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Sony Pictures Entertainment Inc.March 21, 2013 D-R-A-F-T 11
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MISSION STATEMENT
PROTECT THE ASSETS OF SONY PICTURES ENTERTAINMENT
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RISK MANAGEMENT STRUCTURE
Janel ClausenVice President,
Risk Management
Aaron AuCoordinatorWork Comp
Claims &Admin Support
for Dept.
Douglas Hastings Claims Manager
GL, Auto, Property & Production
Claims
Dawn Luehrs Director
Global Production Risks
Donna TetzlaffDirectorGlobal
Corporate Risks including
Distribution Activities Britianey Barnes
AdministratorGlobal Production Risk
Support, Bonds & Notary
Kate Calabrese Claims/Systems,
AdministratorMedia Liab. Claims,
EPL Claims, Dept. Budget & Risk Mgmt Systems Mgr.
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Key Risk Management Functions
Risk Identification• Understanding SPE and identifying its unique risk characteristics • Assessing Film & TV Production and Distribution Risks
Risk Treatment Working with Internal and External Partners• Developing a policy on risk to optimize risk retention/transfer methods (Finance)• Negotiating and implementing insurance risk transfer program (Insurance Companies)• Fixed asset protection and catastrophic risk assessment (Finance & Administration)• Liability and litigation control (Legal)• Employee and public safety, security & crime control (SEHS)
Risk Administration• Claims Management for Sony Pictures Global Operations• Maintain insurable asset inventory and exposure data• Allocate risk costs to Studio, each Production and all other groups• Management Reports
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Contract reviews• Corporate (200)• Productions Domestic and Foreign(1,500 per year)
Coverage Requests (600 per year)• Scope, limits, extensions, amendments
Outgoing Certificates Issued and Reviewed (3,000 per year)• Same Day Issuance• Notice of Cancellation Compliance
Incoming Certificates Reviewed (600)
Special Endorsements (2,000 per year)• City Specific Additional Insured – General Liability• Specific Vendor Additional Insured – General Liability• Notice of Cancellation – General Liability• Additional Insured – Media Liability; Errors & Omissions
Policy Renewals• Gather and transmit renewal data to insurer for negotiations• Policies reviewed to verify terms and conditions match quotations received• Policies summarized updated and maintained
Ongoing Cross-Team communication
SPE Risk Management: The Day-To-Day
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Production Risk Management – A Dynamic Process
•RM notified of new
Pre-Production
Initial Production Notice to Risk Management – Weekly Production & Business Affairs Meetings, Online Publications, Phone Calls
Script Review, Exposure and Location Analysis – Domestic/International determination
Cast declarations, medicals, stop dates and cast multi-production utilization
Budgeting –Finalize Insurance line, Identify special insurance extensions – cast (age, medical etc.), marine, aviation, railroad, automobile, stunting, international, disability, duration of production
SEHS Coordination
Post-Production
Additional Filming and Re-Shoots
Claims Finalization
Annual Production Renewal Process
Production
Adapt to changes in pre-production schedule
Location changes
Contract Review – Standard SPE/Non-Standard, Vendor, Supplier and amendments to Insurance Policies and Insurance Certificates as needed
Claim activities
Special Hazard Identification and Insurance treatment
• Watercraft• Aviation• Stunting• Railroad• Automobile
SEHS Coordination
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Corporate Risk Management – A Dynamic Process
Global Insurance Renewal Process
Activities begin 120 days before renewal and varies by coverage (Property, Casualty, E&O, D&O, Marine, Aviation, etc.)
Collect exposure data from SPE entities (values, payrolls, productions costs, sales, vehicles)
Update claim summaries/status by line of coverage
Partner with broker to finalize submission and renewal program design and negotiation strategy
Meet with insurers as necessary
Monitor renewal progress and respond to insurer requests
Analyze insurer proposals and make recommendations to SPE management
Implement renewal and coordinate certificate issuance, reviews and approves insurers’ premium invoices for payment.
