Presentation on theme: "AON RISK SERVICES CLIENT SEMINAR 2009 STATE OF THE ART RISK MANAGEMENT DURING THE CRISIS August Pröbstl Amsterdam, 10 th September, 2009."— Presentation transcript:
AON RISK SERVICES CLIENT SEMINAR 2009 STATE OF THE ART RISK MANAGEMENT DURING THE CRISIS August Pröbstl Amsterdam, 10 th September, 2009
Agenda 1.About Us 2.Trends / Developments 3.One of our answers 2September 2009MARP – August Pröbstl – AON Risk Services
Munich Re Group Half-year facts & figures 2008 and 2009 September 2009MARP – August Pröbstl – AON Risk Services 30 June June 2009 Ratings A.M. BestA+ (superior) FitchAA- (very strong) Moody'sAa3 (excellent) S&P AA- (very strong) A.M. BestA+ (superior) FitchAA- (very strong) Moody'sAa3 (excellent) S&P AA- (very strong) Reinsurance premiums (half year!) Life/ Health: 3.4Mrd Non-Life: 7.4Mrd Life/ Health: 4.4Mrd Non-Life: 7.9Mrd Insurance premiums (half year!) Life/ Health: 5.9Mrd Non-Life: 2.8Mrd Life/ Health: 6.1Mrd Non-Life: 2.8Mrd Assets under management 175Mrd 177Mrd Employees > > Regional presence More than 50 countries 3 Munich Re Group is a strong and reliable risk partner these days and, it goes without saying, as well in the future.
Binding strategic risk criteria and operational limits driving Group-wide risk management Swift reaction to changed market conditions and targeted measures across all LoB Risks generally well captured by existing risk models Hardly exposed in stock market, ~73% very well rated government FI bonds Risk Management within Munich Re Group Our strength – your added value September 2009MARP – August Pröbstl – AON Risk Services Pro-active internal Risk Management Reliable risk modeling Reasonable exposure to financial sector Ongoing analysis of scenarios Group-wide strategic risk management framework Hedging strategy proved successful in financial crisis Reduced impact of weak capital market 4
Traditional reinsurance solutions Large individual risks solutions Specialty commercial solutions Personal specialty solutions Standard retail solutions Risk capacity Distribution power Risk know-how September 2009MARP – August Pröbstl – AON Risk Services5 Munich Re Groups Business Model More than reinsurance
MARPs presence in the world Further local offices to be continuously explored 6September 2009MARP – August Pröbstl – AON Risk Services As an integral part of Munich Re Group, MARP offers global (re-)insurance covers for Fortune 5000 companies and leading players in their industries either via fronting or via captives
General PropertyCasualty Property damage Business interruption Machinery breakdown Nat Cat covers … General liability Product liability Directors & officers liability … EnergySpecial Enterprise Risks Property damage Business interruption Offshore in combination with onshore Mining … Supply chain interruption Coverage against reputational damage or loss of brand value Non-physical damage BI … Engineering Contractors all risks Erection all risks Builders risks Advanced loss of profit Delay in start-up …. MARPs lines of business Traditional products and individual risk solutions available September 20097MARP – August Pröbstl – AON Risk Services Client Management as well as a claims handling and operations unit support our lines of business.
Agenda 1.About Us 2.Trends / Developments 3.One of Our Answers September 20098MARP – August Pröbstl – AON Risk Services
Some global cycle indicators implying moderate price increases >> September 2009MARP – August Pröbstl – AON Risk Services Global Cycle indicators Summary Capital endowment of reinsurance and primary insurance industry Less than expected capacity-induced change and capacity constraints Balance sheets and shareholders equity have recovered, but not to pre-crisis level Capacity restrictions do not indicate broadbased significant further price increases Current level of r/i prices / June/July renewals: Overall price increases not as significant as expected Significant increases in capital- and loss-intensive lines Regional differences persist Pricing is improving, but no widespread hardening 9
>> Some global cycle indicators impacting moderate price increases September 2009MARP – August Pröbstl – AON Risk Services Global Cycle indicators Summary Consensus of external views about the cycle / External observers expect: Prices to increase slightly with substantial differences by line and region For capital intensive lines further price increases are expected For regions and lines with recent losses and exposure increases further hardening is expected Macro economy; expected capital market returns / Recently improved economic outlook but still high uncertainties Investment returns recovered recently, but still not reaching pre-crisis levels On balance overall macro economy supportive for price increases 10
Financial Credibility Crisis disclosed interesting insights about the insurance market September 2009MARP – August Pröbstl – AON Risk Services11 1 Raw beta to DJ Stoxx 600, total return, daily basis, 1-year. 5-year credit default swaps (spreads in basis points p.a.). CDS Spreads 1 Jan 2008 to 31 Aug Source: Datastream Clients increasingly focus on security and financial credibility of business partners when considering the intrinsic value of capacity and overall economics in placements.
Regulatory capital requirement for a captive and its types of risk current capital requirement potential requirement under Solv II September 2009MARP – August Pröbstl – AON Risk Services12 requirement after individual risk transfer Introduction of a risk-based capital approach Risk-based capital approach reveals opportunity costs of self-insurance via captive Insurance buying driven by exposures rather than available budgets
Increased awareness for new types of risk Liquidity risks and intangible assets in the spotlight September 2009MARP – August Pröbstl – AON Risk Services Financial Crisis New or pending requirements Spinney of regulations Various, regional distinctions Company Pursuing profitable growth Seizing opportunities Taking new risks Cost-conscious and demanding Well informed (e.g. via internet) Diminishing loyalty Customers Highly competitive Global and dynamic Shortened product cycle Market Environment Regulatory RequirementsOther Important Parties Analysts Investors Rating agencies 13 Of all our identified risks that we face, I am only able to transfer 7% to the insurance market, although I am aiming for more than 10%. … says a corporate risk manager.
Agenda 1.About Us 2.Trends / Developments 3.One of Our Answers September MARP – August Pröbstl – AON Risk Services
Special Enterprise Risk (SER) SERs objective is to fully comprehend clients ERM needs September 2009MARP – August Pröbstl – AON Risk Services What does SER do? Develop innovative solutions for individual risk profiles Tailor-made solutions, not off the shelf products Close collaboration with clients and their broker Project-driven, not product-driven What does SER not do? Cover 100% of clients mitigation need without reservation Cover standard exclusions on a stand alone basis Cover strategic business risk or management decisions Cover success of market entry 15
SERs working model Quite flexible, trying to identify and focus on promising topics September 2009MARP – August Pröbstl – AON Risk Services Conceptional DesignIssue Based One Specific IndustryAcross All Industries REACH Reputational/ Brand Value Risk Renewable Energies CBI Multi Year & Line Clinical Trials Pandemic Ext. Warranty Legend A few current examples Deal done Boundaries are given by conceptional design and issue based work. Solutions are developed for individual as well as across all industries. In principle global with current focus Europe and US SER is not a product developing unit. 16
SER solution for a pharmaceutical company Structured solution for a multi line & multi year deal September 2009MARP – August Pröbstl – AON Risk Services Captives situation Efficient capital structure using RI FSA induced activities Motivation Capital adequacy directive (similar to Solvency II) Limited risk transfer using captives liquidity situation Deal structure Multi year and multi line Traditional underwriting via MARP UK Coverage is 7LoB, e.g. NDBI Product recall Business travel accident 17