International Programs – Beyond the Hype

1. International Programs – Beyond the Hype

2. Bruce Wineman • Sr. Managing Director • Aon Global Client Network • Audrey Rudberg • Insurance Manager • Cargill Inc. • Richard Friesenhahn • Executive Vice President Head of Specialty Casualty, US and Canada • AIG Property Casualty • Mike Reeves • Executive Vice President – Global Markets • Crawford & Co.

3. What to Expect • After attending this session you should be able to better understand: • Factors that impact international insurance program performance from Fiscal, Statutory and Operational perspectives • Potential impact of poorly designed risk finance programs • Best Practices to employ in designing, implementing and managing international insurance programs

4. Agenda • Introduction • Program Performance – the Other Half • 7 Dimensions of a Successful International Program • What Can Go Wrong? • Best Practices

5. Program Performance – the Other Half • Fiscal • Tax • Payment • Operational • Response • Indemnity • Legal • Finance • Tax • Compliance • Human Resources • Statutory • Admitted • Non-Admitted • Compulsory • Constraints • Market – Product Availability • Cost Considerations • Market Evolution • Customs / Practice / Knowledge • Change

6. 7 Dimensions of Successful Program Design

7. What Can Go Wrong?

8. WAREHOUSE FIRE IN FRANCE Non-Admitted not permissible in France No Local Policy issued First Party Damages in excess of $50M – PD & BI • Issue: Program Structure

9. Compulsory Insurance = Those lines of insurance that are required by law for companies operating in a particular territory – typically Automobile Third Party Liability, Work Injury and some forms of Professional Liability. Trend towards compulsory requirements for other lines, such as Environmental and D&O, in certain countries. Compulsory Insurance

10. Admitted Insurance • Policy issued by Insurer licensed or registered in Country A • Risk • based in Country A • = Admitted • Policy issued by Insurer NOT licensed or registered in Country A • = Non-Admitted • Risk • based in Country A • “In over 85% of countries non-admitted cover is prohibited or restricted”

11. Claims Payments & Tax Considerations • Non-AdmittedLoss • Proceeds • Loss proceeds (collected by P on behalf of FS) • Parent • Entity • ("P") • Foreign • Subsidiary • (“FS") • Foreign • Subsidiary • ("FS") • Capitalization • (If P only insures Financial Interest) • Income Tax? • Frictional Cost • Income or Other Tax?

12. Program Design Tool • Explores recommended approach for multinational program, considering local regulations, tax, coverage and claims issues. • Provides risk managers with comprehensive/holistic view of variables impacting their decision to insure their companies’ risk exposures locally or globally. • Illustrates how particular exposures, business strategies and risk sensitivities impact a multinational’s program structure. • Available at: www.aig.com/multinational/pdt

13. Sample Country Review Workbook

14. WAREHOUSE FIRE IN FRANCE Non-Admitted not permissible in France Local policy issued under Primary Liability program with limits at US$1M Third Party Property damages over US$6M • Issue: Coverage

15. WAREHOUSE FIRE IN FRANCE Operation had expanded rapidly. Error is calculating exposure based on incorrect exchange rate. Values reported at US$9M actually over $90M • Issue: Communications

16. INSURANCE PREMIUM TAX Global company technically headquartered in Switzerland for tax purposes, but majority of operations in the US. Liability policy issued by global insurer at direction of US Risk Management with Master policy issued in Switzerland and local policy issued in US. Premiums paid by Swiss management company. • Issue: Compliance

17. Tax Audits

18. FLOOD IN THAILAND Sub-Contractor Location Multiple sources of components Significant Damages • Issue: Address Exposures

19. Transfer Pricing

20. FLOOD IN THAILAND Sub-Contractor Location Multiple sources of components Significant Damages • Issue: Efficiency

21. Developing the Right Solution Listening to the client requirements Building the right solution/process jointly Supporting brand and business strategy Custom systems structure, data and MI Delivering expert project management and implementation Building relationships and working to the same objectives Focus on program controls Financial Quality Data Process Feedback

