WILLIS CAPTIVE PRACTICE · Willis Captive Practice November 2009 Page 3 Captive Management Our team...

WILLIS CAPTIVE PRACTICE

CAPABILITY STATEMENT

November 2009

Willis Captive Practice November 2009

FINDING BETTER WAYSAvoid? Control? Retain? Transfer? How you manage the risks confronting your business has a critical effect on your overall performance, reputation and stakeholder value.

Willis brings together market leading professional expertise and a determined, innovative approach to deliver cutting edge risk finance and insurance solutions. We are the only professional services organisation to integrate insurance broking and risk finance consulting services across OperationalRisk, Boardroom Risk and People Risks.

We continually challenge the status quo, helping our clients to find better ways to assess and treat risks, ultimately driving down the cost of insurance and protecting stakeholder value.

Willis Captive Practice November 2009

CONTENTS

AUSTRALASIAN CAPTIVE PRACTICE CAPABILITIES 1

AppendicesAppendix 1: Team CV’s 5Appendix 2: Willis Client Bill of Rights 10

PROPRIETARY NATURE OF DOCUMENTThis document is prepared for the sole and exclusive use of the party or organisation to which it is addressed. Therefore, this document is considered proprietary to Willis Australasia Limited and may not be made available to anyone other than the addressee or person within the addressee’s organisation. Willis Australasia Limited documents may be made available to other persons or organisations only with written permission of Willis Australasia Limited.

© COPYRIGHT 2009All rights reserved. No part of this document may be reproduced or transmitted in any form by any means, electronic or mechanical, including photocopying and recording, or by any information storage or retrieval system, except as may be permitted, in writing, by Willis Australasia Limited.

Willis Captive Practice November 2009 Page 1

AUSTRALASIAN CAPTIVE PRACTICE CAPABILITIESIt is all about maximising the Utilisation of Risk Financing Vehicles

Captives are long-term, strategic risk-financing vehicles that require diligent and in some cases labour-intensive processes. The provision of such services requires global insurance, reinsurance, accounting, analytical and regulatory knowledge. Our experience has shown that organisations with a centralised approach to their global insurance placements place great value on the provision of local strategic captive consulting services that go beyond pure financial reporting and accounting.

Proactive Captive Management Requirements

From our experience in providing captive consulting and management services to other global organisations we believe that there are a number of key selection criteria that any captive board should take into account prior to selecting an appropriate captive service provider:

• ResponsivenessYou are probably looking for a captive consulting and management team that responds to new developments, queries and any other day-to-day issues in a timely and productive manner.

• Regulatory compliance and corporate governance Compliance with local prudential and regulatory standards is the most critical task for any captive board. Anycompany would be committed to comply with Prudential Regulation as well as their own internal Corporate Governance Standards and reporting requirements. Willis has a significant amount of experience in dealing with a variety of Prudential Regulators and will ensure that we are able to respond and report to both Regulators’ and client’s internal requirements in a timely and accurate manner.

• Periodic management and board reportingYou require captive consultants and managers that are able to deal with a captive insurance subsidiary’s complex insurance, reinsurance, accounting and reporting requirements in a changing environment. Thisrequires the provision of concise periodic management reports to ensure that the financial reporting obligations to the Board and the captive’s shareholder are met.

• Strategic risk-financing consultingThe management of a captive insurance subsidiary should encapsulate more than just periodic management reporting and accounting. Clients require a certain level of strategic input provided by the Captive Manager or Captive Consultant to ensure optimum utilisation of the captive for the group’s risk-financing needs. Our strategic approach is implemented by providing specialist captive consultants and managers who not only understand the management reporting and accounting requirements of the captive, but also provide strategic advice regarding the risk retention and reinsurance structure of the captive. This provides expertise with closer interaction between the parent company, the captive and the reinsurance broker and thus assists in maximising the utilisation and value of the captive to and by the parent company.

• Teamwork and communication – locally and in the captive’s domicileClients require a Captive Management team that interacts and communicates on a day-to-day basis with itsGroup Insurance and Treasury teams, business units, direct insurance brokers, reinsurance brokers, fronting insurers, claims managers and to a less frequent extent with auditors, actuaries and asset managers. Strong communication skills coupled with the ability to work as part of a team is therefore essential.

More than any other Captive Consulting and Management practice, Willis understands the needs of Australian businesses to be able to access local captive expertise. Our experienced team members are at your service bothin Melbourne and your captive’s domicile and provide specialist service right here in Australia with open communications to the team offshore.

