NASCO KARAOGLAN GROUP

1. NASCO KARAOGLAN GROUP THE ROLE OF THE INSURANCE & REINSURANCE BROKER IN THE MENA REGION By: DR KHALIL TALEB

2. CONTENTS • Introduction • Configuration • The Broker’s Role • His Duties • Diagnosis of Risk/Insurance Requirements • Risk Analysis • Risk Management • Services to the Client • Security Issues • Benefits of Appointing a Broker • Conclusion

3. CONFIGURATION BROKER DIRECT INSURED DIRECT BROKER/CONSULTANT REINSURED/INSURER REINSURANCE BROKER • Person • Property • Liability • Insurance Company • Reinsurance Company • Broking Firm Function is identical but its application varies He works for the Client but is generally remunerated By the Underwriters and/or Reinsurers

4. THE BROKER’S ROLEHE IS • To be versed technically • To be a Mediator • To be a Moderator • To be a Catalyst • To be Assessor of Information • To Filter the information • To be a Translator of culture • To be aware of : 1- Client's need 2- Client’s requirements 3- The prevailing environment be it, Market, Political, Economic or Social Issues 4- The forces prevailing in the market BUT HE IS NOT • A simple intermediary • A post office • A Silent Partner

5. HIS DUTIES • Ensuring that all information about the risk received are well presented to the Underwriters/Reinsurers Concerned • Ensuring that the Client disclose all material facts in appropriate form to the Underwriters • Possessing a flexibility to adapt to his Client’s needs & requirements in a particular geographical zone • Possessing the ability to deliver a Tailor made product (service) • Having global connections to follow on Client’s geographical expansion • Ensuring a close relationship with underwriters • Containing the blame

6. DIAGNOSIS OF RISK / INSURANCE REQUIREMENTS • Assessing the insurable interest (be it Property, Person or Liability) such as “the property in the course of construction” for C.A.R or “The Ship” for a Hull Policy and appropriation to the Owner of such property • Assessing the risk to be insured and providing the right conditions to be given to the risk (Property to be insured/concerned). For example, Institute Yacht Clauses not appropriate for an ocean going vessel or Institute Time Clauses not suitable for pleasure boat etc. • Ensuring the right coverages given after handing over of a project such as decennial liability in a C.A.R policy &/or such protection as business interruption following a delivery of a vessel or the like… • Providing affiliated coverages that need to be looked upon such as workmen compensation, crew personal accident, etc…

7. DIAGNOSIS OF RISK / INSURANCE REQUIREMENTS • Designing Treaty Reinsurance Program according to each Country’s specific need and local regulations. • Natural Perils/Earthquake/Flood Exposure • Unlimited Motor Liabilities • Medical/Labor Law

8. RISK ANALYSIS THE BROKER • Should have the technical ability and knowledge of the risk to advise the Client of the possible/probable damage as to number and size of claim(s) in order to work out the level of self-insurance (through deductible bearing or otherwise) with a view to minimizing the cost of insurance. • Should have the technical ability and knowledge to determine the most appropriate method of risk financing and to assist the Client to assess the optimum of risk assumption and risk transfer. • Should have the ability to discuss technical matters with risk managers &/or surveyors &/or risk assessors in order to provide the Client with the appropriate technical advices with a view to bettering the risk and allowing a saving on the cost of insurance. • Should have the ability to assist the insurance companies to design their Treaty Reinsurance programs in determining the risk profiles / statistics / the max aggregate exposure

9. RISK MANAGEMENT Following risks analysis, a risk management would be needed. It is aimed at containing the risk of loss. Risk Management comprises 3 phases : • Identifying the risks which are likely to affect a property, such as natural hazards, bad management or negligence • Assessing the risk, such as evaluation and quantification of the possible amount of a claim (both severity and frequency) and the likelihood of a particular happening. • Controlling the risk, as to the extent of, measures or precautions taken to eliminate (loss prevention) or minimizing the overall cost of a claim.

10. SERVICES TO THE CLIENT • Negotiating competitive/realistic pricing • Ensuring competition among the various underwriters in the market • Providing broadest coverage available which suits the Client’s insurance needs • Insuring favourable relationship with insurance markets • Assessing accurate budget forecasting • Screening financial capacity of insurance markets • Ensuring swift loss recoveries • Assuring market intelligence • Forecasting environmental changes • Developing wordings appropriate to Client’s needs • Being proactive in claims handling

11. SECURITY ISSUES It is the duty of the Brokers to ensure that all Companies with whom they place insurance are financially sound and factually satisfy the Broker’s responsibility to their Clients. An assessment of the underwriters should take into consideration the following criteria : • Financial Aspects • Domiciliation • Ultimate Ownership • Reinsurance Protections • Management • Whether Long Tail and Us Business are heavily written • Government supervision & regulations • Currency Regulation • Past Performance

12. BENEFITS OF APPOINTING A BROKER 1- FINANCIAL • Independent advice without extra cost • Reduction in premium through competition • Reduction in administrative expenses • Bargaining Power • Choice in Insurance and Reinsurance Securities • Management of premium payments / claims collection • Analysis of scope of coverage at no extra cost • Provision of packaging deals • Free legal advice where needed

13. BENEFITS OF APPOINTING A BROKER 2. OPERATIONAL • Quality presentation of information to underwriters (slip) • Flexibility in the choice of Insurance / Reinsurance terms • Experience in answering questions to underwriters without bothering the Client, whenever possible • Technical support to local insurers • Continuity with the International Markets • Expert advice on the implications of contractual needs, legal matters and associated insurance requirements

14. BENEFITS OF APPOINTING A BROKER 3. CLAIMS • Recommendations of loss Adjusters according to the peculiarity of the claim and territory • Expert negotiations with the parties concerned in the interest of all • Control of collection from the Reinsurers/Insurers with minimum delays • Control of currency fluctuation in claims settlement

15. CONCLUSION The Broker forms an integral part of the Insurance Industry and its promotion will do nothing but boost its development.