Emerging Risks in Marine Transportation Webinar

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Emerging Risks in Marine Transportation Webinar 1 About Advisen: Advisen Ltd. is a privately-owned, independent and unbiased provider of news, data and risk analytics to the commercial insurance industry.
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Emerging Risks in Marine Transportation Webinar 1 About Advisen: Advisen Ltd. is a privately-owned, independent and unbiased provider of news, data and risk analytics to the commercial insurance industry. Advisen s mission is to deliver productivity and insight to insurance professionals. Advisen brings greater success though technology and data, revolutionizing the way the commercial insurance industry functions. Our customers leverage the Advisen platform, adding power to their proprietary ability and bringing value to their clients. Please locate us on: 2 Many Thanks to our Sponsor! About Aon: Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 62,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world s best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit for more information on Aon and to learn about Aon s global partnership and shirt sponsorship with Manchester United. 4 Emerging Risks in Marine Transportation White Paper: Industry Analysis: Marine Transportation Copy of these slides Recording of today s webinar 5 Today s Moderator David Bradford- President, Research & Editorial Group, Advisen Ltd. Today s Panelists Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten-Barge, Director of Risk Management, Genco Today s Panelists Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Role Bob is the U.S. Practice Leader for Aon Broking s Marine Practice. Responsibilities include strategic planning for Aon s presence in the marine industry and consistent delivery of high quality products and services. Bob personally leads the Account Executive or broking role for serveral large Aon marine accounts. He participates and/or assists others in the marine practice with the strategic program design for many marine accounts. Experience Bob has devoted most of his 30+ year career to the design, placement and handling of large risk management programs, predominantly for marine industry companies. Technical coverage experience includes Cargo, Hull, P&I, Builders Risk, Terminal Operators, and other forms of marine liability. Through his knowledge of the marine insurance market, Bob has helped lead Aon in the development of new products and services for marine clients. Education/Service Bob earned his B.A. from the State University of New York at Stony Brook. His completed his post graduate studies at The College of Insurance, New York and The School of Offshore Operations, Texas. Bob also maintains his broker s licenses in New York and several other states. He is an Associate Member of the American Institute of Marine Underwriters, Chairman of the American Institute Marine Underwriters Producer Advisory Committee, and Council Member of American Bureau of Shipping Special Underwriting Committee. Today s Panelists Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Role Barbara is the National Logistics Manager for Aon s Marine Practice. She assists colleagues and their Third Party Logistics clients and prospects by using her vast knowledge of the industry and applying services that Aon can offer. She also assists in broking logisitcs. Expertise Barbara has over thirty years of insurance knowledge as both an underwriter and insurance broker, with her recent years specializing in insurance solutions for third party logistics providers and Fortune 1000 companies with dedicated logistics operations. Barbara s specialty is customizing insurance programs for each individual logistic client s unique and specific needs. She understands the quick paced world of logistics and ensures that each client s needs are met on a timely basis. She was recognized by Risk and Insurance Magazine as one of the top six international marine Power Brokers for Education/Service She is a member of the American Institute of Marine Underwriters, Council of Supply Chain Management Professionals, and past president of the Propeller Clun, Port of Chicago. Today s Panelists Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Patrick Hickey is the senior ocean cargo product line officer for Zurich in North America. He is responsible for underwriting, strategy, planning, marketing, compliance and IPZ (International Programs from Zurich) for the cargo portfolio. Hickey is a dedicated ocean marine professional with more than 20 years in the field. Prior to joining Zurich, he was Vice President, Western Zone with AIG Global Marine & Energy and focused his attention on Fortune 500 multinational corporations. Hickey has managed national broker relationships and multi-line insurance product offerings for global freight forwarders and third party logistics providers. His past experience has led him to opportunities in the New York, Los Angeles and San Francisco marine markets. He is a past officer of the Marine Underwriters of Southern California and past President of the Board of Marine Underwriters of San Francisco, Inc. He is currently a member of the American Institute of Marine Underwriters (AIMU) Cargo Committee and the National Cargo Bureau. Today s Panelists Linda Conrad, Director of Strategic Business Risk Management, Zurich Linda Conrad is Director of Strategic Business Risk for Zurich. She leads a global team responsible for delivering tactical solutions to Zurich and to customers on strategic issues such as business resilience, supply chain risk, Enterprise Risk Management (ERM), risk culture and Total Risk Profiling. Linda also addresses enterprise resiliency issues in print