The Power of Pooling and How Your Local Water Supply Connects You to New York, London, Zurich, and Back Again

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ACWA/Joint Powers Insurance Authority 2013 Fall Conference The Power of Pooling and How Your Local Water Supply Connects You to New York, London, Zurich, and Back Again Presented by: Alex Tokar, Managing
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ACWA/Joint Powers Insurance Authority 2013 Fall Conference The Power of Pooling and How Your Local Water Supply Connects You to New York, London, Zurich, and Back Again Presented by: Alex Tokar, Managing Director, AON December 3, 2013 JW Marriott LA Live Los Angeles, California The Power of Pooling...and how your local water supply connects you to NY, London, Zurich & back again. December 3, 2013 ACWA JPIA Fall Meeting Los Angeles, CA Proprietary & Confidential December 3, The Water-Insurance Connection 350 years strong Proprietary & Confidential December 3, It all started with salt water British East India Shipping Diamonds Pepper Silk Indigo and most importantly Proprietary & Confidential December 3, Coffee & Tea Proprietary & Confidential December 3, Bad Things Happen to Ships Proprietary & Confidential December 3, Back in London HQ Then like now - No one likes to lose money. Proprietary & Confidential December 3, Insurance is Created (circa 1688) Proprietary & Confidential December 3, The Basis of Lloyds Pooling Risk & Pledged Assets The Syndicates & The Names Behind Lloyds: Ascott Beazley Brit Caitlin Farraday Jansen-Green Hiscox Pembroke RJ Kiln Talbot Proprietary & Confidential December 3, Personal Liability Means Personal Liability! Proprietary & Confidential December 3, The Reinsurance Crisis of the 1980s Asbestos European Storms Piper Alpha Explosion July 6, 1988 Lloyds Nearly Fails Proprietary & Confidential December 3, Audience Participation Session I Five audience members selected to participate in a claims scenario. Each member will have a simple script with one or two lines to recite. The syndicates bought reinsurance in at least two ways: 1. A reinsurance policy to pay any future claims with a premium equal to the amount of the reserve, often from the same syndicate in a subsequent year. 2. Treaty reinsurance for the syndicates current book of business. Both forms of reinsurance always tended to stay within the confines of Lloyds. Ascot Beazley Farraday Hiscox Steed Proprietary & Confidential December 3, Lloyds Reinsurance Reforms Introduction of Corporate Capital Limit Exposure to US Liability Risks Increased Reinsurance Outside of Lloyds Proprietary & Confidential December 3, Back in the New World Top US Commercial Insurers Proprietary & Confidential December 3, Top Reinsurance Brokers Proprietary & Confidential December 3, Top Reinsurers Proprietary & Confidential December 3, Reinsurance Case Study AIG Growth During 1980s: Specialization Marketing Treaty Reinsurance Facultative Reinsurance Proprietary & Confidential December 3, Audience Participation Session II Five audience members selected to participate in a reinsurance negotiation. Each member will have a simple script with one or two lines to recite. Scenario: AIG Develops Product Recall Insurance Post Tylenol Incident Management sees an opportunity Underwriting, Actuarial & Legal develop rate & form Reinsurance Broker finds market support Reinsurer sets terms, restrictions & reporting requirements Underwriter Reinsurance Broker Lloyds Reinsurer Proprietary & Confidential December 3, Reinsurance Concepts Facultative vs. Treaty Quota Share vs. Excess of Loss Bordereau Reporting Class Exclusions Minimum Retentions Ceding Commissions Proprietary & Confidential December 3, The Insurer s Business Plan Key Considerations Target combined ratio below 100 Target expense ratio below 30 Target classes & excluded classes Underwriting guidelines & capable staff Minimum premiums Coverage advantages But most importantly PREMIUM!!! Proprietary & Confidential December 3, The Broker as Distributor Insurer = Manufacturing & The Brand Reinsurer = Outsourced Manufacturing Broker = Logistics & Retail Stores Client = Consumer Proprietary & Confidential December 3, Audience Participation Session III Two audience members selected as underwriters to participate in a budget scenario. Two audience members selected as potential clients. Each member will have a simple script with one or two lines to recite. Scenario: January 1, 2014 Budget: $3,000,000 Premium Target Classes: Public Entities, Utilities, & Higher Education T&E Budget Remaining for 2013: $2,500 You are $1,000,000 behind budget! Underwriter JPA Underwriter Solo Buyer JPA Buyer Proprietary & Confidential December 3, JPA & Pools vs. Individual Risks Why do smart underwriters like to work with JPA & Pooled Risks? Rate/Form Flexibility vs. Standard Form Substantial Premium vs. Minimum Premium Marketing Cost vs. Centralized Distribution Faster Growth Potential to Build the Book of Business Hanukah & Christmas are more fun at home vs. Proprietary & Confidential December 3, The Largest Brokers Proprietary & Confidential December 3, The Modern Insurance Market AIG & AIG Management Diaspora post 2008 ACE, Ironshore, AWAC, Berkley, etc. The Unique History of the Starr Companies Proprietary & Confidential December 3, Pooling & The Market for Large Risks Evolution of the Direct Reinsurer The Continued Importance of Lloyds The Impact of Hans und Franz Proprietary & Confidential December 3, Pooling & The Market for Large Risks Where Culture Meets Business Underwriting British Style Proprietary & Confidential December 3, Pooling & The Market for Large Risks Where Culture Meets Business Underwriting Swiss & German Style Proprietary & Confidential December 3, The ACWA JPIA Connection to the World Market Premium Equivalent to some Fortune 500 Companies Interest &/Or Participation by Direct Reinsurers Influence of Reinsurers behind Starr & Others Proprietary & Confidential December 3, The ACWA JPIA Connection to the World Market Proprietary & Confidential December 3, The Power of Pooling Questions Proprietary & Confidential December 3,
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