22. Response – implementation (1) Global crisis team agreed Project plan developed Business critical tasks prioritised Operational resource both local and from other countries to cover language, culture, licences, visas, immunisation, travel, accommodation, incident control centre First notice of loss/ intake – scripts: phone, dedicated email, web portal Claims management and reimbursement processes Treasury management – bank accounts, currency, who & where Legal, data privacy and integration of local Government requirements Activate global web claims system Data capture criteria

23. Response – implementation (2) Implement 24/7 online access. Risk management information system – MI report design, distribution & frequency Systems initiated with defined triggers in place Resource ‘Ramp Up’ to accommodate surge volume Training programme implemented Designated CAT personnel with ability to mobilise as required Supply chain utilisation with access to approved and accredited contractors Transparent client communication channels throughout

24. Risk Management Best Practices • Assessment • Know the company’s footprint and operations • Seek knowledge partners and service providers with a comparable footprint (Brokers/Insures/Claim Adjusters/Loss Control) • Data collection: what, who and how • Evaluation • Establish a Risk Financing/program strategy with respect to international operations • Utilize consistent methodology for determining where local policies advisable • Determine local service requirements (Broker, policy issuance, invoicing, Engineering/Loss Control, claim adjustment) • Document decisions

25. Risk Management Best Practices • Implementation • Communicate • Objectives and Program Structure • Local service expectations/deliverables • Roles/Responsibilities, including local decision rights • Processes/procedures for invoices, policy receipt/acceptance, document retention, claims reporting • Monitor • Changes in country rules or non-insurance situations with potential impact • Service deliverables, regularly • Outcomes and issues with key stakeholders

26. Broker Best Practices • Assessment • Risk Management objectives • Communications process/protocols • Compliance Framework and threshold for materiality • Claims Scenarios • Evaluation • Regulatory constraints • Program structure options • Market capabilities • Opportunities for consolidation/improvement across lines • Challenges • Service scope and model • Document decisions

27. Broker Best Practices • Implementation/Monitoring • Marketing plan for Global and Local lines • Account Service Plan with milestones • Risk Management Manual and other documentation available to all stakeholders • Open Items/Stewardship Reports

28. Insurer Engagement Best Practices • Communicate • Risk financing strategy • Program structure objectives including local policy coverage and service requirements • Exposure Information • Evaluate program structure  options and identify potential constraints • Timeline and monitoring  for implementation • Off- Cycle Meetings • Implementation postmortem • Upcoming changes in exposures /operations • Exchange of knowledge of specific  country changes • Review of loss trends and  mitigation activity • Specific claim updates

29. Insurer Engagement Best Practices • Roles/Responsibilities • In-country • Claims • Points of escalation

30. Claims/TPA Best Practices • Crisis team agreed in advance. • Roles/responsibilities/processes/escalations etc. agreed • Understanding of potential regulatory and compliance requirements • Pre event planning with partners around ‘common events’ in specific geography. Dry runs to identify potential process problems • ‘One off’ non major events – clear protocols subject to geography/event specific requirements pre agreed with partners. Empowered management available to commit globally • ‘ One off’ major events – assigned and empowered to sign off commitments and timelines subject to needs around incident type

31. Claims/TPA Best Practices • Protocols signed off , secured and kept current ready for activation. Core team all trained/aware of global assignment/commitments and ability to deploy • Agreeing core protocols around incident types with partners – within first 60 days

32. Toward Program Performance

33. Questions, Final Comments and Contact Information • Bruce Wineman/Aon Global Client Network • Telephone: 212 441 1633 • e-mail: Bruce.Wineman@aon.com • Audrey Rudberg/Cargill Inc. • Telephone: 952 742 7296 • e-mail: Audrey_Rudberg@cargill.com • Richard Friesenhahn/AIG • Telephone: (212) 458 3593 • e-mail: Richard.Friesenhahn@aig.com • Mike Reeves/Crawford & Co. • Telephone: +44 (0) 207 265 4096 • e-mail: Mike.Reeves@crawco.co.uk

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