposure, operating costs or the overallperformance of the insurers portfolio.

• ANNUAL MANDATORY REQUIREMENTS - Over the last few years we have seen many P&I Clubs’ insert annualmandatory uplifts/requirements, which are often non-negotiable, such as deductible increases etc. This is a practicewhich the commercial market does not follow.

• PROSPECTS FOR SUPPLEMENTARY OR EXCESS CALLS - IG Group Clubs have the power to make excesssupplementary calls if there is a need to raise funds, which are non-negotiable. The non-mutual commercial insurancecompanies do not have this capability

• RELEASE CALLS - The Commercial Market gives clients freedom to change insurer without having to releasethemselves 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.

FIXED PREMIUM P&I INSURANCE EXPLAINED

WHAT IS FIXED PREMIUM P&IINSURANCE?

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

Third party risks include a carrier’s liability to a cargoowner for damage to cargo, a ship’s liability after acollision, environmental pollution, the ship’s 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 calls, unlike IG Group Clubs.

The premiums involved in this market sector are oftenmore 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 FIXEDPREMIUM INSURANCE?

Fixed premium insurance contracts are typically providedby 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” fixedpremium terms for some longstanding fleets, US flaggedfleets and Government fleets, which have been approvedby the International Group

A number of P&I Clubs, such as American, Gard, Skuld,SOP and Steamship Mutual also have fixed P&I premiumfacilities 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 publishedtowards the end of this year.

All of the IG Clubs provide alternative fixed insuranceproducts, such as Charterer’s Liability Insurance and other marine related products, which do not fall under the conventional IG Group P&I product or IG group reinsurance programme.

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• 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 board’s to decide whether they can indemnify a Member in difficulty.

• UNDERWRITING FOR PROFIT - The IG Clubs are focused on “not for profit service” acting as servants of theMembers, whereas some of the commercial market P&I providers can be more profit minded when handling claims. We at Arthur J. Gallagher will ultimately add value to assist and ensure that the claimant is indemnified at anappropriate level.

• 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 premium calls.

• LIMITS OF LIABILITY - Without access to the International Group Pool, fixed premium coverage will be limited to aspecific limit of liability, however, clients may still be exposed to catastrophes, which could potentially exceed smallerlimits. 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 (UnitedStates 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 anInternational 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 budgetedsupplementary calls in full to the Membership if the Club has experienced a good underwriting year.

The Arthur J. Gallagher London P&I division has over 150 years of combined experience.

DID YOU KNOW?

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All of the International Group of P&I Clubs offeralternative fixed premium solutions for their clients.These may include non-pooled insurance productssuch as charterer’s liabilities, offshore P&I, contractualliabilities, specialist operations etc., however, some ofthe IG P&I Club managers can provide fixed premiumP&I covers aimed at smaller tonnages on a limitedliability basis.

Gard Offshore

Japan Club Naiko (Coastal) Class

Shipowners P&I Club

Skuld P&I Club

Standard Offshore

Steamship Yacht Facility

Swedish Club Offshore

Insurance companies are business entities thatgenerally look at multiple lines of insurance, be itmarine or non-marine related risks. Insurancecompanies that provide marine insurances typicallycan provide hull and machinery, cargo, ports andterminals, kidnap and ransom covers etc. some ofthese companies also provide fixed cost P&Iinsurance. In the past some of the demutualised P&Ifacilities and managing general agents have beenpurchased by independent insurance companies.

British Marine (a brand of QBE Europe)

Navigators P&I (Navigators)

Ingosstrakh Insurance Co.

Raetsmarine BV (a brand of Amlin Europe)

Rosgosstrakh Ltd

An MGA is an individual or business entity appointed by an insurance company to conduct and arrangeinsurance contracts on their behalf. An MGA generally acts as a fronting company for the insurer, as well asproviding the insured with evidence of cover within thedefined underwriting authority. MGA’s also servicepolicies and most importantly handle claims. TraditionallyMGA’s were formed where insurance companieswanted to expand their markets, but did not have theirown resources or technical knowledge to open and staffoffices, therefore utilising the services of an MGA.

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

Aigaion Insurance Co. SA(Lloyds of London)

Carina (Lloyds of London)

Charterama BV (RSA)

Charterers P&I Club (Munich Re)

Eagle Ocean Marine (American Club)

Hanseatic P&I (Lloyds of London)

Hydor AS (Brit Syndicate)

Lodestar Marine Ltd

(RSA) Norwegian Hull Club (Lloyds of London)

Osprey Underwriting Agency(Lloyds of London)

WHO CAN PROVIDE FIXED PREMIUM P&I INSURANCE?

There are three “facility types” that offer fixed premium P&I insurance, as follows:

7


THE COMMERCIAL P&I MARKET TODAY

The commercial P&I market has almost doubled in size since2009, with fifteen P&I fixed premium and charterers liabilityspecialist markets now competing for business. This industryoffers insurance solutions aimed at small vessel operators,short-trade vessels, principally operating in coastal or inlandwaters typically within a tonnage range below 10,000 GT.

Some fixed premium facilities can cover for vessels up to 40,000 gross tons (higher GT caps and limits are also available depending on the facility). For charterer’sliabilities, there are no vessel type or size restrictions amongthe specialist charterer’s liability facilities. Limits up to USD1 Billion are available, however, typically the larger limit ofchoice is USD 500 million, where the majority of assuredsare usually insured below USD 50 Million. All fixed premiumfacilities target ship owners, operators, charterers andtraders emanating from all geographical areas (subject toEU/US Sanctions), however certain facilities tend to shyaway from passenger, cruise and U.S. flagged, trans-Atlanticand trans-Pacific business.

Coverage for over-age and non-IACS classed tonnage isalso available from the majority of fixed premium facilities.

We at AJG believe that some of the key advantages ofinsuring with a fixed premium insurer are that they canoffer certainty of cost and lower, more accessible, limits of liability, with no liabilities for unbudgeted supplementarycalls or annual general increases. Not all of the alternativenon-IG facilities offer fixed premium covers, some aremutual. In addition to this there are also exclusivecharterer’s liability specialist insurers, which cater forcharterers and traders.

The fixed premium P&I market has continued to evolveconsiderably over the last five years, with more newentrants than exits from this industry sector. This isperhaps to be expected given the IG Group system’sworkings and the competitive nature of the commercialmarket. In addition, there have also been a number ofinvestors looking to make new inroads into the fixedpremium arena, which is a particularly attractive headlinerevenue growth area.

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

NEW ENTRANT

Aigaion Insurance CompanySA (Est. 2011)

Carina – Tindal Riley (Est. 2013)

Charterama BV (RSA) (Est. 2009)

Eagle Ocean Marine (American Club) (Est. 2010)

Hellenic Mutual P&I(Est. 2011)

Hydor(Brit Syndicate)(Est. 2009)

India Ocean P&I Club(Est. 2013)

Lodestar Marine Ltd (RSA)(Est. 2012)

Rosgosstrakh P&I(Est. 2010)

Skuld P&I Club(Est. 2013)

MARKET EXIT

South of England Mutual (2011)

Ceylon P&I Club(2012)

NON-IG MARKET DEVELOPMENT (LAST SIX YEARS: 2008 - 2013)

ESTABLISHED MARKET

British Marine (QBE)

Charterers P&I Club (Great Lakes – Munich Re)

China P&I Club

Hanseatic P&I

Ingosstrakh

Korea P&I Club

Navigators P&I

Norwegian Hull Club

Osprey Agency

Raetsmarine BV (Amlin)

SPECULATIVE MARKET

North of England Fixed P&I(Sunderland Marine Merger talks)

8

Arthur J. Gallagher is one of the leadingglobal P&I specialist brokers.

DID YOU KNOW?


9

THE COMMERCIAL P&I MARKET OUTLOOK

We at Gallagher London are very mindful of the continueddepressed global freight market conditions, which are notshowing signs of recovery in the near future. In several ofthe ship segments, rates and asset values are low, reflectingthe fact that world trade is still trailing excess ship supply,with the ordering of new buildings likely to delay theshipping recovery further.

With ship owners continuing to struggle through this bleaktrading period, the focus of operational expenditure isbecoming more of a key driver to ensure future success.

Ship owners, charterers and traders will be pleased to know that 2013/2014 should offer further rate relief in the commercial P&I market sector. Careful planning andimplementation of renewal strategy, however, is vital toachieve a significant P&I rate reduction without sacrificingquality of service or security.

There are four dominant factors driving the future of the commercial P&I market, which we have identified as follows:

• Overflowing market capacity• Increased market competition• Independent insurance companies diversifying into fixed

P&I facilities • IG Club managers providing alternative fixed P&I facilities

The overflowing market capacity is positive for ship owners, operators and charterers, offering an abundance of choice and competition, where fixed premiumunderwriters skirmish for business to meet their individualgrowth targets. Ultimately this will continue to drive downP&I premiums further in 2013 and 2014. In addition to this, the purchaser “assured” holds much of the power in negotiations, with the combination of these factorsgoverning the market environment to the extent that the new and established markets are continually fighting for business in order to hold on to their market share.

ALEX VULLOASSOCIATE DIRECTOR, GALLAGHER LONDON

Ship owners, charterers and traders will be pleased to knowthat 2013/2014 should offer further rate relief in thecommercial P&I market sector

“

“

”

”

The result of increased competition has seen the averageOwned P&I rate per GT drop by 6.81% since 2008 whilstthe amount of fixed premium tonnage written has risen by 49.33%


10


MARKET COMPETITION ANALYSIS COMPARISON BETWEEN 2001/02 AND 2013/14

2001/2002 DOMINANT MARKETS - FIXED & NON-IG MUTUALS

OWNED P&I MARKET RATE PER GT DEVELOPMENT LAST FIVE YEARS (2008-2012) (USD)

FINANCIAL COMMENTARY

2013/2014 DOMINANT MARKETS - FIXED & NON-IG MUTUALS

Looking back to the 2008/09 policy year, the total annualfixed market P&I premium (owned) was in the region ofUSD 215 million, with annual gross tonnage figures justover 28 million GT, generating an average rate of USD 7.59per GT. Since 2008, the fixed premium market capacity and competition has doubled, with a recorded total annualfixed market premium in 2012 (owned) of approximately

USD 300 million with a total of 42 million GT underwritten,bringing down the average rate per gross ton down to USD 7.084. The result of increased competition has seenthe average owned P&I rate per GT drop by 6.81% since2008, where the amount of gross tonnage underwrittenhas risen by 49.33%.

2008

$214,645

28,278

$7.590

-6.81%

39.17%

49.33%

2009

$261,893

36,020

$7.271

-4.21%

2010

$275,886

36,023

$7.659

5.34%

2011

$287,886

39,417

$7.290

-4.81%

2012

$298,713

42,228

$7.074

-2.97%

Varianceon 2011

(%)

5.29%

7.13%

5 YearCumulativeResult (%)

39.17%

49.33%

POLICY YEAR

Total Owned P&I Premium

Total Gross Tonnage (Owned)

P&I Premium per GT (Owned)

Annual Rate Adjustment (%)

Av. Rate Increase (Last 5 Years)

5 Year Cumulative Premium Growth (%)

5 Year Cumulative CL Volume Growth (%)

AXA CorporateSolutions

InterCoastalShipowners P&I BV

China P&I Club

Korean P&I Club

British MarineLuxembourg SA

Osprey UnderwritingAgency Ltd

Charterers P&I Club

Southern Seas P&I

IngosstrakhInsurance Co.

Terra NovaInsurance Co.

Aigaion InsuranceCompany SA

China P&I Club

IngosstrakhInsurance Co.

Osprey UnderwritingAgency Ltd

British Marine Ltd

Eagle Ocean Marine

Korean P&I Club

RaetsMarine BV

Carina

Hanseatic Underwriters

Lodestar Ltd

Rosgosstrakh Ltd

Charterama BV

Hellenic Mutual P&I & War Risks

Association

Navigators Insurance Co.

Charterers P&I Club

Hydor A/S

Norwegian Hull Club

11


OWNED P&I PREMIUM DEVELOPMENT (2008-2012) (In USD ‘000)

2008 2009 2010 2011 2012

$350,000,000

$300,000,000

$250,000,000

$200,000,000

$150,000,000

$100,000,000

$50,000,000

$0

Premium Income (USD) Linear (Premium Income (USD))

Total Premium Per GT Linear (Total Premium Per GT)

OWNED P&I MARKET RATE PER GT DEVELOPMENT LAST FIVE YEARS (2008-2012) (USD)

2008 2009 2010 2011 2012

7.800

7.700

7.600

7.500

7.400

7.300

7.200

7.100

7.000

6.900

6.800

6.700

Whilst the average owned rate per GT has reduced since 2008, some facilities are coming under pressure to increase premium levels by passing on increasedreinsurance costs to their clients. Last year, AJG recordedan underlying current where hardening reinsurancemarkets may put pressures on insurers to drive premiumsupward. This year we have seen British Marine (QBE)implementing a general increase style renewal, attemptingto increase premiums by 6% at renewal, to cater for risingreinsurance costs within the QBE Group. The Germanconsortium Hanseatic P&I has also aimed at a 7.5%increase on premiums at renewal, in view of risingreinsurance costs.

