SPECIAL EDITION OCTOBER

MDS GROUP MAGAZINE 2012

Special Feature AIG CEO Robert H. Benmosche interview inside

BrokersLink Discover the history of the global alliance

Spain ARTAI PRESIDENT Jaime Borrás shares his thoughts

Catastrophes Today An interview with Erwann Michel-Kerjan

01 COVER.indd 1 26/09/2012 02:57 A SPECIAL EDITION FOR A SPECIAL POINT IN TIME

I see great hroughout my tenure as the CEO of MDS, I’ve had the things on the opportunity to meet and work with bright people from around “horizon for MDS T the world, to appreciate a variety of new perspectives and to and all its work towards the strengthening of BrokersLink, a truly innovative and partners and powerful international alliance we helped found. While there have been clients, and hope many moments along the MDS time line that have been cause for excitement, our current progress and accomplishments give me great those who share pride and make me more confident than ever that together, we can our passion will achieve remarkable things in the world of risk management. be there with us. This special edition of Full Cover is a testament to the gravity and potential of this moment. Front and center is a captivating interview of Robert Benmosche, CEO of American International Group, Inc. (AIG), which helps answer some of the most pressing questions in insurance today and lend insight into one of the world’s largest and most storied firms. The issue also features interviews with Dr Erwann Michel-Kerjean and Manuel Padilla, touching on many important issues and giving readers a closer look at some of today’s top risk management executives.

These interviews are complemented by a number of reports and explorations of important businesses and markets, and are rounded out with a detailed look at the exciting proWgress within the BrokersLink’s history. As MDS moves towards the achievement of extraordinary new goals in the Latin world and beyond, I feel more passionate and driven about our work and our potential than ever before.

I see great things on the horizon for MDS and all its partners and clients, and hope those who share our passion will be there with us. José Manuel Fonseca

03 ROBERT BENMOSCHE THROUGH AIG’S TURBULENT RECENT PAST, ROBERT BENMOSCHE HAS HELPED FORGE A A MAN WITH GLOBAL DRIVE AND CAPABILITIES PATH TOWARDS A STRONGER, BRIGHTER FUTURE.

“AIG is a company that keeps its approximately $24 billion of cash that As the Chairman of BrokersLink, it’s my duty and also my great promises to the American public, our has not yet been returned, which does clients, our shareholders and not include more than $18 billion of honor to help forge and nurture beneficial partnerships, ...It’s clear to everyone that bondholders,” says Bob Benmosche. profits. If you look at the profits that and to meet with noted leaders in the insurance world “It’s about having the ability to count on have been earned up until now, it’s clear “ the crisis at the AIG promise and the AIG skills.” In to everyone without question that the where long term vision is critical to survive. As we gear up for the BrokersLink 2012 Conference in AIG is over. the following interview, conducted in crisis at AIG is over; that AIG has August, AIG’s President and CEO talks sustained itself; that we’re still, on a Madrid, we’re looking forward to hearing from about AIG’s progress and rebranding, shareholder equity basis, the largest some of these exceptional leaders, and in the property casualty industry and insurance company in the world and particular from Mr. Robert Benmosche, CEO getting the right return on risks, making progress on our market of AIG Group, who contributed to his company’s opportunities with Independent Broker capitalization as well. Networks, and more. That’s good for clients, it’s good for impressive rise from the incredible challenge brokers, it’s good for everyone. Because of the financial crisis of 2008 and beyond. AIG’S PROGRESS now they can see that they can count on BrokersLink and its prominent co-founder AND REBRANDING AIG to be there. Jose Manuel Fonseca (JMF) | Please tell MDS, together with AIG/Chartis enjoy a us about AIG’s progress since 2009. Hei Wong (HW) | The company is reciprocal and productive partnership. Where For us at AIG, the real question for the returning to the AIG name. What led our strategies meet, we’re able to broaden our first year to year and a half after I got to you to this decision? reach and refine our skills for greater service to AIG was: Will AIG make it? AIG appeared I believe we’ve gained new to be in crisis. If we weren’t a company respect from people about the clients worldwide. As BrokersLink moves that had shareholder value, then the capability of the company. towards greater market diversification and the question was: What would happen to We’re a strong, vibrant, management of emerging risks, we know we’ll the bondholders, clients, and so on? In leading company in go further with AIG/Chartis by our side. January 2011, we were able to do the the insurance restructuring, having taken AIA public sector around Mr. Benmosche recently answered questions at that point. By May, we were able to from the members of the BrokersLink’s board of sell 100 million shares of AIG stock to directors to bring our readers this captivating the capital markets, which demonstrated to the Federal Reserve interview –setting an exciting tone for his upcoming and the U.S. Treasury that we were able speech in Madrid. to raise capital, if we needed, to fund the • Joined AIG as President and company. CEO in August 2009, when he was José Manuel Fonseca Since then, we’ve continued to also elected to the AIG make progress. As of August Board of Directors. 2012, we’ve reached the point where the U.S. • Retired as Chairman and CEO of government only has MetLife, Inc., in 2006 after an 11-year career.

• Led the transition of MetLife from a mutual to a public company in 2000.

• Spent more than 13 years at PaineWebber Group Incorporated, and directed the merger of Kidder Peabody into PaineWebber in 1994.

• Earlier in his career was a Chase Manhattan Bank Vice President and a staff consultant with Arthur D. Little.

