Insuring Canadian Risks Understanding the Opportunity

Insuring Canadian Risks Speakers: Lois Gardiner, Aon, SVP Director Risk Consulting Western Canada Kevin Klippenstein, CFO, Parrish & Heimbecker, Limited, Winnipeg, Manitoba Jason Carne, Independent Insurance consultant and recently retired Managing Director of KPMG Moderator: Kim Willey, ASW Law Limited

Insuring Canadian Risks SVP – Aon Global Risk Consulting – 2.5 years Based in Calgary Canada – Director Western Canada CPA, FCIP, FRM, B Comm Prior to Aon spent most of my career as a Risk Manager: Canadian Pacific Railway Managing Director Risk Management – 7 years Shell Canada and Shell International – 11 years including 2 years in Shell’s captive Solen Versicherungen AG Started in Insurance; (RSA) in both Claims and Commercial Underwriting

Insuring Canadian Risks Canadian drivers for interest in captive consulting: Pragmatic – must add value Growth of Canadian organizations More international operations Perceived vs planned M&A activity Additional domiciles are more favorable now with TIEA’s Moving Domiciles Captive Optimization Uninsurable Risks

Insuring Canadian Risks Benchmarking

Insuring Canadian Risks Jason Carne is a recently retired partner of KPMG in Bermuda where he worked from 1992 to Jason’s career has focused on the reinsurance industry where he has gained a wide variety of experience through his involvement in audits and advisory projects for both commercial and captive enterprises. This work has given him significant experience in the field of International Financial Reporting Standards, U.S. GAAP and SEC Reporting requirements, including Sarbanes-Oxley related work and more recently Solvency II and regulatory related work. Jason's advisory experience also includes captive feasibility and formation work.

Insuring Canadian Risks Benefits of a captive for Canadian multinationals: COST REDUCTION 1 COVERAGE: ACCESS TO REINSURANCE 23 CASHFLOW: INVESTMENT INCOME 4 CONTROL: ADMINISTRATIVE TOOL

Insuring Canadian Risks Profile of a typical Canadian captive owner…  Willingness or need to assume incremental risk  Seeking to enhance risk management  Partially insured, uninsured or uninsurable risks exist  Sufficient cash flow to fund the captive  Often some non-Canadian risk, but not necessarily  Premium to flow to a captive is in excess of $1 million (not always)

Insuring Canadian Risks What are some of the questions to ask? Treasury How much capital do I need and where should I hold it? What form should the capital take? How can I efficiently redeploy profits? Structuring Where should I domicile a captive? How do I structure an offshore captive Should I use a Segregated Account Company? International Tax Considerations What are the tax implications of the desired structure and under what rules will income be determined? Will the premiums suffer premium taxes? Are premiums tax-deductible Will the structure give rise to withholding tax implications? Will the undistributed profits of the captive be taxed in the hands of the owners? What are the transfer pricing implications? Operational Would my risk management strategy benefit from having a captive? How do I run my captive? How do I use my captive to control costs and reduce the cost of buying (re)insurance? What insurance related services can I provide? Regulatory How are captive insurance companies regulated? How can I avoid a unduly burdensome regulation? Are there any regulatory restrictions on writing captive business?

Insuring Canadian Risks Kevin Klippenstein, C.A. C.F.O of Parrish & Heimbecker Limited since 2000 –Responsibilities include risk management Full responsibility for the captive –Feasibility study / creation / implementation / operation Also involved in risk management for non-profits: –Participaction / Manitoba Club / St. Mary’s Academy Highest risk factor – three teenage daughters

Insuring Canadian Risks My risk landscape: $2B in assets / 200+ locations / + $2B in revenues Large fleet of trucks / large employee base Food safety risks International exposure Conservative risk profile –family owned 100 year + private company Lean senior management team – –rely heavily on external advisors and business partners

Insuring Canadian Risks The Captive Experience: The motivation to consider a captive The feasibility study The creation process Captive operations

Insuring Canadian Risks Panel Discussion

Insuring Canadian Risks Questions?