The document provides an overview of the energy and marine insurance industry presented by Arya Insurance Brokerage. It discusses factors such as the economic downturn impacting oil prices and offshore energy markets. It also summarizes that while losses impacted some insurers, overall the energy insurance portfolio remained profitable in 2010. Looking ahead, it notes increased offshore exploration creating opportunities for industry growth despite current overcapacity challenges faced by insurers.

1. Presented By:
AFTAB HASAN - CEO
‘Arya Insurance Brokerage CO. (LLC)’
Dubai - U.A.E.

2.  Economic Outlook on the Energy and Marine Industry
 Factors Influencing Offshore – Oil & Gas Market
 Cyclic Nature of Oil Price & Global Economic Downturn
 Outlook for Offshore Energy Vessels
 Major Factors Driving Insurance Industry
 General State of the Market – Post Recession
 The Underwriting Environment with Upstream
 The Underwriting Environment with Downstream
 Regional Overview due to the unrest in the Middle East & Africa
 Region on Energy / Marine Insurance Sector
 Conclusive Remarks

3.  The world economy ran out of steam in 2008 while 2008
was also record year for some as the economic boom
reached its peak in the first half of the year.
 The worldwide Energy Industry ravaged by the economy
and financial crisis over the last two years has passed
through its darkest hour.
 Global GDP of the key driving nations went down
drastically.
 Global activity in the key areas – Production / Trade / Oil /
Non-Fuel Commodity Prices also affected badly.
 The recovery remains largely policy driven and faces
significant challenges as policy makers look to unwind the
unprecedented fiscal monetary and financial support they
provided to keep their economies and financial market’s
from collapsing.

4.  When the world economy collapsed in late 2008, the order
book for Shipping & Offshore industry was at an
unprecedented level. Many of these new build contracts
have since been cancelled or renegotiated. While some new
tonnage will be delivered in 2011, in shipping there is
inevitably a time lag before supply can adjust to demand.
 Whilst the world fearfully debates whether there will be a
double-dip recession, the energy industry and the
underwriting markets are both suffering from the same
problem – surplus capacity as rates are softening yet fresh
capacity is queuing up to join in, particularly in Lloyd’s,
almost in defiance of logic.

5.  75% of the earth's surface is covered by oceans and today 60%
of the world's petroleum production comes from offshore
operations in waters of more than half the coastal nations on
earth so it is no surprise that as onshore oil and gas reserves will
deplete exploration and production activities will extend into
offshore basins which has potential proven reserves.
 This in turn will create opportunities for E &P Companies,
Oilfield Equipment's Manufacturers, Shipyards, Oil and Gas
Suppliers, Human Capital, Professionals, Technology and Assets
to turn the tide from the doldrums it was in a year ago.
 Worldwide Offshore Industry is on a promising-to-bullish track.
 Energy Demand wants to grow long terms (China – India –
Elsewhere)
 Offshore Accounts for one third of oil production which is up
significantly from pass.

6. Increase in spending activities
Mergers and acquisitions taking place
Capital expenditure is an average down
Investment climate is improving
Major reforms in Brazil's energy sector
Global offshore drilling spending has
increased
Shale plays a key role in unconventional
investment in energy sector
Global energy investments to restart their
stalled projects

7.  Due to Global financial crisis at the end of 2008 we have observed a
global economic downturn in 2009.
 As per International Monetary Fund, global output fell by an estimated
0.6% in 2009.
 Due to imbalance in supply & demand for oil we observed a sharp
decrease in oil price from US$140 to US$40 per barrel price levels in the
first quarter of 2009.
 The oil and gas sector is building up slowly as world markets pull
themselves out of recession.
 We have observed that the industry is cyclical in nature and subject to
fluctuations in demand.
 With the demand for crude oil increasing, especially from China and
India, as well as the need to offset falling output due to natural field
depletion, oil and gas companies have plans to increase investments in
2012.
 Amid macro-economic uncertainty and market volatility, analysts are
putting the industry on a promising-to-bullish track for 2012 as oil
prices remain solid, rig counts rise and the offshore industry turns the
tide from the doldrums it was in a year ago.

