Liberty International Underwriters University of Houston Energy Case Study Steven P. Weiss, CPCU, AMIM, NAMS-CMS Vice President, Marine Engineering and Project Cargo

Liberty International Underwriters 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

Liberty International Underwriters 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

Liberty International Underwriters 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

Liberty International Underwriters The identification and analyses of loss exposures What are the exposures? –First Party –Third Party –Financial –Employee

Liberty International Underwriters The identification and analyses of loss exposures (cont) First Party –Own Property

Liberty International Underwriters The identification and analyses of loss exposures (cont) Third Party –Contractual –Personal Injury –Property Damage (others)

Liberty International Underwriters The identification and analyses of loss exposures (cont) Financial –Business Interruption –Delay in Start Up –Self Insured Retentions –Deductible

Liberty International Underwriters The identification and analyses of loss exposures (cont) Employee –Workers Comp –Jones Act –Longshore and Harbor Workers

Liberty International Underwriters Examine feasibility of Alternative Risk Management Techniques Contracts to transfer risk Training of Employees Engineering solutions Exit lines of business Contractors Insurance

Liberty International Underwriters Selection of the best Risk management techniques In my situation, what works best? –Probably some combination of the above

Liberty International Underwriters 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

Liberty International Underwriters Risk Financing What is Risk Financing Where do you get it? –Deductibles/Self Insured Retentions –Mutual Agreements –Cash flow –Insurance

Liberty International Underwriters Insurance Flow Assured Broker/ Agent Wholesale Broker Underwriter Reinsurer Reinsurance Broker

Liberty International Underwriters 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

Liberty International Underwriters 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

Liberty International Underwriters 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

Liberty International Underwriters 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

Liberty International Underwriters 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

Liberty International Underwriters Reinsurer Insures who insure other Insurance companies Pay commission to Reinsurance Broker Often pay override to the ceding insurer

Liberty International Underwriters Insurance Industry Insured Broker/Agent Insurance Company Reinsurance Company Insurance Company Broker/Agent

Liberty International Underwriters Top Global P&C Companies 2009 Rank Company Revenues Country 1Allianz$125,999Germany 2Berkshire Hathaway112,493U.S. 3AIG103,189U.S. 4Munich Re Group74,764Germany 5Zurich Financial Svcs 70,272Switzerland 6State Farm Insurance61,480U.S. 7Tokio Marine Holdings 38,458Japan 8Allstate32,013U.S. 9Liberty Mutual 31,094U.S. 10Swiss Reinsurance30,745Switzerland Source: Company Filings

Liberty International Underwriters Top U.S. P&C Companies Source: Fortune magazine Note: LMG includes a full year of Safeco Rank Company Revenues 1 Berkshire Hathaway112,493 2 AIG103,189 3 State Farm61,480 4 Allstate32,013 5 Liberty Mutual31,094 6 Hartford24,701 7 Auto owners insurance5,017

Liberty International Underwriters The path of a submission Choosing a Broker Preparation Of a submission Market Presentation Submission of Quotes Binding of a Project Life Completion Genesis of a Project

Liberty International Underwriters 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

Liberty International Underwriters Other Resources

Liberty International Underwriters 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 standing 1.AM Best – A (Excellent) 2.Moody’s – A2 (Good) 3.Standard & Poor’s – A- (Strong)

Liberty International Underwriters Do you Have any questions?