Liberty International Underwriters

University of HoustonEnergy Case Study

Steven P. Weiss, CPCU, AMIM, NAMS-CMS

Vice President, Marine Engineering and Project Cargo

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What are we going to do?

• What is Risk Management • What is risk financing• What is the insurance industry and

how does that play with Risk Management

• How do the insurance players all interact

• Who are the major players• Take a submission from cradle to

grave

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What is Risk Management

• The identification, control and management of risks/hazards within an environment to ensure that they are always at a tolerable or negligible level

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How is this done?

• There are five steps – The identification and analyses of loss

exposures– Examination of the feasibility of

Alternative Risk management Techniques– Selection of the best Risk management

techniques– Implementation of the techniques– Continual monitoring of the program

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The identification and analyses of loss exposures

• What are the exposures?

–First Party

–Third Party

–Financial

–Employee

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The identification and analyses of loss exposures (cont)

• First Party

–Own Property

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The identification and analyses of loss exposures (cont)

• Third Party

–Contractual

–Personal Injury

–Property Damage (others)

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The identification and analyses of loss exposures (cont)

• Financial

–Business Interruption

–Delay in Start Up

–Self Insured Retentions

–Deductible

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The identification and analyses of loss exposures (cont)

• Employee– Workers Comp– Jones Act– Longshore and Harbor Workers

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Examine feasibility of Alternative Risk Management Techniques

• Contracts to transfer risk

• Training of Employees

• Engineering solutions

• Exit lines of business

• Contractors

• Insurance

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Selection of the best Risk management techniques

• In my situation, what works best?– Probably some combination of the above

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Implementation of the techniques

• Get the contracts signed

• Engineer and install the solutions

• Exit/sell lines of Business

• Find the proper contractors

• Purchase the Insurance

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Risk Financing

• What is Risk Financing

• Where do you get it?– Deductibles/Self Insured Retentions– Mutual Agreements– Cash flow– Insurance

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Insurance Flow

Assured

Broker/Agent

Wholesale Broker

Underwriter

Reinsurer

Reinsurance Broker

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Assured/Insured

• The Assured is the purchaser of the insurance

• Normally through Broker or Agent

• Pays Commission or fee for services to Broker

• Pays premium to Underwriter

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Broker/Agent

• One who for commission or fee, brings parties together and assists in negotiating contracts between them

• Representative of the Assured

• Receives Fee for service from Assured or commission from Underwriter

• Many are very well trained and knowledgeable

• Also know as the Retail Broker/Agent

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Wholesale Broker

• Intermediary between retail Broker/Agent and Underwriters if the B/A does not have the proper market

• Normally commission paid by Underwriter

• Represents the Insured sort of as well as the retail broker

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Underwriter

• Reviews the risk as presented by the broker

• If the risk is within appetite then assumes the risk for the loss of life, property or finances of another

• Pays commission to the Broker if agreed up front

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Reinsurance Broker

• One who for commission or fee, brings parties together and assists in negotiating contracts between them

• Places insurance for insurance companies

• Normally commission paid by reinsurer

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Reinsurer

• Insures who insure other Insurance companies

• Pay commission to Reinsurance Broker

• Often pay override to the ceding insurer

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Insurance Industry

Insured

Broker/Agent

Insurance

Company

Reinsurance

Company

Insurance

Company

Broker/Agent

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Top Global P&C Companies2009

• Rank Company Revenues Country• 1 Allianz $125,999 Germany• 2 Berkshire Hathaway 112,493 U.S.• 3 AIG 103,189 U.S.• 4 Munich Re Group 74,764 Germany• 5 Zurich Financial Svcs 70,272 Switzerland• 6 State Farm Insurance 61,480 U.S.• 7 Tokio Marine Holdings  38,458 Japan• 8 Allstate 32,013 U.S.• 9 Liberty Mutual 31,094 U.S.• 10 Swiss Reinsurance 30,745 Switzerland

Source: Company Filings

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Top U.S. P&C Companies - 2009

Source: Fortune magazineNote: LMG includes a full year of Safeco

Rank Company Revenues 1 Berkshire Hathaway 112,493

2 AIG 103,189

3 State Farm 61,480

4 Allstate 32,013

5 Liberty Mutual 31,094

6 Hartford 24,701

7 Auto owners insurance 5,017

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The path of a submission

Choosing a

Broker

Submission of

Quotes

Genesis of a

Project

Preparation

Of a

submission

Market

Presentation

Binding of a

Project

Project

Life

Completion

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Here is what we discussed

• What is Risk Management • What is risk financing• What is the insurance industry and

how does that play with Risk Management

• How do the insurance players all interact

• Who are the major players• Take a submission from cradle to

grave

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Other Resources

• http://www.iii.org/

• http://www.aicpcu.org/

• http://www.libertymutual.com

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Financial Highlights LIU

• LIU 2009 Premium – over $3.5B

• Liberty Mutual 2009 Worldwide Revenue of $31.1 Billion up from $28.9 Billion in 2008

• Statutory Surplus - $14.B (28.0% increase)

• Total Assets – Over US$109 billion

• World-class Fortune 100 (# 71) financial standing1.AM Best – A (Excellent)2.Moody’s – A2 (Good)3.Standard & Poor’s – A- (Strong)

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Do you

• Have any questions?