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Ocean Marine Overview and Catastrophe Modeling Issues

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Steven G. Searle, FCAS SVP Instrat Ocean Marine Overview and Catastrophe Modeling Issues 2000 – 2005 US Cat Losses 2005 Hurricane Losses Impact on Marine and Offshore Energy Offshore Energy Katrina RMS estimates between $2bn and $5bn Eqecat expects a loss ranging from $5bn to $8bn Rita

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2005 hurricane losses impact on marine and offshore energy
2005 Hurricane LossesImpact on Marine and Offshore Energy
  • Offshore Energy
    • Katrina
      • RMS estimates between $2bn and $5bn
      • Eqecat expects a loss ranging from $5bn to $8bn
    • Rita
      • RMS estimates between $1bn and $2bn
  • Yacht
    • Katrina
      • Insurance losses range from $300M to $400M. (Boat Owners Association of The United States- Oct 12, 2005)
  • Hurricane Katrina also destroyed an estimated 75% of the marinas along 150 miles of the Gulf Coast
ocean marine
Ocean Marine
  • Agenda
    • Marine Overview
    • Marine Results
    • Marine Catastrophe Modeling Developments
ocean marine5
Ocean Marine
  • Agenda
    • Marine Overview
    • Marine Results
    • Marine Catastrophe Modeling Developments
ocean marine6
Ocean Marine
  • Lines of Business
    • Cargo
    • Hull (blue-water, brown-water)
    • Commercial Protection and Indemnity (P&I)
    • Liability
    • Yacht (including P&I)
    • Offshore Energy
ocean marine split by lob cy direct written premiums
Ocean Marine Split by LOBCY Direct Written Premiums

Source: AIMU 2005 Calendar Year Operating Ratios

ocean marine8
Ocean Marine
  • Agenda
    • Marine Overview
    • Marine Results
    • Marine Catastrophe Modeling Developments
calendar year ocean marine results direct business
Calendar Year Ocean Marine ResultsDirect Business

Source: AM Best Aggregates and Averages

calendar year ocean marine results net business
Calendar Year Ocean Marine ResultsNet Business

Source: AM Best Aggregates and Averages

slide11

Calendar Year US Marine ResultsDirect Written Premiums ($B) and Net Combined RatioCompanies reporting to the American Institute of Marine Underwriters

Source: AIMU 2005 Calendar Year Operating Ratios

slide12
US Calendar Year Net Combined RatiosLOB detailCompanies reporting to the American Institute of Marine Underwriters

Source – AIMU 2005 Calendar Year Operating Ratios

slide13
US Calendar Year Net Combined RatiosLOB detail (cont.)Companies reporting to the American Institute of Marine Underwriters

Source – AIMU 2005 Calendar Year Operating Ratios

slide14
US Calendar Year Net Combined RatiosLOB detail (cont.)Companies reporting to the American Institute of Marine Underwriters

Source – AIMU 2005 Calendar Year Operating Ratios

ocean marine15
Ocean Marine
  • Agenda
    • Marine Overview
    • Results
    • Marine Catastrophe Modeling Developments
catastrophe modeling vendors
Catastrophe Modeling Vendors

Applied Insurance Research (AIR), EQECAT or Risk Management Solutions (RMS)

  • valuable knowledge inputs to identify, understand and manage risk
modeled perils
Modeled Perils
  • hurricane
    • wind
    • loss amplification/demand surge
    • storm surge
  • earthquake
    • shake
    • fire following
    • sprinkler leakage
    • loss amplification/demand surge
  • other wind
  • winter storm
  • terrorism
  • flood (Europe)
  • pandemics
modeled lines of business
Modeled Lines of Business
  • Personal lines property
  • Commercial lines property
  • Industrial property
  • Builders Risk
  • Auto Physical Damage
  • Workers Compensation
  • Lives at risk – Accident and Health
  • Marine (partially*)

Marine lines

  • Fixed Properties (marinas) - handle well
  • Contents (warehouse cargo) - can handle with adjustments
  • Oil Rigs - modeling capabilities available
  • Mobile Property (cargo, floaters) - capabilities exist but are limited
  • Yachts - capabilities in the RMS May 2006 release
  • Commercial Hull (?)
modeled coverage parts
Modeled Coverage Parts
  • Fixed Property
    • completed structures
    • structures under construction (e.g. shipbuilders risk)
    • machinery & equipment
    • piers / wharves
    • offshore platforms
  • Personal Property
    • contents
    • stock
    • electronic Data Processing equipment
  • Mobile Property
    • cargo
    • floaters including contractors equipment (though generally difficult to include)
    • personal yachts
  • Time Element
the four catastrophe model modules
The Four Catastrophe Model Modules

Module 2

Event Database

Module 1

Data Preparation

Module 3

Damage Calculation

Module 4

Loss Calculation

model applications loss potential occurrence return period losses
Model Applications - Loss Potential “Occurrence" Return Period Losses

A.M. Best Benchmarks

  • U.S. Hurricane
  • U.S. Earthquake
yacht modeling capabilities
Yacht Modeling Capabilities

X

RMS RiskLink May 2006 release

rms construction classification update risklink version 6 0 may 2006
RMS Construction Classification Update RiskLink version 6.0 (May, 2006)
  • Seven New RMS Yacht Classes (length and power)
    • Boats, inside a Building (Marina) - Precast Reinforced Concrete with Concrete Roof (RMS Code 54)
    • Boats, Moored, Less than 26 ft, Motor - (RMS Code 55)
    • Boats, Moored, Less than 26 ft, Sail – (RMS Code 56)
    • Boats, Moored, 26-60 ft, Motor - (RMS Code 57)
    • Boats, Moored, 26-60 ft, Sail (RMS Code 58)
    • Boats, Moored, Greater 60 ft, Motor (RMS Code 59)
    • Boats, Moored, Greater 60 ft, Sail (RMS Code 60)
offshore energy modeling databases
Offshore Energy Modeling/Databases
  • RMS currently has offshore modeling capabilities
    • Version 6.0 Changes
      • new construction classes
      • new year built ranges
      • new occupancy classes
      • includes Contingent Business Interruption, Operators Extra Expense
      • new loss amplification factors specific to offshore platforms
  • EQE to release offshore energy model
  • ERAS - database program used by many energy clients for capturing exposure information by platform
    • Exposure management only, no damage estimates or simulations of events.
outlook
Outlook
  • Role of Actuaries and Catastrophe Modelers continues to grow in the Marine renewal process.
  • Models will continue to be valuable as one of many information inputs…
    • but extremely dangerous if used as the only information input
  • Models have improved risk quantification significantly…
    • but can mislead if users do not understand shortcomings
  • Applications can create significant marketplace advantages…
    • but inappropriate applications can create hidden dangers
  • Models continue the tradition of innovation and progress…
    • but models are “not" perfect and need to improve
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