Manage ongoing relationships with brokers and insurers until subsequent renewal cycle (e.g. Tokio Marine – major strategic partner)
Risk Management Analysis and Administration
Identify corporate global risk exposures• Review contracts, leases, agreements• Monitor changes to locations, human
resources, inventory and warehouses• Assess impact of insurance laws and
requirements by country of operation• Due diligence for mergers & acquisitions
Analyze insurance solutions for new/changing exposures
• International• Media• Terrorism• Cyber Risk• Surety Bonds
Respond to internal SPE inquiries (e.g. clearance procedures, claims, INFOSEC, legal, SEHS)
Coordinate insurance responses for promotions, sales, marketing, distribution, studio operations, digital, the internet
Ongoing claim management
Manage annual insurance budget
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Annual Total Casualty Premium/Retained Losses vs. Total Annual Revenues – 2006 thru 2012
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
Annual Premium
10794858.6666667
15200836.7666667
13347348.6666667
13939807 13105103 14840956
Retained Losses
10316872 25270899 4347458 7818441 8965623 4443217
Revenues (in 000)
8000000 7500000 7700000 7500000 7000000 7900000
$2,500,000
$7,500,000
$12,500,000
$17,500,000
$22,500,000
$27,500,000
$32,500,000
$37,500,000
$42,500,000
$6,500,000
$6,700,000
$6,900,000
$7,100,000
$7,300,000
$7,500,000
$7,700,000
$7,900,000
$8,100,000
Sony Pictures Entertainment IncAnnual Total Premium & Retained Losses vs. Revenues
2006 thru 2012
Fiscal Year Pre
miu
m &
Lo
sse
s
An
nu
al R
ev
en
ue
s
(in
00
0)
9
Annual Workers’ Comp Premium/Retained Losses vs. US Headcount – 2006 thru 2012
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
PREMIUMS
722005 627875 662681 431715 407982 426164
RETAINED LOSSES
1142000 1199000 1340000 1344000 1289000 1367000
HEADCOUNT
5222 5677 4788 4626 4507 4568
$250,000
$750,000
$1,250,000
$1,750,000
$2,250,000
500
1,500
2,500
3,500
4,500
5,500
Sony Pictures Entertainment Inc.Annual Workers' Comp Premium and Retained Losses vs. Domestic
Headcount2006 thru 2012
Fiscal Year Tota
l P
rem
ium
& R
eta
ined L
osses
Headcount
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Annual Global Property/B&M/Terrorism Premium/Retained Losses vs. Property Values – 2006 thru 2012
2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
GLOBAL PROP/B&M/TERR PREM
3977379 4590306.1 3680890 3695921 3950880 4330010
RETAINED LOSSES
150000 150000 50000 50000 0 50000
PROPERTY VALUES (in 000)
1753896 1831736 1921700 1918542 1981686 1926487
$500,000
$1,500,000
$2,500,000
$3,500,000
$4,500,000
$1,625,000
$1,675,000
$1,725,000
$1,775,000
$1,825,000
$1,875,000
$1,925,000
$1,975,000
$2,025,000
Sony Pictures Entertainment IncProperty Premiums & Retained Loss vs Total Values
2006 thru 2012
Fiscal YearAn
nu
al
Pro
perty
Prem
ium
s &
Lo
sses
Pro
pert
y V
alu
es (
in 0
00s)
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Annual Production Package Premium/Retained Losses vs. Net Insurable Production Costs – 2006 thru 2012
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
PACKAGE PREMIUM
1719086
5401540
4453435
5342573
4358758
5277797
RETAINED LOSSES
1202357
2741860
1201288
4211947
2825819
1809762
PRODUCTION COST
238814444
992143112
721306940
1149266874
541189554
792148117
$1,000,000
$3,000,000
$5,000,000
$7,000,000
$9,000,000
$11,000,000
$100,000,000$300,000,000$500,000,000$700,000,000$900,000,000$1,100,000,000$1,300,000,000
Sony Pictures Entertainment IncTotal Annual Production Package Premium & Retained Losses
vs. Insured Production Cost
Fiscal Year
Productio
n P
ackage P
rem
um
&
R
etain
ed Loss
Productio
n C
ost
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Casualty, Property and Executive Risk
Financial• Collateral reduction of $900,000 in 2012• Implemented International Master Control Program 2010-2013; savings of $243,000• Workers’ Compensation program moved from ACE to Tokio Marine in 2010 after aggressive marketing in
2009; saving $900,000• Work Comp Medical Bill Review pricing shifted from percentage (25%) of savings to per bill ($12.50).
