1. Aon’s 11 th Energy Insurance Training Seminar Markets and security Adam Barber-Murray

2. Contents How do we find market to follow the leader’s terms Analyse of following market Criteria for choosing following market

3. Lead Terms Established Need to have support for 100% What is the market capacity? With the leader’s line down – is it job done ? –Send out to all markets by email –“fill your boots”

4. Market Analysis If it’s a renewal look at the expiring market. –Who will renew –Who may come off:- Do we need to find new markets? –Do we blanket email the whole market Underwriters choice – Risk record – Treaty restrictions – Renewal rates Client choice (Broker input) – Security – Poor Service – Slow Claims

5. Market Analysis (continued) There is an art to ‘building’ a placement Need to select markets to be approached. – Build momentum – Underwriters will not write full capacity line for 100% E.g AIG capacity USD200 million Written line 20% – Need to have supporting lead lines The personal touch – Grab underwriters attention – Set the scene

6. Market Analysis (continued) Important to get support on same terms and conditions. – Avoid fragmentation of the placement – Same deductibles Avoid separate policy with different adjusters – Complications with claims – Duplication of effort for insured

7. Marketing Considerations What criteria do we use for selecting following markets?

8. Criteria for selecting Markets Security of the insurer / financial strength Rating Agencies – S&P, AM Best, Fitch, Moody’s – S&P Rating AAA - an insurer rated ‘AAA’ has EXTREMELY STRONG financial security characteristics. ‘AAA’ is the highest insurer Financial Strength Rating assigned by S&P AA - an insurer rated ‘AA’ has VERY STRONG financial security characteristics, differing only slightly from those higher rated A - an insurer rated ‘A’ has STRONG financial security characteristics, but is somewhat more likely to be affected by adverse business conditions than are insurers with higher ratings

9. Criteria – Security (continued) S&P Rating (continued) – BBB - an insurer rated ‘BBB’ has GOOD financial security characteristics, but is more likely to be affected by adverse business conditions than are higher rated insurers. – BB - an insurer rated ‘BB’ or lower is regarded as having vulnerable characteristics, that may outweigh its strengths. ‘BB’ indicates the least degree of vulnerability within the range to CC

10. Criteria – Security (continued) Insurer security and the broker The broker does not guarantee security of insurers We have a security committee – responsible for establishing appropriate market security procedures and financial guidelines for all entities within Aon. Includes assessing and classifying all markets/underwriters and intermediaries with which Aon maintains an active trading relationship – Two market security departments – Chicago and London Meets regularly to review insurers security Looks at Credit Rating Agency - financial strength rating Looks at financial size – Capitalisation of US$50 million minimum Looks at claims payments Talks to peers – Monitor rating changes – Issues client advisory packs

11. Criteria – Insurer Appetite The Risk Appetite of the insurer – Do they write the class of business – Do they write business in the region Nat cat exposures Gulf of Mexico – Do they have the “experience” to handle as supporting market? – Is the insurer in expansion mode? – Is there an existing relationship with the client Needs to be a big line – To keep the momentum going

12. Criteria – Service The insurers response time new business – Availability of underwriter – Extensive modelling Will the insurer require to be an agreement party – Agreeing all policy changes / endorsements – Slows down service response times General query response times

13. Criteria – Claims The principle reason insureds buy insurance is to have their claims paid Does the Insurer pay claims swiftly? Does the insurer want to be a claims agreement party

14. Following Markets How many times, on average does a placing broker have to approach an underwriter with a new risk before the risk is accepted?