Transcript AON RISK SERVICES CLIENT SEMINAR 2009 STATE OF THE …

AON RISK SERVICES CLIENT SEMINAR 2009
STATE OF THE ART RISK MANAGEMENT DURING THE CRISIS
Amsterdam, 10th September, 2009
August Pröbstl
Agenda
1. About Us
2. Trends / Developments
3. One of our answers
MARP – August Pröbstl – AON Risk Services
September 2009
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Munich Re Group
Half-year facts & figures 2008 and 2009
30 June 2008
30 June 2009
Ratings
A.M. Best
Fitch
Moody's
S&P
A+ (superior)
AA- (very strong)
Aa3 (excellent)
AA- (very strong)
A.M. Best
Fitch
Moody's
S&P
A+ (superior)
AA- (very strong)
Aa3 (excellent)
AA- (very strong)
Reinsurance premiums
Life/ Health:
Non-Life:
€ 3.4Mrd
€ 7.4Mrd
Life/ Health:
Non-Life:
€ 4.4Mrd
€ 7.9Mrd
Life/ Health:
Non-Life:
€ 5.9Mrd
€ 2.8Mrd
Life/ Health:
Non-Life:
€ 6.1Mrd
€ 2.8Mrd
(half year!)
Insurance premiums
(half year!)
Assets under management
€ 175Mrd
€ 177Mrd
Employees
>44.000
>47.000
More than 50 countries
More than 50 countries
Regional presence
Munich Re Group is a strong and reliable risk partner these days and, it
goes without saying, as well in the future.
MARP – August Pröbstl – AON Risk Services
September 2009
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Risk Management within Munich Re Group
Our strength – your added value
Reduced impact of weak capital market
Hedging strategy proved successful in financial crisis
Group-wide strategic risk
management framework
Reasonable exposure to
financial sector
Binding strategic risk criteria and operational
limits driving Group-wide risk management
Hardly exposed in stock market,
~73% very well rated government FI bonds
Pro-active
internal Risk
Management
Ongoing analysis of scenarios
Reliable risk modeling
Swift reaction to changed market conditions
and targeted measures across all LoB
Risks generally well captured by existing
risk models
MARP – August Pröbstl – AON Risk Services
September 2009
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Munich Re Group’s Business Model
More than reinsurance
Traditional
reinsurance solutions
Large individual
risks solutions
Specialty
commercial
solutions
Personal
specialty
solutions
Standard retail
solutions
Risk
capacity
Distribution
power
Risk
know-how
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September 2009
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MARP’s presence in the world
Further local offices to be continuously explored
London
Paris
Munich
NY/ Princeton
Singapore
As an integral part of Munich Re Group, MARP offers global (re-)insurance
covers for Fortune 5000 companies and leading players in their industries
either via fronting or via captives
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September 2009
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MARP’s lines of business
Traditional products and individual risk solutions available
General Property
Casualty

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
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
Property damage
Business interruption
Machinery breakdown
Nat Cat covers
…
Energy

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General liability
Product liability
Directors’ & officers’ liability
…
Special Enterprise Risks
 Property damage
 Business interruption
 Offshore in combination
with onshore
 Mining
 …
 Supply chain interruption
 Coverage against reputational
damage or loss of brand value
 Non-physical damage BI
 …
Engineering



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Contractors all risks
Erection all risks
Builders risks
Advanced loss of profit
Delay in start-up
….
Client Management as well as a claims handling and operations unit
support our lines of business.
MARP – August Pröbstl – AON Risk Services
September 2009
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Agenda
1. About Us
2. Trends / Developments
3. One of Our Answers
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September 2009
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Some global cycle indicators implying moderate price
increases >>
Global Cycle
indicators
Summary
 Capital endowment
of reinsurance and
primary insurance
industry
• Less than expected capacity-induced change and
capacity constraints
• Balance sheets and shareholders equity have
recovered, but not to pre-crisis level

