schoch dsu 08
TRANSCRIPT
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Project Cargo
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Worldwide Financed Projects
Middle East, SE Asia and Latin America KeyDeveloping Insurance Markets
North America
USD28.4bn
67 deals
W Europe
USD44.8bn
160 deals
E Europe
USD4.1bn
7 deals
SE Asia
USD20.3bn
54 deals
USD3.9bn
7 deals
Latin America / Caribbean
USD16.9bn
30 deals
Middle East / Africa
USD53.2bn
47 deals
Australasia
USD7.3bn
29 deals
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Worldwide Financed Construction DealsUSD180bn Project Finance Q1/Q3 2007
Investment in USD bn
10 0
12 0
14 0
16 018 0
20 0
nUSD
0
2040
6080
2001 2002 2003 2004 2005 2006 2007
Yearly Q1 - Q3
inb
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Worldwide Financed Construction Deals410 Project Deals Q1/Q3 2007
Number of Deals
25 0
30 0
35 0
40 045 0
ofDeals
0
50
10 0
15 0
20 0
2001 2002 2003 2004 2005 2006 2007
Yearly Q1 - Q3
Num
ber
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Financed Construction DealsUSD180bn Project Finance Q1/Q3 2007
Breakdown of Financed Construction
Deals
Energy Petrochemical Oil & Gas Industrial
Infrastructure M ining Telecom
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Project Cargo
What is covered?
Physical Loss or Damage cover under the Material
section of the Cargo Cover and not explicit excludedin the DSU Cover
Which Clause do we use?
London E.C. Bruce Endorsement under the CargoCover or equivalents in the local markets
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Project Cargo
Project cargo insurance is coverage for equipment
destined for infrastructure projects and Industrial
facilities. Policy coverage includes physical loss &damage and may include consequential loss, such as
delay in start-up (DSU) and additional cost of working
US$300m, with placements up to US$1.2bn possible
in the marine market. Global project cargo income isestimated at USD165m (2007)
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Project Cargo
Insurance coverage is typically driven by banks, and
the projects construction placement followed by
other coverages, including cargo.
Increased traditional reinsurance participation in
emerging markets with particular focus on Middle
East, Latin American and Asia
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The Project Cargo Time Schedule
Provisional Certificate of Acceptance50 / 50 Clause
RM, PBRM etc.
03
construction value at
the end of the project
01 02
maintananceTRC/TRM & DSU
Slide 9
Hot testing
Cold testing
Sea, air or land cargo transportation property, BI,
TPL etc.Constrction or
Erection period
Time
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The Project Cargo Indemnity Period
$
Slide 10
Provisional
Deductible
Indemnity Period
Maximum Indemnity Period
Final CAR / EAR & DSU Period
Original Transport
Period
Time
CAR / EAR & DSU
Period
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The Project Cargo Indemnity Period
IllustrationofahypotheticalUS$250mioconstructionproject
150
200
250
300
alue
US
Critical
transit
timeframe
Illustration of a hypothetical USD 250 Mio construcion project
0
50
100
6 12 18 24 30 36
Time(Months)
Pro
ect
Time (Months) Project Start Date
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The Project Cargo Indemnity Period
Critical item #1
Critical item #2
Critical item #3
Deductible
Critical
transit
timeframe
Slide 12
Critical item #4
6 12 18 24 30 36
Time (Months)
Project
Start DateShipmentDate
ArrivalDate
ReplacementTime
Key:
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Important Considerations
It is essential that underwriters also insure the
physical loss or damage insurance (cargo policy) in
conjunction with the consequential loss policy, as
control by the underwriters is vital. Preferably they
will be written as two sections of the same policy
with the loss of profit claim triggered by a loss under
the material dama e car o section. Thus an
condition or warranty imposed by Underwriters on
the cargo policy will similarly affect the advance lossof profit coverage.
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Important Considerations
Otherwise the consequential loss underwriters
would have no control over the damaged cargo and
would be unable to influence the course of action.
The assured would have to submit any claims
se aratel to two sets of insurers who ma not
adopt identical positions. With the same
underwriters the claim will be dealt with byone Claim Department in conjunction with the
Underwriter who assessed and wrote the risk in the
first instance. Therefore an overall view would be
adopted minimizing the loss to both insurers.
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Important Considerations
It also ought to be remembered that the value
of any one item or part of one item has little bearing
on its significance to loss of profit Underwriters. AnAll Risks Underwriter receives premium based on the
value and the claim is paid relative to that value.
For the consequential loss Underwriter, loss or
damage to quite low value items which are vital to acontract might result in an entire plant being
inoperable if repairs or replacement parts are not
quickly available.
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What is the Reinsurers Role on DSU?
Capacity
Knowledge Transfer
Diversifying: Worldwide view and allocation of
the Risk
Surveys / Claims Handling Support
Capacity
Capacity
Capacity
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DSU Reinsurance Types
The market differentiates between two reinsurance
methodologies:
TYPE 1:
Quasi-direct reinsurance (fronted), written out of
London and Singapore. Singapore is a growing
market that is becoming dominant in Asia, leaving
little room for London other than for the largest or
most complex projectsTYPE 2
Traditional reinsurance (supporting experienced
cedants)
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Market size by Region
USDm
Capacity for
global deals any
one risk
Capacity
stand-alone
Global Total 1,232 -
London 872 872
Singapore 60 310
North America 150 225
Europe 100 200
Other 50 100
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Worldwide Market Size
Leading carriers in market on stand-alone basis
1025800
1000
1200
1400
acity,
US$mio
Following
207 152
720
0
200
400
600
Worldwide London
Availab
leCap
Leading
Carriers
Carriers