Estimated cost savings in excess $100,000
Major Insurance Claim Settlements• Marvel - $3,000,000• SPE Cyber Attack - $400,000• Grouper - $15,000,000• Pinewood - $15,000,000• Crime and Employment Claims –$1,400,000
Program Enhancements• Lowered Workers’ Compensation deductible from $750,000 to $500,000
• Increased CA Earthquake Coverage from $70,000,000 to $100,000,000
• Increased Property Program Loss Limit from $400,000,000 to $500,000,000
• Cyber Liability program was separated from the Multimedia/Technology program and now have a separate $20,000,000 limit with expanded coverage
• Cyber Liability amended to provide coverage for the care, custody and control of Third Party Intellectual Property Assets
Risk and Insurance Strategy: SPE Risk Management Achievements
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Risk and Insurance Strategy: Sampling of SPE Risk Management Achievements
Program Enhancements (cont.)
• Terrorism Coverage - Expanded Policy Form to include Coverage For Political Violence; Secured Coverage For $193,000,000 International Office Schedule at No Charge; Expanded Policy To Provide $1,000,000 in Coverage For Previously Excluded Territories (War Risk when declared)
• Regular testing of Broker Offerings with RFP's in 2007 and 2011• Maintaining experienced staff while developing new staff assuring quality service continuity with regular
staff evaluations and goal setting• Unique claim settlements (Pinewood property claim, certain E&O claims, 9/11 Civil Authority)• Implementation of Risk Management Information System (RMIS)• Reduction of Cost of Risk over the last few years despite upward cost pressure from insurers• Production Program
Cast clearance extensions negotiated for higher risks Anna Nicole Smith Grown Ups 2 London Calling Michael J. Fox Project One Direction
Increased coverage for Ingress/ Egress (relevant for Hurricane Sandy claims est. $300,000) 2013 renewal enhancements:
Premium savings of $900,000 Increased sub-limits for civil authority Increased covered artists from 20 to 25
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SPE Business Partners & Resources
Procurement Legal/Litigation
Business Affairs Studio Operations & Facilities
Real Estate Corporate Safety/Security & Environmental Affairs
Information Security Compliance
Corporate Communications Information Technology
EIS Infrastructure Marketing & Publicity for MPG/TV and HE
Digital Group – SPI, SPII, SPA, SP Technology Production Acquisitions for Sony Pictures Classics, Worldwide
Corporate Acquisitions and Mergers Corporate Events
SCA/SEL/SME Risk Management Finance
Medical Department People & Organization
Transportation Tax
Labor Relations Home Entertainment
Post Production International Groups
INTERNAL
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SPE Business Partners & Resources
Adjusters Artists
Business Managers Attorneys
Physicians/Nurses Studio Risk Managers
Insurance Brokers & Carriers Appraisers
Vendors/Contractors/Consultants Investigators
Muni/Government Agencies Finance Companies
EXTERNAL
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SPE - A Specialized Risk Profile
Studio Property Assets• Fire and Earthquake• Business Interruption
Off-Site Production Risks• International • Marine• Aviation
Intellectual Property Risks• Media• Cyber/Technology
Mergers, Acquisitions & Divestitures• Claim legacy (e.g. Grouper)
Employee and Third Party Safety
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Risk and Insurance Total Cost of Risk – Fiscal Year 2012
Premiums: $15,000,000
(includes all U.S./Canada and Master International)
Retained Losses: $4,500,000 Estimated
(includes: auto, general liability, workers compensation, errors & omissions/media and cyber, production)
Exposures • Revenue: $7,900,000,000• Property Assets (Total Insured Values): $1,920,000,000
(Replacement Cost including Business Interruption + Extra Expense)• Workers Compensation Payroll (subject payroll): $897,000,000 (Head Count 4,568)• Insurable Production Cost: $800,000,000
(TV, MP, Home Entertainment, Digital and Studio)
