1. BC Risk and Insurance Management Association, 16 January 2013 Michael Key, FM Global Vancouver Branch Manager The majority of property loss is preventable…even in supply chains.

2. “World’s Best Supply Chain Risk Insurance Provider” Global Finance magazine in its July/August 2012 issue. “Backed by 177 years of experience and an engineering staff with a deep knowledge of risk, FM Global is an industry winner when it comes to helping multinationals insure their supply chains,” says the magazine in its rankings of the World’s Best Supply Chain Finance Providers 2012. “With nearly US$7 billion in policyholder surplus, FM Global offers its clients extended supply chain risk insurance coverage. This envelops not only an insured's direct suppliers and customers but also suppliers and customers up and down the supply chain.” The editorial team from Global Finance sought input from industry analysts, corporate executives and technology experts during the selection process and considered factors such as market share and global coverage, product innovation, customer service, technology, execution skills and client-specific implementations..

4. “Nearly 90 percent of firms do not conduct a risk assessment when outsourcing production.” “Supply Chain Risk: It's Time to Measure It” Harvard Business Review Blog, Feb 5, 2010

5. Instead of trying to anticipate low-probability, high- impact events, we should reduce our vulnerability to them. Let’s Get Real...

6. So What’s New?  Over 50% of Fortune 500 profit now comes from overseas  Supply chains have become more complex, extending to tertiary levels and beyond  Demographic change has placed more business in harm’s way  We are in a truly intertwined global economy  Catastrophe events are having deeper impact

7. Natural Catastrophes Worldwide;1980–2010 Number Meteorological events (Storm) Hydrological events (Flood, mass movement) Climatological events (Extreme temperature, drought, forest fire) Geophysical events (Earthquake, tsunami, volcanic eruption) Source: Geo Risks Research, NatCatSERVICE. © 2011 Munich Re

8. Volcanic eruption Island, March/April Heat wave/ Wildfires Russia, July-Sept. Earthquake Haiti, 12 Jan. Hurricane Karl, floods Mexico, 15-21 Sept. Earthquake, tsunami Chile, 27 Feb. Winter Storm Xynthia, storm surge Western Europe, 26-28 Feb. Flash floods France, 15 June Earthquake China, 13 April Floods, flash floods, landslides China, 13-29 June Hailstorms, severe storms Australia, 22 March/6-7 March Earthquake New Zealand, 4 Sept. Severe storms, hail United States, 12-16 May Severe storms, tornadoes, floods United States, 30 April – 3 May Typhoon Megi China, Philippines, Taiwan, 18-24 Oct. Floods Australia, Dec. 2010 Natural Catastrophes; 950 loss events Source: Geo Risks Research, NatCatSERVIC.E

10. Root Causes Happening Concurrently Globalization Urbanization Information Technology

11. New emerging market leaders growing in numbers… 1996: 20 2006: 47 2016: >150

12. Source: Swiss Re Sigma Report No. 1/2011 Note: Catastrophes included are those with >$17mil insured losses, $85mil in economic losses, or 20+ deaths Number of Catastrophes By Region, 2010

13. Of Particular Concern… 30% of World’s Consumer Electronics Hong Kong Shenzhen Dongguan Guangzhou Forshan Zhongshan Zhuhai Macau

14.  “There is a 26% chance of a major flood or windstorm over the life of a building…in a 1 in 100 year flood zone.” –Lou Gritzo, VP Research FM Global, “Flirting with Disasters”, Reason Magazine, Issue 1 2011.

15. Urbanization: Loss Aggregation

16. And Mostly In Nat Cat Areas

17. Drive Towards Effective Supply Chain Risk Management

18. Identification & Assessment Avoidance & Reduction Acceptance & Transfer RISK

20. Avoid or Mitigate the Interruption  Thoroughly understand your supply chain at every tier – loss control and business impact analysis  Map the manufacturing process  Identify weaknesses  Harden facilities, owned or otherwise  Duplicate if necessary  Overlay with financial mapping  Define acceptable risk  Create contingency and disaster plans

21. Avoid or Mitigate the Interruption –Governance –Risk tolerance –Finance and balance sheet considerations –Manufacturing –Logistics –Sales and Marketing –Human Resources –Risk Management –And More!  Requires top level commitment  Must engage multiple disciplines

22. Insurance Company Local Operations Suppliers Government/ Regulators Broker Strategic Alliances Senior Management Finance Legal Internal External IS Risk Management “The Conductor”

23. Property Damage Business Interruption Supply Chain Disruptions  Corporate Reputation  Investor Confidence  Market Share  Self-insured Retentions/Deductibles  Life Safety  Environment  Community and Employee Relations

24. What keeps CFO’s awake at night? Opinion Research Corporation/FM Global Joint Survey of Top Business Risks to Top Revenue Drivers:  Competition is viewed as the biggest risk to revenue, followed by supply chain disruption and property-related risk  Most broadly cited consequence of disrupting a top revenue driver is a loss of competitiveness

25. What is the link between financial performance and risk quality? FM Global commissioned Oxford Metrica to explore the relationship between risk quality and financial performance. The independent research establishes a clear connection between skillful investment in property risk improvement and sustained financial performance.

26.  A clear, empirical connection was found between risk quality and shareholder value performance.  High-quality risk engineering was found to be strongly correlated with low cash flow volatility, a core value driver. Stable cash flow is a strong driver of value creation.  Risk quality is a strategic issue and an essential aspect of effective corporate governance procedures. What is the link between financial performance and risk quality?

27. ~ 30 X “Risk” Losses by FM Risk Mark Quartiles Gross Loss $(Millions)

28. US$724,000 Fire Physical Risk Management Practices versus Ave. Loss Severity (2005-08) US$3,200,000 US$478,000 Natural Catastrophes Physical Risk Management Practices versus Average Loss Severity (2005-08) Strong Practices US$3,400,000 Weak Practices The Consequences Can Be Dire Strong Practices Weak Practices

30. 2.34 0.34 0 0.5 1 1.5 2 2.5 Unimproved Locations Improved Locations Dollar loss per $100 TIV Comparison of “Improved” and “Unimproved” Locations Katrina Loss Comparison

31. The Opportunity….  Own and manage the risk  Understand the exposures  Harden the supply chain, owned and non- owned  With knowledge of the exposures, tailored supply chain insurance solutions can be created Together these steps create: COMPETITIVE ADVANTAGE

32. When You’re Resilient You’re in Business The majority of property loss is preventable…even in supply chains.