6 7 A look at some of the covers from AIG’s the world. We feel at this stage of the of several options. outside world that when AIG says it’s employee publication, Contact, shows the game, it makes sense to return to the strong enough to live up to its promises, company’s long-standing presence in areas AIG name. Jamie Crystal (JC) | What are your Commitment to BrokersLink we have a regulatory body – an across the globe, from Asia and the U.S. to The changing of the brand signifies thoughts on being regulated by the independent third party beyond the Latin America and Europe. what we believe, and what our research Federal Reserve? AIG is committed to diversifying its distribution channels through Independent rating agencies, beyond outside is telling us. The buyers of our products We recognize and respect the need for Broker Networks (IBNs) such as BrokersLink. AIG and BrokersLink share key accounting firms – that says, you know feel very good about AIG today and have regulation. The Federal Reserve has to characteristics, including a global footprint and an entrepreneurial approach what, we agree with them. That’s our a lot of confidence in us. And we’re look at large financial institutions, or to meeting clients’ needs. BrokersLink is uniquely positioned – with the approach and why we’re working hard building that confidence around the large institutions that can have an support of its senior leadership, Management team and members – to drive to be ready for that day of supervision. world. impact on the financial markets. For a success through jointly identified strategies with AIG. Our rebranding approach in the fall, company like AIG, the Federal Reserve AIG sees its alliance and business with BrokersLink growing as this IBN Steve Jackson (SJ) | Besides acquiring once we’re ready, is that AIG is a would make sure that noninsurance focuses on such areas as: broker-dealer Woodbury Financial company that keeps its promises to the activities would not affect the insurance • Multinational business, regional and global from The Hartford in July, are you American public, our clients, our activities or the financial markets. • Middle market and other customer segments looking to make other acquisitions? If shareholders and bondholders. It’s When we think about AIG, we’re a very • Specialty lines, such as aviation, energy, and marine so, in what areas? about having the ability to count on the large company. We have a large amount • Emerging risks, such as cyber risk In looking at potential acquisitions, we AIG promise and the AIG skills. of resources at the holding company, • Emerging markets, including Brazil, China, and India feel it’s important to stay within our which means they are not regulated by Partnering with BrokersLink to help grow multinational business, AIG has realm of insurance. We’re looking at Gregory Allard (GA) | What are AIG’s insurance company regulators in the hosted regional multinational training sessions for BrokersLink members: anything in the insurance arena that we plans for continuing to buy back shares states or countries we do business in. A Latin America in 2011, Europe in 2012, and Asia Pacific, planned for 2013. think would provide us with a good from the U.S. Treasury? regulator like the Federal Reserve would investment return – better than buying AIG continues to focus on capital oversee the totality of the company. back our debt or buying back our stock. management. Capital management is People need to be comfortable that I really can’t give you a more definitive not necessarily just buying back shares. AIG is well-run, has excellent risk answer other than that we look at what The buyers of our It could be buying back our debt. It could management, and can be supportive to ...we look at what the best return is for the company’s products feel very also be buying companies. For instance, the insurance companies if there is a the best return is shareholders over time. we decided to buy Fuji Fire and Marine, problem. It would be an important “ good about AIG which was an acquisition we made in statement for the Federal Reserve to “ for the company’s EXPERIENCE IN today and have a lot Japan. We also recently bought the make that we have sufficient liquidity shareholders INSURANCE AND AT AIG of confidence in us. broker-dealer from The Hartford for and sufficient risk management so that over time JMF | How and why did you enter the our Advisor Group. So we will do what we can live up to all of our obligations insurance industry? we think is in the best interest of our and promises, and not cause a problem When I was at PaineWebber in the shareholders. Buybacks are clearly one for the financial markets. It says to the early 1980s, I was asked to take on

8 9 AIG has always been a strong and loyal partner of BrokersLink since its inception, and we highly value its close business “ relationship with our community around the world. José Manuel Dias da Fonseca, Chairman of BrokersLink

marketing responsibility for the went wrong in America in 2008. But if insurance area. That was my first we all worked hard and had a vision that Key Facts exposure. I didn’t think, however, that I we all believed in, we could pay back the and Figures would be involved in insurance after I American people for their support with moved into other aspects of the a profit and be left with one of the ...we are 90+ Years in operation securities business…until I decided to strongest insurance companies in the changing into a change my career in 1995. world. 100+ Countries where AIG I was looking for something else. One The people of AIG at that time rolled “culture that relies operates of the options was to help the up their sleeves and worked as hard as much more on Metropolitan Insurance Company they could. What I say to them today is analytics, data 57,000+ AIG employees think through distribution strategies. I that we can actually become the icon of figured that working for a mutual everything that’s right about America. management, 30% Percentage of revenue insurance company, you’d get a little bit and data mining. outside of the U.S. and of quality of life. It didn’t last very long. JC | What made you decide to stay on at Canada I wound up helping them restore the AIG, despite your diagnosis/illness? field force. Within a couple of years, I When I was diagnosed with cancer, it $64bn AIG’s revenue in 2011 was surprised to find that I was named was before we did the restructuring my mother with $250,000 in debt. My company in 2009? look to expand in mandatory auto. On the Chairman, CEO, and President of with the Federal Reserve. I felt that if I mom had a motel, cabins, a restaurant, The AIG culture is about innovation, the commercial side, we can leverage $85m+ Clients that AIG serves MetLife. Then we decided it didn’t make were to step down before I physically and a bar. She was able to get her four entrepreneurialism, and empowerment our global footprint for Chinese sense to stay as a mutual, so we took it needed to, we would lose the kids off to school every day, close the bar of people at the point of sale in working companies doing business outside of 87% U.S. government public in 2000. momentum. I felt that we’d come too at one in the morning, and start the with our clients and our brokers. We’ve China. We also see Korea as an assistance repaid I retired in 2006 after eight years as close to achieving the turnaround, and restaurant at six in the morning. And got to preserve those strengths. opportunity. And we continue to see CEO, restoring MetLife as the leader in I wanted to make sure we reached the she did it with a smile. On the other hand, we are changing Japan as an important market for us. $27.5bn Claims paid in 2011 our industry. (We were second in the point where there was great confidence She made all of us go to college. We into a culture that relies much more on We’re very large in Japan; we’re still the U.S. when I started, and when I retired, that this would happen. My family and had to pay for it; she didn’t have the analytics, data management, and data largest foreign property casualty insurer $117m Average claims paid MetLife was the largest in North I agreed that I should keep fighting this, money to do it. But she made us all go to mining. We are highly skilled as in the country. each business day in America.) I retired to Dubrovnik, keep doing what I had to do. college. I spent almost seven years technicians, underwriters, and product We also see Brazil as a vibrant growth 2011 by AIG’s property Croatia, to become a winemaker. The good news is, while the original driving a Coca-Cola truck selling soda. creators. We were not that skilled in economy. We were very big in Brazil casualty business chemo did not work, they put me on a I made the most money of any salesman leveraging information to help us think before the crisis. Unfortunately, we had HW | What made you decide to come therapy in late November of 2010 that, because I worked hard at it. It put me through what pricing should be and to sell our joint venture there. Starting out of retirement? by January of 2011 – just as we were through all of my educational what risks really should be considered. from scratch, we’re making great First and foremost, I realized that doing the restructuring with the Federal experiences – prep school as well as The new AIG has all of the old progress, especially using the AIG brand American business was in rapid decline Reserve – had an effect. I didn’t know college. I’m proud of what it was able to strengths, and we’re adding to them a in Brazil, and we think we can come because people had lost confidence in how much time I had, but the doctors do to get me started in life. whole new strength of being very back. We’re also strong in Argentina and the ability of corporations to do the said I had more time. And I’m still having When I look at my life, what’s clear to analytic, with predictive data modeling Mexico. We have been in Argentina for right thing. And I thought if AIG were to more time. Then, in May of 2011, the me is that however difficult the hand is and other information-gathering tools a long time and have a big operation fail, it would be difficult for the industry crisis at AIG was over. This company that you’re dealt, it’s your hand. You to help us be even better than we were there. Overall, Latin America still looks to recover. It’s a very important would be here and continue to be need to make the most of it. If you wait before. like a great growth opportunity. institution. I felt, and my family and strong. And the team that was here for somebody else to do it for you, it There are opportunities for us in the close friends felt, that I could make a could carry the ball if I couldn’t. I’m still won’t happen. I believe we are what we FUTURE OF THE Middle East, Asia, and parts of Europe. difference – that, along with my meeting here kicking and screaming. I couldn’t choose to make of ourselves. And I INSURANCE INDUSTRY And we are – and expect to continue to with Hank Greenberg, who basically felt be happier. recognize that if you take on a SJ | In what areas of the world does AIG be – a major player in the United States, that if I were to do the job, he would be responsibility, you have to live up to it. see the best growth potential? with more innovation on the property able to support the vision that I had, GA | What drives you to succeed? Coming to AIG was something I chose AIG has a deep relationship in many casualty side. which was to restore AIG and do what I guess it’s something to do with my to do. I will see it through. That’s what places around the world. One area I believe you’ll see us continually grow we, in fact, have done. mother. When my dad died, I was 10. He drives me to succeed. And I enjoy it. where we see real growth is China. On our life and retirement business in the In 2009, I said to the people of AIG didn’t have a will, didn’t have any life the personal lines side, we’re going to U.S., but also begin to move back outside that we were the icon of everything that insurance; he was 50 years old and left SJ | How would you describe the the U.S. Having sold ALICO and taken corporate culture at AIG, and how has AIA public, we still have the ability, in it changed since you arrived at the places where we currently have licenses,

