Energy Insurance and Risk Management - PowerPoint PPT Presentation

Loading...

PPT – Energy Insurance and Risk Management PowerPoint presentation | free to download - id: 3b08cd-NjQyM



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

Energy Insurance and Risk Management

Description:

The insurance transaction distribution system The role of the markets (especially Lloyd s) The role of the broker A presentation at The University of Houston ... – PowerPoint PPT presentation

Number of Views:448
Avg rating:3.0/5.0
Slides: 82
Provided by: bauerUhE2
Learn more at: http://www.bauer.uh.edu
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: Energy Insurance and Risk Management


1
Energy Insurance and Risk Management The
insurance transaction distribution system The
role of the markets (especially Lloyds) The role
of the broker
A presentation at The University of Houston -
October 9, 2007 Jerry McAloon Aon Risk Services
2
Wonderful! Just wonderful!...So much for
instilling them with a sense of awe.
3
Discussion outline
  • What is Risk Management?
  • Why buy insurance?
  • Types of Insurance
  • Insurance program structure
  • The purpose of reinsurance
  • Insurance program marketing The Insurance
    Transaction Distribution System

4
Insurance Its not just a job, its an
adventure
5
Discussion outline
  • What is Risk Management? lt3 minutes
  • Why buy insurance? lt3 minutes
  • Types of Insurance lt3 minutes
  • Insurance program structure lt5 minutes
  • The purpose of reinsurance lt3 minutes
  • Insurance program marketing ???

6
Discussion outline
  • What is Risk Management?
  • Why buy insurance?
  • Types of Insurance
  • Insurance program structure
  • The purpose of reinsurance
  • Insurance program marketing

7
What is Risk Management?
  • Focus on Hazard risk
  • The Risk Management Process
  • Identify the Risk
  • Quantify the Risk
  • Probability of loss
  • Severity of loss
  • (Ignore the Risk)
  • Avoid the Risk
  • Minimize the Risk
  • Transfer the Risk

8
Risk Transfer
  • Contractual risk transfer
  • Hold harmless
  • Indemnification
  • Additional Assured status
  • Waiver of Subrogation
  • Insurance

9
Discussion outline
  • What is Risk Management?
  • Why buy insurance? (3 minutes?)
  • Types of Insurance
  • Insurance program structure
  • The purpose of reinsurance
  • Insurance program marketing

10
Why buy insurance?
  • What is insurance?
  • What does insurance do?

11
Why buy insurance?
  • Financial protection from what?
  • Inability to absorb loss
  • Contractual requirements
  • Legal/regulatory requirements

12
Discussion outline
  • What is Risk Management?
  • Why buy insurance?
  • Types of Insurance (3 minutes?)
  • Insurance program structure
  • The purpose of reinsurance
  • Insurance program marketing

13
Types of Insurance
  • Property
  • Casualty
  • Control of Well
  • Management Liability
  • Marine
  • Aviation
  • Kidnap Ransom
  • Environmental
  • Political Risk
  • Patent Infringement
  • Surety

14
Types of Insurance Broadly speaking
  • Property
  • Physical Damage
  • Business Interruption (a.k.a. Time element)
  • Casualty
  • Workers Compensation
  • General Liability (Legal tort and Contractual)
  • Auto Liability
  • Employers Liability

15
Discussion outline
  • What is Risk Management?
  • Why buy insurance?
  • Types of Insurance
  • Insurance program structure (3 minutes?)
  • The purpose of reinsurance
  • Insurance program marketing

16
Insurance Program Structure
  • ALWAYS starts with
  • What is the client trying to accomplish?
  • The best process
  • yields
  • the best result

17
Insurance Program Structure
  • Followed closely by
  • What is reasonably achievable in the current
    insurance market conditions?
  • The best process
  • yields
  • the best result

18
A successful renewal requires a strong foundation

Binding Implementation
1 Week
Minimum
Broking All Viable Proposals
4 Weeks
Develop Submission
Market Tactics (Access)
2-3 Weeks
Develop Marketing Strategy
Market Selection
2-3 Weeks
Develop Risk Profile
1-2 Weeks
19
Insurance Program Structure
  • Layers
  • Primary
  • Excess
  • Quota Share (a.k.a. Subscription or
    Participation)

20
Insurance Program Structure
  • Why a layered or quota share program?
  • Client goals objectives
  • Underwriter preference
  • Pricing considerations
  • Coverage considerations

21
Insurance Program Structure
  • A layered program

22
Insurance Program Structure
  • A layered program (showing layer limits)

23
Insurance Program Structure
  • A quota share program

24
Insurance Program Structure
  • Combination of Layering and Quota Share

25
Insurance Program Structure
  • Underlying Insurance

26
Discussion outline
  • What is Risk Management?
  • Why buy insurance?
  • Types of Insurance
  • Insurance program structure
  • The purpose of reinsurance (5 minutes?)
  • Insurance program marketing

27
The purpose of reinsurance
  • Spread of risk
  • Increases/supplements capacity
  • Facilitates writing broader coverage
  • Puts capacity in the control of qualified
    underwriters

28
Types of Reinsurance
  • Facultative
  • Treaty
  • Quota Share
  • Excess of Loss

29
Other Reinsurance Issues
  • Risks Attaching vs. Losses Occurring
  • Natural Catastrophe (NatCat) Accumulations
  • NatCat Risk Modeling

30
Catastrophic Event Modeling Hurricane Loss
Analysis
31
NatCat Risk Modeling
32
A disturbing trend
33
A disturbing trend
34
Discussion outline
  • What is Risk Management?
  • Why buy insurance?
  • Types of Insurance
  • Insurance program structure
  • The purpose of reinsurance
  • Insurance program marketing (3 minutes?)