Osprey Underwriting Agency was similarly looking at a 5% rise in view of inflation. Despite this, we have seenthese markets continue to renew on expiring terms or lesswhere the commercial nature of the market often assiststo overcome rate rises. It remains to be seen whetherthese facilities will adopt a similar approach to renewalsin 2014, which may hinder their competitive edge andcould prove to be costly.

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CHARTERED PREMIUM INCOME DEVELOPMENT (2008-2012) (USD)*

2008 2009 2010 2011 2012

$80,000,000

$70,000,000

$60,000,000

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$0


* represents the four non-IG specialist insurers on Page 54 to 59

The below figures are based on premium vs. volumeaverages to demonstrate how the market premium ratingfor this risk profile has developed over the past five years.It is important to note that a charterer may be on risk fromanywhere between 1 day and 365 days within the policyperiod, which is not taken into account on the averagepremium per vessel figure. Despite this, however, theannualised figures do demonstrate an increase in volumes

since 2008, with a four year cumulative growth of 77.70%.Similarly there is a comparative market trend to the“Owned” side where the average premium per vessel hasfallen by 19.76% over the last four years, although therating development since 2009 has flattened asdemonstrated in the table below.

CHARTERERS PREMIUM & VOLUME DEVELOPMENT (2008-2012) (In USD ‘000s)*

2008

$52,600

31,561

$1,666.61

-

-19.76%

42.59%

77.70%

2009

$65,400

49,371

$1,324.66

-20.52%

2010

$67,500

49,371

$1,367.20

3.21%

2011

$68,000

50,583

$1,344.33

-1.67%

2012

$75,000

56,083

$1,337.30

-0.52%

Varianceon 2011

(%)

10.29%

10.87%

-0.52%


11.11%

13.60%

-19.76%

NON-IG CHARTERERSMARKET

Total Chartered Premium

Total Vessels on Risk(Chartered)

Av. Premium per Vessel(Chartered)




5 Year Cumulative CL Volume Growth (%)

CHARTERERS LIABILITY PREMIUM DEVELOPMENT

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CHARTERED AVERAGE PREMIUM PER VESSEL LAST FOUR YEARS DEVELOPMENT (2008-2012) (USD)*

2008 2009 2010 2011 2012

$1,800.00

$1,600.00

$1,400.00

$1,200.00

$1,000.00

$800.00

$600.00

$400.00

$200.00

$0.00

Av. Premium Per Vessel Linear (Av.Premium Per Vessel)

* represents the four non-IG specialist insurers on Page 54 to 59

OVERVIEW OF THE COMMERCIAL P&I MARKET - PREMIUM DEVELOPMENT LAST 5 YEARS (2008 – 2012) (In USD ‘000)

2008

$214,645

$46,749

$52,600

$313,994

2009

$261,893

$63,868

$65,400

$391,161

2010

$275,886

$76,203

$67,500

$419,589

2011

$287,360

$91,451

$68,000

$446,811

2012

$298,713

$98,225

$75,000

$471,938

Varianceon 2011

(%)

5.29%

7.41%

10.29%

5.99%


39.17%

110.11%

11.11%

50.30%

MARKET

OWNED P&I

NON-IG MUTUAL P&I

NON-IG CHARTERERS

TOTAL

2008 2009 2010 2011 2012

$600,000,000

$500,000,000

$400,000,000

$300,000,000

$200,000,000

$100,000,000

$0

Total Non-GI Mutual Non-IG Charterers Owned P&I Linear (Total USD))

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In November 2012, The Royal Sun Alliance Group (RSA)expanded their P&I offering further, backing the Rotterdambased charterer’s liability specialist agent “Charterama BV”,who are steadily growing in strength.

In addition to this, RSA also provide the first $100 million of reinsurance to Lodestar, who has entered the market in a very strong and aggressive manner with a rumoured premium income of approximately $18 million within thefirst 10 months of trade. Some market speculators suggestthat RSA will purchase both Lodestar and Charterama BVwithin the next five years. In March of this year, Londonbased Amlin PLC purchased the Dutch managing generalagency RaetsMarine BV, as part of its ambition to grow inthe international maritime industry. RaetsMarine BV willcontinue to undertake the responsibility for fixed premiumP&I and charterer’s liability business whilst Amlin will takethe lead for cargo and hull business.

At the start of 2013, the fixed premium market saw the new entrant list expand further, with the InternationalGroup (IG) Club managers providing their fixed premiumalternative P&I facilities. Tindall Riley, the managers of theBritannia P&I Club launched “Carina” backed by the AegisSyndicate (Lloyds of London) and AssuranceforeningenSkuld (Gjensidig) has advanced its list of ancillary P&Iproducts, offering their fixed premium alternative facilitywhich has already seen significant new business wins. It is still too early to determine what the impact of theInternational Group (IG) Club managers fixed premiumoffering will be. It is apparent, however, that Club managerswill be looking to increase revenues by competing with theestablished commercial markets. IG Club managers will not be able to directly compete on each others “mutualaccounts” that meet the fixed premium underwriting criteria,as stipulated in the International Group Agreement.

THE IMPACT OF INCREASED MARKET CAPACITY FROM INDEPENDENTINSURERS AND IG CLUB MANAGERS

The below table shows the fixed premium P&I facilities provided by the various IG Club managers):

INTERNATIONAL GROUP CLUB MANAGER

Shipowners Claims Bureau Inc

Assuranceforeningen Skuld(Gjensidig)

Tindall Riley Ltd

Gard AS

Shipowners Protection Ltd

Charles Taylor PLC

Steamship Mutual ManagementServices

P&I CLUB

American P&I Club


Britannia P&I Club

Gard AS

Shipowners P&I Club

Standard P&I Club

Steamship Mutual P&I Club

P&I FIXED FACILITY (OWNERS)

Eagle Ocean Marine


(Owners P&I and Offshore P&I)

Carina

Gard Offshore

Shipowners P&I Club

Standard Offshore

Steamship Yacht Facility

CONCLUSION

The last five policy years has demonstrated that theaverage premium and rating levels have fallen in theOwned (-6.81%) and non-IG Chartered (-19.76%)markets, where we expect this trend continue in the short to mid-term.

Whilst 2013/2014 will be a good year for ship owners,operators and charterers to reduce their operationalexpenditure in the fixed market sector, more pressure will be put on the individual markets to hold on to existingbusiness and protect premium income revenues. The costof the average claim is still increasing annually, as arereinsurance costs, which will also have an impact onprofitability going forward. We at AJG envisage that thefixed market will begin to reshape as this increasedcompetition stimulates the fixed premium market cycle.

As a result of this, we anticipate that some of the fringe market facilities will become more vulnerable to a potential market exit.

Ship owners, charterers and traders insuring within the fixed markets should look to prepare an early renewal strategy to take full advantage of the current market climate, while there is a high probability to reduce operational expenditure.

If you are not already a Gallagher

client, why not consult with us?

15

Arthur J. Gallagher can provide independentbenchmarking reviews and proven costsavings strategies to reduce operationalexpenditure, without cost or commitment.

DID YOU KNOW?

2012

2013

16


REVIEW OF THE LAST 12 MONTHS

AUGUST

SEPTEMBER

OCTOBER

NOVEMBER

DECEMBER

JANUARY

FEBRUARY

Lodestar Ltd commences underwriting P&I risks.

-

Hanseatic P&I announce Capt. Peter Wölk will take over the managerial lead and the responsibilities

for their claims work and related services.

Lodestar announces their ability to provide a further USD 400 million capacity via Lloyds of London,

in addition to the USD 100 already provided by Royal Sun Alliance, taking the maximum limit of

liability on offer up to USD 500 million.

Royal Sun Alliance (RSA) and Charterama BV announce a new partnership to provide Charterers

Liability with effect from 1st November 2012. RSA will provide the capacity up to USD 100 million.

Nigel Oakley – P&I Underwriter at British Marine resigns to take up the underwriting position at the

Skuld P&I Club’s new fixed premium facility.

-

With effect from 1st January, Amlin Corporate Insurance N.V. operates under the new name

Amlin Europe N.V.

Tindall Riley launches their new fixed premium facility “Carina”.

Skuld launch their fixed premium yacht facility, headed by ex-British Marine chairman Robert Johnston

and Fergus Draper with effect from January 1st.

The Indian Ministry of Shipping (regulation of entry of ship into ports, anchorages and offshore

facilities rules, 2012) grants 5 year approval status for following insurer:

Lodestar Ltd

British Marine announced the recruitment of the Shipowners P&I Club underwriter David Rees,

with effect from March 2013.

Skuld announced the recruitment of Nigel Oakley with effect from 18th February.

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MARCH

APRIL

MAY

JUNE

JULY

On the 4th March, Amlin Europe acquire Dutch managing general agent RaetsMarine BV.

RaetsMarine will continue to be the primary underwriter for P&I and Charterers Liability risks.


facilities rules, 2012) grants 5 year approval status for following insurer(s):

British Marine (QBE)

Korean P&I Association

Hellenic Mutual P&I & War Risk Association

RatesMarine BV (Amlin Europe)

British Marine announce plans to unify their P&I offering in Asia, with QBE Asia P&I offering a local

base for the Far East Market. Matthew Ginman and Marc Duck will re-locate to Singapore from

London to support the operation.

British Marine announces 85% retention of business renewed at 20th February 2013.



Hanseatic Underwriters

Hanseatic P&I announces new consortium members with effect from 1st May 2013.

Lodestar Ltd confirms their “approved P&I insurer” status by the Japanese MLIT.

-



Navigators P&I

James Petrie resigns from Lodestar Ltd to join the UK P&I Club as an underwriter.

FACILITY

AIGAION MARINE

BRITISH MARINE

CARINA

CHARTERAMA BV

CHARTERERS P&I

CHINA P&I CLUB

EAGLE OCEAN MARINE

HANSEATIC P&I

HELLENIC P&I

HYDOR A/S

INGOSSTRAKH

KOREAN P&I CLUB

LODESTAR LTD

NAVIGATORS P&I

NORWEGIAN HULL CLUB

OSPREY

RAETSMARINE BV

ROSGOSSTRAKH LTD

CARRIER

Lloyds of London

S&P: A+

QBE Insurance (Europe) Ltd

S&P: A+

Lloyds of London

S&P: A+

Royal Sun Alliance

S&P: A+

Great Lakes/ Munich Re

S&P: AA-

Mutual Insurance Company

S&P: Unrated

American Club/ Lloyds of London

S&P: BBB-

Insurance Consortium –

See Page

S&P: Various A Rated

Mutual Insurance Co.:

S&P: Unrated

Reinsurance: Lloyds of London,

S&P: A+

Lloyds of London

(Brit Synidcate 2987)

S&P: A+

Ingosstrakh

S&P: BBB-

Mutual Insurance Company

AMB: A- (excellent)

Royal Sun Alliance

S&P: A+ Rated

Navigators Insurance Co.

S&P: A

Norwegian Hull Club

S&P: A-

Lloyds of London

S&P: A+

Amlin Europe N.V.

S&P: A-

Rosgosstrakh Ltd

Local Rating: BB-/RU AA

ANNUAL PREMIUM

INCOME 2012

US$ 1,146,682

US$ 106,000,000

Not available

US$ 10,000,000

US$ 28,000,000

US$ 67,090,000

US$ 6,500,000

P&I: US$ 19,700,000

CL: US$ 1,000,000

US$ 914,036

US$ 5,000,000

US$ 23,523,685

US$ 30,221,000

US$ 18,000,000

US$ 22,000,000

US$ 14,000,000

US$ 38,400,000

P&I: US$ 54,500,000

CL: US$ 24,500,000

US$ 4,008,499

TOTAL TONNAGE/

VESSELS INSURED

174,750 GT

GT 12,000,000

Not available

8,300 Declarations

12,000 Declarations

31,340,000 GT

650,000 GT

2,400,000 GT

306,200 GT

1,200,000 GT

5,001,155 GT

11,833,000 GT

1,777,512 GT

2,100,000 GT (approx.)