 Current level of r/i
prices
/
 Capacity restrictions do not indicate broadbased
significant further price increases
June/July renewals:
• Overall price increases not as significant as expected
• Significant increases in capital- and loss-intensive
lines
• Regional differences persist
 Pricing is improving, but no widespread hardening
MARP – August Pröbstl – AON Risk Services
September 2009
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>> Some global cycle indicators impacting moderate
price increases
Global Cycle
indicators
Summary
 “Consensus” of
external views about
the cycle
External observers expect:
• Prices to increase slightly with substantial differences
by line and region
• For capital intensive lines further price increases are
expected
• For regions and lines with recent losses and exposure
increases further hardening is expected
/
 Macro economy;
expected capital
market returns
/
• Recently improved economic outlook but still high
uncertainties
• Investment returns recovered recently, but still not
reaching pre-crisis levels
• On balance overall macro economy supportive for
price increases
MARP – August Pröbstl – AON Risk Services
September 2009
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Financial Credibility
Crisis disclosed interesting insights about the insurance market
CDS Spreads 1 Jan 2008 to 31 Aug 20091Source: Datastream
900
800
Munich Re
700
600
500
400
300
200
100
0
1
Raw beta to DJ Stoxx 600, total return, daily basis, 1-year. 5-year credit default swaps (spreads in basis points p.a.).
Clients increasingly focus on security and financial credibility of business
partners when considering the intrinsic value of capacity and overall
economics in placements.
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September 2009
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Introduction of a risk-based capital approach
Regulatory capital requirement for a captive and its types of risk
current capital requirement
requirement after individual risk transfer
potential requirement under Solv II
 Risk-based capital approach reveals opportunity costs of self-insurance
via captive
 Insurance buying driven by exposures rather than available budgets
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September 2009
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Increased awareness for new types of risk
Liquidity risks and intangible assets in the spotlight
Customers
 Cost-conscious and demanding
 Well informed (e.g. via internet)
 Diminishing loyalty
Market Environment
Financial Crisis
 Highly competitive
 Global and dynamic
 Shortened product cycle
Company
 Pursuing profitable growth
 Seizing opportunities
 Taking new risks
Other Important Parties
 Analysts
 Investors
 Rating agencies
Regulatory Requirements
 New or pending requirements
 Spinney of regulations
 Various, regional distinctions
“Of all our identified risks that we face, I am only able to transfer 7% to
the insurance market, although I am aiming for more than 10%.” … says a
corporate risk manager.
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Agenda
1. About Us
2. Trends / Developments
3. One of Our Answers
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September 2009
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Special Enterprise Risk (SER)
SER’s objective is to fully comprehend client’s ERM needs

What does SER do?
 Develop innovative solutions
for individual risk profiles
 Tailor-made solutions, not “off the
shelf” products
 Close collaboration with clients
and their broker
 Project-driven, not product-driven

What does SER not do?
 Cover 100% of client’s mitigation
need without reservation
 Cover standard exclusions
on a stand alone basis
 Cover strategic business risk or
management decisions
 Cover success of market entry
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September 2009
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Across All Industries
SER’s working model
Quite flexible, trying to identify and focus on promising topics
 Boundaries are given by
conceptional design and issue
based work.
Reputational/
Brand Value Risk


Ext. Warranty

One Specific Industry
REACH

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 Solutions are developed for
individual as well as across all
industries.
Pandemic
Multi Year & Line
 SER is not a “product developing
unit”.
Renewable
Energies
Clinical Trials
 In principle global with current
focus Europe and US

CBI
Legend
A few current
examples
Conceptional Design
Issue Based

Deal done
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September 2009
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SER solution for a pharmaceutical company
Structured solution for a multi line & multi year deal
1
Captive‘s situation
 Efficient capital structure using RI
 FSA induced activities
Coverage is 7LoB, e.g.
 NDBI
 Product recall
 Business travel accident
Motivation
 Capital adequacy directive
(similar to Solvency II)
 Limited risk transfer using
captive’s liquidity situation
2
4
Deal structure
 Multi year and multi line
 Traditional underwriting
via MARP UK
3
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September 2009
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© 2009 Münchener Rückversicherungs-Gesellschaft © 2009 Munich Reinsurance Company
THANK YOU VERY MUCH
FOR YOUR INTEREST
August Pröbstl
Head of MARP
Munich Re Group
Tel.: +49 (0) 89/ 38 91 – 2626
Fax: +49 (0) 89/3891 – 72626
E-mail: [email protected]