1. ® Aon Energy Course Wednesday 6 th July 2011

2. ® AIM Introduction Underwriter & Underwriting Underwriting – Tools Conclusion

3. ® Introduction Chris Walker – Who? Berkley – Who?

4. ® Underwriters & Underwriting

5. ® Underwriting What is it?

6. ® Underwriting What is it? Banking : the process of analyzing and structuring a proposed loan?

7. ® Underwriting What is it? Banking : the process of analyzing and structuring a proposed loan? Insurance : the process of pooling of funds from many insured entities in order to pay for relatively uncommon but severely devastating losses which can occur to these entities

8. ® Underwriters Define?

9. ® Underwriters Define? People who take bets on something not happening?

10. ® Underwriters Define? People who take bets on something not happening? People who collect premium and avoid paying claims?

11. ® Underwriters Define? People who take bets on something not happening? People who collect premium and avoid paying claims? People who argue with brokers as to why they should not do something and then agree to do it?

12. ® Underwriters My definition?

13. ® Underwriters My definition? A person who is charged with exposing capital to risk with the aim of making a return on that capital.

14. ® Underwriters My definition? A person who is charged with exposing capital to risk with the aim of making a return on that capital. This is done by :

15. ® Underwriters My definition? A person who is charged with exposing capital to risk with the aim of making a return on that capital. This is done by : Profit = earned premium + investment income - incurred loss - underwriting expenses

16. ® Underwriting Tools

17. ® Risk Identification / Selection : Client types – analysis of types of clients in the risk pool. Hazard – analysis of the types of hazards associated Location – focus on region

18. ® Underwriting Tools

19. ®

20. ® Product Offering :

21. ® Underwriting Tools Product Offering : Cover offered – Property

22. ® Underwriting Tools Product Offering : Cover offered – OEE,

23. ® Underwriting Tools Product Offering : Cover offered – Construction

24. ® Underwriting Tools Product Offering : Cover offered – Construction

25. ® Underwriting Tools Product Offering : Cover offered – Construction

26. ® Underwriting Tools Product Offering : Cover offered – Property, OEE, Construction etc. Point of attachment : Primary or excess.

27. ® Underwriting Tools Point of attachment : Primary or excess.

28. ® Underwriting Tools Line size choice: Underwriters perception of risk – how attractive?

29. ® Underwriting Tools Line size choice: Underwriters perception of risk – how attractive?

30. ® Underwriting Tools Line size choice: Underwriters perception of risk – how attractive? Capacity:  Net  Reinsurance  Clash / Aggregations Note : Relative size to other similar risks in portfolio.

31. ® Underwriting Tools External tools: Reinsurance  Treaty Reduce retention = opportunistic Increased retention = volatility reduction (Relative size of capacity is not a good indicator of the size or health of the insurance company )  Facultative Reinsurance Opportunistic Enables larger lines to be written on the original Remove unacceptable parts of risk. Broker  Leverage on & by brokers

32. ® Underwriting Tools Internal tools: Benchmarking against:  Similar risks  Long term average  Actuarial average – set to allow adequate ROC. Actuarial capital allocation – pricing. Claims management :  Timely  Accurate  Understanding

33. ® CONCLUSION Underwriter & Underwriting No longer a past time but a profession Underwriting – Tools Many and complex : Risk identification and selection Attachment point Product offered Line size Risk lay off and retention

34. ® THANK YOU