10 11 History Clearly, I see the world growing, and C.V. Starr establishes a general insurance company, American Asiatic I see the need for insurance growing. Therefore, 1919 Underwriters, in Shanghai, China. “I see our business as a growth business. First U.S. office, American International Underwriters (AIU), opens in 1926 New York City. 1937 First Latin American market operation opens, in Cuba. 1939 Company headquarters relocates from Shanghai to New York City. to grow those businesses organically or Whether it’s CyberEdge or whether it’s Part of what we’re going to see at AIG together. So the independent brokers Soon after World War II, C.V. Starr opens AIU offices in Japan and through acquisition – and, when the taking a relook at workers’ is a lot more refinement in how we use out there that are much more limited in Germany to provide insurance for the U.S. military. 1946 time is right, to expand to other compensation, which is more data, which is a competitive advantage geography, limited by product, aren’t Global expansion continues by entering France and Mexico. countries. traditional to other kinds of insurance, for us because we have more information going to retain those relationships 1948 Again, we’re going to focus on a there’s no question that companies have than most about many risks. We just unless they can make themselves Offices open in Brazil and Italy. handful of countries in the growth to ask themselves whether they have to do a better job of mining it – virtually appear as a global broker with 1949 economies, and we’ll continue to keep understand what will happen under especially on the property casualty side, broad skills. 1951 AIU establishes its first Middle Eastern operation, in Lebanon. moving in other countries as well. We certain conditions. but also on the life side. We’re doing a lot Independent Broker Networks are just had our 50th anniversary in South Even at AIG, through our prior more analytics than we ever did before. allowing their members to virtualize 1969 AIG stock begins publicly trading in the over-the-counter market. Africa. We have a strong operation ownership of a company, we had a break That’s allowing us to be much more themselves by being part of a broader there; it’s an important market. in data security using a third party in effective in selecting and pricing the group providing service around the 1984 AIG begins trading on the New York Stock Exchange. AIG is strong in many places, and we another country. It was expensive and right risk. world. And we, as a manufacturer of want to make sure we maximize difficult to go through, and it required a product, are going to be able to provide The People’s Republic of China grants AIG a license to operate a life 1992 and non-life insurance business in Shanghai, the first license granted wherever we can. lot of remediation and disruption. INDEPENDENT BROKER service around the world. So this form by the Chinese government to a foreign insurance organization in You’ve seen what’s happened with other NETWORKS of independent distribution is more than 40 years. SJ | What is your outlook for the leaks where people’s information is out GA | What do you see as the role of important. property casualty industry in general, there. This is a catastrophe that a Independent Broker Networks in a 2001 Tata and AIG form a joint venture general insurance company in India. and AIG’s property casualty business company may face, and it may not have global environment? GA | What’s your advice for specifically? the skills, the loss control, or the ability What we’ve seen is an industry that grew Independent Broker Networks like 2005 AIG receives a general insurance license in Vietnam. There’s no question that when people to insure those resources when up being very product focused – focused BrokersLink? focus on capital preservation, they need something does go wrong. on how to distribute its products and on We see Independent Broker Networks Progress Since 2008 to be able to use insurance companies It’s not only having the insurance. It’s finding specialized brokers, who then as helping us be part of the solution in a AIG is close to achieving a complete turnaround of the company: to support that capital base in times of also having people who help deal with found clients who needed those broad way. Clients rely on us to do more The U.S. government, through the Federal Reserve Bank of New York crisis. That’s what insurance does. If you risk management. We’re going to sit specialties. It’s clear that clients are now than just be product sales organizations. 2008 (FRBNY) and the U.S. Department of the Treasury, steps in to help AIG look at large fires, tornadoes, down with the client and broker, and becoming more than just mono- I would encourage everyone to think during the financial crisis; maximum support authorized by the U.S. earthquakes, tsunamis…this is all about say, “Here are the things you need to do product and mono-geography. about how we can be more to the client government to AIG reaches $182.3 billion by the end of 2008. companies not having enough capital to to mitigate the risk.” So they’re getting At AIG, we now have a Global than we are today – to ask clients, “As withstand those kinds of crises. So they the benefit of our skills and our Commercial business and a Global you think about our relationship, what AIG announces that its Board of Directors has elected Robert H. rent that capital from the insurance knowledge, as well as our insurance Consumer business, versus a U.S. more could we give you to make your job 2009 Benmosche as President and CEO. Mr. Benmosche is also elected a companies. products. business and a non-U.S. business. We easier and better?” Sometimes we’re member of the Board. Clearly, I see the world growing, and We’re going to continue to look at have to think about our financial lines afraid to ask those open-ended I see the need for insurance growing. major issues and see how we can support products around the world, our liability questions. AIG enters into an agreement-in-principle with the Treasury and the Therefore, I see our business as a growth clients as they deal with those issues. products around the world, our medical It’s got to be beyond just financials. It’s 2010 FRBNY, designed to repay AIG’s obligations to U.S. taxpayers, and to position AIG as strong, independent, and worthy of investor business. products around the world, because our got to be problem solving – thinking confidence. At AIG, what’s important is that we GA | What are your thoughts on pricing clients now want us to pull all of this about innovative ways to be more to the make sure that we don’t provide capital and property casualty rates? clients than just somebody who helps AIG announces that it has executed its recapitalization plan with the for an inappropriate return on the risks People are looking for a hard or soft them work on the financial spreadsheets. 2011 Treasury and the FRBNY; AIG repays in full the approximately $21 we’re taking away from clients and market, which has been the tradition of We’re doing a lot One change I’ve seen at AIG is that, billion outstanding balance on the FRBNY credit facility and exchanges putting on the books of AIG. We’ve got the business. What we’re looking at is more analytics than because of the crisis, we have gotten various forms of government support for 1.655 billion common shares, to be much more data-driven than not prices per se, but risks and whether closer to our clients. Clients are looking resulting in the Treasury owning approximately 92 percent of AIG’s before. That should give us a competitive we’re getting the right return on risks. “we ever did before. to AIG and the broker to problem-solve. common stock. advantage in making sure that whatever For example, we looked at the way we That’s allowing us So it’s all of us working together to be we are doing, it is priced appropriately were handling fleet risk in more client-focused and nimble in As of summer 2012, together with repayments, withdrawals, to be much more 2012 exchanges, sales, and other actions, total outstanding government for AIG and for the clients of AIG. transportation companies. We realized effective in selecting meeting their needs. support to AIG has decreased over 85 percent, or $158 billion (including that, regardless of price, we were not There’s no question that there’s got to $21 billion that was unused or expired), with approximately 871.1 GA | AIG is known for its innovative doing the right risk selection. Some of and pricing the be more seamlessness as we think about million shares of AIG common stock owned by the Treasury as the coverages. Can you tell us about how our competitors had better analytical right risk. the client. It can’t look like a patchwork remaining investment. AIG is responding to some emerging tools. They understood what risks they quilt; it’s got to look like a blanket that’s risks? should or should not write, and then been woven by everybody working they thought about how they priced. together.