2,450 Vessels Insured

15,806,600 GT

22,371 Declarations

1,118,552 GT

18


COMMERCIAL P&I MARKET OVERVIEW

LOCATION

ATHENS, GREECE

LONDON, UNITED KINGDOM


ROTTERDAM,

NETHERLANDS


BEIJING, CHINA

NEW YORK, USA

HAMBURG, GERMANY

ATHENS, GREECE

BERGEN, NORWAY

MOSCOW, RUSSIA

SEOUL, KOREA



OSLO, NORWAY


ROTTERDAM,

NETHERLANDS

MOSCOW, RUSSIA

MAXIMUM LIMIT

Up to USD 500 Million

Up to USD 1 Billion

P&I: Up to USD 500 Million

Charterers: USD 50 Million



IG-Club Limits


Charterers: Up to USD 2 Million





FD&D: up to USD 1 Million

Up to USD 1 Billion





Up to USD 1 Million (U.S Business)


Charterers: Up to USD 500 Million

FD&D: Up to USD 2 Million


MAX SIZE VESSEL

-

All vessels < 10,000 GT

Charterers < 30,000 GT

P&I < 5,000 GT

No limit

No limit

No Limit

All Vessels < 12,500GT

Bulkers: < 40,000 GT

Tankers: < 10,000 GT

All Vessels < 10,000GT

Charterers: Unlimited

No limit, but 97% of vessels are

<10,000GT

No limit

Non Tank < 20,000GT

Tankers < 10,000 GT

Up to 25,000 GT

No Limit

Up to 10,000 GT

All Vessels < 40,000 GT

Charterers: Unlimited

Tankers: < 8,500 GT

All others: < 25,000 GT

EXCLUSIONS ETC

No U.S. business

Avoids passenger risks, dirty

tankers, Tran-Pacific/ Atlantic.

Not disclosed

No exclusions

No cruise or passenger

business

No exclusions

No U.S. flagged or yachts

No U.S. flagged or managed

business


business


business

Avoids passenger risks,

Non-IACS and US flagged

No coastal fishing vessels or

dirty tankers over 10,000 GT

No tankers trading to USA, US

flagged, large cruise vessels

Do not write tanker

(persistent cargo).

No passenger, private yachts

or U.S. flagged business

U.S. flagged business above

USD 50 Million

19


20

Arthur J. Gallagher employs over 13,500insurance practitioners worldwide. (as at 31/12/12)

DID YOU KNOW?

21

COMMERCIAL P&I MARKET FACTS & FIGURES

22


AIGAION INSURANCE COMPANY SA www.aigaion.gr

Established in 1995, Aigaion Insurance Company SA is a specialist marine insurer based in Athens (Greece), insuringover 2,000 vessels and yachts, catering predominantly to the local Greek market.

Aigaion provides fixed cost P&I insurance solutions, as well as H&M and Cargo Insurance products, offering P&I limits up to USD 10 million. The facility typically writes vessels up to 10,000 GT, with 85% of their portfolio emanating fromSouthern Europe, consisting of medium size merchant vessels and the balance of the portfolio being made up of tugs,barges and yachts.

Aigaion Insurance Company SA is the manager of the Hellenic P&I Mutual & War Risks Association who are also basedin Greece with a London based representative office.

Reinsurance Carrier: Lloyds of LondonStandard and Poor’s Rating: Unrated (Reinsurers A+ )Maximum Limit Offered: USD 10 MillionVessel Type/ Size Cap: Up to 10,000 GT Facility Location: Athens, Greece

GEOGRAPHIC SPREAD OF BUSINESS TYPE OF ENTERED VESSEL

85% Southern Europe

15% Middle East

28% Tugs

21% General Cargo

20% Barges

17% Passenger & RORO

14% Tankers

POLICY YEAR INFORMATION IN US$

ANNUAL PREMIUM 5 YEARS

OWNED P&I PREMIUM INCOME (USD)

Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income - - - 1,759,884 1,659,890

P&I Claims Incurred - - - - -

Surplus/ Deficit - - - - -

23


BUSINESS PORTFOLIO SPREAD

70% H&M

30% P&I

TONNAGE DEVELOPMENT 5 YEARS (OWNED)

ENTERED GROSS TONNAGE

Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage - - - - 174,750

PREMIUM PER GT DEVELOPMENT 5 YEARS (OWNED) (USD PER GT)

Policy Year: 2008 2009 2010 2011 2012

Premium Per Gross Ton - - - - 9.50

P&I PREMIUM INCOME (USD) TONNAGE DEVELOPMENT (GT)

2002

08

2002

09

2012

10

2012

11

2012

12

1,780,000

1,760,000

1,740,000

1,720,000

1,700,000

1,680,000

1,660,000

1,640,000

1,620,000

1,600,000 0

50,000

100,000

150,000

200,000

2008

2009

2010

2011

2012

PREMIUM PER GT (USD PER GT)

2008200

2009200

2010201

2011201

2012201

10.00

9.00

8.00

7.00

6.00

5.00

4.00

3.00

2.00

1.00

0.00

24


BRITISH MARINE www.britishmarine.com

Established in 1876, British Marine is a specialist Hull & Machinery, Protection and Indemnity and Legal Expenses insurerfor small to medium sized vessels. At the turn of the 21st Century British Marine was de-mutualised and more recently in2005 the privately held fixed premium insurer was successfully acquired by the QBE Group. With effect from 31st March2010, all of British Marine’s assets and liabilities, including its current and past contracts of insurance and reinsurancewere transferred to QBE Insurance (Europe) Limited. The “British Marine” brand name has now become a trading namefor QBE.

Today British Marine provides fixed cost P&I insurance solutions, as well as H&M and Charterer’s Liability Insuranceproducts, offering P&I limits up to USD 500 million (limits up to USD 1 Billion are also available). The insurer typicallywrites vessels up to 10,000 GT, with 90% of their portfolio consisting of medium size merchant vessels and the balanceof the portfolio being made up of fishing vessels and super yachts.

On the Charterer’s Liability side, limits for P&I are available up to USD 100 million with Charterer’s Damage to Hull beinglimited up to USD 50 million. There is however a guideline tonnage cap of 30,000 GT.

Reinsurance Carrier: QBE Insurance (Europe) LtdStandard and Poor’s Rating: A+Maximum Limit Offered: USD 1 BillionVessel Type/ Size Cap: Up to 10,000 GT and Charterers up to 30,000 GTFacility Location: London, United Kingdom


37% Northern Europe

22% Far East

15% Southern Europe

9% Middle East

9% South America

3% Africa

3% Australia

24% General Cargo

20% Others

18% Bulkers

11% Containers

11% Tugs & Barges

6% Fishing

6% Tankers

3% Yachts

1% Dredgers




Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income 93,000,772 125,000,000 133,500,000 125,000,000 106,000,000



2% North America

25




100% P&I

00820 00920 01020 01120 01220

90,000,000

100,000,000

110,000,000

130,000,000

140,000,000

120,000,000

150,000,000


2008

2009

2010

2011

2012

8

9

9.5

8.5

10

0

3,000,000

6,000,000

9,000,000

12,000,000

15,000,0002008

2009

2010

2011

2012TONNAGE DEVELOPMENT 5 YEARS (OWNED)


Policy Year: 2008 2009 2010 2011 2012

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


Policy Year: 2008 2009 2010 2011 2012

Premium Per Gross Ton 8.45 9.26 9.87 9.92 8.83

26


EAGLE OCEAN MARINE www.eagleoceanmarine.com

Eagle Ocean Agencies, Inc. is an affiliated company of The Shipowners Claims Bureau, Inc., who are the managers of theAmerican P&I Club and Atlantic Marine Associates, Inc., which is a general marine adjusting and claims handlingcompany.

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 primarilyfocused on operators of smaller ships, below 12,500 gross tons, operating in regional waters, with policy limits beingavailable up to USD 25 million for P&I and USD 2 million for FD&D. P&I coverage is available to operators on aworldwide basis; however coverage is not available to operators based in the U.S.A. or trading exclusively in U.S. waters.At present the facility is more Far East focused, with 60% of their portfolio emanating from this region.

The agency has recently re-structured its insurance and reinsurance arrangements, with American Steamship OwnersMutual Protection and Indemnity Association, Inc. providing the primary security. This in turn will allow Eagle Ocean to putup American Club security guarantees up to its primary limits, as well as providing American Club blue cards.


68% Far East

12% Africa

10% Middle East

7% Southern Europe

3% South America

35% Tugs & Barges

30% Tankers

18% General Cargo

8% Others

5% Bulkers

3% Containers

1% Fishing




Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income - - 500,000 5,000,000 6,500,000

P&I Claims Incurred - - 50,000 3,000,000 400,000

Surplus/ Deficit - - 450,000 2,000,000 6,100,000

Reinsurance Carrier: American P&I ClubStandard and Poor’s Rating: BBB-Maximum Limit Offered: Up to USD 50 MillionVessel Type/ Size Cap: Up to 12,500 GTFacility Location: New York, United States of America

27



98% P&I

2% FD&D


0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

08200 09200 1020120100 11201 12201


10.80

10.60

10.40

10.20

10.00

9.80

10.00

00820 00920 01020 01120 01220

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

0820 0920 2011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage - - 50,000 650,000 470,000


Policy Year: 2008 2009 2010 2011 2012

Premium Per Gross Ton - - 10.00 10.64 10.00

28


HANSEATIC UNDERWRITERS www.hanseatic_pandi.com

Hanseatic P&I is an insurance consortium, which was founded in 2005 by five German Insurance Companies: Allianz, Gothaer,Kravag, Ergo and Sovag. March 2011 saw Sovag leave and Torus Insurance (Europe) AG join. More recently in 2013 thenumbers of participating insurance companies increased to six as UNIQA Sachversicherung AG, Vienna, also became part of Hanseatic P&I and Hanseatic Defence. The consortium is managed by Zeller Associates Management Services GmbH,Hamburg. Hanseatic P&I provide ship owner’s liability, charterers liability and inland craft P&I cover. In addition FD&D is providedas either an additional or separate legal expenses cover under the brand name “Hanseatic Defence”, based on the sameconsortium of insurance companies as its P&I product. The facility offers P&I cover for all types of vessels with a limit up to USD 500 Million.

The core risk appetite of Hanseatic P&I is small and medium size general cargo and container vessels, as well as liquid cargoand dry bulk. Additionally, Hanseatic has expertise in traditional offshore and specialist vessels of any type. The underwritingphilosophy at Hanseatic was originally focused on German and Northern European interests and later diversified its underwritingcriteria to include other geographical areas. At present, Hanseatic P&I core business emanates from all parts of Europe, Russiaand Turkey and it is presently looking to expand to select Middle East /North Africa and Asian regions.

Reinsurance Carrier: Allianz Global Corporate & Speciality AG – Swiss Re – Lloyds of LondonStandard and Poor’s Rating: AA – AA – A+Maximum Limit Offered: Up to USD 500 MillionVessel Type/ Size Cap: 40,000 GT for Bulk Carriers and 10,000 GT for TankersFacility Location: Hamburg, Germany


60% Northern Europe

14% Southern Europe

12% Middle East

8% Far East

4% South America

2% Africa

42% General Cargo

22% Bulkers

19% Containers

9% Tugs & Barges

3% Tankers

2% Fishing

1% Dredgers

1% Offshore

1% Others




Policy Year: 2008 2009 2010 2011 2012


P&I Claims Incurred 7,900,000 7,200,000 12,900,000 14,700,000 13,700,000

Surplus/ Deficit -200,000 4,000,000 1,800,000 1,100,000 6,000,000



Policy Year: 2008 2009 2010 2011 2012

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


4

6

8

10

2008

2009

2010

2011

2012 87% P&I

6% Charterers/DTH


1% SOL to Cargo4% FD&D

2% War

29



50,00,000

10,000,000

15,000,000

20,000,000

200822020 2009

2010

2011

2012

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2008

2009

2010

2011

2012

PREMIUM PER GT DEVELOPMENT 5 YEARS (OWNED) (USD)

Policy Year: 2008 2009 2010 2011 2012

Premium Per Gross Ton $5.50 $7.00 $7.74 $7.52 $8.21

CHARTERERS LIABILITY DEVELOPMENT 5 YEARS (USD)

CHARTERERS LIABILITY INCOME

Policy Year: 2008 2009 2010 2011 2012

Charterers Premium Income $1,200,000 $850,000 $900,000 $950,000 $1,000,000

Charterers Claims Incurred $1,800,000 $700,000 $200,000 $150,000 $170,000

Surplus/ Deficit -$600,000 $150,000 $700,000 $800,000 $830,000

30


HYDOR A/S www.hydor.no

Established in 2010, Hydor is an underwriting agent on behalf of the Brit Syndicate 2987 (Lloyd’s of London), offering fixedpremium Owner's Protection & Indemnity, Charterer's P&I, FD&D and other marine related insurance products.

Hydor is licensed and regulated by the Financial Supervisory Authority (FSA) of Norway.

Through Lloyd’s of London, the Brit Syndicate 2987 holds security ratings from Standard & Poor's A+ (Strong).The fixed premium facility looks at vessels up to 10,000 GT, providing limits up to USD 500 million for P&I andCharterer’s 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.

