Royal Caribbean Cruise Lines 2013 Annual Report Download - page 24
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PART I
In conjunction with our cruise vacations, we offer pre-
and post-cruise hotel packages to our Royal Caribbean
International, Celebrity Cruises and Azamara Club
Cruises guests. During 2013, we expanded the mar-
kets in which we sell our cruise vacation protection
coverage, which provides guests with coverage for
trip cancellation, medical protection and baggage
protection. Onboard and other revenues accounted
for approximately 28% of total revenues in 2013 and
approximately 27% of total revenues in 2012 and 2011.
SEGMENT REPORTING
We operate five wholly-owned cruise brands, Royal
Caribbean International, Celebrity Cruises, Azamara
Club Cruises, Pullmantur and CDF Croisières de
France. In addition, we have a 50% investment in a
joint venture with TUI AG which operates the brand
TUI Cruises. We believe our global brands possess
the versatility to enter multiple cruise market seg-
ments within the cruise vacation industry. Although
each of our brands has its own marketing style as well
as ships and crews of various sizes, the nature of the
products sold and services delivered by our brands
share a common base (i.e., the sale and provision of
cruise vacations). Our brands also have similar itiner-
aries as well as similar cost and revenue components.
In addition, our brands source passengers from similar
markets around the world and operate in similar eco-
nomic environments with a significant degree of com-
mercial overlap. As a result, our brands (including TUI
Cruises) have been aggregated as a single reportable
segment based on the similarity of their economic
characteristics, types of consumers, regulatory envi-
ronment, maintenance requirements, supporting sys-
tems and processes as well as products and services
provided. Our Chairman and Chief Executive Officer
has been identified as the chief operating decision-
maker and all significant operating decisions including
the allocation of resources are based upon the analy-
ses of the Company as one segment. ( For financial
information see Item 8. Financial Statements and
Supplementary Data.)
EMPLOYEES
As of December 31, 2013, we employed approximately
64,000 employees, including 57,000 shipboard
employees as well as 6,200 full-time and 700 part-
time employees in our shoreside operations. As
of December 31, 2013, approximately 80% of our
shipboard employees were covered by collective
bargaining agreements.
INSURANCE
We maintain insurance on the hull and machinery
of our ships, which includes additional coverage for
disbursements, earnings and increased value, which
are maintained in amounts related to the net book
value of each ship. The coverage for each of the hull
policies is maintained with syndicates of insurance
underwriters from the British, Scandinavian, French,
United States and other international insurance markets.
We maintain liability protection and indemnity insur-
ance for each of our ships through either the United
Kingdom Mutual Steam Ship Assurance Association
(Bermuda) Limited or the Steamship Mutual Under-
writing Association (Bermuda) Limited. Our protection
and indemnity liability insurance is done on a mutual
basis and we are subject to additional premium calls
in amounts based on claim records of all members of
the mutual protection and indemnity association. We
are also subject to additional premium calls based on
investment shortfalls experienced by the insurer.
We maintain war risk insurance which covers damage
due to acts of war, including invasion, insurrection,
terrorism, rebellion, piracy and hijacking, on each ship,
through a Norwegian war risk insurance organization.
This coverage includes coverage for physical damage
to the ship which is not covered under the hull policies
as a result of war exclusion clauses in such hull policies.
We also maintain protection and indemnity war risk
coverage for risks that would be excluded by the rules
of the indemnity insurance organizations, subject to
certain limitations. Consistent with most marine war
risk policies, under the terms of our war risk insurance
coverage, underwriters can give seven days notice to
us that the policy will be canceled and reinstated at
higher premium rates.
Insurance coverage for shoreside property, shipboard
inventory, and general liability risks are maintained
with insurance underwriters in the United States and
the United Kingdom.
We do not carry business interruption insurance for
our ships based on our evaluation of the risks involved
and protective measures already in place, as compared
to the cost of insurance.
All insurance coverage is subject to certain limitations,
exclusions and deductible levels. In addition, in certain
circumstances, we either self-insure or co-insure a
portion of these risks. Premiums charged by insurance
carriers, including carriers in the maritime insurance
industry, increase or decrease from time to time and
tend to be cyclical in nature. These cycles are impacted
both by our own loss experience and by losses incurred
in direct and reinsurance markets. We historically
have been able to obtain insurance coverage in
amounts and at premiums we have deemed to be
commercially acceptable. No assurance can be given
that affordable and secure insurance markets will
be available to us in the future, particularly for war
risk insurance.