12 13 FROM THE BROKERSLINK BOARD OF DIRECTORS

A CLOSER LOOK The role of a BrokersLink Board of the market’s needs in a practical and Directors member requires focused valuable way, and the results are cause AT THE PEOPLE work. It relies on a broad yet skilled for a very positive outlook on GUIDING background in risk management and BrokersLink’s future. related fields, and demands careful As we’ve watched BrokersLink grow BROKERSLINK attention to ensuring the alliance has to become the exceptional network it is TOWARDS ITS the leadership and resources to reach its today, all members of the Board have goals. It can also be very rewarding, and remained deeply committed to GOALS. as BrokersLink gains momentum collaboration and the pursuit of quality, worldwide, we couldn’t be more excited and these principles have helped to –or more grateful to our members, guide our decisions. We believe these partners, and clients for helping to make same principles will continue to drive us this alliance a success. forward and further establish Today, we’re attracting an increasing BrokersLink as the ideal network for number of new members, and interest risk management professionals, their from new clients and carriers is on the partners, and their clients. rise. Every day we move towards a more powerful and capable position in the insurance field, delivering ever-better products and services while forging meaningful new connections. The diversity and talent of our network, echoed in the qualifications and experience of our Board, helps to meet

...“ all members of the Board have remained deeply 14 committed to collaboration and the pursuit of quality. JOSE MANUEL FONSECA