and television appearances, including CNBC, Fox Business News and the Financial Times, and is featured in a Wall Street Journal site. Linda holds a Special designation in ERM, and serves on the Board of the Institute of Risk Management in London. Linda is deputy member of the ERM Committee of RIMS, sits on the Supply Chain Risk Leadership Council, and was Chairwoman of the Asian Risk Management Conference. She has taught at University of Delaware Captive program and in the Masters on Supply Chain Management program at University of Michigan s Ross School of Business, where she also serves on the Corporate Advisory Council. Linda studied at the Graduate Institute of International Studies in Geneva, Switzerland and Fox Business School. Today s Panelists Anthony J. Ten-Barge, Director of Risk Management, Genco Experience Tony has over 20 years of operational risk management experience at a multinational electronics firm, aerospace, automotive remanufacturer, and logistics. He has extensive experience in managing the due diligence process and managing liabilities during and after transaction. His expertise also includes the managing of environmental remediation, compliance and regulatory affairs, facility security, contract management and review as well as risk project management. While at the multinational electronics firm he managed the international program and a special worldwide HPR engineering and business interdependency program which reduced the property loss exposure and quantified the business interruption and contingent business interruption exposure. The aerospace firm was a portfolio legacy company of a major private equity firm. While there Tony quantified, managed, reduced and eliminated liabilities of operations previously closed and sold, including a Bermuda captive. He reduced workers compensation claims cost for ongoing operations and placed aircraft products liability insurance. Tony has also developed cost effective loss control and security programs and has implemented and monitored environmental risk control programs. Service Tony is on the Board of Trustees of the Dwight D. Eisenhower Society of Gettysburg, PA which manages a trust to provide Eisenhower Leadership Scholarships at Gettysburg College and to ROTC students and oversees the management of the Eisenhower Farm National Historic Site in Gettysburg, PA. How has the prolonged downturn in the global economy impacted the marine transportation industry? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco Shipping Market Source: IUMI and Bloomberg What are some of the changes to transportation you have observed over this period? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco U.S. 3PL Market E (US$ Billions) Source: Armstrong & Associates Logistics Trends in Supply Chain Management Order Management Warehouse Management Logistics Global Clusters Labor Management Yard Management Transportation Management Carrier Management Trading Partner Management Reverse Logistics RFID Solutions Risk Management Reshoring 17 Focusing on the logistics industry, how important is this business to the economy and what are its growth expectations? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco The U.S. Business Logistics System Cost is the Equivalent of 8.5 Percent of Current GDP in 2011 Carrying Costs - $2.184 Trillion All Business Inventory Interest Taxes, Obsolescence, Depreciation, Insurance Warehousing Transportation Costs Motor Carriers Truck Intercity Truck Local Other Carriers Railroads Water (International 28, Domestic 5) Oil Pipelines Air (International 16, Domestic 15) Forwarders $ Billions Subtotal Subtotal Subtotal 177 Shipper Related Costs 10 Logistics Administration 49 TOTAL LOGISTICS COST 1,282 Up 7.6% Up 6.2% Up 6.6% 19 Source: 2012 CSCMP Annual State of Logistics Report U.S. 3PL/Contract Logistics Market 3PL Segment 2011 Gross Revenue/Turnover (US$ Billions) Domestic Transportation Management Asset Based (1) 11.1 Domestic Transportation Management Non Asset Based 41.3 International Transportation Management 46.1 Value-Added Warehousing and Distribution 34.0 Software 3.0 Total (2) 133.8 What are some of the Risk Management issues for companies in the logistics business? Are all logistics services and contracts the same? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco Operational Risk Management Responsible for Limiting Loss Due to Operations Identify Risks -Operating Environment -Internal Operations -Stakeholders -New Operation & Divestures 22 Operational Risk Management Contractual Risk Liability Risk Professional Liability Risk Environmental Liability Risk Crime and Theft Risk Workers Compensation Risk Contract Employee Risk Employment Practice Liability Risk 23 Logistics Risk Management (From 3PL Perspective) Components of Logistics Risk Management Senior Management Risk Manager Logistics/Transportation Manager Procurement Officer Business Insurance Protection Property/Casualty Insurance Cargo Liability Insurance Professional Liability Insurance Worker s Compensation Crime Supply Chain Insurance Transfer Options for Customers Shipper s Interest Insurance Who s placing? Buyer/Seller/3PL Customs Bonds Buy your own or outsource? Issues Loss Valuation Logistics Risk Management Contract Negotiations -Key Contract Components Liability Shippers Interest -Time Schedules Non-Standard Risk Issues Customer Bidding -Bid specifications reasonable/unreasonable Unusual requests -Competition Standard Terms & Conditions Standard contractual trading conditions for freight forwarders and customs brokers in the United States. Similar rules are followed by other major trading nations of the world. Contents Be Careful Service by third parties -- Reviews by management, risk managers, Indemnification for freight & duties attorneys, underwriters Choosing routes/agents, etc. -- Ability to negotiate terms & conditions Quotations not binding -- More and more contracts! Duty to furnish information Declaring higher value Insurance Requirements No responsibility for government requirements Loss or damage due to delay Limitations for loss Presenting claims Construction of terms and venue Indemnity clauses Force Majeure What are the key insurance needs of a logistics company, and are there any specialty coverages required? