Project Cargo

Worldwide Financed ProjectsMiddle 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

Indian SubcontinentIndian Subcontinent

USD3.9bn

7 deals

Latin America / Caribbean

USD16.9bn

30 deals

Middle East / Africa

USD53.2bn

47 deals

Australasia

USD7.3bn

29 deals

Worldwide Financed Construction DealsUSD180bn Project Finance Q1/Q3 2007

Investment in USD bn

100120140160180200

inbn

USD

020406080

2001 2002 2003 2004 2005 2006 2007

Yearly Q1 - Q3

inbn

USD

Worldwide Financed Construction Deals410 Project Deals Q1/Q3 2007

Number of Deals

200250300350400450

Num

ber

ofD

eal

s

050

100150200

2001 2002 2003 2004 2005 2006 2007

Yearly Q1 - Q3

Num

ber

ofD

eal

s

Financed Construction DealsUSD180bn Project Finance Q1/Q3 2007

Breakdown of Financed ConstructionDeals

Energy Petrochemical Oil & Gas Industrial

Infrastructure Mining Telecom

Project Cargo

What is covered?Physical Loss or Damage cover under the Materialsection of the Cargo Cover and not explicit excludedin the DSU Cover

Which Clause do we use?Which Clause do we use?London E.C. Bruce Endorsement under the CargoCover or equivalents in the local markets

Project Cargo

Project cargo insurance is coverage for equipmentdestined for infrastructure projects and Industrialfacilities. Policy coverage includes physical loss &damage and may include consequential loss, such asdelay in start-up (DSU) and additional cost of working

Significant limits are required: typically up toSignificant limits are required: typically up toUS$300m, with placements up to US$1.2bn possiblein the marine market. Global project cargo income isestimated at USD165m (2007)

Project Cargo

Insurance coverage is typically driven by banks, andthe project’s construction placement followed byother coverages, including cargo.

Increased traditional reinsurance participation inemerging markets – with particular focus on MiddleEast, Latin American and Asia

The Project Cargo Time Schedule

Provisional Certificate of Acceptance

$50 / 50 Clause

RM, PBRM etc.

03

construction value atthe 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

The Project Cargo Indemnity Period

$

Slide 10

ProvisionalDeductible

Indemnity Period

Maximum Indemnity Period

Final CAR / EAR & DSU Period

Original TransportPeriod

Time

CAR / EAR & DSUPeriod

IllustrationofahypotheticalUS$250mioconstructionproject

The Project Cargo Indemnity PeriodIllustrationofahypotheticalUS$250mioconstructionproject

150

200

250

300P

roje

ctV

alu

e(U

S$)

Criticaltransittimeframe

Illustration of a hypothetical USD 250 Mio construcion project

0

50

100

150

6 12 18 24 30 36

Time(Months)

Pro

ject

Val

ue

(US

$)

Time (Months) Project Start Date

The Project Cargo Indemnity Period

Deductible

Critical item #1

Critical item #2

Critical item #3

Deductible

Criticaltransittimeframe

Slide 12

Critical item #4

6 12 18 24 30 36Time (Months)

ProjectStart DateShipment

DateArrivalDate

ReplacementTime

Key:

Important Considerations

It is essential that underwriters also insure thephysical loss or damage insurance (cargo policy) inconjunction with the consequential loss policy, ascontrol by the underwriters is vital. Preferably theywill be written as two sections of the same policywith the loss of profit claim triggered by a loss underthe material damage cargo section. Thus anythe material damage cargo section. Thus anycondition or warranty imposed by Underwriters onthe cargo policy will similarly affect the advance lossof profit coverage.

Important Considerations

Otherwise the consequential loss underwriterswould have no control over the damaged cargo andwould be unable to influence the course of action.

The assured would have to submit any claimsseparately to two sets of insurers who may notseparately to two sets of insurers who may notadopt identical positions. With the sameunderwriters the claim will be dealt with byone Claim Department in conjunction with theUnderwriter who assessed and wrote the risk in thefirst instance. Therefore an overall view would beadopted minimizing the loss to both insurers.

Important Considerations

It also ought to be remembered that the valueof any one item or part of one item has little bearingon its significance to loss of profit Underwriters. AnAll Risks Underwriter receives premium based on thevalue and the claim is paid relative to that value.

For the consequential loss Underwriter, loss ordamage to quite low value items which are vital to acontract might result in an entire plant beinginoperable if repairs or replacement parts are notquickly available.

What is the Reinsurer’s Role on DSU?

Capacity

Knowledge Transfer

Diversifying: Worldwide view and allocation ofthe Risk

Surveys / Claims Handling Support

Capacity

Capacity

Capacity

DSU Reinsurance Types

The market differentiates between two reinsurancemethodologies:

TYPE 1:

Quasi-direct reinsurance (fronted), written out ofLondon and Singapore. Singapore is a growingmarket that is becoming dominant in Asia, leavinglittle room for London other than for the largest orlittle room for London other than for the largest ormost complex projects

TYPE 2

Traditional reinsurance (supporting experiencedcedants)

Market size by Region

USDm

Capacity forglobal deals any

one riskCapacity

stand-alone

Global Total 1,232 -

London 872 872

Singapore 60 310

North America 150 225

Europe 100 200

Other 50 100

Worldwide Market Size

Leading carriers in market on stand-alone basis

1025800

1000

1200

1400A

vaila

ble

Cap

acit

y,U

S$m

io

FollowingCarriers

207 152

1025

720

0

200

400

600

Worldwide London

Ava

ilabl

eC

apac

ity,

US$

mio

LeadingCarriers

Carriers