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HCC_Surety test case

Shaun Bingham

Underwriting Review

Tokio Marine HCC - Credit Group

Date: 28 April 2022

Authors: Mark Reynolds and Jerome Swinscoe

Executive Summary – Q1 2022

- QTD/YTD Results across all issuing companies:

o Q1 GWP totalled $25.5.M, a 20% increase from Q1 2021.

o Our Q1 combined ratio is 88.4% and PTOI is $2.8M, compared to 70.8% and $6.4M in Q1 2021. The deterioration arises from the increase of our gross loss target from 40% to 60% as of 1 January 2022, due to the Russian invasion of Ukraine. Our overall IBNR as of 31 March 2022 stands at $55.8M, an increase from $49.4M at year-end 2021.

- QTD/YTD Results on London/EU paper:

o London Q1 GWP amounted to $19.5M, a 27% increase over Q1 2021.

o Our Q1 combined ratio in London is 90.6% and PTOI is $1.7M, compared to 68.5% and $5.0M in Q1 2021. The deterioration is the result of increasing our loss target from 40% to 60%, due to the Russian invasion of Ukraine. Our London IBNR as of 31 March 2022 stands at $41.8M, an increase from $37.0M at year-end 2021.

- Losses: After several excellent months, losses increased significantly in March. The most significant activity was $8.1M of new reserves on two cases for Trafigura in Sudan. In spite of this, our incurred loss ratios in Q1 were 28% gross and 17% net across all issuing companies, and 40% gross / 31% net in London.

- Invasion of Ukraine: The 24 February invasion of Ukraine by Russia is expected to have a significant impact on losses for 2022. As noted above, we have increased our loss target for AY 2022 to 60%. We have added twenty-seven items to the Watch List, with total gross exposure of $128M ($120M on London/EU paper) and total net exposure of $103M ($97M on London/EU paper). No reserves have yet been posted, although we currently have $40M gross / $28M net on high-severity WL, which includes Severity 3 and 4.

- Production: As noted above, our production increased in Q1, returning to the level seen prior to the pandemic. Prior to the 24 February invasion of Ukraine, we had been seeing an increase in bound risks and benefitting from higher rates in some areas.

Current underwriting approach:

We have now reverted to the strict conservative underwriting approach implemented from Q2 2020 and are factoring in the multiple risk factors inherent to the current global environment (higher commodity prices, global inflation, volatility, supply chain disruptions, slowdown in Chinese economy and increasing interest rates). We are aiming for higher premium rates wherever justified. Our declination rate has once again increased.

Business

· Production detail by Insureds and brokers:

Shown below are our leading insureds and brokers for Q1 2022 in UK/France, and their GWP for full-year 2021 (thousands of USD).

Insured Groups

Insured Groups

Insured_Group

Sum_GWP

African Export-Import Bank (Afreximbank)

2040101.92

1262429.34

Cargill

1151860.21

Deutsche Bank

809773.98

DairyAmerica, Inc.

727224.71

Credit Suisse

479273.43

BNP Paribas

466443.54

Blackhawk Mining, LLC

415000.00

Asian Development Bank

294781.29

Credit Agricole SA (CACIB)

289022.43

Huawei

244894.14

HTP Energy

240810.00

Banco Santander

215034.25

Africa Finance Corp

214894.01

ASSA ABLOY AB

207900.00

Inter-American Development Bank

204555.63

Castleton Commodities International LLC (CCI)

201789.20

ABN AMRO Bank N.V.

196796.84

Delta Shipping Corp.

170000.00

Al Arabia Bunkering Company LLC

140000.00

Eranove

134054.39

Formlabs Inc.

120000.00

B&W Energy Services, Inc.

90250.00

Gilead Sciences Israel Ltd.

85500.00

Diversified Lenders, Inc.

81000.00

Deere & Company

71250.00

ICBC Standard Bank

64861.92

Equinor ASA (Statoil)

63198.57

Export Development Canada

56422.18

Intel Corp.

56190.00

ASHRA

52959.31

Barry Wehmiller

45277.00

Cobank ACB

43399.31

Citibank

27601.64

Columbia Steel Casting Co., Inc.

27450.00

Gunvor Group Ltd

25530.34

Empire Electric Association, Inc.

25000.00

ING Bank

23876.72

Brown Brothers Harriman & Co.

23653.00

AB Svensk Exportkredit (SEK)

15268.32

Aareal Bank AG

14106.49

Commerzbank

11868.88

IHC

10180.86

BIC-BRED (Suisse) SA

9516.92

Attijariwafa Bank Europe

5471.35

Cutsforth, Inc.