THE What are the key milestones of your have four kids from a first marriage career? (they’re now between 20 and 27 years BROKERSLINK The first major milestone was probably old), all working except the youngest, CHAIRMAN during my time working in a bank, back who is still at university. I now live with in my twenties. BPA, the leader bank at the my wife Carla, the love of my life, with my OUTLINES HIS time, was a very innovative and aggressive son Afonso and our little princess RISE IN THE company. I was given a position in charge Leonor, who is four years old. She makes of insurance and risk, and leveraging that me feel younger every day. INSURANCE I lead the team that created the first FIELD AND HIS Portuguese project of Bancassurance, in What do you do besides working at 1985. This was one of the first such projects your company? TAKE ON WHY in Europe. It was quite a success. Following I simply love music and books. My THE NETWORK this initial stage of my career, I helped to favorite types of music are mainly THRIVES. create and strengthen a pensions funds classical and jazz. I’m a big fan of management company, Praemium. I then literature oriented towards politics, moved to another bank, and I was social affairs, history, and related appointed President of an insurance subjects. I am chairman of the Casa da company called Real Seguros in 1990. It Musica Foundation, which owns of a was there that we launched the ambitious huge concert hall and symphonic AssurFinance program, selling mortgages, orchestra. I’m also President of a football car financing, and personal loans. Then club near the city of Porto. MDS and Sonae Group provided a fantastic management school from which Why is BrokersLink important for I learned a great deal. Over the course of your business? these experiences, I must say that my It is indeed very important. The network involvement with Ferma was very is an ideal medium for leveraging and important –I acted as a Board Member showcasing our international approach, and Vice President. And of course, the which for us means the creation of a most significant milestone of my career, fantastic knowledge base. It’s also a the project of my life, would be the fabulous brand and marketing tool, and BrokersLink alliance. of course BrokersLink is also a group of great friends and business partners. Could you tell us a little bit about your family? What makes Brokerslink special and I have a big family, what are its key strengths in the which makes me marketplace? a happy man. I The excellent, motivated professionals and the collaborative spirit of the alliance are what really stand out to me as the The “ great differentiators. It’s easy and network is profitable to conduct business in an ideal BrokersLink, which also means great medium for service and support for the international clients. The potential of BrokersLink leveraging and is enormous, and while we’ve showcasing our already brought several international competitive advantages to market, I firmly believe approach. we’ll see more in the near future.

15 STEVE JACKSON

WITH ROOTS IN LATIN AMERICA, MR. JACKSON ENVISIONS A MORE ROBUST BROKERSLINK.

What are the key milestones of your friends-oriented person off court. and to forge fruitful new professional career? relationships. To date I’ve spent nearly 30 years at What should the members know about Cooper Gay. I was made a director in you regarding your leadership and What is your vision for BrokersLink in 1990, at the age of 26. After several years management Style? next 5 years? focusing on this position, I became I’m naturally quite a passionate person I expect BrokersLink to keep growing managing Director of Cooper Gay y Co. and somewhat competitive. Must be and attracting like-minded retailers all Ltd.’s Non-Marine Division in 1998. In the Latin American experiences I’ve had over the world. I believe BrokersLink 2001, I was promoted to the Group over the years! When approaching will become a real and credible Executive Committee, and was pleased leadership, I tend to steer towards alternative to the mega brokers like Aon, to join the BrokersLink Group Board in rolling up my sleeves and getting very Willis, and Marsh, though you could 2007. I was named CEO of Cooper Gay involved. I prefer to lead by example and argue that the alliance has achieved this Latin America in 2010. try to do myself what I would like others milestone already. Eventually, I would to do. I can be impatient with people and like for BrokersLink to become a holding Who is your Favorite Sport Star? situations, I know, and that’s something company through which shares of key Tennis champ Rafael Nadal. He’s to which I’ve been devoting extra participating brokers can be purchased incredibly focused and aggressive on attention. (if the brokers so wish) in order to glue court, whether during practice or the alliance together more formally and matches, yet he also seems to be a very Why is BrokersLink Important for with greater robustness. generous, loyal, kind, and family- and your business? Cooper Gay is an independent global What makes BrokersLink special and wholesale and reinsurance broker --we what are its key strengths in the have no owned retail network. Having market? a strategic association with a global There are other global networks that network of independent could claim to do what BrokersLink retailers like BrokersLink is a does, but there are several key perfect fit for our business differences –and key advantages-- that model. We’re able to distinguish the alliance. BrokersLink is extend the services not a network created just to service and benefits our USA-multi-national businesses. It’s an clients seek, alliance of brokers formed to compete effectively and offer an alternative to the mega brokers. It has more in-house I believe services through partner service BrokersLink“ providers than other networks. It has significant premium leverage in the will become a international market and not just from real and credible USA. Other networks don’t have a alternative to the strong global wholesale and reinsurance partner. The culture of BrokersLink is mega brokers. very special. Under Jose Manuel’s leadership, BrokersLink has created a strong culture of profound professionalism, personal relationships, and mutual assistance.

16 GREGORY ALLARD

A FIRM BELIEVER IN THE POWER OF REGIONAL STRENGTH SHARES HIS VIEWS ON THE NETWORK TODAY.

What are the key milestones of your answer for serving our clients with a ...BrokersLink is career? more broad spectrum of insurance on track to become There have been several important products and services, meeting needs points in my 40 years of life so far; I’d say that are growing increasingly complex as “the authoritative the first was my graduation from Esslsca’s they cross borders. BrokersLink not only reference for business school. In 1996, my career began allows us to better serve our clients –it managing medium- to take shape in New York, where I also enables us to compete more worked as Assistant Vice President of the effectively with integrated global sized global Syndicated Loans department at BWCC. networks. accounts. I joined Filhet-Allard in 1998. My career got another critical boost upon my What is your vision for Brokerslink graduation from the Center of Advanced within the next 5 years? Insurance Studies, drawing upon the I think BrokersLink is on track to become resources of the Conservatoire National the authoritative reference for managing des Arts et Métiers. medium-sized global accounts. This is the reason we need to continue Could you tell us a little bit about your improving our reporting process and family? leverage technology to develop relevant I’d definitely describe myself as a family IT systems and support. man. My children are central to my life and my hope for the future. I have three What makes Brokerslink special and children; two boys, who are 10 and 7, and what are its key strengths in the one girl, who is just over 2 years old. marketplace? At the core of what makes BrokersLink What do you do besides working at special is the fact that every member gets your company? to be part of the same family --and of First and foremost, I take care of my course, that members strongly believe in family, and work towards enjoying every this project. BrokersLink is a collaboration moment as time seems to go by so fast. I of the most efficient brokers across the also focus on staying healthy and globe. Each member is one of the leading improving my fitness level through sport brokers in its domestic market, and this whenever I can. I mainly participate in brings a great deal of strength and running, golf, and skiing. I strongly authority to the network. The specialized believe that sports are the best way to resources and reinsurance members balance a very busy job. involved with BrokersLink allows the alliance to cover a full spectrum of risk Why is BrokersLink important for management. your business? A full-time team with With the increasing globalization of our regional COOs is also a economy, it is necessary to be able to key of BrokersLink’s serve our clients throughout the world. success, as they We currently have 4 operations implement the abroad, and our clients are actively strategy devised looking for new markets and by the board, and opportunities. I believe that are close to their BrokersLink is the right markets.