Willis Global Captive Practice - Philosophy

We operate a team based, knowledge sharing philosophy to captive management to ensure that an integrated approach to Captive management and consulting is achieved rather than a mere administrative approach where certain functions are considered and managed separately. This is supported by the infrastructure and resources of


both the Willis Captive Practice and Willis Group, with risk financing specialists being employed within most of the major broking teams.

Our specialist captive teams are recognised industry leaders and have experience in many industry sectors, includingglobal manufacturing, rail, transport, banking and finance, retail, utilities etc. We have acquired an outstanding reputation for innovation and professionalism and our intent is to help our clients meet their financial and strategic objectives, (whether it be by designing custom-made solutions for business ventures or viewing risk in relation to return), to arrive at the optimal balance between retained risk and insurance.

Willis manages approximately 300 captive insurance structures worldwide. As a result of our investment in people, systems and continuing professional and academic education combined with our strong work ethic, we have positioned ourselves as one of the world’s premier captive management and consulting practices. Our investments have resulted in solid working relationship with our clients and more importantly, with each domicile’s prudential regulators.

Willis has offices in all the traditional captive management domiciles such as Bermuda, Cayman Islands, Vermont, Guernsey, Dublin, Jersey, as well as experienced teams working in Australia, Singapore and New Zealand.

Australasian Captive Practice – Total Captive Management

The Willis Australasian Captive Insurance Team represents both global and local specialist expertise by multi-disciplined personnel with experience in all key captive domicile locations; providing advice and ongoing management support in respect of captive insurance companies and other alternative risk financing strategies.

The Team

Willis’ Australasian Captive Consulting and Management team consists of six captive insurance professionals located across three domiciles. These professionals act as one team for all Australasian based clients to ensure the quality of service, consistency of advice and expertise provided to our clients. The Willis team currently manage 16captives within the region and are considered industry leaders. Our approach to captive management and consulting is to ensure that the client has access to expertise in their home country as well as in their domicile of choice.

The Captive Management team is led by Peter Lowe who is supported by André Kyburz in Australia, Jessica Schade in New Zealand and George Ong in Singapore.

We attach the CV’s of the team associates who will be available to you for any captive consulting and management project.

The Approach to Total Captive Management

Willis believe our proactive approach to captive management will enable you to achieve your risk and financial goals set for your retention vehicle (captive) and use the team’s extensive experience in “Total Captive Management”, which allows them to work efficiently and effectively across boundaries and provide local service with a holistic approach to the Captive Insurance concept:

Total Captive Management

Captive Management Reinsurance Consulting

Total Captive Management

Captive Management Reinsurance Consulting


Captive Management

Our team members are fully qualified in either insurance, financial consulting or accounting (or both), providing a truly comprehensive management service.

This incorporates all aspects of the management and administration of a captive insurance company, including development of a business plan, domicile application and negotiation, underwriting and policy administration, claims management, accounting, management reporting, regulatory compliance, coordination of cash and investment management services and company secretarial services.

Consulting

Willis understands that companies do not stand still. Changing conditions in the economic environment as well as internal developments may call for a fresh approach to risk financing. Our team is versatile and experienced to helpyou establish a new approach to risk financing or assist to evolve and change your existing captive structure and where it is no longer viable or applicable, to transition to alternative solutions.

Services include captive feasibility studies, evaluation and/or audit reviews of captive operations and insurance programs, loss portfolio transfers of insurance liabilities and migration/relocation of captives. Captive business planning and formation services are also provided.

For truly international companies with captive insurance subsidiaries we also offer fronting tender services from drafting tender documents to tender review process and evaluation.

Reinsurance

Our contacts in the global reinsurance and insurance arenas are supported by our highly capable marketing expertise through Willis Re to ensure that we are able, where required and desired by our clients, to provide access to reinsurance markets across the world for all classes of insurance for captives.

“Advantage Captive” through our “Willis Excellence Model”

All our captive practices around the world operate under the Willis Excellence Model (WEM). WEM is a framework which identifies the steps in quality control standards to be followed in providing captive management services to our clients. The framework and standards are internally assessed and audited each month. WEM requires two sets of eyes to review and sign off all documents and steps in the process, some of them are herewith listed for your information.

• Captive Manager AuthorityThis ensures the manager acts within the authority levels specified by the Board of the captive. For each company under management a management agreement and management engagement document will be produced setting out the captives details.