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco Logistics Customers Need Strong Broker Capabilities Markets strong relationships with the highest quality international insurance markets Risk Control claims specialist who provide claims handling, settlement and recovery services on an international basis Technology intranet capabilities tailored to fit the needs of each individual client Service prompt day-to-day service that understands the pace of the logistics industry Global Operations Global buying power with centralized coordination and standards and local service Intellectual Consultation Enterprise Risk Management; Supply Chain Management 28 Pre Loss How to Get Details Right Three Aspects to Your Policy Expectation Gap Insured Insurer Expectation GAP in event of claim Policy Wording Policy Structure Policy Declared Values and Limits Is the insurance marketplace receptive to logistics risks? Are there any specific underwriting concerns and/or solutions? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco Marine Premium 2011 by Line of Business Source: IUMI Market Availability Broader coverages available specifically developed for logistics Global economy / supply chain Success requires using specialized global service providers Typical limits Cargo Liability: $1 Million and up Motor Truck Cargo Liability: $100,000 and up E & O: $250,000 and up Zurich s Supply Chain Insurance: up to $100 Million Typical deductibles retention has been increasing among larger companies Cargo Liability: $5,000 and up E & O: $25,000 and up Supply Chain: 10% of limit From Factory to Shelf Insurance Solutions Importer/Shipper Cargo Insurance Customs Bonds Supply Chain Consolidator/NVOCC Cargo Liability for bill of lading, warehouse receipt, etc. Customs Broker Customs Bonds Factory/Warehouse/DC Property/Casualty/W.C. Include Completed Ops Bailee Liability Warehouse Contents / storage Pick & Pack Foreign Ports/Terminal Operators Workers Compensation Stevedores Liability Terminal Operators Liability Property/GL US Ports/Terminal Operations US L & H Stevedores Liability Terminal Operators Liability Property/GL Freight Forwarders Shipper s Interest/Cargo Insurance (transferable) Cargo Liability Bailee Liability Professional Liability Motor Truck Cargo Liability Warehouse Legal Liability Ocean Carrier Hull & P & I Sometime Cargo Insurance Trucking Companies Rail Lines Motor Truck Cargo Liability Shipper s Interest/Cargo Insurance Bailee Liability Cargo Insurance Shipper s Interest vs. Cargo Liability Shipper s Interest Must have an insurable interest Terms of Sale By written contract - Logistics company can demonstrate insurable interest through letter or contract with written instructions to insure from client Named insured is shipper/owner of merchandise Common Policy Terms Limit of Insurance Geographical Territory Valuation Insuring Terms All Risks Named Perils Duration of Coverage warehouse to warehouse, until delivered, including interruptions in transit that are beyond the control of the shipper (port delays, deviations, etc.) Basis of Premium Collection Cargo Liability Protects carrier for loss or damage to merchandise of others Common Carrier Liability Carmack Amendment Contract Carrier Liability Named insured is carrier Common Policy Terms Limit of Liability Geographical Territory Valuation Insuring Terms Broad Form Common Exclusions Duration of Coverage Basis of Premium Collection 34 E & O Insurance Overview Covers consequential or financial loss suffered by the shipper as a result of the carriers negligence, error or mistake Exposure No standard international limits of liability Risk from errors or mistakes such as: Freight delay due to negligence Lost or stolen freight Improperly completed documentation Negligent selection of an airline, carrier, packer, sub-contractor Legal fees can be costly 35 Cargo Liability Package Programs Liability for loss or damage to cargo Liability for errors and omissions Third party liabilities Fines for regulatory breach, i.e. customs, pollution and safety at work Costs including misdirection, investigation defense, disposal and mitigation Coverages may include cargo liability, air liability, motor truck cargo liability, warehouse liability, packing liability, specific contractual liability 36 Earlier in this webinar, mention was made of Supply Chain Management. Can you explain what this entails and why it is important? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Management, Genco Supply Chain is Everywhere So Many Opportunities! Key Industries with Supply Chain Concerns High Tech & Electronics Consumer Products Automotive & Transport Equipment Food & Beverage Life Sciences, Pharma & Healthcare Industrial Manufacturing Retail Chemical Source: Annual Third-Party Logistics Study/CSCMP What are some of the Risk Management issues and concerns with Supply Chain management? Dave Bradford- Advisen Ltd. Robert DeMotta, U.S. Practice Leader- Marine, Aon Risk Solutions Barbara Spain, Senior Vice President, National Logistics Manager- Marine, Aon Risk Solutions Patrick Hickey, Vice President- Cargo, Zurich Global Corporate Linda Conrad, Director of Strategic Business Risk Management, Zurich Anthony J. Ten- Barge, Director of Risk Managem
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