b'On an individual operator basis, the biggest influences onin the cargo or shipping industry, so why is this affecting FOGHORN FOCUS your insurance premiums are your loss ratio (claims paid di- me? The simple answer is that many of the same insurance vided by premium paid), the location(s) where you operatecompanies who underwrite these risks also participate on (i.e. coastal locations, highly litigious areas, etc.), the age ofyour insurance program. To get a better understanding of your vessels, and if you have a high aggregation of assets inthe impact associated with each of these events, let us con-one area. These are all important items that insurance com- sider the costs of each one. pany underwriters look for when they review your risk. HurricaneIanwasamajorweathereventin2022that ultimatelyprolongedrateincreases.AccordingtoBrian-na Sacks at the Washington Post, Hurricane Ian caused The general rule of $112.9 billion in damages. This ranks Ian as the third most costly hurricane behind Katrina and Harvey, according to thumb is that insuranceNational Centers for Environmental Information. While many of these payouts were related to property, wind, and companies break even flood, there was a significant amount of claims related to vessel damage. Recreational and commercial vessels were di-at a 60 percent loss ratiorectly hit, and the insurance companies paid for their losses. (the remaining 40 percentInregardtotheFrancisScottKeyBridgeincident,my colleague Alex Vullo, executive director of protection & being fixed costs). indemnity practice leader at Gallagher states, The overall So for every dollar of costoftheincident,includinghullrepairs,GA/salvage, loss of life, crew injury, repairs to the bridge, business in-premium you pay, the terruption etc. have been estimated between $2 billion and $4 billion. Whilst this range is vast, even at $2 billion this insurance company payswould make the incident (most likely) the biggest maritime casualty ever, exceeding the costs of the Costa Concordia out 60 cents in claims.or the Ever Given, to cite recent examples. Furthermore, the impact on rates for subsequent renewals of reinsurance goingforwardmayultimatelybesubstantial,effectively meaning that, in these circumstances, the group clubs could be paying for this casualty for many years to come, not so From an external standpoint, big weather events like Hur- much in the form of claims incurred in a particular policy ricane Ian in 2022, major incidents like the Francis Scottyear, but rather in materially increased reinsurance rates for Key Bridge incident in Maryland this year, and the risingyears to come. The gross cost of this claim has a significant cost of social inflation all have significant impacts on yourimpact on the overall loss ratio of each of the insurers that insurance premiums. Combine these with hungry plaintiffwere on this program. Unfortunately, this will eventually attorneys and you have a perfect storm. The general rulehave a trickledown effect on all maritime operators.of thumb is that insurance companies break even at a 60 percentlossratio(theremaining40percentbeingfixedOn top of these two events, social inflation is playing a part. costs). So for every dollar of premium you pay, the insur- Per a recent report by the Institute for Legal Reform, From ance company pays out 60 cents in claims. In the eyes of an20102019 the median aberration verdict increased by insurance company, a flat renewal is not even keeping up27.5 percent from $19.3M to $24.6M. Plaintiff attorneys with inflation.know the game and they know how to play it well. In areas like Louisiana or New York you will see numerous plain-You may ask yourself, I dont operate on the coast, so whytiff attorney billboards. The likelihood of your employees am I getting dinged for hurricane losses? Or we are notand customers obtaining an attorney is substantially higher FOGHORN 28'