• Accounting & Financial ReportingFinancial reporting is a key part of the captive management function and absorbs a major part of the service time. Establishes to whom the accounts are to be reported and confirms upon frequency and deadlines. Usesaccounting checklists for production of all accounts with appropriate sign-off on completion.

• Domicile & Regulatory ComplianceEnsures that the captives are in compliance with the domiciles specific rules and regulations, submit annual returns to comply with registration body and regularly monitoring captive margins, solvency requirements and report shortfalls to the Captive Board representatives and the prudential regulator.

• Non Financial ReportingThe Board and Management will require accurate and timely information on which they base their decisions. Management information will normally be supplied on a regular basis, the format and content of which will be agreed with the Board from time to time.


• Acceptance of Risks on behalf of the CaptiveEnsuring the contracts of insurance entered into are within the captive’s business plan. Regularly checking that the risk proposals are within the approved underwriting guidelines.

• Agreement on Policy WordingsEnsuring that the insurance wordings match both the insured’s requirements and the cover approved by the Board and the prudential regulator. Draft wordings to cover risks accepted by the captive and check documentation provided by third parties. All wordings should be approved by the Board of Directors.

• Maintenance of Reinsurance CoverageWhen reinsurance is purchased on behalf of the client, it is essential that terms of this cover are complied to ensure that the cover is maintained. Review reinsurance policy wordings to ensure that the policy provides the cover expected (matching wherever possible captive’s cover provided to insured’s). Ensure the policy conditions are adhered to and reinsurance contracts renewed as necessary.

• Banking Investment & Trust TransfersOpening accounts in accordance with Board resolutions, investing funds in accordance with the guidelines established by the Board, making payments only in accordance with parameters established by the Board and as authorised by the client.

• Claims Notification ProcessAll claim notifications received must be reviewed to establish whether the claim is to be paid by the captive and its reinsurers. Review captive coverage terms and policy conditions and with those of reinsurers, particularly reinsurance attachment points to which they relate in the aggregate.

• Claims AdministrationClaim files must contain all pertinent information to facilitate the claim reinsurance settlement process, particularly those which may be prone to debate. Those with losses recognised as being particularly contentious, claims should only be paid in accordance with the captive policy coverage, the total losses recoverable from reinsurers to lay settlement of claim by captive to be completed by following reinsurers’acceptance of liability and quantum. The Captive Management Board must be consulted with any concern about reinsurers’ ability to pay claims.

• Delegated Claims AuthorityEnsuring that delegated authority limits are clearly documented and complied as per client company procedures. Paying claims only when within a clear delegated limit, claims outside the limit are referred to the Management and Board for settlement.

• Addressing Management and Operational RisksThe Board and Management have additional exposures arising from the operation of the captive and in ensuring that the management complies with the regulatory requirements, such as those specified in the Captive Insurance Acts or other relevant Prudential Regulation. Review and place the appropriate insurance covers to address these exposures, such as Directors’ & Officers’ Liability Insurance, Professional Indemnity Insurance and Statutory Liability Insurance.


APPENDICESAPPENDIX 1: TEAM CV’S

NAME: Peter Lowe

POSITION: Practice Leader – Willis Global Captive Practice Australasia

ROLE: Captive Consulting and Management

BACKGROUND:

Peter has extensive experience in the formation, management and consulting on captive insurance companies. In the past 20 years he has advised companies on captive formations and alternative risk financing mechanisms, governments and regulators on captive legislation and given expert testimony to select committees.

PROFESSIONAL EXPERIENCE:

• Peter has spent 26 years’ international business experience in Australia, England, Bermuda, USA and New Zealand. Peter qualified as a Chartered Account, working at Ernst & Young specialising in tax and audit. Peter joined Marsh working in the alternative risk financing arena, reinsurance design and large global insurance accounts.

• In 2006 Peter was recruited by Willis as the Risk Solutions practice leader for New Zealand and Australasian Practice Leader for the ART and Captive Consulting Practice.

• Strong client focus to managing accounts with an emphasis on understanding a clients business and co-ordination a “One Flag’ approach utilising the resources available within Willis.

• Strives to understand client’s businesses and brings a risk focused approach, helping clients to manage all risks faced by their business.

PAST PROJECT RESPONSIBILITIES:

• Designed Captive Insurance programs

• Expertise with large global organisations including the design and placement of their risk financing programmes.

