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TRANSCRIPT
Willis Latin American Energy Conference October 2012
OIL – An Introduction
Barry Brewer VP Marketing
2012
• Who is OIL? • Membership • Underwriting highlights • Policy Coverages • Limits / Deductibles • 8 Business Sectors • Limit Structures • Atlantic Named Windstorm
(ANWS) • Rating & Premium Plan • OIL vs. Commercial Market
Topics
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• OIL is an Energy Industry Mutual Insurance Company headquartered in Hamilton, Bermuda
• Formed by 16 major energy companies in 1972 after two incidents in the late 60’s that resulted in inadequate coverage / pricing
• Today, OIL is a world leader in global energy insurance
• 54 Shareholders / Policyholders - medium to large public / private world-class energy companies headquartered around the world
• 46% of membership has been with OIL for over 20 years
Who is OIL? World’s Largest Energy Mutual
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• $300 million broad and stable “cornerstone” capacity
• Over $2 trillion in assets insured globally for 54 members
• $6 billion in assets
• $3.0 billion in shareholder’s equity
• Over $11 billion in claims paid over 40 years
• S&P A- rating (stable outlook)
• Expense ratio = approx. 3-6 %
• Not dependent upon reinsurance
Who is OIL? World’s Largest Energy Mutual –by the numbers
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Current OIL Members – September 1, 2012
Apache Corporation Arkema BASF SE BG Group plc BHP Billiton Petroleum (Americas) Inc. Buckeye Partners, L.P. Canadian Natural Resources Ltd Canadian Oil Sands Limited CEPSA Chevron Corporation Chevron Phillips Chemical Company LLC CITGO Petroleum Corporation ConocoPhillips DONG Energy A/S Drummond Company Inc. DTE Energy Company EDF Group El Paso Energy Transfer Partners, L.P. ENI S.p.a. Galp Energia S.A. Hess Corporation Hovensa LLC Husky Energy Inc. LOOP LLC. Lyondell Chemical Company Marathon Oil Company
Marathon Petroleum Corporation MOL Hungarian Oil and Gas Company Murphy Oil Corporation Nexen Inc. Noble Energy, Inc. Nova Chemicals Corporation Occidental Petroleum Corporation OMV Aktiengesellschaft Paramount Resources Phillips 66 Company Puerto Rico Electric Power Authority Repsol YPF, S.A. Royal Vopak N.V. Santos Ltd. Sempra Energy Sinclair Companies (The) Statoil ASA Suncor Energy Inc. Sunoco, Inc. Talisman Energy Inc. Tesoro Petroleum Corporation TOTAL Valero Energy Corporation Westlake Chemical Corporation Williams Companies, Inc. (The) Woodside Petroleum Limited. Yara International ASA
54 Shareholders 46% members more than 20 years
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OIL Membership by Headquarter Location
Globally diversified membership with an increasing interest from non-US companies.
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• At least 50% of either Gross Assets or Annual Gross Revenues derived from “Energy Operations”
• A minimum of $1 billion of Gross Assets
• An investment grade credit rating of at least “BBB-” (S&P) or “Baa3” (Moody’s)
Membership Criteria
Quantitative: Energy Companies that have:
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Net Incurred Losses: 1972-2011
By Industry
1972-2011 (39 yrs) Aggregate Value = $11.8Bn (untrended)
As at December 31, 2011
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Net Incurred Losses Since 1972*
By Geographic Region of Physical Loss
As at December 31, 2011 Expressed in billions of U.S. dollars * untrended
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Automatic coverage for: • Worldwide Coverage for an Energy Company and its
Consolidated Subsidiaries / Affiliates
• A member’s interest in a JV or other non-consolidated affiliate (if interest equates to less than 1% of Gross Assets)*
• Coverage for non-owned assets where a member has a contractual obligation to repair / replace
What’s Covered?
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Limits Offered Largest Single Block of Capacity for Global Energy Companies*
* Roughly 85% of the members elect the $300M limit. * OIL’s $300M limit is a per occurrence limit. No one event can be more than $300M. * OIL’s Aggregation Limit is $900M (non-windstorm risks) and $750M for windstorms
within the ANWS zone
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Limits Offered Minimum OIL Limit Purchase 60% Coverage from OIL
* OIL also allows either a 10%, 20%, 30% or 40% ‘internal quota share’ via Flat, Retro or a combination
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• Windstorm losses up to an annual aggregate retention of $300M are mutualized among all members in the Standard Pool.
• Windstorm losses above the $300M retention are mutualized only among windstorm members in two new pools (onshore & offshore).
• No losses flow through the Flat Pool.
Allocation of Windstorm Losses
Multiple events are added together at year’s end prior to the allocation to the WS Pools’ Annual Aggregate Retention and Excess Pools
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• Formula based (no price negotiation)
• Operates as a 5 year post loss funding facility designed to recoup losses over a 5 year period (20% a year)
• All losses of the Group are mutualized by all members based on their pool % which is fixed annually
• Zero sum mechanism (losses will equal premiums over time). Not for profit
Rating & Premium Plan Principles
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Repayment Schedule for Losses Incurred 2007-2011
The 8 business sector premiums + windstorm premium = Total Annual Premium Contribution
*Roughly 80% of member’s next year premium is “Locked down” as loss history and allocation already determined
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• Applies sector and deductible weightings.
• Gross Assets are adjusted for operational risk (sector weighting) and coverage profile (limit/deductible weighting) to generate Weighted Gross Assets which is used to determine pool % and calculate individual premiums.
8 Business Sector (Non-Windstorm) Pricing
8-Business Sectors are Defined as:
* Original 5 sectors
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• Membership is exclusive to energy companies
• Members are all shareholders / policyholders and have vested interests
• “Mutualized” sharing of losses
• Easy annual renewal.
• Premiums are formula and performance based i.e. no underwriting
• One policy form for all members per the OIL Shareholders’ Agreement
• OIL uses gross assets from audited balance sheets while the market uses insured values
OIL vs. Commercial Market
OIL Features
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Provides hedge against a frequently volatile commercial insurance market
One of the broadest policy forms currently available
Stability (capacity and terms & conditions)
Low expense ratio
Shareholder input: – influence product capability/evolution and
developments
Generates long-term benefits for shareholders
Networking opportunities
OIL vs. Commercial Market
OIL Advantages