35
Insurance Distribution System
  • Insurance companies sell insurance
  • Insurance company agents sell insurance
  • Brokers help their clients buy insurance

36
Insurance Distribution System
  • Insurance companies sell insurance
  • Insurance company agents sell insurance
  • Brokers help their clients buy insurance
  • (after first helping them decide whether to buy
    insurance, and if so, how much to buy)

37
The role of the broker
  • Transactional
  • Consultative

38
The role of the broker
  • Transactional
  • Insurance placement
  • Monitor insurer financial stability
  • Data gathering/risk analysis
  • Cash flow actuarial analysis
  • Submission preparation
  • Manuscript policy design
  • Negotiations
  • Recommendations
  • (additions/deletions, MA, contract review)
  • Documentation (policies, certificates, etc.)
  • Premium billing and remittance
  • International (admitted policies)
  • Analytical/Actuarial work
  • Insurance program administration
  • Mid-term servicing
  • Claims advocacy and processing

39
The role of the broker
  • Consultative
  • Total Cost of Risk (T.C.O.R.)
  • Safety Loss Prevention/Risk Control
  • Risk Management Information Systems, AonLine,
    etc.
  • Master Service Agreements
  • Contractor insurance programs
  • Risk bearing capacity analysis
  • Manage retained losses
  • Global network the Risk Managers eyes ears
  • Captive Management Captive Utilization
  • Tax-driven strategies
  • High level claims advocacy economic forecasting,
    etc.
  • Enhanced claims-related services (Accelerated
    Claims Closure, Structured Settlements, Loss
    Portfolio Transfer, etc.)

40
Broker compensation
  • Commissions
  • Fees

41
(No Transcript)
42
Insurance Program Marketing
  • Let the fun begin!

43
Why buy insurance?
  • What is insurance?
  • What does insurance do?

44
What is insurance?
  • CONTRACT
  • Payment (of premium) in exchange for a promise of
    payment (of claim) under certain explicitly
    agreed circumstances
  • Requires good faith

45
Catastrophe Insurance for the Energy Industry
46
Insurance Program Marketing
  • Negotiation
  • Leverage
  • Relationships
  • Trust

47
The insurance profession
48
Insurance Program Marketing
  • The bad news
  • Insurance (including insurance brokerage) is a
    highly regulated industry
  • Transparency Disclosure
  • Domestic vs. Foreign (Surplus Lines) vs. Alien
  • Locally admitted insurers
  • U.K. Financial Services Authority
  • Premium tax, Surplus lines tax, Federal Excise Tax

49
Insurance Program Marketing
  • The good news
  • We can (and do) work through all that.

50
Insurance Program Marketing
  • Retail insurance brokers / Agents
  • Wholesale brokers / Intermediaries
  • Managing General Agents
  • Insurers/ Underwriters / Carriers
  • Coverholders / Facilities

51
Insurance Program Marketing
  • The role of the Broker in the Insurance
    transaction

52
Insurance Program Marketing
  • The role of the Broker in the Insurance
    transaction
  • The clients advocate
  • Broker vs. Agent

53
Insurance Program Marketing
  • The Brokers role in
  • Negotiation
  • during the Insurance transaction

54
Insurance Program Marketing
  • The Brokers use of
  • Leverage
  • in the Insurance transaction

55
Insurance Program Marketing
  • The importance of
  • Relationships and Trust
  • in the Insurance transaction

56
Insurance Program Marketing
  • The (global) energy insurance market
  • North American insurance companies
  • Bermuda insurance companies
  • U.K. and European insurance companies
  • Lloyds of London
  • Mutuals
  • Others

57
Insurance Companies North America
  • ACE Global
  • American Electric Gas Insurance Services
    (AEGIS)
  • American International Group (AIG)
  • American Offshore Insurance Syndicate (AOIS)
  • Arch
  • Chubb
  • CNA
  • Commonwealth Ins.
  • FM Global
  • Houston Casualty
  • Lexington
  • Liberty International
  • Markel
  • Navigators
  • St. Paul/Travelers
  • Starr Companies
  • XL Insurance
  • Zurich Insurance

58
Insurance Companies Bermuda
  • ACE Bermuda
  • Allied World Assurance co. (AWAC)
  • Arch Ins.
  • Axis
  • Endurance Re
  • Everest Re
  • Lancashire
  • MaxRe
  • Montpelier
  • Starr Excess
  • XL Insurance
  • Zurich Insurance