17 ...the business HEI development of “BrokersLink needs more cooperation WONG between members.

A TALENTED What are the key milestones of your Roughly 8 years later, we formed the Pan career? Asian Alliance. We exchanged ideas, EXECUTIVE I started my career as an office assistant information, and knowledge –a real WITH BIG in an insurance company in the early change from the status quo. Together, we 1980s. As time went by, I took up a more strengthened business and created a new IDEAS FOR THE client-facing role as an marketing image for ourselves in the market. FUTURE OF executive. After that, I was assigned to set Adding to these benefits, a global up a new branch in Macau. I joined the platform like BrokersLink allows us to BROKERSLINK. New World Group in the early 1990s and reach brokers and specialist service was put in charge of setting up a joint providers around the globe. venture in Thailand. Following this move, I took up various management What do the clients like about positions in Singapore, Malaysia before BrokersLink? returning to Hong Kong to step into my Our clients enjoy the friendly, flexible, current role. and professional services provided by BrokersLink. Could you tell us a little bit about your family? What is your vision for Brokerslink Prior to taking up my positions in the within the next 5 years? Asia Pacific Region, I established a home I hope there will be more referrals in Australia. I have three children. My between members in the future, and this eldest daughter is in her fourth year of will be the foundation for us to secure law study. My son is studying urban and more global accounts. Moreover, I hope regional planning, and is on an exchange mid-level management can achieve program in Denmark. My youngest greater collaboration. daughter is still in highschool. What are the areas that need further What do you do besides working at development at BrokersLink and what your company? would be your key suggestions to make During my leisure time, I focus on staying it happen? fit. Meditation and yoga are some of my Firstly, I think the global image of favorite pastimes. I also love BrokersLink should be more of a focus, meeting new people, driven by improved PR. I also think that traveling, photography, the business development of BrokersLink and the occasional game needs more cooperation between of golf with my clients members. This could be achieved by and business partners. selecting a coordinator for each region. Last but not least, we need more regional Why is BrokersLink training for mid-level management to important for your help them develop swiftly. business? As a local independent What makes BrokersLink special and broker, it’s a great what are its key strengths in the competitive advantage to marketplace? be able to access a flexible BrokersLink is a unique organization network. As reliance on a supported by key regional brokers. Many single international broker is of our members own their firms. We can far from ideal, we started serve both multi-national corporations thinking about setting up our and smaller clients. Professional, quality own network about 15 years ago. service is our main selling point.

18 This is the flipside DR. ERWANN of globalization: risks “are becoming more MICHEL-KERJEAN global, too.

INTERVIEWED BY JACQUELINE LEGRAND, COO AT MDS HOLDING.

WHAT DEFINES A CATASTROPHIC EVENT, AND WHERE IS RISK MANAGEMENT HEADED TODAY? JACQUELINE LEGRAND GETS THE ANSWERS.

Jacqueline Legrand: Dr. Erwann Michel- that a catastrophe is an untoward event insurance market in the United States. Kerjan, you are an authority in managing that inflicts unusually consequential The President signed a new law in July the risks, the financial impact and the consequences. In the past few years the that was based on some of the work we public policy challenges associated with world has seen so many catastrophes that had done in the past few years catastrophic events. How do you define a affected several continents and trillions of recommending to move away from catastrophic event? euros of losses that there is a fast-growing subsidized rates to risk-based premiums. Dr. Erwann Michel-Kerjan: How you interest in these questions among prime The reform of the National Flood define a catastrophic event really depends ministers’ and presidents’ office as well as Insurance Program was a perfect example on who you are. At an individual level, a by many company boards and in civil of how leading research institutions can car accident can be a catastrophe. If you’re society. create value by giving policymakers the a publicly trade company and your stock tools they need to make informed drops 30 percent in a week, that can be JL: What projects are you currently decisions that will affect millions of catastrophic. A government that just working on? people. This program covers $1.3 trillion suffered large economic losses or a high Dr. EMK: There are quite a few. Let me of assets, so this is a substantial move. number of fatalities from a disaster, well, mention about two or three briefly. The On the corporate side, my Wharton that is clearly a catastrophe, too. There’s first has just been completed here in the colleagues Howard Kunreuther, Mike not a single definition of what a US with my team at the Wharton School. Useem and I are leading an ambitious catastrophe is. It really depends on your We worked closely with key decision project that aims at developing good perspective. But everybody understands makers to reform the residential flood practices for C-suites and Boards of S&P

500 firms to approach and act upon droughts, earthquakes and tsunami s, but National Risk Management Office (with “I actually do not think the end of the world is coming catastrophic risk management today. We also investigating the country’s exposure a national risk officer equivalent to the on December 21, 2012! have already conducted interviews with to commodity price volatility, social risks, Chief Risk Officer for a corporation), Maybe it is because I was first trained in mathematics 100 of these firms. We have also reviewed and agricultural risks. That’s a big which would make this country the first and physics and that I’ve enjoyed the practice of martial public data on companies’ risk propensity endeavor and I think we’re going to show in the world to make such an important arts for many years (Japanese Karate). It’s a good way to and analyzed the stock market very quickly that if a country can be much move. If it happens, this is likely to become stay balanced. performance of these 500 firms over the more proactive at managing its risk, that a best practice that many other countries Also I like good discussions with those who have past 10 years. One preliminary conclusion same country could achieve greater could be inspired by and which would something to say and do so by tasting great wines. We live is that many more Boards are now political stability and bring in more respond pretty well to the new reality of in a just-in-time world today, but it still takes years to considering catastrophe risk management foreign investments. There are reasons interdependent risks. The strategic make good wine, so it helps keep a longer view on life. A as a strategic issue. Three or five years ago why Morocco went through the Arab framework we have developed there suggestion for a special occasion? Sure: this would have been a non-issue for many Spring very differently than many of its could then be used elsewhere. • For a great French wine, go with a 1990 Pauillac, of them. Times have changed. Results of neighbors in that part of the world. premier cru classe 1855; if you are in Paris: try the our analysis will be made public this JL: Such an approach would benefit some Clos Montmartre (yes there is a vineyard right coming year – stay tuned! JL: Who are you working with in Morocco emerging countries in Asia that are in the middle of the city of light!; not super Internationally, I’m advising the World for this project? growing at the moment but prone to a lot good but fun to drink–if you can find it). Bank on a project for the Kingdom of Dr. EMK: A project like this has to be by of catastrophic events that can have a • If you move to Spain, try THE Vega Sicilia Morocco. The goal is to develop with and for the country, which is exactly what negative effect on the whole world. Unico; nothing younger than 1998; them, from scratch, their entire national we do there. We work with all ministries. Dr. EMK: Absolutely. We’ve seen that last • For a great American wine, go with an risk management strategy, which includes The initiative is coordinated by the year with Thailand when the world saw, Opus One (of course) (not all years are everything from probabilistic risk Ministry of General Economic Affairs once again, that we’re living on a small equally great though). (And drink with assessment, to risk management and under the Prime Minister. highly interconnected planet. This is the moderation)” financing. We’re looking not just at We are currently discussing the flipside of globalization: risks are natural catastrophes such as floods, opportunity for Morocco to develop a becoming more global, too. Maybe ten

