Liberty International Underwriters

University of HoustonEnergy Case Study

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

Vice President, Marine Engineering and Project Cargo

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

The identification and analyses of loss exposures

• What are the exposures?

–First Party

–Third Party

–Financial

–Employee

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

The identification and analyses of loss exposures (cont)

• First Party

–Own Property

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

The identification and analyses of loss exposures (cont)

• Third Party

–Contractual

–Personal Injury

–Property Damage (others)

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

The identification and analyses of loss exposures (cont)

• Financial

–Business Interruption

–Delay in Start Up

–Self Insured Retentions

–Deductible

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

The identification and analyses of loss exposures (cont)

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Examine feasibility of Alternative Risk Management Techniques

• Contracts to transfer risk

• Training of Employees

• Engineering solutions

• Exit lines of business

• Contractors

• Insurance

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Selection of the best Risk management techniques

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Risk Financing

• What is Risk Financing

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Insurance Industry

Insured

Broker/Agent

Insurance

Company

Reinsurance

Company

Insurance

Company

Broker/Agent

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Flow of Business

Insured

Broker

Insurance

CompanyReinsurer

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Top Global P&C Companies

($ billions)Rank Company

1 State Farm $35.0 2 Allianz 29.2 3 AXA 20.7 4 Zurich Insurance 18.6 5 Allstate 18.6 6 AIG 18.3 7 Royal & Sun Alliance 12.8 8 Winterthur 12.4 9 Assicurazioni Generali11.5 10 Munich Re 11.4

Gross Written

Rank Company Premium $ %

1Allianz $63.8 34.6119% 2AIG 56.7 38.4210% 3State Farm 50.2 15.243% 4AXA 38.2 17.5 84% 5Zurich 37.2 18.6100% 6Liberty Mutual + Safeco 34.3 28.0444% 7Assicurazioni Generali 32.4 20.9181% 8Munich Re 32.1 20.7181% 9Allstate 30.0 11.461%

10Berkshire Hathaway 24.9 20.0408%

1996 2008 ’96 – ‘08 Increase

Liberty Mutual 6.3Source: Company Filings

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Top U.S. P&C Companies

($ billions)

Rank Company DWP

1 State Farm $35.0 2 Allstate 18.0 3 AIG 13.5 4 Zurich Insurance12.3 5 Travelers 9.0 6 Nationwide 8.6 7 CNA 7.1 8 Liberty Mutual 5.8 9 Hartford 5.610 USAA 4.7

Rank Company DWP

1 State Farm $49.9 2 AIG 32.1 3 Zurich Insurance 28.2 4 Allstate 26.8 5 Liberty Mutual 26.3 6 Travelers 21.8 7 Berkshire Hathaway16.2 8 Nationwide 15.8 9 Progressive 13.810 Hartford 11.1

Source: Highline Data ServicesNote: LMG includes a full year of Safeco

1996 2008

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

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

Lib

erty

Inte

rnatio

nal U

nd

erw

riters

Do you

• Have any questions?