59
Insurance Companies U.K. Europe
  • ACE Europe
  • Allianz
  • Axis
  • GARD Marine Energy
  • GE Frankona
  • Generali
  • Gerling
  • Glacier Re
  • Hannover Re
  • Houston Casualty
  • Infrassure
  • Lancashire
  • Munich Re/Great Lakes/Munich American Risk
    Partners (MARP)
  • Navigators
  • Partner Re
  • QBE
  • SCOR
  • Swiss Re/SR International
  • Wurttembergische
  • Zurich Re

60
Insurance Program Marketing
  • Mutuals
  • Assessable
  • Non-Assessable

61
Mutual Insurers
  • AEGIS
  • Oil Insurance Limited (O.I.L.)
  • Oil Casualty Insurance Limited (O.C.I.L.)
  • Nuclear Energy Insurance Ltd. (N.E.I.L.)
  • Energy Insurance Managers (E.I.M.)

62
Insurance Program Marketing
63
What is Lloyds?
  • A marketplace NOT an insurance company
  • First published reference 1688
  • First breakaway group of professional
    underwriters 1769
  • First reinsurance contract (C.E.Heath) 1880
  • San Francisco earthquake (1906) Pay all our
    policyholders in full, irrespective of the terms
    of their policies. C.E. Heath
  • Central Guarantee Fund 1925
  • LATF 1939
  • GAAP Accounting 2005

64
Marketing at Lloyds Who does the work?
  • The Lloyds Broker
  • The Lloyds Syndicates
  • Names
  • Individual
  • Corporate
  • The Slip

65
What is Lloyds today?
  • The Franchisor
  • (The Managing Agents are the Franchisees)
  • Franchise Board
  • Performance Management
  • Capital Management
  • Risk Management (RDS)

66
Franchise management
  • Syndicate business planning
  • Monitoring / benchmarking
  • Claims, reinsurance and run-off management

Performance Management
Risk Management
Capital Management
  • Realistic Disaster Scenarios
  • Risk management framework
  • Risk based capital
  • Central assets

Source Lloyds
67
What is Lloyds today?
  • Entrepreneurial, Dynamic, Diverse
  • Innovative
  • Consistent Stable
  • Solvent
  • Global

68
Lloyds results demonstrate challenge of
sustaining profitability
(f) forecast
69
Why is Lloyds important to us?
  • Second largest surplus lines market in the U.S.
    (after AIG) 42 of Lloyds market premium is
    from U.S.
  • Center of the energy, marine and aviation global
    insurance markets
  • 6th largest reinsurer

70
Why is Lloyds important to us?
  • Does business in over 200 countries territories
  • Insures
  • 93 of all Dow Jones Industrial Average companies
  • 94 of FTSE 100 companies
  • 85 of Fortune 500
  • 82 of Fortune European Top 50
  • The top 7 pharmaceuticals
  • The top 20 banks

71
Marketing at Lloyds How much CAPACITY is
available?
  • Capacity to provide limits of insurance
  • Stamp capacity the ability to accept premium
    on behalf of Names (31.4 billion for 2007)

72
The Lloyds Market
  • 46 Managing Agents
  • 437 active syndicates in 1980 62 in 2006
  • Underwriters, Claims professionals, Accountants,
    Attorneys, Support staff, etc.
  • Average Syndicate stamp capacity 411 million
  • 163 accredited brokerage firms
  • 4,000 people daily

73
Lloyds syndicate trends 1983-2005
2005 average syndicate capacity 221m
m
409
201
62
44
2005
1983
Source Lloyds
74
Investors at Lloyds
75
Investors at Lloyds
  • 111 corporate members
  • 1,497 individual (unlimited liability) Names
  • 468 Name Companies (representing limited
    liability individuals)
  • 132 Scottish Limited Partnerships

76
Placing business at Lloyds
  • The Lloyds broker
  • Negotiations at the Box
  • Standing in the queue
  • Meetings with clients
  • Contract documentation
  • The Slip
  • The Wording
  • The POLICY
  • ConCert
  • Uberrimae fidei
  • Lloyds in the 21st Century

77
Placing business at Lloyds - Market dynamics
  • Subscription market - Anti-trust implications?
  • Leaders Followers (?)
  • The (underwriting) decision making process
  • Accept or decline
  • Coverage (incl. Limits/Retentions)
  • Price
  • Line size
  • Facilities / Lineslips
  • Information sharing
  • Choosing a Leader

78
Placing business at Lloyds - Market dynamics
  • Subscription market Anti-trust implications?
  • Leaders Followers
  • The (underwriting) decision making process
  • Coverage (incl. Limits/Retentions)
  • Price
  • Line size
  • Facilities / Lineslips
  • Information sharing
  • Choosing a Leader

79
Upstream underwriting capacities, 2004-06
USm
max. OEE limits purchased in commercial market
typically US 300m
Source Aon Limited
80
Energy Property underwriting capacities, 2004-06
USm
SourceAon Limited
81
Energy Insurance and Risk Management
A presentation at The University of
Houston October 9, 2007 Jerry McAloon Aon Risk
Services 832-476-6998 Jerry_McAloon_at_ars.aon.com
About PowerShow.com