2010 Houston Marine Insurance Seminar Westin Galleria Hotel September 20 th, 2010 Marine Insurance...
-
Upload
carissa-thurmond -
Category
Documents
-
view
218 -
download
0
Transcript of 2010 Houston Marine Insurance Seminar Westin Galleria Hotel September 20 th, 2010 Marine Insurance...
2010Houston Marine Insurance Seminar
Westin Galleria HotelSeptember 20th, 2010
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited1
Evolutionary Change at OIL
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited2
Genetic Evolution
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited3
Corporate Evolution & Adaptation
It is unlike genetic evolution Brought about by internal and external forces Can be slow or fast In OIL’s case, the forces have been both
monumental and subtle Ivan, Katrina, Rita & Ike: $3.3 billion in claimsRating & Premium Plan: Leaks, shifts & others Deepwater Horizon: TBD
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited4
Windstorm Changes
5 Oil Insurance LimitedMarine Insurance Seminar - Sept 20, 2010
Ivan, Katrina, Rita & Ike
In hindsight, Ivan, Katrina & Rita
• Demonstrated that the mutual did not adequately allocate premium based upon Atlantic Named Windstorm (ANWS) risk
• Onshore and Offshore ANWS Sectors were introduced in 2007
Ike• Demonstrated that the ANWS Sector Weightings
were very difficult to properly calibrate and that large losses still produced scaling of limit
• New Windstorm Plan in 2010
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited6
Windstorm losses have contributed over 58% of OIL’s total losses during the past 5 years and 49% over the past 10 years
From 1999 to 2003, windstorm losses only accounted for 6% of OIL’s total losses
7
Historical Losses (10 yrs)
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Windstorm Losses
8 Business Sectors
New Windstorm Plan Summary
$150M part of $250M Quota Share per occurrence limit
Per shareholder annual aggregate limit = twice the per occurrence limit
Losses up to an annual aggregate retention of $300M are mutualized among all members in the Standard Pool
Losses above the $300M retention are mutualized among windstorm members in two new pools (onshore & offshore)ANWS Sectors are eliminated
No losses flow through the Flat Pool
Oil Insurance Limited8Marine Insurance Seminar - Sept 20, 2010
New Windstorm Plan Summary
New deductible discount curves No deductible scaling Premium weighting for high vs. low windstorm
activity areas Rest of the World coverage
Differs from ANWS Other features
New Retro coverage & pricing mechanism for both windstorm and non-windstorm losses
Oil Insurance Limited9Marine Insurance Seminar - Sept 20, 2010
Loss to Premium Flows
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited
$150M Q/S
Deductible
$300MPer
Shareholder Annual
Aggregate Limit
$750MPer Event
Aggregation Limit
$300M WS Pools’ Annual Aggregate Retention
(8 Business Sectors & Standard Pool Only)
Onshore Excess Pool
Offshore Excess Pool
Multiple events are added together at year’s end before allocation to the WS Pools’ Annual Aggregate Retention and Excess Pools
10
Limits Premium
Rating & Premium Plan (R&PP) Changes
11 Oil Insurance LimitedMarine Insurance Seminar - Sept 20, 2010
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited12
Old R&PP – What was bad?
Changes in WGAs can shift premium from one group of members to another
Immediate & Automatic
System is subject to “surprises”
The use of Current WGA to calculate Current Premium & TWP
Optionality Complexity
APS discourages deductible changes
Members must account for future obligations to OIL (TWP)
New Lock-In Method
It maintains the same 5 year post loss funding method of the Old R&PP
The new plan is designed to:
Eliminate significant swings in premium and TWP
Simplify the R&PP formula
Eliminate the periodic and unintended shifting of premium and TWP from one or more members to others
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited13
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited14
New Lock-In Method
WGA calculation and Sector Weightings remain independent of this method
Pool %N = Weighted Gross AssetsN
Total Weighted Gross AssetsN
Final Pool % in any given year is calculated using the Gross Assets reported as of December 31 from the prior year
Premium is only affected in the year following a new loss year and new Pool %’sAsset Year → Pool % Year → Premium Year
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited15
New Lock-In Method
Current Premium(separate calculations for Standard and Flat Premium)
20% of Losses1 * Pool %1
20% of Losses2 * Pool %2
20% of Losses3 * Pool %3
20% of Losses4 * Pool %4
20% of Losses5 * Pool %5
Expenses1 * Pool %1
Risk Premium Factor (+ or -), if any
Deepwater Horizon
16 Oil Insurance LimitedMarine Insurance Seminar - Sept 20, 2010
OIL’s Response
OIL will likely wait for final legal, regulatory & financial requirements to be established before contemplating change.
Marine Insurance Seminar - Sept 20, 2010 Oil Insurance Limited17
?
Thank You
18 Oil Insurance LimitedMarine Insurance Seminar - Sept 20, 2010
Oil Casualty Insurance, Ltd.
Marine Insurance Seminar
September 20, 2010
Oil Casualty Insurance, Ltd.Marine Insurance Seminar - September 20, 2010
Hurricanes Katrina & Rita
21
Hurricanes Katrina & Rita’s impact on OCIL:
– Speculative reaction by rating agencies– Exposure analysis– Executed new underwriting strategy
• Increased attachments• Reduced maximum limits • Reduced expected losses and volatility• Growth and diversity
Oil Casualty Insurance, Ltd.Marine Insurance Seminar - September 20, 2010
Significant Changes Since the Hurricanes
22
2006• Reduced the minimum limit required for membership to $25 million from $50
million
2008• Shareholders approved amendments to the Shareholders’ Agreement to
provide for Non-Shareholder Policyholders and to allow OCIL to act as a reinsurance company
• Maximum Policy Limit reduced to $100M• Policy form flexibility (claims made and occurrences reported)
2009• Wrote first assumed treaty reinsurance contract
2010• Shareholders’ Agreement was amended permitting other lines of insurance
subject to ¾ approval by the Board of Directors
Oil Casualty Insurance, Ltd.Marine Insurance Seminar - September 20, 2010
Where we are today!
23
• 2009 & 2010 saw significant growth and wider spread of business from direct writings and assumed reinsurance transactions
• 60 Shareholders and 10 Policyholders headquartered in U.S., Canada, South America, Europe & Africa.
• 4 Treaty Reinsurance Programs
Oil Casualty Insurance, Ltd.Marine Insurance Seminar - September 20, 2010
Who we are today!
24
• S&P’s May 2010 report states that OCIL’s capital adequacy ratio is above S&P’s minimum for the AAA range
• Strong reinsurance program provided by quality reinsurance companies
Oil Casualty Insurance, Ltd.Marine Insurance Seminar - September 20, 2010
Impact from Deepwater Horizon
25
• OCIL’s exposure to the event is minimal
• Questions remain on how the conventional market will react in maintaining capacity
• Awaiting outcome of government drilling ban and amendment to OPA
• OCIL has seen an increase in submissions and requests for increased limits since the explosion
• OCIL is responding promptly to inquiries
THANK YOU!