energy insurance the road ahead dominick hoare. the loss/profit equation inherent business dilemma...
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Energy Insurance The Road Ahead
Dominick Hoare
The Loss/Profit Equation
• Inherent Business Dilemma• Demands of Capital• Stable Profit Environment• Sustainable Business Concept
Current Environment
• Volatility• Premium Increases• Severe Loss Frequency• Long Term Uncertainty
Toulouse
Toulouse
Toulouse
Toulouse
Toulouse
Toulouse
P36
P36
P36
P36
P36
P36
P36
P36
P36
P36
P36
P36
Gulf of Mexico Blowout
Gulf of Mexico Blowout
Gulf of Mexico Blowout
Gulf of Mexico Blowout
Gulf of Mexico Blowout
Willis Loss Database
Years No. of Incidents Total US$ Loss
1991 - 1996 1417 16,881,924,551
1997 – 2001 1808 19,323,966,884
All Years 3225 36,205,891,439
Lloyd’s Energy Statistics
0%
50%
100%
150%
200%
250%
1996 1997 1998 1999 2000
Offshore Physical Damage - Incurred Loss Ratio
Lloyd’s Energy Statistics
0%
50%
100%
150%
200%
250%
1996 1997 1998 1999 2000
Control of Well - Incurred Loss Ratio
Lloyd’s Energy Statistics
0%
50%
100%
150%
200%
250%
300%
350%
400%
1996 1997 1998 1999 2000
Onshore Physical Damage - Incurred Loss Ratio
Lloyd’s Energy Statistics
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
200%
1996 1997 1998 1999 2000
Energy Liability - Incurred Loss Ratio
Lloyd’s Energy Statistics
0%
50%
100%
150%
200%
250%
1996 1997 1998 1999 2000
All Classes - Incurred Loss Ratio
Lloyd’s Peer Group
100
140
180
220
260
Com
bine
d R
atio
Rating Index
0%
20%
40%
60%
80%
100%
120%
140%
160%
1993 1994 1995 1996 1997 1998 1999 2000 2001
Equity Markets
9/11
P36 - March
Toulouse - September
Situation
• Capital Intolerance• Flawed Business Model• Short Term Solutions vs. Long Term
Business
Solution
• Mutual and Constructive• Reduce Volatility• Renewed Confidence• Stable Capital
Fundamental Restructuring of Business
• Return on Capital• Higher and Consistent Premium Levels• Transparent Risk Transfer
Insured's Charter
• Higher Quality Product• New Standard Levels• Commitment and Continuity
Lloyd’s
• Flexible and Innovative Product• Expertise and Professionalism• Unique Talent Pool
Lloyd’s
• Chairman’s Strategy Group/Franchise Concept
• Proactive and Supportive• Entrepreneurial Spirit• Strong Corporate Governance
Lloyd’s
• 9/11• Trading Continuity• Funding Obligations• 2000 Gross Income – £ 10.2bn• 2001 Gross Income – £ 11.6bn• 2002 Gross Income – £ 12.8bn
Regulatory Environment
• Risk Focused Management• LMP Reforms• Product Centered• Market Leadership from Lloyd’s
Re-Definition of Insurance Business Model
• Structural Change – Mutually Driven• Product of Highest Quality and Integrity• Sustainable and Profitable• Is Failure an Option?
Energy Insurance The Road Ahead
Dominick Hoare