Protection• 18 Major Lines of Coverage• Over 40 Underwriters providing over 70 Policies plus numerous local and international policies for non-
US production offices
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Program Structure – Major Coverage Limits
$80M
$10M
Program Structure – Major Coverage Limits
Umbrella & Excess Liability
Up to $150m xs of Primary
$1M $1M GL $2MAL $3M
$1M
$2M $10M P $50KEQ 5% $50K $50K $50K
$5M$15M
$10M
$15M
Various
$150M
$5K
$50M
P$
50
0M
$20M
$250KGL $100K 500KAL $25K
CA
EQ
$ 7
0M
$100M
$150M
SIR/Deductible
$75K
$10M
$1M$25M $5K
$50M
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SPE Risk ManagementPartner with Insurance Broker Risk Assessment – conduct annual review of SPE’s risk profile, highlighting changes which could impact coverage
requirements.
Quantitative Analysis – assess recent and historical loss trends. Emphasize improvements which can result in deductible / structure improvements
Marketing – annual marketing is undertaken to identify best-in-class insurers capable of responding to the SPE Risk Management Standards.
Program Negotiation – negotiate optimal program structure with cost effective balance between deductibles and premiums. Program must provide the most comprehensive coverage with the flexibility to respond quickly to SPE’s inherent and contractual exposures.
Day-to-Day Administration – timely and accurate responses to SPE’s unique day to day requirements.
Review, analyze and negotiate claim service pricing and agreements with Third Party Administrator and carriers
Assist Productions in claim reporting and in resolving difficult or unusual claims
Coordinate bi-annual claims review with ESIS and with Tokio Marine
Review statistical loss runs and claim status on legacy CNA and current Chartis Insurance Services programs
Review claim reserves and evaluate the accuracy of reserve levels on casualty programs
Procure annual claim data files for actuary utilization and loss forecasting
Monitor claim status and disposition plans on legacy programs
Evaluate bi-annual Workers' Compensation Trend & Loss Analysis reports
Review carrier position on any denied claims for challenge to coverage applications
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SPE Risk Management Insurance Company Relationships Identify insurance company partners that will provide long term stability
Production Package market is limited and Fireman’s Fund has been identified as a preferred partner
Tokio Marine has been a preferred partner since the Sony acquisition and participates on major portions of the property & casualty programs
Hiscox has emerged as a strategic partner for the specialized Media Liability risks of SPE
Insurance Company providers are continually assessed for their financial stability and a long term commitment to the Entertainment Industry
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MARKETING SPE’s: Property, Casualty, Executive/Professional Risks
Working with our Risk Management Partners, establish desired program options, limits, retentions, structure, pricing and terms
Assess market relations and leverage existing partnerships and facilitate new competitive alliances
Establish a Renewal Timeline
Build the SPE Marketing and Risk Story
Deliver a best-in-class submission
Drive the market through knowledge, leverage and competition
Direct interaction with underwriters to tell “The SPE Story”
Update Insurer Security Status
Risk Management Insurance Program Development
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Risk Management and Insurance Strategy
Central to our role as SPE’s Risk Management Department is the rigorous process utilized to assess SPE’s exposure to risk on a long term strategic basis and day-to-day project basis.
Inherent to anticipating and proactively addressing SPE’s risk exposures, we:
• Understand SPE’s objectives in designing and implementing a superior insurance program, using specialized professional resources as needed, in formulating cost efficient risk management and insurance solutions.
