We Have a Plant There? u Managing International Property Insurance and Claims

1. We Have a Plant There?uManaging International Property Insurance and Claims Denver – April 28, 2014

2. Presenters Office: +1 (412) 394-7930 Email: pdlaun@jonesday.com • Peter Laun Partner Jones Day • Ron Hajjar Managing Director, Claims Preparation Practice Aon Risk Solutions • Jose Heftye Senior Director, Global Risk Management Flextronics Office: +1 (972) 403-3334 Email: ron.hajjar@aon.com Office: +1 (408) 576-3726 Email: jose.heftye@Flextronics.com

3. What to Expect • Transform lessons learned from past claims experience to: • Design an efficient international property insurance program. • Develop a claim management plan before loss occur. • Better loss quantification to maximize recovery minimize delay.

4. Different levers that will influence a property claim outcome

5. Typical Structures of International Property Insurance Programs • Worldwide, no local insurers (not allowed in some jurisdictions) • Global master with local admitted insurers • Individual domestic placements • Government-required reinsurance and effect

6. Issues Relating to PossibleProgram Structures • Local objectives and needs versus corporate objectives and needs (e.g., deductible structures) • Captive to cover deductible and protect BU P&L

7. One Insurer Versus Quota-Shareor Layered Programs One Insurer Multiple Insurers Advantages • Claims Negotiation • Renewal Process • Bigger relationship • Pricing Stability • Capacity Stability • Counter Party Exposure • Claims Negotiation • Renewal Process • Smaller relationship Disadvantages • Pricing Stability • Capacity Stability • Counter Party Exposure

8. DIC Coverage • May be critical coverage for global program • How it works • Key issues • Substantive Language, Coverage or Limits issue vs. interpretation issue • DIC coverage may not protect local balance sheet—can money be repatriated?

9. Legal Program Structure Issues • Choice of Law (local, defined state) • Choice of Forum • Arbitration vs. Litigation • Policy Construction Clauses (anti contra proferentem)

10. Possible Structures for Claim Preparation • Local team • Non-local team • Hybrid • Broker involvement—varies by country • Does insurer have local adjuster

11. POSSIBLE CLAIM SCENARIOS • Local only • Multi-location: different countries and policies (inter-dependencies) • DIC claims (local claim, global policy responds)

12. CLAIMS ADJUSTMENT PROCESS • Depends greatly on structure of program and claim • Global program may lead to hybrid claims adjustment process—local and global/DIC • Local policy—local norms and adjustment practices

13. Key Issues Program Structure • Declared values for BI and PD (more common outside US) —inflation skews values • Leased property vs. owned property • Local adjustment practices or policy language may result in coverage gaps • BI coverage (e.g., budget vs. revised market) • Code upgrade coverage • Disputes over what is damaged and extent of damage • Professional fees—covering forensic accountants; rates; local versus international accountants

14. Key Issues Cultural and Logistics • Currency exchange • Timing—can be a much slower process • Audit detail level—can be higher • Cultural; language (e.g., policy and contract translations) • Local expectations vs. corporate views • Time zones • Access to local resources

15. Key Issues Legal and Regulatory • Legal regime differences (effective access to courts, pro-policyholder orientation, etc.) – ipsa dixit problem • Tax implications of global vs. local payment • Government reinsurance involvement and effect • Contractual obligations to 3rd parties (e.g. customers and suppliers)

16. In Summary • Multiple variables will influence the outcome of a claim • Pre-loss work will help you identify those variables and prepare to successfully adjust future claims: • Loss quantification • Coverage identification • Execution and project management

17. KEEP THIS SLIDE FOR EVALUATION INFORMATION/MOBILE APP ETC. Please complete the session survey on the RIMS14 mobile application.