Aon’s 11th Energy Insurance Training Seminar

Markets and securityAdam Barber-Murray

Contents

• How do we find market to follow the leader’s terms

• Analyse of following market

• Criteria for choosing following market

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”

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

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

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

Marketing Considerations

What criteria do we use for selecting

following markets?

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

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

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

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

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

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

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?