aon risk services client seminar 2009 state of the art risk management during the crisis august...

AON RISK SERVICES CLIENT SEMINAR 2009STATE OF THE ART RISK MANAGEMENT DURING THE CRISIS

August Pröbstl

Amsterdam, 10th September, 2009

Agenda

1. About Us

2. Trends / Developments

3. One of our answers

2September 2009MARP – August Pröbstl – AON Risk Services

Munich Re GroupHalf-year facts & figures 2008 and 2009

September 2009MARP – August Pröbstl – AON Risk Services

30 June 2008 30 June 2009

Ratings A.M. Best A+ (superior)

Fitch AA- (very strong)

Moody's Aa3 (excellent)

S&P AA- (very strong)

A.M. Best A+ (superior)

Fitch AA- (very strong)

Moody's Aa3 (excellent)

S&P AA- (very strong)

Reinsurance premiums(half year!)

Life/ Health: € 3.4Mrd

Non-Life: € 7.4Mrd



Insurance premiums(half year!)





Assets under management € 175Mrd € 177Mrd

Employees >44.000 >47.000

Regional presence More than 50 countries More than 50 countries

3

Munich Re Group is a strong and reliable risk partner these days and, it goes without saying, as well in the future.

Binding strategic risk criteria and operational

limits driving Group-wide risk management

Swift reaction to changed market conditions

and targeted measures across all LoBRisks generally well captured by existing

risk models

Hardly exposed in stock market,

~73% very well rated government FI bonds

Risk Management within Munich Re GroupOur strength – your added value


Pro-activeinternal Risk Management

Reliable risk modeling

Reasonable exposure to financial sector

Ongoing analysis of scenarios

Group-wide strategic risk management framework

Hedging strategy proved successful in financial crisis

Reduced impact of weak capital market

4

Traditional reinsurance solutions

Large individual risks solutions

Specialtycommercial

solutions

Personal specialtysolutions

Standard retailsolutions

Riskcapacity

Distributionpower

Riskknow-how

September 2009MARP – August Pröbstl – AON Risk Services 5

Munich Re Group’s Business Model More than reinsurance

MARP’s presence in the worldFurther local offices to be continuously explored

Singapore

LondonParisMunich

NY/ Princeton

6September 2009MARP – August Pröbstl – AON Risk Services

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

General Property Casualty Property damage Business interruption Machinery breakdown Nat Cat covers …

General liability Product liability Directors’ & officers’ liability …

Energy 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 Contractors all risks Erection all risks Builders risks Advanced loss of profit Delay in start-up ….

MARP’s lines of businessTraditional products and individual risk solutions available

September 2009 7MARP – August Pröbstl – AON Risk Services

Client Management as well as a claims handling and operations unit support our lines of business.

Agenda

1. About Us


3. One of Our Answers


Some global cycle indicators implying moderate price increases >>


>> 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

10

Financial CredibilityCrisis disclosed interesting insights about the insurance market


1 Raw beta to DJ Stoxx 600, total return, daily basis, 1-year. 5-year credit default swaps (spreads in basis points p.a.).

CDS Spreads 1 Jan 2008 to 31 Aug 20091Source: Datastream

Clients increasingly focus on security and financial credibility of business partners when considering the intrinsic value of capacity and overall

economics in placements.

Regulatory capital requirement for a captive and its types of risk

current capital requirement

potential requirement under Solv II


requirement after individual risk transfer

Introduction of a risk-based capital approach

Risk-based capital approach reveals opportunity costs of self-insurance via captive

Insurance buying driven by exposures rather than available budgets

Increased awareness for new types of risk Liquidity risks and intangible assets in the spotlight


Financial Crisis

New or pending requirements Spinney of regulations Various, regional distinctions

Company

Pursuing profitable growth Seizing opportunities Taking new risks

Cost-conscious and demanding Well informed (e.g. via internet) Diminishing loyalty

Customers

Highly competitive Global and dynamic Shortened product cycle

Market Environment

Regulatory RequirementsOther Important Parties

Analysts Investors Rating agencies

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“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.

Agenda

1. About Us


3. One of Our Answers


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

15

SER’s working modelQuite flexible, trying to identify and focus on promising topics


Conceptional Design Issue Based

REACH

Reputational/ Brand Value Risk

Renewable Energies

CBI

Multi Year & Line

Clinical Trials

Pandemic

Ext. Warranty

Legend

A few current examples

Deal done

Boundaries are given by conceptional design and issue based work.

Solutions are developed for individual as well as across all industries.

In principle global with current focus Europe and US

SER is not a “product developing unit”.

16

SER solution for a pharmaceutical company Structured solution for a multi line & multi year deal


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3

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1Captive‘s situationEfficient capital structure using RIFSA induced activities

Motivation Capital adequacy directive (similar to Solvency II) Limited risk transfer using captive’s liquidity situation

Deal structureMulti year and multi lineTraditional underwriting via MARP UK

Coverage is 7LoB, e.g.NDBIProduct recallBusiness travel accident

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THANK YOU VERY MUCH FOR YOUR INTERESTAugust PröbstlHead of MARPMunich Re GroupTel.: +49 (0) 89/ 38 91 – 2626Fax: +49 (0) 89/3891 – 72626E-mail: [email protected]

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aon risk services client seminar 2009 state of the art risk management during the crisis august...

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