CAN PROPERTY UNDERWRITERS TRUST SALVORS? Peter Townsend ISU Associate Members Day 16th March 2016

Insurance industry

• Asbestos and pollution • Occurrence liability • Reinsurance to Close • Under reserved • Equitas

Insurance industry

• Contract certainty • Market reform contracts • Solvency 2 • Transparency and Adequacy of capital • Greater regulation

Salvage industry

What is the perception?

Underwriters perception?

• Suitability of contract? • Some abuse of LOF? • ISU code of conduct • Cosy shop? • SCR/PCR/Cargo inadequately represented? • Insufficient transparency?

• ISU publishes aggregated statistics but • Estimated that 25% of awards are published • 75% of LOF cases are settled and remain

private

As reported in Tradewinds

Underwriters perception?

Relates to LOF only Settlements closer to 15% of salved value

Reality??

• Future of salvage? • Frequency down • Severity up • World fleet profile changing • Are salvors keeping pace?

• Eg 25% of containership teu capacity comprised of vessels of 10,000 teu+

I know what you are thinking….

• Lloyds only • “T” risk • Before internal costs • Before reinsurance costs • Cost of capital • 85% required to break even? • 85% required to break even?

To change the perception?

• Better governance? • Broader code of conduct to include client? • More transparency/awards published? • More communication with underwriters? • Closer links to IUMI? • Right contract, right time? • Vessel Response Plans OPA 90

• USCG • Around the World • Retainer to encourage investment?

Future?

• Changing requirements of Shipping industry • Size is everything

• Game changers • Eg Panama canal expansion? • Shift of split between hull and cargo • IMO regulations

• More M&A/consolidation by salvors? • Diversification of salvage companies? • Investment requirement • Social media impact

To improve perception

To improve perception

Change is inevitable

Except from a vending machine….