Reinsurance Carrier: Brit Syndicate 2987 – Lloyds of LondonStandard and Poor’s Rating: A+Maximum Limit Offered: USD 500 MillionVessel Type/ Size Cap: Up to 10,000 GT, Unlimited for Charterers LiabilityFacility Location: Oslo, Norway


67% Northern Europe

14% South America

9% Far East

4% Southern Europe

3% Africa

2% North America

1% Middle East

28% Fishing

26% General Cargo

20% Bulkers

10% Containers

7% Tankers

5% Offshore

2% Tugs & Barges

2% Yachts




Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income - - - 2,000,000 5,000,000

P&I Claims Incurred - - - 250,000 750,000

Surplus/ Deficit - - - 1,750,000 4,250,000

31


84% P&I

6% Charterers/DTH


5% FD&D

5% War


20 00920 01020 01120 01220

0

1000000

2000000

3000000

4000000

5000000


0

1

2

3

4

5

22008

22009

2201010

22011

22012

0

200000

400000

600000

800000

1000000

1200000

00820 00920 01020 2011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage - - - 1,000,000 1,200,000


Policy Year: 2008 2009 2010 2011 2012

Premium Per Gross Ton - - - 2.00 4.17

32


INGOSSTRAKH INSURANCE CO. www.ingos.ru

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, Cargo and other marine related insurance solutions. The insurer has an internationalportfolio. 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 500 Million 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 costal craft, to larger ocean going vessels in excess of 20,000 GT. Thefacility does not cater to large tankers, cruise vessels or U.S. based business.

The facility has performed consistently well over the last twelve years with an aggregate loss ratio of 85.3%The company is rated BBB- by Standard & Poor’s and a National Scale rating of ruAA++.

Reinsurance Carrier: Lloyds of LondonStandard and Poor’s Rating: BBB-Maximum Limit Offered: Up to USD 500 MillionVessel Type/ Size Cap: No Limit, but 97% of vessels covered are below 10,001 GTFacility Location: Moscow, Russia


56% Northern Europe

17% South America

8% Middle East

8% Southern Europe

6% Far East

5% Africa

27% General Cargo

22% Tugs & Barges

16% Fishing

13% Others

9% Tankers

5% Dredgers

4% Bulkers

2% Offshore

1% Containers

1% Yachts




Policy Year: 2008 2009 2010 2011 2012



Surplus/ Deficit 5,900,000 1,750,000 6,800,000 3,155,935 6,197,274

33


88% P&I

7% FD&D


5% Charterers/DTH


15,000,000

20,000,000

25,000,000

30,000,000

2009

2010

2011

2012


3

3.5

4

4.5

5

200820000

2009

2010

2011

2012

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

2008

2009

2010

2011



Policy Year: 2008 2009 2010 2011 2012

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


Policy Year: 2008 2009 2010 2011 2012


34


LODESTAR LTD www.lodestar-marine.com

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 Artémis, a family owned investment company with consolidatedassets in excess of Euro 27 Billion. Lodestar comprises of a team of experienced underwriters and claims executives plus in-housesurveyors, 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" ratedinsurers 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 aletter of undertaking or bank guarantee. Furthermore, Lodestar is in the process of finalising Flag State approval for the issuanceof Blue Cards with acceptance already received from a number of Authorities including United Kingdom, Netherlands, HongKong and Australia etc. Lodestar is authorised and regulated by the FSA as an appointed representative of Pro InsuranceSolutions Limited.

Reinsurance Carrier: Royal Sun Alliance GroupStandard and Poor’s Rating: A+Maximum Limit Offered: USD 500 MillionVessel Type/ Size Cap: Up to 20,000 for non-tanker vessels and up to 10,000 GT for tankersFacility Location: London, United Kingdom


32% Southern Europe

28% Far East

15% Middle East

11% South America

10% Northern Europe

3% Africa

1% North America

67% Dry Cargo

11% Tankers

9% Offshore

9% Tugs & Barges

2% Others

1% Fishing

1% Yachts




Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income - - - - 18,000,000



*Note: 2012 premium income is a speculative amount, official Lodestar figures to be published in Q2 of 2014.

35


94% P&I

3% FD&D


2% Other Risks

1% Charterers/DTH


2009

2010

2011

2012

0

5,000,000

10,000,000

15,000,000

20,000,000


0

2

4

6

8

10

12

00820 00920 01020 011202011

01220

0

500,000

1,000,000

1,500,000

2,000,0002008

2009

2010

2011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage - - - - 1,777,512


Policy Year: 2008 2009 2010 2011 2012


36


NAVIGATORS P&I www.navpandi.com

Established in 2004, the Navigators Insurance Group set up a fixed premium P&I facility protecting ship owners, managers andcharterers 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 limitedOcean trades. The facility offers limits up to USD 500 million 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 alsoavailable on a worldwide trading basis, excluding U.S. waters.

In addition to Owner’s P&I, Navigators can also offer contractual liabilities as an extension of the main P&I coverage. Charterer’sLiability is also available to vessels below 10,000 GT. Navigators Insurance Company and Navigators Specialty InsuranceCompany are both rated ‘A’ (Strong) by Standard & Poor’s.

Reinsurance Carrier: Navigators Insurance CompanyStandard and Poor’s Rating: AMaximum Limit Offered: Up to US$ 500 MillionVessel Type/ Size Cap: Up to 10,000 GTFacility Location: London, United Kingdom


33% Europe

32% Far East

16% North America

8% South America

6% Middle East

5% Africa

56% General Cargo

11% Tugs & Barges

11% Bulker

10% Tankers

5% Others

4% Fishing

3% Offshore




Policy Year: 2008 2009 2010 2011 2012




37



20,000,000

25,000,000

24,000,000

23,000,000

22,000,000

21,000,000

29,000,000

28,000,000

27,000,000

26,000,000

30,000,000

2008200

2009200

2010201

20112012 201220122

0

500,000

1,000,000

1,500,000

2,000,000

2,500,0002008

2009

2010

2011



Policy Year: 2008 2009 2010 2011 2012

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


2008

2009

2010

2011

2012

10.00

10.50

11.00

11.50

12.00


Policy Year: 2008 2009 2010 2011 2012



100% P&I

38


OSPREY UNDERWRITING AGENCY LIMITED www.special-risks.co.uk

Established in 1991, Osprey Underwriting Agency is a specialist P&I fixed premium insurance provider and is the oldest P&Ifixed premium insurer in London. The Agency provides insurance services to ship owners on a variety of vessel types andoperations, 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 carryingpersistent cargoes and passenger vessels. For business emanating from the U.S. 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 andLloyd’s agents. Osprey is actively looking to expand its non-US book of business with a focus on Asia, whilst maintaining itsleading position as providers of U.S. Primary P&I Insurance.

Reinsurance Carrier: Lloyds of London (various syndicates)Standard and Poor’s Rating: A+Maximum Limit Offered: Up to US$ 100 MillionVessel Type/ Size Cap: Up to 25,000 GT (dry bulk) and 10,000 GT all other vessel typesFacility Location: London, United Kingdom


74% North America

10% Europe

8% South America

4% Middle East

4% Other

39% Tugs & Barges

23% Fishing

17% Offshore

13% Others

8% General Cargo




Policy Year: 2008 2009 2010 2011 2012




39


85% P&I

10% Other Risks


5% H&M

P&I PREMIUM INCOME (USD) VOLUME DEVELOPMENT

2008

2009

2010

2011

2012

30,000,000

40,000,000

50,000,000

45,000,000

35,000,000


2008200

2009200

2010201

2011201

2012201

10,000.00

15,000.00

16,000.00

11,000.00

12,000.00

13,000.00

14,000.00

17,000.00

18,000.00

19,000.00

20,000.00

0

500

1000

1500

2000

2500

3000

3500

2008

2009

2010

2011

2012VOLUME OF BUSINESS UNDERWRITTEN

NUMBER OF VESSELS UNDERWRITTEN

Policy Year: 2008 2009 2010 2011 2012

No. Vessels Underwritten 2,350 2,660 2,849 3,095 2,450

AVERAGE PREMIUM PER VESSEL DEVELOPMENT 5 YEARS (OWNED) (USD)

Policy Year: 2008 2009 2010 2011 2012

Average Premium Per Vessel 13,191.49 13,533.83 14,215.51 13,279.48 15,673.47

40


RAETSMARINE BV www.raetsmarine.com

RaetsMarine BV was founded in 1993, initially writing charterers liability insurance only. RaetsMarine BV were independentunderwriting agents of Amlin Corporate Insurance BV before they were absorbed by Amlin Europe N.V. in 2013. RaetsMarinecontinues 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, tugsand barges and other specialist units.

For Charterers Liability, RaetsMarine has no restrictions on vessel type, size, age or territory. The facility currently serves over1,000 charterers, including traders, operators, NVOCCs and others chartering vessels, offering limits up to USD 500 Million (for both owned and chartered business).

RaetsMarine BV is owned and controlled by Amlin Europe N.V. which is A- rated by Standard and Poor’s.

Reinsurance Carrier: Amlin Europe N.V.Standard and Poor’s Rating: A-Maximum Limit Offered: Up to USD 500 MillionVessel Type/ Size Cap: Up to 40,000 GT. Unlimited for Charterers Liability.Facility Location: Rotterdam, Netherlands


74% Europe

10% Far East

8% Middle East4% South America

4% Russia & CIS

4% Africa

4% North America

28% Others

22% General Cargo

18% Bulkers13% Tugs & Barges

7% Tankers

5% Containers

4% Fishing

1% Dredgers

1% Offshore

1% Yachts




Policy Year: 2008 2009 2010 2011 2012



Surplus/ Deficit 14,300,000 21,300,000 17,836,000 21,714,000 27,250,000



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage 5,298,502 12,178,942 11,390,104 16,262,048 15,806,600]


2

3

4

5

6

2008

20092222 2010

2011

2012 65% P&I

22% Charterers/DTH

8% FD&D


4% Ports and Terminals

0.5% SOL to Cargo

0.5% War

41



20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

2008222 2009

2010

2011

2012

0

5,000,000

10,000,000

15,000,000

20,000,000

2008

2009

2010

2011

2012


Policy Year: 2008 2009 2010 2011 2012


CHARTERERS LIABILITY DEVELOPMENT 5 YEARS (USD)

Policy Year: 2008 2009 2010 2011 2012



Surplus/ Deficit 12,420,000 11,308,000 11,440,000 12,005,000 12,250,000

42


ROSGOSSTRAKH LTD www.rgs.ru

Established in 1921, Rosgosstrakh Ltd is one of the leading Insurance companies in Russia. In 2010 the insurance company was privatized and today it employs over 100,000 professionals in 83 regional branches, comprising of 3,000 officesthroughout Russia.

As a Marine Insurer, Rosgosstrakh is the third largest carrier in Russia, which provides H&M and P&I insurance solutions,catering to vessels up to 25,000 GT (and 8,500 GT for tankers), offering limits up to 100 Million. The insurer currently handles in excess of 580 vessels, with a combined GT of 1,005,019 (based on 2011 policy year).

RGS is accredited by MLIT, Japan and UMA of Turkey as well as the maritime authorities and flag states such as Russia, Liberia,Malta, Panama and others. The insurer is also expected to become a member of BIMCO by the end of 2012.

RGS is locally rated by Expert Ra and currently holds a rating of A++

Reinsurance Carrier: Reinsurance TreatyStandard and Poor’s Rating: BB-/RuAA (P&I Reinsurance Treaty A+)Maximum Limit Offered: Up to USD 500 MillionVessel Type/ Size Cap: Tankers up to 8,500 GT and All other vessels up to 25,000 GTFacility Location: Moscow, Russia


90% Russia

6% Southern Europe

2% Middle East

1% Far East

1% Northern Europe

40% Tankers

28% General Cargo

15% Others

9% Fishing

5% Tugs & Barges

3% Offshore




Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income 744,480 1,943,532 3,286,643 3,885,055 4,008,499

P&I Claims Incurred 101,532 274,745 195,519 2,090,796 975,731

Surplus/ Deficit 642,948 1,668,787 3,091,124 1,794,259 3,032,768

43


100% P&I



0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

220082000 22009

22010

22011

22012


3.0

3.5

3.75

3.25

4.0

20082000 2009

20102000 2011

2012

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2009

2010

2011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage 235,258 562,170 1,038,500 1,055,019 1,118,552


Policy Year: 2008 2009 2010 2011 2012


44

Arthur J. Gallagher & Co is a public listedcompany on the New York Stock Exchange.

DID YOU KNOW?

45

NON-IG MUTUAL FACILITIES FACTS AND FIGURES

46


CHINA P&I CLUB www.cpiweb.org

The China Shipowners Mutual Assurance Association was established in 1984, based in Beijing, China, offering mutual P&I,Legal Defence, Charterers Liability and Hull insurance solutions to its Members. In 1994, the CPI set up a service office in HongKong, with additional representative offices in the major ports of China's mainland, such as Shanghai and Dalian.

The CPI is not a member of the International Group of P&I Club’s, however the Club does rely on reinsurance arrangements tooffer its Members IG-Club limits, through a co-insurance arrangement with the Skuld, Steamship Mutual, UK Club and the Westof England (excess of USD 400,000).

The Club has a growing portfolio of predominately Chinese Members and has more recently attracted new Members from HongKong, Singapore and other parts of Asia. The Club has an exceptionally strong free reserve amounting to US$ 686 Million, whichwould put CPI second to Gard in terms of free reserve strength (compared to IG-Group Club free reserves).