• Extensive experience in the alternative risk financing arena including formation and management of approximately 70 captive insurance companies in Bermuda, Cayman Islands, Guam, Singapore, New Zealandand Vermont.

EDUCATIONAL BACKGROUND:

• Bachelor of Business – Monash University, Melbourne Australia (Caulfield Institute of Technology)

• Institute of Chartered Accountants (Australia) - Member

• ASIC, Tier 2, Insurance Broker Qualified

• Australia & New Zealand Institute of Insurance & Finance - Member

• Qualified Practicing Insurance Broker


NAME: André Kyburz

POSITION: Consultant - Willis Global Captive Practice Australasia

ROLE: Captive Consulting and Management

BACKGROUND:

André is considered to be one of the pre-eminent Risk Finance specialists in Australia, where he worked in leading roles for captive management and Alternative Risk Finance for both Aon and Marsh. In these capacities he developed a thorough understanding of Singapore’s (MAS) and Australia’s (APRA) solvency and prudential capital models, André is therefore well placed to advise captive insurers, discretionary mutual funds and large corporations on their risk retention and financing requirements.


André also spent time in Deloitte Touche Tohmatsu’s Business Insurance Consulting practice where he assisted senior counsel at ASIC and the HIH Royal Commission on matters relating to HIH’s reinsurance contracts, claims reserves and related accounting issues. Prior to his move to Australia he worked both as a Financial Controller and Risk Management Consultant for various companies including Swiss Re, Winterthur International (now XL) and other advisory businesses in the risk and insurance management industry.


André’s international insurance and reinsurance experience and expertise include:

• Design and placement of international insurance and reinsurance programs (general/public liability, professional indemnity, directors’ and officers’ liability, property and business interruption insurance) for global financial institutions, global multinational companies and government agencies including ART (Alternative Risk Transfer) components both in Australia and overseas.

• Conducting captive insurance company audits for clients anticipating audits from regulatory bodies. Assisting clients during the audit process by regulators including review of adequacy of claims reserves and IBNR's and corporate governance processes.

• Design and implementation of an insurance portfolio management application from scratch for a major bank captive in Australia.

• Some of the major clients that André has provided Captive consulting or management services to include but are not limited to ANZ Bank, AWB, Bendigo Bank, BHP Billiton, Coles Myer, Credit Suisse, CSL, Foster’s, Incitec Pivot, National Australia Bank, Orica Limited, PaperlinX, Santos, Toll Holdings, UBS Bank, Visy, Woodside and others.


• Bachelor of Economics

• Chartered Accountant

• Certified Insurance Professional (CIP), ANZIIF Associate

• Certified Finance and Treasury Professional (CFTP), Finance and Treasury Association Member

• Accredited Mortgage Consultant, MFAA Member


NAME: Jessica Schade

POSITION: Accountant - Willis Global Captive Practice Australasia

ROLE: Captive Accountant

BACKGROUND:

Jessica has five years experience in the insurance industry across Australia and New Zealand. Starting in Australia as a Claims Manager and Account Executive for a Health Insurance Company, before returning to New Zealand to become a Treasurer. Whilst in this role, Jessica assumed the role of Captive Accountant.

In 2007 Jessica moved to Willis and became the Captive Accountant for 9 Captive Insurance Companies located in New Zealand, Vanuatu and Australia.

PROFESSIONAL EXPERIENCE & RESPONSIBILITIES:

Jessica’s captive management experience and expertise include:

• Regulatory Filings and Returns (both in Australia (APRA) and New Zealand)

• Claims Management

• Maximising Interest Earnings

• Managing interest rate risk and foreign exchange exposures

• Reinsurance accounting

• Analysing underwriting exposure

• Monitoring capital adequacy and solvency requirements

• Monitoring compliance with insurance legislation and prudential regulations


• Bachelor of Business Studies – BBS, Massey University

• Currently completing a Graduate Diploma in Accounting, Massey University


NAME: George Ong

POSITION: Divisional Director - Willis Management (Singapore) Pte Ltd

ROLE: Captive Management

BACKGROUND:

George heads the Willis Singapore Captive Practice with overall responsibility for the management of the office and servicing of its clients. He has considerable experience in the Singapore insurance industry, having served in various capacities in the areas of finance, compliance, consultancy and audit roles.


