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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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Steven G. Searle, FCAS

SVP Instrat

Ocean MarineOverview and Catastrophe Modeling Issues



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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


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Ocean Marine

  • Agenda

    • Marine Overview

    • Marine Results

    • Marine Catastrophe Modeling Developments


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Ocean Marine

  • Agenda

    • Marine Overview

    • Marine Results

    • Marine Catastrophe Modeling Developments


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Ocean Marine

  • Lines of Business

    • Cargo

    • Hull (blue-water, brown-water)

    • Commercial Protection and Indemnity (P&I)

    • Liability

    • Yacht (including P&I)

    • Offshore Energy


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Ocean Marine Split by LOBCY Direct Written Premiums

Source: AIMU 2005 Calendar Year Operating Ratios


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Ocean Marine

  • Agenda

    • Marine Overview

    • Marine Results

    • Marine Catastrophe Modeling Developments


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Calendar Year Ocean Marine ResultsDirect Business

Source: AM Best Aggregates and Averages


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Calendar Year Ocean Marine ResultsNet Business

Source: AM Best Aggregates and Averages


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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


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

Source – AIMU 2005 Calendar Year Operating Ratios


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

Source – AIMU 2005 Calendar Year Operating Ratios


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

Source – AIMU 2005 Calendar Year Operating Ratios


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Ocean Marine

  • Agenda

    • Marine Overview

    • Results

    • Marine Catastrophe Modeling Developments


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Catastrophe Modeling Vendors

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

  • valuable knowledge inputs to identify, understand and manage risk


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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


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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 (?)


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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


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The Four Catastrophe Model Modules

Module 2

Event Database

Module 1

Data Preparation

Module 3

Damage Calculation

Module 4

Loss Calculation


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Model Applications - Loss Potential “Occurrence" Return Period Losses

A.M. Best Benchmarks

  • U.S. Hurricane

  • U.S. Earthquake


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Yacht Modeling Capabilities

X

RMS RiskLink May 2006 release


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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)


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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.


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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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