20 21 ...risk management should “not be a brake against transforming years ago, many business leaders could Take the east coast of China for business have said, “Well, I don’t really care much example. We could very well see a massive about what’s happening in Thailand; typhoon hitting Hong Kong, Shanghai opportunities most of my business is here in the US or in and then Dalian next year. The ripple into reality. Europe.” Today, if your factories or some effects would be worldwide and extreme. of your suppliers (or the suppliers of your Or take the state of Florida in the United suppliers for that matter) are in Thailand, States, where the population increased you want to make sure your entire global ...risk names were Bill Gates, Larry Summers, about 600 percent in the past 50 years. Erwann O. Michel-Kerjan is Managing Director of the Wharton School’s supply chain is resilient, not just the first management Condoleezza Rice, Tony Blair, Angela Many more people in harm’s way means Risk Management and Decision Processes Center, and teaches Value cycle of large suppliers…. Merkel, Philipe Calderon... who all made more exposed assets, too: mathematically, Creation in the Wharton MBA program. He is also Chairman of the OECD “has become too history later in their careers, as we know. the same hurricane that had mild effects Secretary-General Board on Financial Management of Catastrophes, which JL: You raise a good point here. important to be left to The program was reinvigorated early 50 years ago would be catastrophic today. advises its thirty-four member countries on these issues. Dr. Michel-Kerjan Globalization has definitely brought risk managers alone. 2000’s after being dormant for several We’ll see many more costly disasters was named a Young Global Leader (YGL) by the World Economic Forum tremendous benefits to our economies.. years. And it’s now called the YGL forum unless we start putting preparedness and (Davos), an honor bestowed to recognize and acknowledge the most Do you see governments, major and lead by David Aikman at the WEF resilience very high on the agenda. The extraordinary leaders of the world under the age of 40; in 2011 he co-led the companies, and organizations working under the high patronage of Her Royal good news is that there is a general Global Risks component of the G20 YGL Paris Initiative under the High together to create risk management and Highness Queen Rania of Jordan. recognition that the past few years are just Patronage of President Sarkozy. He has worked extensively on terrorism, risk transfer solutions for our world to It’s about moving from the over- Every year, the Forum selects 100 or so the beginning of a new era of catastrophes hurricane and flood insurance and how to reduce America’s exposure and sustain large scale disasters of all kinds? protected silo approach (my “favorite” of the most promising global leaders, we need to seriously prepare for. That’s the need for federal disaster relief. Dr. Michel-Kerjan is the author of Dr. EMK: In terms of collaboration risk, in my favorite facility in the next 20 based on what they have already achieved. true for virtually all industry sectors. several acclaimed books, including, most recently, The Irrational between the public and private sectors, to years) to a much better understanding of We all come from different fields, cultures, International organizations, pushed Economist (PublicAffairs, with P. Slovic) and At War with the Weather (MIT be somewhat blunt, it works well on the interdependencies of the risks not backgrounds, etc. and from all continents. by their donors, have started to seriously Press, with H. Kunreuther) which received the prestigious Kulp-Wright paper. In reality though, there are inherent only within the organization but within We get together several times a year for work in this catastrophe risk award for the most influential book on risk management. He is a regular tensions. This often does not make a good the entire international environment in five consecutive years to work on joint management space in recent years, and contributor in the media and has given over 100 public speeches. He has start for long-term sustainable which your organization operates. This is projects. This has always been a very this is very encouraging: that’s true of the studied at Polytechnique in France, McGill and Harvard. Email: collaboration. There are good examples a world where being agile and responsive humbling experience. OECD and its 34 industrialized member [email protected] of public-private partnerships where you are maybe the most important attributes. countries; that is true of the World Bank can mutually bring the strengths of the JL: Back to large-scale disaster and not in low- and middle-income countries. two camps together, though, and that JL: Speaking of agile brains, You are part only natural catastrophes but all kind of And this year, even the G20 recognized JL: It’s really about creating value. have for instance: a state-run insurance works well at managing risks. of the forum of Young Global Leaders., disasters. What is your view for the disaster risk management as one of the Dr. EMK: Absolutely, and the good news program for earthquakes in California, which is a unique recognition on the future? key priorities. is that we know how to do it: that’s the multiple state insurers to cover against JL: More generally, where is risk World Economy Forum for exceptional Dr. EMK: No doubt we’ll see more and To stay positive, it is also important to cool part of it. wind loss on the coast, a terrorism risk management going? young leaders who share commitment more of them. That’s something that I’ve keep in mind that risk management insurance program which benefits from Dr. EMK: I think the world is pretty to shaping the global future. What is that been talking a lot about. What many should not be a brake against transforming JL: That’s where, as people, we have to get free up-front federal reinsurance, a federal exciting given the immensity of the task all about? people have still failed to do is to ask the business opportunities into reality; rather creative. national flood insurance program, etc. before us. Dr. EMK: I feel honored to be part of this right question, which is not whether we’ll it ought to be about sustaining this vision. Dr. EMK: Sure. Creativity, but also The pendulum has swung from a world I like to say that given all the fantastic group of amazing leaders The have another hurricane in Florida this Risk Management 2.0 is all about value concrete implementation with short- where the government was not covering catastrophes and crises that have unfolded idea came from Klaus Schwab, founder year or another social unrest in China creation. More boards and government term measurable return. those risks to one where it does. As the in just the past ten years, risk management and chairman of the World Economic next year. The real question is what is offices are interested in it, also, and are swing happened in America, one can has become too important to be left to risk Forum (he was in his early thirties when going on here, what are the fundamental looking for high-level expertise. For JL: One of your main areas of work is the expect to see it in other countries as well, managers alone. And those who realize he created the Forum, by the way). While trends that are changing the world we’re instance, if the world is going to see more financial management natural disasters if they suffered from a series of that will be the winners. Is this the same senior world leaders have been gathering living in so profoundly that the whole disasters, can we develop new and terrorism risk. What solutions are catastrophes. type of risk management that we used to together in Davos for the past 43 years, system is becoming much more sensitive technologies, new services, new products emerging today? The other interesting aspect revolves do ten years ago? No, it has to be much Professor Schwab realized the importance and volatile? that will help during disaster time? What Dr. EMK: It depends on what markets around developing countries asking more global and strategic risk of preparing the next generation of Understanding the symptoms is the financial products do we design to take you’re looking at. In the US there are two themselves what type of insurance management. It’s a risk management leaders as well. first step to cure. Take natural disasters. advantage of increased volatility in the trends. There has been a radical shift in market they should develop. China is a capacity that requires not only good The program was originally called the It’s not rocket science but just common financial markets? There are massive risk sharing arrangements. It used to be good example, as it’s potentially a huge quantitative skills but also to be adaptive Global Leaders of Tomorrow, I think, and sense to see that more people are living on untapped opportunities with this new very market-oriented, and it still is, but market. Can they develop large-scale and to be able to translate risk dilemmas counted among their ranks several young, planet Earth and most of these people are (and very unusual) way to think about risk with a growing role for the Federal insurance market and if so, what would into boardroom discussions. yet not well-known, individuals. Their in highly hazard prone areas. management and value creation. Government in terms of risk sharing. We it look like? Maybe they would create

