This is the dimension of the imagination Rod Serling called The Twilight Zone – A dimension we call – The Intersection of Risk. In this session we explore another dimension beyond what is known to the common broker. It is a dimension as vast as your customer contract and as timeless as an uncovered claim. It is the middle ground between products and services, between intellectual property and warranties, and it lies between the pit of the risk manager's worst fears and the summit of an underwriter's combined ratio.

Jose Heftye, Flextronics Jenny Novoa, Gap Sarah Stephens, Aon Your Moderator: Alex Tokar, Aon

Scene 1: The Suppliers Big Headache Scene 2: The Brands Big Risk Scene 3: A New Dimension of Possibilities

Scene 1: The Suppliers Big Headache

Contract Demands: £50,000,000 Errors & Omissions £50,000,000 Intellectual Property Liability Deductible no greater than… Conflicts & Resolution: Third party Intellectual Property Liability does not exist Possible utilization of a captive to address future situations The Guest Star of this scene: Redesign of a smart meter

Contract Demands: 40,000,000 Product Liability 40,000,000 Product Recall 40,000,000 Product Warranty 40,000,000 Errors & Omissions Conflicts & Resolution: Client wanted dedicated limits per the contract Utilized existing program with side agreement to reinstate limits if capacity was eroded Self-insured product warranty and able to get client to accept lower recall limits The Guest Star of this scene: Bluetooth automotive manufacturing

Contract Demands: $20,000,000 Products Liability $20,000,000 Product Recall $20,000,000 Consequential Damages $20,000,000 Brand Reputation Conflicts & Resolution: Thus far Impossible to comply with clients demand for brand reputation. Product Liability & Recall partly evidenced with existing programs. Consequential damages agreed, but self-insured. The Guest Star of this scene: Electronic Retail Products

Scene 2: The Brands Big Risk

Contract Requirement: Software companies must have E&O and Privacy insurance. Software companies must have E&O and Privacy insurance. Access to our customer data and/or systems could expose large losses. Access to our customer data and/or systems could expose large losses. Complaint & Resolution: Vendors claims E&O/privacy are too expensive or limits too high. Evaluate the risk to the company. In certain case we accept the risk and waive E&O. The Guest Star of this scene: Software Vendors

The Guest Star of this scene: Co-development deals Contract Requirement: No one wants to accept any risk! No one wants to accept any risk! Who owns the IP? Who owns the IP? Who caused the problem? Who caused the problem? Complaint & Resolution: Make sure the business has a defined scope of work. Make sure the business has a defined scope of work. We may back off of high limit requests based on the business partner. We may back off of high limit requests based on the business partner.

Contract Requirement: Big exposures for the company – data, technology, infrastructure Big exposures for the company – data, technology, infrastructure We want substantial E&O, GL, property, and privacy limits. We want substantial E&O, GL, property, and privacy limits. Complaint & Resolution: Significant pushback during contract negotiation Risks too big to ignore. Held our ground for higher limits. The Guest Star of this scene: Outsourced IT & Data Centers

Contract Requirements: Products for infants and children create unique risks Products for infants and children create unique risks Require higher product liability limits and recall insurance Require higher product liability limits and recall insurance Complaint & Resolution : Overseas vendors often claim insurance is unavailable or they dont wish to purchase We take a tough stance on this one The Guest Star of this scene: High Risk Products

Scene 3: A New Dimension of Possibilities

The E&O UFO Professional Indemnity Media Liability Healthcare Risks Internet Media Intellectual Property Infringement Content Liability Data Breach Expense Identity Theft Insurance Medical Malpractice Architects & Engineers Crisis Management Identity Theft Liability Network Risk Cyber Liability Data Breach Insurance InfoSec Security/PrivacyLiability Technology Professional Professional Liability Third Party Recall

Client Quandary: Your client requests to be added as an additional named insured or an additional insured on your E&O policy Policy Solution: Additional insured status: Makes no sense &/or not available Alternatives may better meet their goals The Guest Star of this scene: E&O Requirement on Services Contract

Client Quandary: Handset manufacturer requires that you accept $50MM in liability for failures of your chip as well as any resultant recall costs they incur Handset manufacturer requires that you accept $50MM in liability for failures of your chip as well as any resultant recall costs they incur You dont purchase any type of recall policy You dont purchase any type of recall policy Policy Solution: E&O coverage for your technology services and products, with an additional coverage grant for third party recall costs The Guest Star of this scene: Handset Manufacturers Conundrum

Client Quandary: A public entity requires evidence of Cyber Insurance in a contract where you will implement a new online system for residents to pay taxes, citations, and licensing fees Policy Solution: You carry E&O insurance, but Cyber is not an industry standard term. Be aware of indemnification obligations for data breach expenses - will your policy pay? The Guest Star of this scene: The Cyber Requirement

Client Quandary: You (the retailer) are hiring a vendor to implement a data- intensive new loyalty program You (the retailer) are hiring a vendor to implement a data- intensive new loyalty program The program will integrate the existing CRM system with mobile devices and a new social media campaign The program will integrate the existing CRM system with mobile devices and a new social media campaign At least 4 vendors will be involved directly or as subcontractors At least 4 vendors will be involved directly or as subcontractors What new risks do we face? What new risks do we face? And Now The Tables Have Turned ! Vendor risk assessment (financial, technical, legal, security, privacy, quality control, compliance) Contractual risk transfer Vendor insurance Your insurance

The End or Is It...? Jose Heftye Senior Director, Risk Management Flextronics, Inc. 847 Gibraltar Dr Bldg 5 Milpitas, CA (408) Sarah Stephens Vice President Aon Risk Solutions Professional Risk Solutions 199 Fremont, Suite 1500 San Francisco, CA (415) Jenny Novoa Senior Director of Risk Management & Safety Gap Inc. Two Folsom Street San Francisco, CA (415) Alex Tokar Managing Director Aon Risk Solutions 199 Fremont Street San Francisco, CA (415)