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University of Houston Energy Case Study

University of Houston Energy Case Study. Steven P. Weiss, CPCU, AMIM, NAMS-CMS Vice President, Marine Engineering, Latin America and Project Cargo. What are we going to do?. What is Risk Management What is risk financing

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University of Houston Energy Case Study

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  1. University of HoustonEnergy Case Study Steven P. Weiss, CPCU, AMIM, NAMS-CMS Vice President, Marine Engineering, Latin America and Project Cargo

  2. 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

  3. What is Risk Management • The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. An organization may use risk Assumption, risk avoidance, risk retention, risk transfer, or any other strategy or combination of strategies in proper management of future events. • Enterprise risk management is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.

  4. 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

  5. The identification and analyses of loss exposures • What are the exposures? • First Party • Third Party • Financial • Employee

  6. The identification and analyses of loss exposures (cont) • First Party • Own Property

  7. The identification and analyses of loss exposures (cont) • Third Party • Contractual • Personal Injury • Property Damage (others)

  8. The identification and analyses of loss exposures (cont) • Financial • Business Interruption • Delay in Start Up • Self Insured Retentions • Deductible

  9. The identification and analyses of loss exposures (cont) • Employee • Workers Comp • Jones Act • Longshore and Harbor Workers

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

  11. Selection of the best Risk management techniques • In the present situation, what works best? • Probably some combination of the above

  12. 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

  13. Risk Financing • What is Risk Financing • Where do you get it? • Deductibles/Self Insured Retentions • Mutual Agreements • Cash flow • Insurance

  14. Insurance Flow Insured Broker/Agent Wholesale Broker Underwriter Reinsurance Broker Reinsurer

  15. Assured/Insured The Assured/Insured is the purchaser of the insurance Normally through Broker or Agent Pays Commission or fee for services to Broker Pays premium to Underwriter

  16. 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 • Broker works for the Insured • Agent can be the Insurance Company agent • Many are very well trained and knowledgeable • Also know as the Retail Broker/Agent

  17. 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

  18. 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 Pays Claims is covered by the Insurance Contract Often for Commercial Insurers has staff Risk Engineering/Loss Control to increase the qquality of the risk if necessary

  19. 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 Allows the Insurance Company to have a greater capacity (treaty) or for the Insurance Company to share the risk of an aspect of the risk they are not keen on or to increase their capacity for a particular risk (facultative)

  20. Reinsurer Insurers who insure other Insurance companies Pay commission to Reinsurance Broker Often pay override to the ceding insurer Allows insurance companies to manager and spread their risk Many insurance companies also do Reinsurance and vice versa

  21. Insurance Industry

  22. TOP TEN GLOBAL PROPERTY/CASUALTY INSURANCE COMPANIES BY REVENUES, 2010 (1) ($ millions) (1) Based on an analysis of companies in the Global Fortune 500. Includes stock and mutual companies. (2) Revenues include premium and annuity income, investment income and capital gains or losses, but excludes deposits; includes consolidated subsidiaries, excludes excise taxes.Source: Fortune./Insurance Information institute

  23. TOP TEN US WRITERS OF PROPERTY/CASUALTY INSURANCE BY DIRECT PREMIUMS WRITTEN, 2011 ($000) (1) Before reinsurance transactions.(2) Based on U.S. total including territories.Source: SNL Financial LC./Insurance Information Institute

  24. PERCENT CHANGE FROM PRIOR YEAR, NET PREMIUMS WRITTEN, P/C INSURANCE, 1975-2010 (1) From Insurance Information Institute

  25. The path of a submission

  26. Issues for 2013 • Numbers presented are all 2011 – numbers are not yet available for 2012 • The largest insured marine loss ever occurred January 2012 • Costa Concordia • Over 500,000,000 hull • Over 600,000,000 P and I (indemnity and removal) • Outcome of Super Storm Sandy • Some rate stabilization • Pricing and Terms in many lines of business not supporting the losses

  27. 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

  28. Other Resources http://www.iii.org/ http://www.aicpcu.org/ http://www.libertymutual.com

  29. Financial Highlights Liberty • Liberty Mutual 2011 Worldwide Revenue of $34.7 Billion up from $33.2 Billion in 2010 • Statutory Surplus - $17.9B (6% increase) • Total Assets – Over US$117.1 billion • World-class Fortune 100 (# 82) financial standing • AM Best – A (Excellent) • Moody’s – A2 (Good) • Standard & Poor’s – A- (Strong) - stable

  30. Do you Have any questions?

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