C. Marine risks

The Group writes a broad account of marine risks with maximum lines as follows:

Marine classes

	2008 Gross premium £m	Current maximum line size £m	2008 Average line size £m
Hull	17	10	1.4
Cargo	32	17	3.5
Energy	39	20	3.3
War and terrorism	25	17	8.7
Specie	9	24	6.3
Bloodstock	21	4	0.6
Yacht (hull and liability)	30	4	1.0
Liability	21	57	4.3

Notes

1. Limits are set in US dollars converted at a rate of exchange of £1 = US$1.5 and therefore currency rate of exchange changes may increase or reduce the sterling limits.
2. Maximum line size is after business written and ceded by specific proportional treaties to Amlin Bermuda Ltd.
3. Premium are stated gross of acquisition costs.

The hull and cargo account is worldwide, covering property damage to ships and loss, or damage, to a large variety of cargo or goods in transit. The hull account can include machinery breakdown and the account written is generally targeted towards lower value tonnage, smaller “brownwater” vessels and fishing boats. These accounts can be impacted by attritional claims of a small size as well as a single individual large claim. The cargo account in particular could also be involved in a major natural catastrophe loss. In an economic recession, it is expected that premium income will fall from these areas as trade reduces and hull values are impacted by reduced freight rates. It is also possible that claims frequency increases due to increased economic pressures affecting fraud and theft claims.

The energy portfolio is mainly offshore rig and construction policies which may be impacted by large individual claims from construction fault or property damage such as fire or explosion, but is also exposed to severe catastrophe losses in the North Sea and Gulf of Mexico. The account includes control of well to limit loss of oil and avoid pollution and also some business interruption cover which indemnifies companies for loss of production.

War business includes aviation, marine and on land terrorism coverage and is exposed to single incidents or a series of losses arising from concerted action. A small amount of political risk, confiscation and contract frustration is written.

Specie business consists of the insurance against damage or theft to fine art, the contents of vaults and other high value goods including jewellers’ block and cash in transit. The fine art may be shown at exhibitions which have very high aggregate values at risk. The class is therefore exposed to the potential for a frequency of small claims and also large individual losses. Some specie is written in catastrophe zones e.g. California.

The bloodstock account protects for death, illness or injury to horses mainly in the UK but business from the USA, Australia and South Africa is also written. This covers racing or eventing horses and breeding studs. The average value insured is below £1 million but there is the potential for an aggregate loss, such as a stable fire, which could cause multiple claims.

Yacht business covers property damage and third party injury for small leisure boats and craft. The bulk of the account is smaller value yachts in the UK and Europe, although there are a number of binders written by coverholders elsewhere, such as Scandinavia, Canada and Australia. There is an expectation of a large number of small claims, as average values are low in comparison to other claims written in the Group. Third party liability yacht claims arise from injury or damage caused by one of our policyholders to third parties. There is also the potential for a large catastrophe loss such as a UK windstorm where there are large aggregate sums insured in coastal regions such as southern England.

The marine liability portfolio is written to protect ship-owners, harbours, charterers and energy companies against damage or injury to third parties. This includes the potential for pollution damage and clean up claims. The account could suffer a large catastrophe incident from a collision causing death of crew and passengers or an oil, or chemical, spill which could incur large clean up costs.

The geographical spread of Marine classes is shown below: