TEEKAY

SHIPPING
CORPORATION
Tradewinds Marine Risk
Forum - Bermuda
May 10-11, 2007

 TEEKAY – THE MARINE MIDSTREAM COMPANY ®

www.teekay.com
Topics

 Teekay Corporate Overview

 Risk Management - Today’s Environment

 What do shipowners and risk managers want from their

hull underwriters and brokers?

 How are brokers and underwriters delivering the goods?

 What is right and what is wrong and how does it need to

improve?

2 www.teekay.com
Teekay – A Global Franchise
 Founded 1973 by the late Torben Karlshoej
 Transnational company with over 5,600 employees worldwide
 Largest tanker company by market capitalisation (NYSE: “TK”)
 Fleet of over 150 vessels
 Transporter of more than 10% of the world’s seaborne oil
 Leading franchises in shuttle tanker and conventional tanker segments
 Fastest growing independent LNG shipping company
 Growing presence in the offshore sector
 Recognised leader in safety, quality, and service

Trondheim Stavanger/Grimstad
Aberdeen
Glasgow
London Riga
Gdansk
Vancouver Tokyo
Nassau Hamburg Gdynia

Madrid Manila
Houston
Mumbai

Rio de Janeiro Singapore

Perth
Sydney

3 www.teekay.com
 Teekay in 1998 – A Tanker Company

CUSTOMER
CUSTOMER
LOGISTICS
LOGISTICS

ASSET MIX AFRAMAX

(HARDWARE) INDO-PACIFIC

CENTRALIZED
PEOPLE
PEOPLE &
& TECHNICAL
SYSTEMS
SYSTEMS AND
(SOFTWARE)
(SOFTWARE) COMMERCIAL
OPERATIONS

SCALE 45 SHIPS
8 OFFICES
TOTAL
SCALE
SCALE 200 SHORE ASSETS
1800 SEA BASED $1.4 BILLION
STAFF EMPLOYEES

4 www.teekay.com
 Teekay in 2007 – Much More than a Tanker Company

We have created a unique platform through

the Teekay Marine Midstream concept

NCS CONOCO
OFFSHORE BHPB CALTEX CEPSA
EMISSIONS EMBEDDED PHILLIPS SPT OFFSHORE
CUSTOMER LOADING MARINE AUSTRALIA STRATEGIC STRATEGIC
CONTROL CHARTERING STRATEGIC LIGHTERING OILFIELD
LOGISTICS LOGISTICS OUT- OUT- COAs L/T
PROGRAM AT ASTRA L/T J/V SERVICES
(NAVION) SOURCING SOURCING CHARTERS
(VOC) OIL CHARTERS

CRUDE OIL TANKERS PRODUCT CARRIERS SPECIALIZED

ASSET MIX SHUTTLE FSOs LNG/LPG
(HARDWARE) TANKERS CARRIERS
LR LR MR SHORT- LIGHTERING ICE FPSOs
VLCC SUEZMAX AFRAMAX I SEA SHIPS CLASS
II

INDIVIDUAL BUSINESS UNITS REGIONAL

FOCUS ON BD/CUSTOMER MARINE, CENTRALIZED STANDARDS
PEOPLE & BUSINESS RELATIONS TECHNICAL TEAMS
SYSTEMS INTELLIGENCE & TRAINING PROJECT
(SOFTWARE) SYSTEMS CUSTOMER HSE / BUSINESS MNGM’T
PEOPLE ASSET PROJECT
TANKERS SHUTTLE GAS OFFSHORE SERVICE RISK EXECUTION
MGMT. DEV. QUALITY
CENTRES

155 VESSELS OWNED,

CHARTERED AND/OR 21 OFFICES
MANAGED TOTAL ASSETS PUBLICLY LISTED
SCALE 26 NEWBUILDINGS ON 800 SHORE BASED $7 BILLION LNG and OFFSHORE
ORDER EMPLOYEES COMPANIES
4800 SEA STAFF

5 www.teekay.com
Going for Leadership from Rig to Refinery
A leader in harsh A leader in high-
weather FPSOs end FSO market

World’s largest Shuttle

tanker operator

Emerging force in Atlantic

product tanker market

50% owner of world’s

leading lightering
World’s largest operator of
business
mid-size crude oil tankers

World’s fifth largest

independent LNG
shipping company
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 Leader in Marine Energy Transportation
5 Floating, Production Storage
& Offtake Units

40 Shuttle
Tankers

28 Product
5 Floating 72 Crude Oil 17 Gas Tankers
Storage Units Tankers Tankers

CUSTOMER PEOPLE FINANCE OPERATIONS

The Teekay Marine Midstream Concept

Includes
Includes 10
10 commercially
commercially managed
managed vessels
vessels
7 www.teekay.com
Growing Investment in Offshore Oil and Gas Sector

SHUTTLE TANKER

FPSO
FSO

Seismic Exploration / Subsea Production Storage Transportation Terminal

Drilling Development

$163 billion in 2005 expenditures

Source: Douglas Westwood.

8 www.teekay.com
Risk Management – Today’s Challenges

 Industry evolution from the traditional shipping model has

brought new challenges in managing risk.
 A different skill set is required for risk managers, brokers
and underwriters
 National oil/gas companies tendering for projects
 Changing apportionment of liabilities
 Prompt, accurate analyses and responses are required to
address complex coverage issues and achieve timely
submission of bids & tenders

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 Hull Underwriters
 What do shipowners and risk managers want
from their hull underwriters and brokers?

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 Hull Underwriters

 Financial Security
 Incumbent on underwriter to
demonstrate and broker to verify
independently of rating agencies

 Competitive Pricing
 The Marine Insurance product is made up of both commoditized
and specialized aspects

 Flexibility
 Marine, energy, builders/conversion, other lines
 Understanding of assured’s business and ability to
accommodate special requirements

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 Hull Underwriters

 Relationship with Assured

 Long term view; able to weather different &
sometimes opposing views about a risk

 Claims Handling
 Terms & conditions – certainty of outcome
 Professional approach to adjusting & resolving any
grey areas
 Respected leader
 Good surveyor network and priority with surveyors

12 www.teekay.com
 Hull Underwriters
 Claims Handling (cont’d)
 Emergency Response Team – support
 Connections and leverage to obtain competitive
commercial terms for emergency response assets
such as tugs
 Prompt claims settlement
 Knowledge transfer – seafarer’s conferences, loss
prevention publications, experience & advice derived
from other casualties

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 Brokers

 Capability
 Large book of marine & non-marine business across all marine
markets. Local strategic & transactional expertise.
 Respected in the markets
 People with integrity, expertise & gravitas to get things done
 Expertise & manpower to service an active account including
project work

 Transparency
 Full disclosure of all remuneration associated with the account
 Operational Excellence – continuous improvement approach

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 Brokers
 Strategic approach; work closely with client
 Set challenging targets and achieve them
 Innovation; develop new strategies; trendsetter
 Provide benefit of experience gained from projects
 Watch for potential problems; develop wordings
 Team structure – backup, depth, succession

 Proven track record with clients

 Broad portfolio of similar business for benchmarking
15 www.teekay.com
 Brokers
 Market presence & influence with underwriters
 Project & contract expertise
 Competitive fees or commission levels
 Market intelligence & reporting
 Responsiveness to market volatility – eg War Risks
 Underwriter security assessment & reporting
 Relationship building between client and underwriters
 Accountability to client
 Wording development

16 www.teekay.com
 Brokers
 Capable claims advocacy when required in
addition to prompt claims collection
 Effective back office admin & systems
 Quality control – documentation & invoicing
 Coordination between client rep & back office
 Single profit centre

“A Collaborative Approach”

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 Business in the 21st Century – A Common Challenge
 Did I mention transparency?

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 Delivering the Goods

 How are brokers and underwriters delivering the

goods?

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 Delivering the Goods – What is Right?

 Focus on transparency in relation to broker remuneration

driven by legislation & enforcement
 Analysis of financial strength has become more
formalized
 Systems have come a long way in recent years
 Faster issuance of documentation
 More use of web-based technology
 Progress toward contract certainty
 Trend toward strengthening relationships
between assureds & underwriters rather
than a focus on keeping them apart!

20 www.teekay.com
 Delivering the Goods – What is Wrong?

 Weakness of back-office functions

 Trend toward under-resourcing and offshore outsourcing
 Wording technicians/experts are thin on the ground

 Strong traditional “tea party gossip” approach to doing business

 Some call it “tradition”
 Market rivalries sometimes get in the way of the assured’s interests
 Vastly different stories make it difficult to find out what’s really going on

 Systems are not being adequately utilized to optimize service providers’ time
to add value to the account

 Market instability (thankfully this is uncommon)

 Isolated incidents of attempts to introduce new last-minute exclusions &
warranties

 Tendency of some to control rather than help facilitate the relationship

between assured & underwriter

 Staff turnover – seems to be a cyclical shuffle

21 www.teekay.com
 Suggestions for Improvement

 Ensure the organisation is working to a standard of

absolute integrity

 Encourage and facilitate transparency in all aspects of

relationships with clients

 Examine whether the focus is fully on the interests of the

client. Even if it all appears to be in order, it’s not a bad
exercise.

 While obtaining new business is crucial, focus on

preserving existing client service levels

22 www.teekay.com
 Suggestions for Improvement

 Ensure back-office functions such as

documentation, invoicing etc. are given adequate
profile & resources in the company. When this
goes wrong it can be a major source of
frustration for clients.

 Fully utilize systems to free up people to do

client facing, value-adding work

 Ensure there is a focus on employee retention to

build expertise & minimize disruption to clients

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 Teekay – The Marine Midstream Company ®

24 www.teekay.com