1. CONSTRUCTION & THE FOOD INDUSTRY The Insurance Industry View Steve Exwood & Jon Miller

2. What We Will Talk About The current tough economic climate combined with increasing raw material prices means food and agri companies face a sustained squeezing of their profit margins. In this environment, any reduction in the capital you spend on construction and infrastructure projects insurance and risk management is to be welcomed. Yet at the same time, insurer attitudes to food and agri risks are changing and they are deploying their underwriting capacity very carefully in this sector. How you plan your construction and development projects, small or large, will have a long term impact on not just the risks faced by the operation but also the actual availability of insurance, the holistic cost of risk and the overall competitiveness of the business. We will discuss:- Food Sector Specific Issues The Insurance Response The Underwriters View A Case Study 2

3. About Us Jardine Lloyd Thompson plc The Jardine Lloyd Thompson group of companies is a leading risk management adviser and insurance and reinsurance broker. Jardine Lloyd Thompson Group plc is quoted on the London Stock Exchange, is in the FTSE 250 and is one of the largest companies of its type in the world with global revenues of £979.2 million in 2013. Jardine Lloyd Thompson Group plc has offices in 40 territories with more than 9,100 employees supported by the JLT International Network enabling us to offer risk management & employee benefit solutions in 139 countries. 3

4. About JLT Specialty Limited At JLT Specialty, we believe in doing things differently. Why? Because in the world of insurance broking, risk management, claims consulting and settlements, the only way we can develop solutions that really deliver is to properly understand all the different challenges clients face. And we know the answer does exist, no matter how difficult the question is. Our success comes from focusing on sectors where we know we can make the greatest difference. On using insight, intelligence and imagination to provide expert advice and robust – often unique – solutions. And on building partner teams to work side-by-side with clients, our network and the market to deliver responses which are carefully considered from all angles. Two of the key global areas of JLT specialisms are the Construction and Food sectors. We have a deep understanding and knowledge of both sectors as well as being leading sector brokers. 4

5. Key Food Sector Risks The risks that have overall impact on the business are:- Property People Products Process The planning and development of any new site or refurbishment will have a major impact on all these risk areas. All construction projects will increase these areas of risk during the process Failure to correctly manage these issues in current facilities puts the operation at a higher level of risk and increases overall costs. 5

6. The Cost Of Getting It Wrong The most catastrophic single event that can affect a food operation is severe damage to premises. Fire is one of the main causes of loss. This is common to may industries. What is almost unique to the food sectored is the scale of the direct and indirect losses. The size of the issue from insurers perspective is set out in the hand outs. Why does this concern Insurers:- Significant property values High revenue and gross profit exposures Plant shut down even from a limited event Design & Construction Even a small claim could be in the 10’s of £millions! 6

7. History Historically the design of food production sites has been based around a number of key drivers:- Production efficiency Low cost and available insurance Fire services that will put out not just control Cost of construction. The holistic cost of risk is changing quickly with a significant long term impact on businesses that needs to be seriously considered. 7

8. Underwriters View There is concern in the insurance market that despite many issues being well known they are not being addressed quickly enough. These areas include:- Fire planning and controls Use of heat Building construction and materials Fire separation Reducing fire brigade protection High Sums insured Gross profit production in one fire zone In Insurance terms fire sources Lack of controls Buildings that burn No separation Very high estimated maximum losses and high occurrence rate! 8

9. Client Outcome If these risks are not actively managed and communicated to the market in the correct manner, the long term impact on a food operations could be severe and include:- High premiums Restricted insurance cover Very high levels of uninsured risks Operational disruption and lower efficiency Retro fit costs Overall a higher level of long term operation cost. 9

10. Case Study Food Factory with 5 sites moves each operation to one central location in 4 stages. The main site is extended each time an operation is incorporated. The Key consideration was operational efficiency. The original factory specification is continued in parts. Combustible materials No control No separation No detection Uncontrolled heat source Limited planned maintenance Insurers were “asleep on the job” and just increased the values at each stage. They were protected by a sprinkler requirement. There were no sprinklers. 10

11. Case Study The company then seeks to extend the premises further in the same way which triggers a review. The insurance market considers the operation as uninsurable at any premium. The existing insurers can charge what they like and also impose significant risk improvements and limits the expansion plans. 11

12. The Solution To consider all aspects of any construction process from a project and operational risk and insurance perspective over the long term. Engage with all parties before committing time and cost. Investigate alternative risk transfer strategies as part of the planning process Involve your insurer, but ensure wider market acceptance of what you have planned 12

13. Questions & Answers Steve Exwood – Partner -JLT Specialty Limited 0115-8980401 Jon Miller – Partner – JLT Specialty Limited 0121-6267806 13