8. OUTLOOK FOR OFFSHORE ENERGY VESSELS
Energy Vessels – Market Cautiously Optimistic
• Oil companies throughout the world have been re-evaluating energy
developments given a collapse in oil prices, which has made some projects
uneconomic.
• Integrated Oil & Gas Companies are showing an increasing reliance on very large
projects to replace the more diverse existing production base
• Demand still strong for E&P Rigs and (OSV) Offshore Support Vessels but market is
moving with cautious
• Lack of enthusiasm to commit to additional new-builds. Market has seen a few
cancellations & slippage
• National Oil Companies have strategic interests that differ from listed companies
• Shortage of semi-submersibles
• Surplus of Jack-ups
• Continued financial turmoil, prevailing low oil prices and economic recessions are
impacting activity levels
• Even if companies take a bullish outlook on a recovery in oil demand growth,
declining revenues and unavailability of credit will limit their ability to invest in
new build projects

9. MAJOR FACTORS DRIVING ENERGY & MARINE
INSURANCE INDUSTRY
 The global energy insurance markets have had to take immediate
stock of their position following the recent tragic earthquake and
subsequent tsunami in Japan.
 Before this tragedy struck, the Macondo blowout and oil spill had
resulted in the largest Operators Extra Expense (OEE) loss in the
upstream market’s history.
 A genuine upstream market bifurcation is therefore becoming
apparent.
 Notwithstanding the impact of Macondo and the Japan earthquake,
both upstream and downstream markets remain overcapitalized.
 Furthermore, a new series of energy losses are also contributing to
the break on any market softening, at least in the short term.
 In the meantime, the statistics continue to point to overall
profitability in both markets.

10.  Piracy continues to be a huge concern, spreading from the Gulf of Aden into the
Indian Ocean. Claims arising from piracy have exceeded $300 million and it is hard
to see any solution in the short term. Meanwhile, the additional cover and support
provided by a kidnap and ransom (K&R) policy has resulted in policy being
expensive to those who have elected to purchase such policies.
 The increase in sanctions against countries such as Iran has brought new challenges
in 2010. Underwriters and brokers are constantly working to ensure they remain
‘Compliant’within the various different sanction regimes.
 The European Union’s latest sanctions directive is due to be ratified and while its
impact on insurers is not yet clear, anyone even considering ways in which sanctions
could be avoided may be prosecuted under the ‘Anti-Avoidance Clause’.
 As profit margins continue to be squeezed, we foresee increased divergence between
those underwriters who are looking to build or expand their accounts and those who
may become increasingly defensive or selective. This means a market place where it
will be essential to employ a SOUND BROKER!

11. ENERGY UPSTREAM
Almost five months to the day after the tragic blowout of
its Macondo well on April 20, BP announced that the well
had been permanently sealed, and abandonment
operations had commenced. The immediate disaster may
be over for BP but the aftermath for the Oil and Gas
Industry in general has only just begun. Whilst BP
themselves did not buy insurance, the loss the market is
ultimately likely to suffer from control of well (including
clean-up costs) and Liability Policies purchased by BP's
Joint Venture Partners and Contractors has been
estimated by some commentators to be in excess of
USD 3Bn.

12. THE UNDERWRITING ENVIRONMENT
WITH UPSTREAM INDUSTRY
Softening pressures are beginning to mount, despite
recent losses capacity is at a ten-year high
Major losses are particularly felt by the fledgling
Singapore Market
Although 2009 was not a bumper year in terms of
profitability, it was hardly a disastrous one either
The new Gulf of Mexico rating model remains
untested following a benign windstorm season
There has been an upswing in activity in the Offshore
Construction Sector

13. THE UNDERWRITING ENVIRONMENT
WITH UPSTREAM INSURER CAPACITIES

14. UPSTREAM ENERGY LOSSES VERSUS
ESTIMATED GLOBAL OFFSHORE ENERGY
PREMIUM INCOME

15. UPSTREAM ENERGY PORTFOLIO
STILL LOOKS PROFITABLE
So in reality 2010 – despite including both Macondo and the Gryphon A loss – might still
turn out to be a profitable year for most direct and reinsurance underwriters; indeed, it
could even be argued that both losses were blessings in disguise for much of the direct
upstream market.