1890.00

Alvean

0.00

DP World

-8.36

Erste Bank

-13228.33

Cairn Energy

-63868.00

There are no rows in this table

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Broker_Groups

Broker_Groups

Broker_Group

Sum_GWP

Notes

BPL

1777974.67

Open

EIA

43399.31

Open

Lockton

1213417.77

Open

Marsh JLT Specialty

791763.98

Open

Miller

9516.92

Open

RK Harrison

76678.14

Open

Texel Finance

13826.15

Open

Willis

82641.25

Open

BPL

1777974.67

Open

EIA

43399.31

Open

Lockton

1213417.77

Open

Marsh JLT Specialty

791763.98

Open

Miller

9516.92

Open

RK Harrison

76678.14

Open

Texel Finance

13826.15

Open

Willis

82641.25

Open

There are no rows in this table

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Debtor limits $15+M in Q1 2022 for Exec Summary and EUMC

Debtor limits $15+M in Q1 2022 for Exec Summary and EUMC

HCCI_Policy_Ref

Insured

Debtor

Debtor_Country

Effective_Date

Exposure_Expiration

USD_Limit

Coverage_Code

Credit_Rating_or_Score

Notes

22RXN51727AA

Societe Generale, NY

Boston Scientific Corporation

United States

2022-01-20T00:00:00.000Z

2026-06-10T00:00:00.000Z

25000040

MTSD

BBB

Open

22RXN51753AA

Societe Generale, NY

HP Inc.

United States

2022-02-21T00:00:00.000Z

2026-06-11T00:00:00.000Z

25000000

MTSD

BBB

Open

22RXNZC018BA

BNP Paribas

American International Group Inc

United States

2022-02-04T00:00:00.000Z

2026-11-19T12:39:09.000Z

25000000

MTSD

BBB+

Open

22RXS51773AA

Standard Chartered Bank

Oracle America, Inc.

United States

2022-03-23T00:00:00.000Z

2023-04-07T00:00:00.000Z

25000000

STSD

BBB+

Open

22RXC51774AA

Standard Chartered Bank

CEND - Bangladesh

Bangladesh

2022-03-23T00:00:00.000Z

2024-04-22T00:00:00.000Z

24000000

CEND

N/A

Open

22RXC51774AA

Standard Chartered Bank

CEND - Ghana

Ghana

2022-03-23T00:00:00.000Z

2024-04-22T00:00:00.000Z

24000000

CEND

N/A

Open

22RXC51774AA

Standard Chartered Bank

CEND - Nigeria

Nigeria

2022-03-23T00:00:00.000Z

2024-04-22T00:00:00.000Z

24000000

CEND

N/A

Open

22RXN51747AA

Societe Generale, NY

Baxter International Inc.

United States

2022-02-09T00:00:00.000Z

2026-12-29T00:00:00.000Z

21080000

MTSD

BBB

Open

22RXS51767AA

Castleton Commodities Merchant Europe

Uniper SE

Germany

2022-03-16T00:00:00.000Z

2022-11-04T00:00:00.000Z

20000500

STSD

BBB

Open

22RXN51754AA

Societe Generale, NY

The Dow Chemical Company

United States

2022-02-21T00:00:00.000Z

2026-12-23T00:00:00.000Z

20000000

MTSD

BBB

Open

22RXN51761AA

Societe Generale, NY

Hewlett Packard Enterprise Company

United States

2022-03-02T00:00:00.000Z

2026-12-24T00:00:00.000Z

20000000

MTSD

BBB

Open

22RXN51765AA

Deutsche Bank AG

Verizon Communications

United States

2022-03-14T00:00:00.000Z

2027-05-28T00:00:00.000Z

20000000

MTSD

BBB+

Open

22RXS51030DA

BP Oil International Limited

Motor Fuel Limited

United Kingdom

2022-03-31T00:00:00.000Z

2023-05-03T14:29:06.000Z

19667081.992544

STSD

bb-

Open

22RXE50137CA

Trafigura Pte Ltd

Ministry of Natural Resources - Kurdistan

Kurdistan(Iraq)

2022-02-11T00:00:00.000Z

2025-04-30T11:03:08.000Z

15458438.02

PREX

B-

Open

22RXS50935DA

BP Oil International Limited

Peninsula Petroleum Ltd.

Ireland

2022-01-01T00:00:00.000Z

2023-04-03T15:36:32.000Z

15000000

STSD

Open

22RXS51475CA

BP Oil International Limited

Duke Oil Company (Nigeria)

Nigeria

2022-02-01T00:00:00.000Z

2022-07-07T15:45:20.000Z

15000000

STSD

Open

22RXS51615BA

BP Oil International Limited

Tupras

Turkey

2022-03-17T00:00:00.000Z

2023-06-17T11:32:51.999Z

15000000

STSD

Open

There are no rows in this table

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