Before joining Willis, George headed the finance and accounting department of one of the Lloyd’s Syndicates established in Singapore, where he was responsible for the finance, accounting, compliance and administrative functions of the Syndicate.

Prior to that, George was an Audit Manager with the Global Financial Services Industry Group in Deloitte Singapore. He specialized in the audit of companies in the insurance industry, including direct life insurance companies, reinsurance companies, captive insurance companies and insurance brokers. He was involved in several Sarbanes Oxley audit engagements and was also responsible in conducting technical training on insurance related topics such as risk management, insurance accounting and regulatory compliance.

He also spent in excess of three years as an Account Manager with Marsh, where he managed a portfolio of major clients.


• Close involvement in marketing initiatives for the Singapore captive practice and business development;

• Close involvement in consultancy work for the captive practice;

• Some of the major clients that George has provided Captive consulting or management services to include but are not limited to Ansell, Cochlear, Gunns, Lion Nathan, Newcrest Mining, Port of Singapore Authority and others.


• Bachelor of Accountancy

• Certified Public Accountant

• Associate of the Chartered Insurance Institute (ACII), UK

• Associate in Risk Management (ARM), Insurance Institute of America


NAME: DEBBIE PILLING

POSITION: Manager, Retail Analytics

ROLE: Analytics/Actuarial

BACKGROUND:

Debbie is responsible for the analytical capabilities within Willis Australia and has access to over 75 years of analytical expertise within the team, including two actuaries. She also coordinates client work with the catastrophe modelling team who provide analysis across a range of natural perils.

She works closely with the Client Advocate and Placement Services division in program structure design and development.


Debbie commenced her career in 1990 with Alexander Stenhouse in London, England straight from university. Her role was as an analyst to provide loss modelling to corporate clients. After 4 years she moved to Manchester to start up the analytical team which provided loss modelling and fund audits to corporate clients in the North of England and Scotland. She spent 10 years in the Alexander & Alexander (and then Aon) Manchester office as a senior consultant providing bespoke modelling to a diverse range of clients. In 2005 she moved to Aon Australia to setup the analytical team in Sydney and in 2008 she joined Willis. She has 18 years of experience working with corporations, government bodies and captive insurance companies.


• Assisting in designing insurance programs for a diverse range of clients

• Modelling of outstanding loss provisions

• Captive feasibility studies

• Heavily involved in designing premium allocation models for major corporations in Australasia


• Bachelor of Science (Hons) (Mathematics with Management Applications)

• Associate of Risk Management


APPENDIX 2: WILLIS CLIENT BILL OF RIGHTS

THE WILLIS CLIENT BILL OF RIGHTSOur Client Bill of Rights is our commitment to upholding the highest standards of integrity in our industry and how we deliver the Willis Value Experience.

At Willis, our culture and our actions are guided by the following principles:

1. Willis represents the client’s best interests through our client advocacy model. Willis’ global resources and services are committed to understanding the client’s company, its industry and its individual needs. Willis’ customized recommendations and solutions will be driven by what is in the client’s best interests. This is the centerpiece of the value Willis provides its clients.

2. At the commencement of every new engagement and at renewal thereafter, Willis will describe the service and value it provides and how it is compensated for it – in plain and simple language as part of our Terms of Business Agreement and our Willis Client Service model.

3. Willis will listen before it acts. Its partnerships with clients will be typified by clear, complete and candid communication.

4. Clients will have a toll free number to give Willis feedback on the quality of its services. Clients can comment, critique and suggest areas for improvement. Willis values client input.

5. Willis will require that the training its Associates receive includes enhanced emphasis on their duty of care and full disclosure to clients.

6. Willis Associates are prohibited from accepting any gifts, entertainment or trips from insurers that could create the appearance of a conflict of interest with its clients.

7. Willis will not accept contingency compensation from insurers*.

8. Willis will conduct its business in accordance with its best practices guidelines, which are incorporated in our Willis Excellence Model.

9. Willis clients will receive the benefits of our glocal approach to service: our global resources delivered locally to help clients realize their highest risk management and business objectives regardless of geography.

10. Adherence to these principles will be enforced by a series of enhanced internal controls, including regular compliance reviews, audits and review by the Audit Committee of the Willis Board of Directors.

*Prior to its merger with Willis, HRH accepted contingent compensation on certain of its clients' accounts; these contingents will be phased out over three years, and no contingents will be accepted on any new brokerage clients or business generated after the October 1, 2008 acquisition.

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