16. UPSTREAM INSURER CAPACITIES
AND AVERAGE RATING LEVELS

17. UPSTREAM INSURER CAPACITIES
AND AVERAGE RATING LEVELS

18. THE UNDERWRITING ENVIRONMENT
WITH DOWNSTREAM INDUSTRY
Downstream insurers are beginning to compete for business in a
manner not seen since the last truly soft market in 1999-2000.
While North American market capacities remained stable, its
International counterpart continued to grow. Various markets
became more prominent, including Chartis, CV Star, Talbot,
Validus, Torus and Zurich.
Following a benign underwriting year in 2009, the portfolio
remained profitable, despite the softening market conditions. The
level of attritional losses has fallen to the point where rates could
fall further before the inherent profitability of the class is
threatened.
The degree of aggression shown by individual insurers is now
driving competition in the market, rather than overall capacity.
Regional markets are contributing to the softening process.

19. THE UNDERWRITING ENVIRONMENT WITH
DOWNSTREAM INSURER CAPACITIES

20. DOWNSTREAM ENERGY LOSSES VERSUS
ESTIMATED GLOBAL OFFSHORE ENERGY
PREMIUM INCOME

21. DOWNSTREAM ENERGY PORTFOLIO
STILL LOOKS PROFITABLE
The improved loss record since 2001 may well be down to general improvements in risk
control and mitigation by the downstream industry, encouraged by the risk engineering
approach taken by the market in recent years.

22. DOWNSTREAM INSURER CAPACITIES
AND AVERAGE RATING LEVELS
DOWNSTREAM MARKET DYNAMICS 2011

23. REGIONAL OVERVIEW: MARINE
INSURANCE
 GLOBAL INSURANCE MARKETS IN FLUX
 ASIA: GROWING CONFIDENCE
 EUROPE: REGIONAL STRENGTH, INTERNATIONAL
CAPACITY
 SCANDINAVIA: DOWN, BUT NOT OUT
 THE UNITED STATES: RISING PRICES
 LONDON MARKET: TRAVELLING WELL

24. HIGHLIGHTS
 MARKETS MOVE CLOSER TO CUSTOMERS
 ASIA GAINS CONFIDENCE
 EUROPE FLEXES MUSCLES
 SCANDINAVIA TAKES STOCK
 US SEES PRICE RISES
 LONDON REMAINS AT THE CENTRE OF INNOVATION

25. H & M:CHALLENGES AHEAD
 A DECADE OF UNDERWRITING RETURNS
 DOWNTURN HITS INVESTMENT INCOME
 HULL VALUES FALLING
 INCREASING REINSURANCE COSTS
 UNDERWRITERS PRESS FOR RATE RISES
 PREMIUM VOLUMES FALL
 PLENTIFUL CAPACITY

26. P&I: SIGNS OF STABILITY
 CLUBS TAKE DECISIVE ACTION
 BIG CLAIMS DRIVERS
 TIME LAG
 ASSET RE-ALLOCATION
 REGULATION

27. CONCLUSION
 Plenty of options open for buyers, but beware of the long-term
implications.
 The current market conditions are now causing insurers to think
again about long term policies.
 Recently, the unrest in the Middle East/North Africa region has led
to an increased interest in strikes, riot and civil commotion
coverage.
 Intelligent ‘INSURANCE BROKER’ can help identify and quantify
risks and bring them under control. They can create and
implement customized solutions employing the most effective blend
of risk mitigation, risk transfer, and advanced risk financing. These
solutions go beyond traditional property / casualty insurance
programs to encompass strategies that can help increase a firm's
revenue growth, enhance its net income, and strengthen its balance
sheet.

28. THANK YOU