Reinsurance Carrier: Co-Insured with International Group P&I Clubs (Skuld, SSM, UK and WofE) Standard and Poor’s Rating: UnratedMaximum Limit Offered: International Group Club LimitVessel Type/ Size Cap: No restrictionsFacility Location: Beijing, China


100% Far East 100% Not Disclosed




Policy Year: 2008 2009 2010 2011 2012



Surplus/ Deficit 33,151,000 29,653,000 39,923,000 39,872,000 37,554,000

47


100% Not disclosed



30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

80,000,000

220080000

22009

22010

22011

22012


2.0

2.5

2.6

2.7

2.8

2.9

2.1

2.2

2.3

2.4

3.0

200800

20000

200900

201001111

201101000

2012010101

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,0002008

2009

2010

2011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage 16,510,000 17,880,000 24,010,000 27,800,000 31,340,000


Policy Year: 2008 2009 2010 2011 2012


48


HELLENIC MUTUAL P&I& WAR RISKS ASSOCIATION www.mutual.gr

The Hellenic P&I Mutual was established in 2007, however, it commenced trading in 2011, providing P&I, FD&D and War RisksInsurance predominantly to the Greek shipping community. The facility offers limits of liability up to US$ 500 Million (coverage upto US$ 1 Billion is also available).

The insurer will initially focus on writing passenger and dry cargo vessels up to 25,000 GT, which are owned andoperated by Greek ship owners and operators.

The Hellenic P&I Mutual are managed by Agion Insurance Company SA, who are based in Greece with a London basedrepresentative office.

Reinsurance Carrier: Lloyds of LondonStandard and Poor’s Rating: Mutual Facility: Unrated - Reinsurers A+ (reinsurers)Maximum Limit Offered: USD 500 MillionVessel Type/ Size Cap: Dry cargo vessels up to 25,000 GTFacility Location: Athens, Greece


70% Southern Europe

21% Middle East

6% Far East

3% Africa

52% Passenger & RORO

19% Tugs & Barges

17% Dry Cargo

12% Tankers




Policy Year: 2008 2009 2010 2011 2012

P&I Premium Income - - - 1,255,406 914,036

P&I Claims Incurred - - - 500,000 6,000

Surplus/ Deficit - - - 755,406 908,036

49


70% P&I

20% War


5% Charterers/DTH

5% FD&D


00820 00920 01020 01120 01220

900,000

1,200,000

1,100,000

1,000,000

1,300,000

1,400,000

1,500,000


0.0

0.5

1.0

1.5

2.0

2.5

3.0

00820 00920 01020 011202011

01220

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

20008

20009

20010

20011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage - - - - 306,200


Policy Year: 2008 2009 2010 2011 2012


50


KOREAN P&I CLUB www.kpiclub.or.kr

The Korea Shipowners Mutual P&I Association was established in 2000, offering fixed premium P&I solutions, as well as othermarine related insurances. KPI operates as a mutual organisation (not for profit), covering in excess of 900 vessels, commandinga collective market share of 10 Million GT, with a premium income of approximately US$ 30 million (based on 2011 results).

The facility offers P&I limits of liability up to US$ 300 Million (US$ 1 Billion is also available in some cases), backed by reinsurersfrom Lloyd’s of London, Korean Re and ACR.

KPI targets a large tonnage range of merchant vessels ranging up to 100,000 GT for dry cargo vessels and up to10,000 GT for tanker tonnages. The majority of their portfolio consists of Korean Members, which makes up 97%of the Club.

Reinsurance Carrier: Lloyds of London, Korean Re and ACRAM Best Rating: A- (excellent)Maximum Limit Offered: USD 1 BillionVessel Type/ Size Cap: No LimitFacility Location: Seoul, Korea


100% Far East 21% Bulkers

21% Fishing

16% Others

15% General Cargo

10% Containers

9% Tankers

9% Dredgers




Policy Year: 2008 2009 2010 2011 2012



Surplus/ Deficit 3,702,000 7,193,000 13,090,000 13,484,000 8,813,000

51


98% P&I

2% Charterers/DTH



10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

22008000808

22009

22010

22011

22012


2.0

2.5

3.0

3.5

200822 2009

2010

2011

2012

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,0002008

2009

2010

2011



Policy Year: 2008 2009 2010 2011 2012

Gross Tonnage 4,996,000 7,338,000 685,000 10,007,000 11,833,000


Policy Year: 2008 2009 2010 2011 2012


52

Arthur J. Gallagher has client capabilities in more than 140 countries.

DID YOU KNOW?

53

NON-IG SPECIALIST CHARTERERS & TRADERSFACILITIES FACTS AND FIGURES

54


CHARTERAMA BV www.charterama.nl

Charterama BV was established in March 2009, based in Rotterdam, Netherlands, as an underwriting agency offering a full range of Charterers’ P&I coverage, the facility is able to respond worldwide, with their extensive global network ofcorrespondents.

Charterama BV is backed by its primary carrier Royal Sun Alliance, along with reinsurance through Munich Re, Chartis and Lloyds of London. Royal Sun Alliance holds an A+ Standard and Poor’s rating.

The facility specialises in Charterers’ Liability, Damage to Hull and FD&D coverage, offering limits up to USD 100 Million and USD 2 Million for FD&D. Additional “fringe” products, such as War and Bunkers insurance are also available.

Given the facilities modest size of five staff members, the facility has grown tremendously from a premium income of USD 3 Million in 2009, to USD 10 Million in 2011.

Reinsurance Carrier: Royal Sun Alliance Standard and Poor’s Rating: A+Maximum Limit Offered: Up to USD 100 MillionVessel Type/ Size Cap: No restrictionsFacility Location: Rotterdam, Netherlands


58% Europe

17% Far East

9% North America

7% Middle East

5% Australia

2% Africa

2% South America

45% Bulkers

30% General Cargo

17% Tankers

5% Containers

2% Tugs & Barges

1% Others



CHARTERERS LIABILITY INCOME (USD)

Policy Year: 2008 2009 2010 2011 2012

Charterers Premium Income - 3,000,000 5,000,000 7,000,000 10,000,000

Charterers Claims Incurred - - - - -


55


72% Charterers/DTH

22% FD&D


4% War

2% Other Risks

P&I PREMIUM INCOME (USD) NUMBER OF VESSELS ON RISK

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

2200808

22009

22010

22011

22012

AV. PREMIUM PER VESSEL

2002

08

2002

09

2012

10

2012

11

2012

12

1170.00

1210.00

1200.00

1190.00

1180.00

1260.00

1250.00

1240.00

1230.00

1220.00

0

2000

4000

6000

8000

10000

22008

2009

2010

2011

2012NO. VESSELS INSURED

Policy Year: 2008 2009 2010 2011 2012

No. Vessels - 2,500 4,000 5,800 8,300

AV. PREMIUM PER VESSEL ON RISK

Policy Year: 2008 2009 2010 2011 2012

- 1200.00 1250.00 1206.90 1204.82

Reinsurance Carrier: Munich ReStandard and Poor’s Rating: AA-Maximum Limit Offered: Up to USD 500 MillionVessel Type/ Size Cap: No restrictionsFacility Location: London, United Kingdom

56


THE CHARTERERS P&I CLUB www.exclusivelyforcharterers.com

The Charterers P&I club was founded in 1986, as a mutual insurance company, specialising in charterers liability insurance anddefence coverage. In 1999 the Club was demutualised and an underwriting agency was formed, backed by Lloyds of Londonsecurity, offering fixed premium charterers liability and other marine related products.

In 2009 the agency switched its security to Great Lakes Munich Re Group, which holds an S&P AA- rating.Michael Else & Co., are the managers of the Club and provide all underwriting and claims support through its globalcorrespondent network.

The facility provides limits of liability up to USD 500 million for charterer’s liability and up to USD 2 million for FD&D.


32% Far East

28% Northern Europe

15% Middle East

10% Australia

9% Southern Europe

3% North America

2% North America

1% South America

60% Bulkers

17% General Cargo

10% Containers

5% Tankers

4% Others

2% Tugs & Barges

1% Dredgers

1% Offshore




Policy Year: 2008 2009 2010 2011 2012

Charterers Premium Income 25,500,000 28,000,000 27,000,000 25,500,000 28,000,000



57


80% Charterers/DTH20% FD&D


P&I PREMIUM INCOME (USD) NUMBER OF VESSELS ON RISK

25,000,000

26,000,000

27,000,000

28,000,000

29,000,000

30,000,000

2200820000

22009

22010

2201120111

22012

AV. PREMIUM PER VESSEL

200800

200900

201001

201101

201201

2000.00

2500.00

2700.00

2800.00

2900.00

2600.00

2200.00

2300.00

2400.00

2100.00

3000.00

0

2000

4000

6000

8000

10000

12000

00820 2009

2010

2011

2012NO. VESSELS INSURED

Policy Year: 2008 2009 2010 2011 2012

No. Vessels - 11,000 11,500 11,000 12,000

AV. PREMIUM PER VESSEL ON RISK

Policy Year: 2008 2009 2010 2011 2012

- 2545.45 2347.83 2318..18 2333.33

58


NORWEGIAN HULL CLUB www.norclub.no

In 2008 the Club commenced underwriting Charterer’s Liability risks, today their portfolio commands a premium income ofaround US$ 11 Million, with approximately 150 charterers & traders clients.

The Club’s charterer’s facility offers limits up to US$ 500 Million for traditional Charterer’s P&I and Damage to Hull.

FD&D for charterers is also available in addition to the Clubs extensive marine insurance product range.The Norwegian Hull Club has a large share of the Norwegian ocean hull market and ranks amongst the largest pure marineunderwriters in the world.

Reinsurance Carrier: Lloyds of LondonStandard and Poor’s Rating: A-Maximum Limit Offered: USD 200 MillionVessel Type/ Size Cap: No restrictionsFacility Location: Oslo, Norway


50% Europe

40% Asia-Pacific

4% Middle East

3% North America

3% South America

80% Bulkers

10% General Cargo

10% Others




Policy Year: 2008 2009 2010 2011 2012

Charterers Premium Income - 8,700,000 9,500,000 11,000,000 12,500,000



59


63% H&M

24% Other Risks


7% War

6% Charterers/DTH

P&I PREMIUM INCOME (USD)

6,000,000

9,000,000

12,000,000

15,000,000

2008

2009

2010

2011

2012

With a client base that extends across the full spectrum of the internationalshipping market, we are able to provide our customers with competitive pricing,obtained from approved insurers around the world, in addition to a service levelthat means that our clients are not just another policy number. We believe that this philosophy distinguishes AJG from the other major brokers. Some of ourspecialist areas include:

Covers include:

• Hull and Machinery • Freight Interest• Mortgagees’ Interest • Loss of Charter Hire• Voyage and Tow Risks • Builders Risk• Increased Value

GALLAGHER HULL AND MACHINERY

Have you considered Arthur J. Gallagher for your H&M placement?



60



Ship security has become an increasingly important issue within the maritimeindustry. With the heightened piracy activity comes an increased risk to shippingcompanies, operations and their vessels and crew.

Covers include:

• Conventional War Risks • Charterers Lost Earnings• Loss of Hire • Kidnap and Ransom• Piracy

Arthur J. Gallagher always seeks to tailor the most suitable package for thedemands and needs of the operation in question

GALLAGHER WAR RISK

Need help with your war risk solutions?

61

INDUSTRY STATISTICS

62


FIXED P&I PREMIUM DEVELOPMENT LAST FIVE YEARS (2008-2012) (In USD ‘000)

COMMERCIAL MARKET PREMIUM DEVELOPMENT

2008

$93,000

$28,600

$31,000

$25,400

$28,200

$7,700

N/A

N/A

N/A

$744,480

N/A

$214,645

28,278

$7.590

-6.81%

9.17%

49.33%

2009

$125,000

$35,500

$36,000

$27,250

$25,000

$11,200

$1,943

$261,893

36,020

$7.271

-4.21%

2010

$133,500

$36,400

$40,500

$23,000

$24,000

$14,700

$500,000

$3,286

$275,886

36,023

$7.659

5.34%

2011

$125,000

$51,700

$41,100

$19,228

$22,500

$15,800

$5,000

$2,000

$3,885

$1,146

$287,360

39,417

$7.290

-4.81%

2012

$106,000

$54,500

$38,400

$23,523

$22,000

$19,700

$18,000

$6,500

$5,000

$4,008

$1,081

$298,713

42,228

$7.074

-2.97%

Varianceon 2011

(%)

-15.20%

5.42%

-6.57%

22.34%

2.22%

24.68%

N/A

30.00%

150.00%

3.18%

-5.67%

5.29%

7.13%


13.98%

90.56%

23.87%

-7.39%

-21.99%

155.84

N/A

1200%

150.00%

438.43%

N/A

39.17%

49.33%

(OWNED)

POLICY YEAR

British Marine

RaetsMarine

Osprey

Ingosstrakh

Navigators

Hanseatic P&I

Lodestar

Eagle Ocean Marine

Hydor A/S

Rosgosstrakh

Aigaion Insurance Co. SA

Total P&I Premium Income(owned)

Total Underwritten GT (owned)

Av. P&I Rate Per GT (owned)



5 Year CumulativePremium Growth (%)

5 Year Cumulative Tonnage Growth (%)

Observing and comparing industry statistics on the various International Group Club’s is relatively easy due to the transparent and consistent nature in which the Clubs report on account. By contrast, analysing the various commercial markets is anextremely difficult task. This is mainly due to the following reasons:

• The individual Markets willingness to release accurate premium, GT and claims figures.

