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Managing a Global Insurance Program 0 New Jersey RIMS January 14, 2014 Tracey Estes Regional Underwriting Manager AIG WorldSource Bruce Wineman Sr. Managing Director Aon Risk Solutions

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1 Agenda Introduction What is the big deal about International? Considerations - 5 key concepts Comparing insurance environment in China and United Kingdom What can go wrong? Emerging trends Framework and tools for making decisions

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2 Introduction Under the best of circumstances, arranging a large insurance program presents a challenge to any Risk Manager, broker or insurer alike. But when the development of a program becomes or is complicated by foreign business customs, financial regulations and language barriers, the matter can become overwhelming.

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3 Whats the Big Deal about International? Obvious Economic EU, NAFTA Currency Fluctuations/Devaluations Language 1,652 dialects in India Political Socialist, Conservative Exposure Earthquake, Cyclone, Flood Time Differences

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4 Whats the Big Deal about International? Not So Obvious Legal Differences Napoleonic Code, Sharia Regulatory Environment Data Collection Cultural/Distance Issues Attitude to Risk and Safety Social Legislation Taxation

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5 Risk Spectrum Who needs a Global Program? BUSINESS ACTIVITIES InternationalGlobalMultinational LESS COMPLEXMORE COMPLEX Limited exposure to loss or liability outside of USA Exports, International Travel, Foreign Suppliers Assets or operations outside of USA, but not inextricably tied together Operations usually not heavily interdependent, foreign operations may be material to the balance sheet. International locations, Material to balance sheet, Operations interdependent Recognizable name, target for lawsuits, finances transcend borders, larger geographic spread

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6 Cant I Just Use My Domestic Program? Maybe but issues arise with: Coverage Compliance Taxation Cost Markets Program Management

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International Considerations 7

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8 Key Concept Number One Compulsory Insurance Compulsory Insurance =Those lines of insurance that are required by law for companies operating in a particular territory typically Automobile Third Party Liability, Work Injury and some forms of Professional Liability. Trend towards compulsory requirements for Environmental and even D&O in certain countries.

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9 Key Concept Number Two Admitted Insurance Risk based in Country A Policy issued by Insurer licensed or registered in Country A Risk based in Country A Policy issued by Insurer NOT licensed or registered in Country A Admitted Non-Admitted In over 85% of countries non-admitted cover is prohibited or restricted

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10 Key Concept Number Three Tax Treatment of Non-Admitted Loss Proceeds Parent Entity International Subsidiary Non- Admitted Loss Proceeds Income Tax Capitalization (or Other) Tax plus Frictional Costs

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11 Key Concept Number Four Excess/DIC Master Policy D I L D I C Policy Limit Breadth of Cover Local Admitted Policies

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12 Key Concept Number Five Financial Interest Insures the parents interest in a subsidiary located in a non-admitted country local subsidiary is not an Insured Insures the balance sheet of the parent, rather than a local asset/interest Settlement to the parent only, no local servicing Policy wording developed and supported by individual legal opinions Subsidiary Global Insurer Master Policy Parent / Policyholder

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13 International Risk Considerations Other Particular International Issues/Considerations: Role of Broker Cash before Cover Taxes: - Premium - VAT/Goods & Services - Fire Brigade - Catastrophe Pools Tacit Renewal Tariff Rating Premium Allocations Underwriting Data Wording Differences in standard policies

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14 Communications Social and Geographic Considerations - Time Zones - Hierarchy - Holidays - Sense of Urgency - Acronyms/Terminology - Reliance on e-mail Managing Expectations - Clear and concise communications - Timeline

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Insurance Environment in China and the UK 15

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Risk Review - China Regulatory Constraints Key Compulsory Coverages WC/EL (State Plan), Motor Non-Admitted Insurance Position Not permitted Tariff Rating national premium tariff as set by CIRC applies to compulsory motor third party liability Wording controlled by CIRC Cash before Cover - Advance premium payment prior to binding risk required under certain policies by province Market Features Brokers only engaged in