• Formulate action plans to leverage SPE’s strengths and opportunities of SPE’s risk techniques relative to overall financial and operational conditions, the business environment as well as insurance market conditions.
• In partnership with External Risk Management Professionals, we continually identify / evaluate opportunities and threats which arise and implement processes and procedures to address them.
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Auto Liability Insures SPE when legally liable for bodily injury and/or property damage to another party caused by an SPE owned/hired or non-owned vehicle
General Liability Protects SPE against another party's bodily injury and/or property damage claims arising out of SPE's premises; operations; products and completed operations due to SPE's negligence.
Foreign Auto / General Liability
Policy covers same insurance as above
US Workers' Compensation & Employer's Liability
WORK COMP - provides no-fault statutory benefits for employees due to a job-related injury (including death) resulting from an accident or occupational disease / EMPLOYER'S LIABILITY - pays on behalf of the employer all sums that the employer becomes legally obligated to pay due to a job-related injury (including death) resulting from an accident or occupational disease caused by the employer's gross negligence.
Foreign Work Comp & Employer's Liab
Sames coverages as US above
Non-Owned Aviation Liability & Hull
Covers SPE when SPE is legally obligated to pay for bodily injury, (including death) and /or property damage to another party arising of the maintenance or use of an owned or non-owned aircraft. Hull Coverage included. Pays for physical damage to the owned or non-owned aircraft.
Media Liability & Technology Errors & Omissions
MEDIA LIABILITY - Protects SPE against third party infringement, (copyright/trademark) claims regarding SPE's created content produced and/or distributed by SPE through any medium. TECHNOLOGY ERRORS & OMISSIONS - insures against third party liability claims against SPE relating to SPE's business activities of build, modify, supply, install, deliver and provide entertainment related software and technology services; i.e., interactive games, post production services, web hosting & design and related customer support, maintenance consulting and training.
Cyber Liability Insures SPE against third party claims for network security breaches as respects corporate confidential and data privacy information.
Global Property Property insurance against physical loss or damage of SPE's physical assets due to perils such as fire, lightening, vandalism, malicious mischief, water damage, earthquake & flood. Policy also provides insurance for loss of business income and extra expense
Production Package
Insures SPE's productions against losses of property & business interruption due to injury or illness of a covered artist; damage or loss of equipment; props; sets; wardrobe; physical damage to production vehicles and third party property damage
Boiler & Machinery
Covers SPE for physical damage or loss caused by a sudden and accidental breakdown of SPE's boilers and machinery equipment, HVAC or any other property or equipment.
Employment Practices Liability
Protects SPE from claims arising out of discrimmination, wrongful termination; sexual harrasment…
D&O Liability Covers SPE's directors & officers, or management equivalent for acts of errors or omissions committed in their capacity as Ds & Os or management equivalent of SPE and SPE subs
Crime Covers SPE for employee theft or dishonesty acts, loss of money & securities, depositor's forgery, robbery, embezzlement.
Fiduciary Liability
Covers errors & omissions of SPE's trustees, employers, fiduciaries, professional administrators as respects the administration of employee benefit programs.
Employed Lawyers Errors & Ommissions Liability
Covers SPE when SPE is legally obligated to pay damages arising from a claim for wrongful acts of its corporate attorneys but only when SPE cannot legally indemnify the corporate attorney.
Special Crime Protects all of SPE's Ds & Os, employees, leased or temporary employees, students, volunteers, loan outs, independent producers, employees paid by a payroll service company, consultants…for perils of Kidnap, Ransom and Extortion.
Terrorism Insures for physical loss or damage for acts of terrorism or political violence, (Political Violence is physical loss or damage due to a gov't action: e.g., confiscation, expropriation, currency inconvertibility
Marine Covers non-owned watercraft liability and physical damage on hull
Ocean Cargo Cover overseas shipments of property & equipment