• Inconsistencies in figures produced by the individual market facilities, as the majority of the declared premium income may also include other marine lines, such as H&M and Chartered Liabilities etc.

63


FIXED P&I MARKET PREMIUM DEVELOPMENT LAST FIVE YEARS (2008-2012) (USD)(OWNED)

2008 2009 2010 2011 2012

$350,000,000

$300,000,000

$250,000,000

$200,000,000

$150,000,000

$100,000,000

$50,000,000

$0

Premium Income (USD) Linear (Total Premium Per GT(USD))

FIXED P&I FIXED MARKET RATE PER GT DEVELOPMENT LAST FIVE YEARS (2008-2012) (USD)(OWNED)

2008 2009 2010 2011 2012

7.800

7.700

7.600

7.500

7.400

7.300

7.200

7.100

7.000

6.900

6.800

6.700

Total Premium Per GT Linear (Total Premium Per GT)

64


GROSS TONNAGE DEVELOPMENT LAST 5 YEARS (In GT ‘000)

2008

11,000

5,298

7,895

2,450

1,400

N/A

N/A

N/A

235

N/A

28,278

2009

13,500

12,178

5,879

2,300

1,600

562

36,020

2010

13,520

11,390

6,024

2,100

1,900

50

1,038

36,023

2011

12,600

16,262

4,730

2,200

2,100

470

1,000

1,055

-

39,417

2012

12,000

15,806

5,001

2,100

2,400

1,777

650

1,200

1,118

174

42,228

Varianceon 2011

(%)

-4.76%

-2.80%

5.71%

-4.55%

14.29%

N/A

38.30%

20%

6.02%

N/A

7.13%


9.09%

198.32%

-36.65%

-14.29%

71.43%

N/A

N/A

N/A

375.46%

N/A

49.33%

P&I OWNED

POLICY YEAR

British Marine

RaetsMarine

Osprey

Ingosstrakh

Navigators

Hanseatic P&I

Lodestar

Eagle Ocean Marine

Hydor A/S

Rosgosstrakh

Aigaion Insurance Co. SA

Total Gross Tonnage

Total (Owned)GT Development Linear (Total (Owned) GT Development)

2008 2009 2010 2011 2012

50,000,000

45,000,000

40,000,000

35,000,000

30,000,000

25,000,000

20,000,000

15,000,000

10,000,000

5,000,000

0

65


NON-IG CHARTERERS PREMIUM & VOLUME DEVELOPMENT (2008-2012) (In USD ‘000s)*

NON-IG CHARTERERS MARKET

2008

N/A

$25,000

$27,600

N/A

$52,600

31,561

$1,666.61

-19.76%

42.59%

77.70%

2009

$3,000

$28,000

$25,700

$8,700

$65,400

49,371

$1,324.66

-20.52%

2010

$5,000

$27,000

$26,000

$9,500

$67,500

49,371

$1,367.20

3.21%

2011

$7,000

$25,500

$24,500

$11,000

$68,000

50,583

$1,344.33

-1.67%

2012

$10,000

$28,000

$24,500

$12,500

$75,000

56,083

$1,337.30

-0.52%

Varianceon 2011

(%)

42.86%

9.80%

0%

13.64%

10.29%

10.87%

-0.52%


233.33%

12.00%

-11.23%

43.68%

11.11%

13.60%

-2.19%

POLICY YEAR

Charterama BV

Charterers P&I Club

RaetsMarine BV

Norwegian Hull Club

Total Chartered Premium

Total Vessels on Risk(Chartered)

Av. Premium per Vessel(Chartered)




CL Volume Growth (%)


2008 2009 2010 2011 2012

$80,000,000

$70,000,000

$60,000,000

$50,000,000

$40,000,000

$30,000,000

$20,000,000

$10,000,000

$0

66


CHARTERED AVERAGE PREMIUM PER VESSEL LAST FOUR YEARS DEVELOPMENT (2008-2012) (USD)*

Av. Premium Per Vessel Linear (Av. Premium Per Vessel)

2008 2009 2010 2011 2012

$1800.00

$1600.00

$1400.00

$1200.00

$1,000.00

$800.00

$600.00

$400.00

$200.00

$0.00

NON-IG MUTUAL P&I PREMIUM & GT DEVELOPMENT (2008-2012) (In USD ‘000s)*

NON-IG CHARTERERS MARKET

2008

$34,941

$11,808

N/A

$46,749

21,506

$2.17

3.93%

110.11%

102.17%

2009

1$44,802

$19,066

$63,868

25,218

$2.53

16.51%

2010

$51,148

$25,055

$76,203

24,695

$3.09

21.84%

2011

$60,012

$30,184

$1,255

$91,451

37,807

$2.42

-21.61%

2012

1$67,090

$30,221

$914

$98,225

43,479

$2.26

-6.61%

Varianceon 2011

(%)

11.79%

0.12%

-27.19%

7.41%

15%

-6.61%


92.01%

155.94%

N/A

110.11%

102%

3.93%

POLICY YEAR

China P&I Club

Korean P&I Club

Hellenic P&I & War Risks

Total Owned Premium

Total Underwritten GT

Av. Rate Per GT (Owned)




5 Year Cumulative Tonnage Growth (%)

67


NON-IG MUTUAL PREMIUM DEVELOPMENT LAST 5 YEARS (2008-2012) (USD)

2008 2009 2010 2011 2012

$120,000,000

$100,000,000

$80,000,000

$60,000,000

$40,000,000

$20,000,000

$0

Total Mutual Premium Income Linear (Total Mutual Premium Income)

MUTUAL P&I FIXED MARKET RATE PER GT DEVELOPMENT LAST FIVE YEARS (2008-2012) (USD)

2008 2009 2010 2011 2012

$3.50

$3.00

$2.50

$2.00

$1.50

$1.00

$0.50

$0.00

Total Mutual Premium Income Linear (Total Mutual Premium Income)

7.84%

5.73%

23.20%

12.93%7.46% 39.44%

1.39%

2.02%

68


NON-IG MUTUAL GROSS TONNAGE DEVELOPMENT LAST 5 YEARS (MUTUAL) (In GT ‘000)

2008

16,510

4,996

Notavailable

21,506

2009

17,880

7,338

25,218

2010

124,010

6,850

30,860

2011

127,800

10,007

37,807

2012

31,340

11,833

306

43,479

Varianceon 2011

(%)

18.25%

12.73%

N/A

15%


136.85%

89.82%

N/A

102%

POLICY YEAR

China P&I Club

Korean P&I Club

Hellenic Mutual P&I & War Risks

Total:

COMMERCIAL P&I MARKET GLOBAL PREMIUM INCOME ANALYSIS – 2012 POLICY YEAR

NorthAmerica

36,932

7.84%

SouthAmerica

26,964

5.73%

Far East

185,727

39.44%

MiddleEast

35,116

7.46%

NorthernEurope

109,277

23.20%

SouthernEurope

60,873

12.93%

Africa

9,502

2.02%

Australia

6,564

1.39%

AREA

2012 P&I Income (in USD ‘000)

% of P&I Income

Total Mutual GT Development Linear (Total Mutual GT Development)

2008 2009 2010 2011 2012

45,000,000

35,000,000

30,000,000

25,000,000

15,000,000

10,000,000

5,000,000

0

69


COMMERCIAL MARKET SHARE BY PREMIUM INCOME (USD)

P&I OWNED 2012

NON-IG CHARTERERS SPECIALIST INSURERS

NON-IG MUTUAL INSURERS

Pos. MARKET 2012 INCOME

1 British Marine $106,000,000

2 RaetsMarine $54,500,000

3 Osprey $38,400,000

4 Ingosstrakh $23,523,000

5 Navigators $22,000,000

6 Hanseatic P&I $19,700,000

7 Lodestar $18,000,000

8 Eagle Ocean Marine $6,500,000

9 Hydor A/S $5,000,000

10 Rosgosstrakh $4,008,000

11 Aigaion Insurance Co. $1,081,618

35.44%

18.22%

12.84%

7.86%

7.35%

6.59%

6.02%

2.17%

1.67%

1.34%

0.50%


1 Charterers P&I Club $28,000,000

2 RaetsMarine $24,500,000

3 Norwegian Hull Club $12,500,000

3 Charterama BV $10,000,000

37%

33%

17%

13%


1 China P&I Club $67,090,000

2 Korean P&I Club $30,221,000

3 Hellenic Mutual $ 914,036

68.3%

30.77%

0.93%

70


RATING AGENCY ANALYSIS

Arthur J. Gallagher (UK) Ltd (“AJG (UK)”) operates a marketsecurity policy which sets a minimum standard for insurancemarkets which can be included on its acceptable marketsecurity list. A number of criteria are utilised to evaluate thefinancial condition of these markets and one of the criteriaused is the ratings allocated by either Standard & Poor’s(S&P) or A M Best. The AJG (UK) security policy sets aminimum rating level of A- from these agencies as anindicator of acceptable security.

Accordingly where a security fails to meet the minimumcriteria, we would direct your attention to your P&I Insurersfinancial strength rating, where and when it falls below anS&P or AM Best A- rating and where this security no longerqualifies for inclusion on the AJG (UK) market security list;requesting that you advise us if you wish us to attempt tosource an alternative market. In some cases it may bepossible to arrange P&I cover with an S&P or AM Best ‘A’ rated carrier on similar terms.

This is something that we can discuss with you on anindividual case by case basis. It is important that youcarefully consider maintaining your insurance with yourcurrent P&I insurer where the rating is below the AJG (UK)minimum of A- and that should you decide to do so that youalso understand that AJG (UK) are not responsible for thecontinuing performance of any security and that any futurecredit risk associated with renewing the policy with yourcurrent insurer will be borne by the assured. We would,therefore, draw your attention to the following ratings andrespectfully request that, if you require us to look at otheroptions in respect of your risk here, you advise usaccordingly as soon as possible

P&I FACILITY CURRENT RATING P&I FACILITY CURRENT RATING

AIGAION MARINE A+ HYDOR AS A+

BRITISH MARINE A+ INGOSSTRAKH BBB-

CARINA A+ KOREAN P&I CLUB UNRATED BY S&P

CHARTERAMA BV A+ LODESTAR LTD A+

CHARTERERS P&I CLUB AA- NAVIGATORS P&I A

CHINA P&I CLUB UNRATED BY S&P NORWEGIAN HULL CLUB A-

EAGLE OCEAN MARINE BBB- OSPREY A+

HANSEATIC P&I A RAETSMARINE BV A-

HELLENIC P&I UNRATED BY S&P ROSGOSSTRAKH LTD BB-

KEY

AA: “Very Strong” financial security characteristics.

A: “Strong” financial security characteristics, but issomewhat more likely to be affected by adverse businessconditions than are insurers with higher ratings.

BBB: “Good” financial security characteristics, but is morelikely to be affected by adverse business conditions than are higher rated insurers.

Positive attributes exist, but adverse business conditionslead to insufficient ability to meet financial requirements.

B: “Weak” financial security characteristics. Adversebusiness conditions will likely impart the ability to meetfinancial commitments.

+ or - Signs show relative standing within the majorrating category

Pi’ ratings are based on public data only; others are basedon a periodic review by S&P analysts.

Ratings BBB or higher are regarded as having financialsecurity characteristics that outweigh any vulnerabilities, and are likely to have the ability to meet financialcommitments.

Ratings BB or lower are regarded as having vulnerablecharacteristics that may outweigh the strengths.

71


We at Arthur J. Gallagher provide a specialist service in handling marine liabilityplacements for all types of marine operations around the world. We provide anindividual tailored service with comprehensive risk management solutions requiredto address the complexities of third party liability issues. Cover can be provided on a primary of excess basis for the following:

• Marine General Liability • Over-side and Underwater Equipment• Stevedores Liability • Marina Operators Liability• Ship Repairers Liability • US Marine Employers Liability

GALLAGHER MARINE LIABILITY

Need help with yourcontractual liabilities?





The Arthur J. Gallagher marine cargo division covers the key trade and cargo sectors around the world,including Europe, US, Canada, S. American, N. & S. Africa, Middle East and Asia. We offer a dedicatedand focused client service and deliver on that promise, providing protection to a broad spectrum ofmanufacturers, distributors, wholesalers, importers and exporters. Our areas of expertise include:

• Agricultural • Food & Beverages • Manufactured Goods• Electronics • Industrial Equipment • Oil & Petroleum Products• Pharmaceuticals • Commodity Business • Including Delayed Start-Up• Containerised Consumer Products

Other areas of insurance include:

• Trade Disruption Insurance • War on Land • Stand Alone Stock & Political Violence (Primary/ Excess/ Layered)

GALLAGHER MARINE CARGO

Time to review your cargoinsurance programme?

72

Arthur J. Gallagher regularly issues specialistP&I publications, newsletter’s, technicalanalysis and educational circulars. Why notjoin our mailing list?

DID YOU KNOW?

73

MAJOR LIMITING CONVENTIONS & STATUTES AFFECTING P&I RISKS

74


DEVELOPMENTS IN THE LAST 12 MONTHS

CONVENTION ON LIMITATION OF LIABILITY FOR MARITIME CLAIMS

In April 2012 the IMO adopted a new protocol to the LLMC 1976 which further increases the liability limits under theConvention. Liability banding remain unchanged but there is an across the board 51% increases in the liability limit for bothpersonal injury/loss of life claims and property claims.

The new limits will come into force in June 2015.

ATHENS CONVENTION / EU PASSENGER LIABILITY REGULATION

The Passenger Liability Regulation (“PLR”), which is the part of the 3rd Maritime Safety Package that deals with passengerliabilities, will come into force on 31 December 2012 without the need for national implementation. The provisions of PLRmirror those of the 2002 Protocol to the Athens Convention, with only minor differences. Whilst the EU itself has acceded tothe protocol, the majority of the individual EU Member States have not yet done so - only Denmark and the Netherlands hadby 30 November 2012 - and are unlikely to have done so by 31 December 2012. The PLR requires that ships which carry12 or more passengers, and that are either registered in an EU state or entering or leaving a port of an EU state, must carry acertificate of insurance. The certificate of insurance must encompass both war/terrorism risks and “non-war” risks. The groupClubs have agreed to issue the “non-war” risk blue cards, however, they are not in a position to issue the war risks blue cardsince such risks are excluded from the pooling agreement and the group reinsurance contract.

The group debated the merits of changing their arrangements so as, in effect, to become war risk underwriters, but thenecessary three quarters majority in favour of such a move was not obtained. Consequently, owners will have to obtain war riskblue cards from another source. One solution involves Safeguard Guarantee Co Ltd, a subsidiary of Gard P&I, which has afacility to provide the financial security required. This facility is available to the market regardless of whether the member isentered for P&I with Gard.

ILO MARITIME LABOUR CONVENTION

Thirty countries were required to ratify the Maritime Labour Convention for it to start the 12 month countdown to its cominginto force. The MLC had already attained the “33% of world tonnage target” a number of years ago, and on 20 August 2012the 30th country signed up - the Russian Federation. By February 2013 this number had expanded to 35. Accordingly theMLC will come into force on 20 August 2013.

The Convention imposes certain financial security requirements on shipowners that will become effective with the entry intoforce of the MLC. Whilst many of the claims which might arise are already within the scope of standard P&I cover, there are a couple of issues now relevant that may arise in the event of insolvency of a shipowner. In order to assist in complying withthese financial security requirements, insurers have agreed to extend the scope of standard P&I cover to include repatriationin cases of insolvency and in the other circumstances listed in the MLC where seafarers are entitled to repatriation.

There is currently no provision concerning outstanding unpaid wages, but liability for unpaid wages following abandonment is a feature of the principles agreed by the International Labour Organisation in 2009. These principles are not applicable at this stage and there is no requirement in the MLC to provide financial security by way of insurance cover for unpaid wages.The MLC does, however, introduce obligations on State Parties to require that seafarers receive payment in accordance withtheir employment agreements. Such obligation to pay seafarers wages is likely to be incorporated in the existing national lawof each State Party in the forthcoming years.

It is likely that certificates of entry will be accepted as evidence of financial security, but the matter is still being finalised as we write.

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1. CONVENTION ON LIMITATION OF LIABILITY FOR MARITIMECLAIMS (LLMC), 1976 (IN FORCE 1 DEC 1986)

This convention applies to all vessels involved in incidents in signatory states, except such incidents to which the CivilLiability Convention (See Section 3) applies. At 30 November 2012, it has been ratified by 53 states, covering 53.76%of world tonnage.

The right to limit losses under this convention is lost if the incident involves a personal act or omission carried outintentionally or recklessly and with the knowledge that loss would result. Liability under the convention is calculatedin accordance with the following formulae (note that, at 12 December 2012, SDR 1 = approximately US$ 1.536):

1A. 1996 PROTOCOL TO THE 1976 LLMC (IN FORCE 13 MAY 2004)

This amends the limits of compensation payable and has been adopted by 45 states encompassing 45.67% of world tonnage at 30 November 2012. These limits are now as follows:

1A.1 PERSONAL INJURY / LOSS OF LIFE

VESSEL SIZE FORMULA

2,000 GT or less Minimum SDR 2,000,000

2,001-30,000 GT Add SDR 800 per GT to the above sum

30,001-70,000 GT Add SDR 600 per GT to the above aggregate

70,001 GT or more Add SDR 400 per GT to the above aggregate

EXAMPLE

25,000 GT SDR 20,400,000

75,000 GT SDR 50,400,000

1A.2 PROPERTY

VESSEL SIZE FORMULA





EXAMPLE

25,000 GT SDR 10,200,000

75,000 GT SDR 25,200,000

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1B. 2012 AMENDMENTS TO THE 1996 PROTOCOL (ADOPTED APRIL 2012, EXPECTED IN FORCE 8 JUNE 2015)

This further amends the limits of compensation payable, but is only in the very early stages of adoption and is notexpected to come into force for another 2 ½ years. These limits will then be as follows:

1B.1 PERSONAL INJURY / LOSS OF LIFE

VESSEL SIZE FORMULA


2,001-30,000 GT Add SDR 1,208 per GT to the above sum



EXAMPLE

25,000 GT SDR 30,804,000

75,000 GT SDR 76,104,000

1B.2 PROPERTY

VESSEL SIZE FORMULA





EXAMPLE

25,000 GT SDR 15,402,000

75,000 GT SDR 38,052,000

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2. INTERNATIONAL CONVENTION ON CIVIL LIABILITY FOR OILPOLLUTION DAMAGE (CLC), 1969 (IN FORCE 19 JUN 1975);PROTOCOL TO CLC, 1992 (IN FORCE 30 MAY 1996))

The Civil Liability Convention covers those who suffer oil pollution damage resulting from maritime casualties involvingoil-carrying ships. The Convention places the liability for such damage on the owner of the ship from which the pollutingoil escaped or was discharged. The original Convention has been largely replaced by the 1992 Protocol, which has beenadopted by 130 states, encompassing 97.19% of world shipping as at 30 November 2012. Liability is strict, andinsurance is compulsory.

Liability under the convention is calculated in accordance with the following formulae:

2.1 LIABILITY UNDER CLC (1992 PROTOCOL)

VESSEL SIZE FORMULA


5,001 GT or more Add SDR 420 per GT to the above sum

Maximum SDR 59,700,000 (equivalent to 140,000 GT)

EXAMPLE

25,000 GT SDR 11,400,000 See earlier comment regarding the mechanics of the calculation

75,000 GT SDR 32,400,000 Liability under the convention is calculated in accordance

with the following formulae:

2.2 LIABILITY UNDER CLC AS AMENDED IN 2000 (IN FORCE 1 NOVEMBER 2003)

VESSEL SIZE FORMULA


5,001 GT or more Add SDR 631 per GT to the above sum

Maximum SDR 89,770,000 (equivalent to 140,000 GT)

EXAMPLE

25,000 GT SDR 17,130,000

75,000 GT SDR 48,680,000

78


3. INTERNATIONAL CONVENTION ON THE ESTABLISHMENT OF ANINTERNATIONAL FUND FOR COMPENSATION FOR OIL POLLUTIONDAMAGE (FUND), 1992 PROTOCOL (IN FORCE 30 MAY 1996)

The purpose of this Fund is to provide compensation for pollution damage to the extent that the protection afforded by the 1969 Civil Liability Convention is inadequate. It is also intended to give relief to shipowners in respect of theadditional financial burden imposed on them by the 1969 Civil Liability Convention, with such relief being subject toconditions designed to ensure compliance with safety at sea and other conventions.

The Fund is financed by receivers of persistent oil cargoes in signatory states, via a governmental levy. It is managedby an inter-governmental organisation, the IOPC Funds.

The original 1971 Fund was denunciated in 1998, being effectively replaced by the 1992 Fund. Subsequently the limitsin that Fund were increased, effective 2003, by way of a protocol adopted in 2000. 111 states have adopted the 1992Protocol at 30 November 2012, covering 91.20% of the world fleet. The 2000 protocol increased this maximum sum to SDR 203 million, inclusive of the primary contribution under the 1992 CLC Protocol.

4. SUPPLEMENTARY FUND 2003 (IN FORCE 3 MAR 2005)

The aim of this Fund is to supplement the compensation available under the 1992 Civil Liability and Fund Conventionswith an additional, third tier of compensation. The Protocol is optional and participation is open to all States which areparty to the 1992 Fund Convention. 28 states have adopted the 2000 protocol at 30 November 2012, covering 20.44%of the world fleet.

As with the 1992 Fund, the Supplementary Fund is financed by levies on receivers of persistent oil cargoes. The totalamount of compensation payable for any one incident will be limited to a combined total of SDR 750 million inclusive of the amount of compensation paid under the existing CLC/Fund Convention system.

5. TANKER OIL POLLUTION INDEMNIFICATION AGREEMENTS.

In recognition of the potential disparities between contributions by shipowners and receivers of cargo towards the cost of pollution incidents, two agreements came into force in 2006 which sought to remedy the situation.

Under STOPIA, owners of small tankers of 29,548 GT or less indemnify the 1992 Fund for the difference between their1992 CLC liability and SDR 20 million. Under TOPIA, all tanker owners indemnify the 2003 Supplementary Fund inrespect of 50% of any claim falling on that fund.

79


6. US OIL POLLUTION ACT (OPA) 1990

The USA is not party to any of the above pollution related conventions, instead there are specific statutes which affectany vessels discharging oil, oil products or oil by-products in US waters. The main one of these is OPA 1990, whichimposes strict liability – the only defence being acts of war, acts of God or that the loss was caused solely by the actionsof a third party.

In July 2006, the US Coast Guard & Maritime Transportation Act 2006 amended limits under OPA 1990 as set out inthe table below. For non tank vessels the above increases were immediate, and for tank vessels they came into force inOctober 2006.

6.1 LIMITS OF LIABILITY UNDER OPA 1990 AS AMENDED IN 2006

VESSEL SIZE FORMULA

Single Hull Tanker: 3,000 GT or less US$ 3,000 per GT with minimum US$ 6,000,000

Single Hull Tanker: 3,000 GT or more US$ 3,000 per GT with minimum US$ 22,000,000

Double Hull Tanker: 3,000 GT or less US$ 1,900 per GT with minimum US$ 4,000,000

Double Hull Tanker: 3,000 GT or more US$ 1,900 per GT with minimum US$ 16,000,000

Other Vessels US$ 950 per GT with minimum US$ 800,000

EXAMPLE

25,000 GT Single: US$ 75,000,000 Double: US$ 47,500,000


The US Coast Guard has subsequently announced increases in liability limits to reflect inflationary erosions since the2006 change. These came into effect on a provisional basis on 1 July 2009, and were formally adopted with effect from5 February 2010. Further increases are likely every three years

6.2 AMENDED LIMITS OF LIABILITY UNDER OPA 1990 WITH EFFECT FROM 5 FEBRUARY 2010

VESSEL SIZE FORMULA

Single Hull Tanker: 3,000 GT or less US$ 3,200 per GT with minimum US$ 6,408,000

Single Hull Tanker: 3,000 GT or more US$ 3,200 per GT with minimum US$ 23,496,000

Double Hull Tanker: 3,000 GT or less US$ 2,000 per GT with minimum US$ 4,272,000

Double Hull Tanker: 3,000 GT or more US$ 2,000 per GT with minimum US$ 17,088,000

Other Vessels US$ 1,000 per GT with minimum US$ 854,400

EXAMPLE



The US has also established an Oil Spill Liability Trust Fund (“OSLTF”) administered by the National Pollution FundsCentre which supports OPA 90 and is funded by a tax on oil produced and imported into the USA. The OSLTF respondswhere a responsible party denies liability or fails to meet that liability or here the first level of liability is insufficient to fundall claims. It can provide up to $ 1 billion any one oil pollution incident.

80

7. US COMPREHENSIVE ENVIRONMENTAL RESPONSE,COMPENSATION AND LIABILITY ACT (CERCLA), 1980

This legislation is focussed on “hazardous substances”, however there are circumstances where both CERCLA and OPAcould apply to an incident involving a shipowner, operator, bareboat charterer etc. Club cover is discretionary as regardsCERCLA related claims. Limits of liability are as follows:

a) for vessels over 300 GT carrying a hazardous substance as cargo – the greater of US$ 5 million or US$ 300 per GT;b) or any other vessel over 300 GT – the greater of US$ 500,000 or US$ 300 per GT.

These limits did not change when the OPA 90 limits were raised in July 2009.In respect of obligations under both OPA and CERCLA, Certificates of Financial responsibility (COFRs) are required.

As Clubs are unwilling to certify financial responsibility as required by the US regulators, the COFR is generally providedby an independent issuing company, and covers the aggregate of the CERCLA and OPA limits of liability.

EXAMPLE

A double hull tanker of 25,000 GT will need a COFR of US$ 55 million, comprising US$ 47,500,000 under OPA 1990as amended plus US$ 7,500,000 under CERCLA.

8. ATHENS CONVENTION RELATING TO THE CARRIAGE OFPASSENGERS AND THEIR LUGGAGE BY SEA (PAL) 1974 (IN FORCE 30 APR 1989)

The Convention consolidated and harmonised two earlier Brussels conventions dealing with passengers and luggagewhich were adopted in 1961 and 1967 respectively. It establishes a regime of liability for damage suffered bypassengers carried on a seagoing vessel. It declares a carrier liable for damage or loss suffered by a passenger if theincident causing the damage occurred in the course of the carriage and was due to the fault or neglect of the carrier.

However, unless the carrier acted with intent to cause such damage, or recklessly and with knowledge that such damagewould probably result, it can limit its liability. For the death of, or personal injury to, a passenger, this limit of liability is setat SDR 46,666 per passenger.

Liability is however further limited for losses arising from acts of terrorism to the practically insurable amount. As of2006, this amount is SDR 250,000 per passenger with an aggregate limit of SDR 340 million. Subsequent to theratification of this convention (by 35 states to date, covering 45.88% of the world’s fleet) the limitation amount hasbecome more and more inadequate. A 1990 protocol increasing the limit to SDR 175,000 was not adopted (beingratified by only 6 minor states) and has been superseded by the 2002 protocol. This is presently being ratified: so far only9 states, including the European Union, representing 2.11% of world tonnage have done so by 30 November 2012.

The principle provisions of this protocol will come into effect within the European Union the European Economic Area viathe EU Passenger Liability Regulation # 329/2009 on 31 December 2012.


81

9. INTERNATIONAL CONVENTION ON CIVIL LIABILITY FOR BUNKER OIL POLLUTION DAMAGE, (BUNKERS) 2001 (IN FORCE 21 NOV 2008)

The Bunker Convention reached its required criteria of 18 states’ ratification in November 2007, and by 30 November2012 had 65 acceptances covering 90.00% of the world fleet.

The Convention covers pollution caused by spills of oil carried as fuel on board the vessel. The limits are the same asthose imposed under LLMC 1976 as amended by the 1996 Protocol.

10. INTERNATIONAL CONVENTION ON LIABILITY ANDCOMPENSATION FOR DAMAGE IN CONNECTION WITH THECARRIAGE OF HAZARDOUS AND NOXIOUS SUBSTANCES BY SEA (HNS) 2010 (NOT YET IN FORCE)

The original 1996 HNS Protocol established a two tier compensation regime for amounts up to SDR 250 million and hasbeen ratified by 14 states or 14.00% of world fleet by 30 November 2012.

A Focus Group was established in 2007 in order to address administrative concerns of the ratifying states – particularlyin respect of the operations of the 2nd tier of compensation, and the difficulty in establishing how much HNS wasreceived in any country.

A revised 2010 protocol, based on the findings of the above focus group, was adopted in April 2010, but has not yetbeen ratified by any states, with 8 states signing the protocol “subject to ratification”.

Under this protocol the total compensation remains the same, but the shipowner’s maximum liability for an incidentinvolving packaged HNS is increased from SDR 100 million to SDR 115 million. Thereafter compensation would be paidby a second tier HNS Fund, financed by cargo receivers. The shipowners liability for bulk HNS remains unchanged atSDR 100 million.


8.1 PROPOSED LIMITS UNDER 2002 PROTOCOL TO PAL

TYPE OF LOSS LIMIT

Strict Liability Passenger Personal Injury / Death SDR 250,000 per passenger

Operator Negligence Passenger Personal Injury / Death SDR 400,000 per passenger

Loss or Damage to Cabin Luggage SDR 2,250 per passenger

Loss or Damage to Vehicle and Luggage therein SDR 12,700 per vehicle

Loss or damage to Other Luggage SDR 3,375 per passenger

82

The revised protocol will enter force eighteen months after at least 12 States (including at least 4 with over 2 million GT)express their consent to be bound by it. Additional conditions relate to cargo receiving country contributions.

10.1 LIMITS OF LIABILITY UNDER HNS 1996

VESSEL SIZE FORMULA – BULK HNS FORMULA – PACKAGED HNS

2,000 GT or less Minimum SDR 10,000,000 Minimum SDR 11,500,000

2,001-50,000 GT Add SDR 1,500 per GT to the above Add SDR 1,725 per GT to the above

aggregate

50,001 GT or more Add SDR 360 per GT to the above Add SDR 414 per GT to the above

aggregate.

Maximum SDR 100 million SDR 115 million

EXAMPLE

25,000 GT SDR 44,500,000 SDR 51,175,000

75,000 GT SDR 91,000,000 SDR 104,650,000


11. NAIROBI INTERNATIONAL CONVENTION ON THE REMOVAL OF WRECKS (NAIROBI WRC) 2007 (NOT YET IN FORCE)

The Convention consolidated and harmonised two earlier Brussels conventions dealing with passengers and luggagewhich were adopted in 1961 and 1967 respectively. It establishes a regime of liability for damage suffered bypassengers carried on a seagoing vessel. It declares a carrier liable for damage or loss suffered by a passenger if theincident causing the damage occurred in the course of the carriage and was due to the fault or neglect of the carrier.

However, unless the carrier acted with intent to cause such damage, or recklessly and with knowledge that such damagewould probably result, it can limit its liability. For the death of, or personal injury to, a passenger, this limit of liability is setat SDR 46,666 per passenger.

Liability is however further limited for losses arising from acts of terrorism to the practically insurable amount. As of2006, this amount is SDR 250,000 per passenger with an aggregate limit of SDR 340 million. Subsequent to theratification of this convention (by 35 states to date, covering 45.88% of the world’s fleet) the limitation amount hasbecome more and more inadequate. A 1990 protocol increasing the limit to SDR 175,000 was not adopted (beingratified by only 6 minor states) and has been superseded by the 2002 protocol. This is presently being ratified: so far only9 states, including the European Union, representing 2.11% of world tonnage have done so by 30 November 2012.

The principle provisions of this protocol will come into effect within the European Union the European Economic Area viathe EU Passenger Liability Regulation # 329/2009 on 31 December 2012.

83


Trade Law (UNCITRAL) began a review of laws in the area of the international carriage of goods by sea. An additionalaim was to update the regimes to reflect more modern transportation systems. This resulted in the Rotterdam Ruleswhich became open for signature in September 2009 and will enter into force 12 months after 20 states have ratified it.

By 30 November 2012, 24 nations have signed the Rules, including major shipping nations such as Greece, Norway andthe United States: collectively these signatories account for 25% of world trade. Noticeably none of the major Asiantrading nations have signed the Rules.

The Convention will come into force one year after ratification by the 20th UN Member state. Whilst 24 have signed theConvention, but only 2 states (Spain and Togo) have yet ratified it at 30 November 2012. Although there remainswidespread support for the Convention, the expectation is that it may be some time before the Rules enter into force.

The Rotterdam Rules have eroded some of the traditional defences available to sea carriers, for example the eliminationof the nautical fault defence. The obligation of due diligence has been extended to apply throughout the duration of thevoyage, and limits of liability per package, or unit of weight, have been significantly increased, beyond Hague-Visby andHamburg Rules limits.

The table below contrasts the liability under the various regimes:

12.1 CONTRASTING LIABILITY UNDER RULES

RULE LIMITATION OF LIABILITY LIABILITY FOR DELAY

Hague Visby (1968) Higher of SDR 2 per kg N/A

or SDR 667 per package

Hamburg (1978) Higher of SDR 2.50 per kg or 2.5 times freight on goods delayed

SDR 835 per package/shipping unit

subject to an upper limit if lost

Rotterdam (2009) Higher of SDR 3 per kg or 2.5 times freight on goods delayed

SDR 875 per package/shipping unit

not to exceed limit under rules

US COGSA (1936) US$ 500 per package/unit N/A

12. UN CONVENTION FOR THE INTERNATIONAL CARRIAGE OFGOODS WHOLLY OR PARTLY BY SEA (ROTTERDAM RULES)2009 (NOT YET IN FORCE)

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JONATHAN SUCKLINGManaging Director+44 (0)20 7204 6091+44 (0)7825 059 [email protected]

MALCOLM GODFREYExecutive Director+44 (0)20 7204 1883+44 (0)7789 003 [email protected]

ANDREW JAMESExecutive Director+44 (0)20 7204 6059+44 (0)7834 489 [email protected]

MATTHEW MACCABEExecutive Director+44 (0)207 204 6200+44 (0)7825 059 [email protected]

PETER WILMOTExecutive Director+44 (0)207 204 1829+44 (0)7887 897 [email protected]

NICOLA ELLISDivisional Director+44 (0)207 204 1892+44 (0)7825 059 [email protected]

GEMMA GREENWOODDivisional Director+44 (0)207 234 4055+44 (0)7554 114 [email protected]

NICOLA KANEDivisional Director +44 (0)203 425 3232+44 (0)7880 290 [email protected]

SIMON MAUDUITDivisional Director +44 (0)207 204 6203+44 (0)7825 059 [email protected]

MIKE MCTOMNEYDivisional Director+44 (0)207 560 3525+44 (0)7710 [email protected]

LUCINDA NOAKESDivisional Director +44 (0)207 560 3898+44 (0)7824 498 [email protected]

NICK PAICEDivisional Director +44 (0)207 204 6254+44 (0)7825 059 607 [email protected]

MALCOLM PECKETTDivisional Director+44 (0)207 204 6193+44 (0)7917 187 [email protected]

RICHARD STURGEONDivisional Director+44 (0)207 204 1887+44 (0)7825 059 [email protected]

TIM SULLIVANDivisional Director+44 (0)207 204 6295+44 (0)7825 059 [email protected]

PATRICK WILMOTDivisional Director+44 (0)207 560 3655+44 (0)7887 897 [email protected]

GARY BRANDAssociate Director +44 (0)207 204 6121+44 (0)7825 439 [email protected]

MIKE INGHAMAssociate Director +44 (0)207 204 1864+44 (0)7825 918 [email protected]

CONTACTS

85


DISCLAIMER: The information contained in this market review has been compiled by Gallagher London from information provided by each insurer. Thisreview does not purport to be comprehensive or give legal advice. While every effort has been made to ensure accuracy, Gallagher London cannot be heldliable for any errors, omissions or inaccuracies contained within the document. Readers should not act upon (or refrain from acting upon) information in thisdocument without first taking further specialist or professional advice.

JENNY MANKELOWAssociate Director +44(0)207 204 622+44(0)7584 609 [email protected]

DAVID MEADWAYAssociate Director +44 (0)207 560 [email protected]

ANNE PAIGEAssociate Director+44(0)207 560 [email protected]

SOPHIA QUENTINAssociate Director+44 (0)207 560 3657+44 (0)7917 595 [email protected]

EDWARD REMNANTAssociate Director +44 (0)207 204 6033+44 (0)7825 439 [email protected]

ALEX VULLOAssociate Director+44 (0)207 204 1891+44 (0)7500 109 [email protected]

DAVID WESCOMBAssociate Director +44 (0)207 204 1863+44 (0)7769 141 [email protected]

ANGUS BLAYNEY+44 (0)207 204 [email protected]

MELANIE BUITENDAG+44 (0)203 425 3195+44 (0)7557 289 [email protected]

MATTHEW CRAMP+44 (0)207 204 6051+44 (0)7825 059 [email protected]

WAYNE GODFREY+44 (0)207 204 [email protected]

MICHAEL HUTCHINS+44 (0)203 425 [email protected]

RICHARD LANDERS+44 (0)207 204 [email protected]

WENDY NEEDHAM+44 (0)207 204 [email protected]

LAUREN OSMAN+44 (0)207 204 [email protected]

SARAH PRESTON+44 (0)207 204 [email protected]

ISABEL SALCEDO+44 (0)207 204 6210+44 (0)7584 609 [email protected]

CLARE STEWART+44 (0)207 560 [email protected]

Arthur J. Gallagher (Speciality) is a trading name of Arthur J. Gallagher (UK) Limited which is authorised and regulated by the Financial Conduct Authority.Registered Office: The Walbrook Building, 25 Walbrook, London, EC4N 8AW. Registered in England and Wales. Company Number: 1193013.www.ajginternational.com

SD4032_B/09092013


P&I Commercial Review 2013 - AS Marine Ltd.

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Transcript of P&I Commercial Review 2013 - AS Marine Ltd.