22 23 It is crucial to break the risk management silo so that many players in an organization “have a important role to play to manage it.

something different from the US or decrease (in turn becoming accessible to the way that the very rich live. Third, this Dr. EMK: Sure. You need to understand European market because the Chinese many more countries)? The market would could be okay if government had your full exposure and monitor it. It’s both philosophy vis-à-vis risk is very different be several orders of magnitude larger than reinforced social programs to help those your exposure to inside and outside risks, itself. You need to understand the market it is today and would also enhance social in need, but all of this is happening at a to national and international risks, to to develop these things. good. Taiwan and Mexico and several time when such programs are cancelled or physical, social, financial, geopolitical, As the world is becoming richer, and as American states have already issued downsized because of the fiscal situations health risks, not just your “favorite” one (for people move from being poor to entering catastrophe bonds, as did the international many countries are in now. example, financial because you are the the middle class, they buy a car, then buy football federation FIFA to cover the 2006 This is a perfect receipt for disaster. CFO, workers’ risks because you are the VP a house, and then a second car and a World Cup final game against a possible Social disaster. for Health and Safety). More than one second house, and then maybe they start terrorist attack. Will income disparity trigger a major company reacted to the events in Japan and a business. All of that creates huge crisis next month? Probably not, these Thailand by starting to monitor the whole potential markets for insurers, so these JL: Investors are not comfortable yet with trends develop over several years, but who supply chain, not just part of it. It’s the first middle class trends in many developing catastrophe bonds and don’t see this as an knows when they break. The Arab Spring step and it’s a big step. We also have the countries represent enormous potential investment diversification. What is your is a perfect example. technology to do it today at a fairly low cost. business in the next ten to fifteen years. take on this? Who’s next: Europe, the US, Latin Finally, what I’m very interested in is Dr. EMK: It’s because they have a feeling America, or China? What would be the JL: To your point about everyone having what we call “alternative risk financing that they can lose all of their nominal if ripple effects on the world economy? his or her own pet risk, your Risk instruments.” This is where you can start they invest big. And you don’t want to be Management 2.0 strategy will imply that being even more innovative and transfer the person at the board meeting being JL: Looking at big trends for corporations all departments of a corporation, whether part of the exposure directly to the looked by everybody else saying, “How to evaluate their risks in terms of legal, finance, sales, or logistics collaborate financial markets. The first catastrophe could you lose 100 percent? 100%!” Now complexity, what are the other big factors together to share the information and bond was done in 1994. The market is if you invest a small part of your portfolio, that are starting to change the way create solutions, would you agree? slightly growing but it’s still very small that’s another story. companies look at risk management? Dr. EMK: Let’s face it: no one can own all compared to what it could be. There are Dr. EMK: Where you generate your the risks alone. It is crucial to break the risk reasons for that but maybe in the next five JL: You contribute actively to the “Global revenue is one of these big factors. Many management silo so that many players in to ten years we can make catastrophe Risks Report” released every year in Davos The year after that, the top risk was food with each other. It’s not complicated to do large corporations are now making more an organization have a important role to bonds accessible to you and me as since 2006 by the World Economic crisis, and that was six months before the if you have the right mindset. I think that’s than 50 percent of their revenue outside play to manage it. individual investors. Imagine that Forum. What are the risks at the top of worldwide food crisis hit. You have to applicable for the world as a whole, but the country they are headquartered in. So, tomorrow you could take 0.001 percent governments’ agenda, senior understand why we got it right twice: also for the individual corporation. for many of the firms I work with, the big JL: Any last words? of hurricane exposure in Florida or management from multi-national since we were right the first time that the Since 2008, more people are starting catastrophic risk is not a hurricane or Dr. EMK: Risk Management 2.0 is about earthquake in Japan and California as part corporations, and international world would see a collapse of very to pay attention to what the World terrorism. It’s not even lack of access to doing risk management in a world that of our investment and retirement organizations? sophisticated financial products, we Economic Forum says, and what the risk financial capital. It’s how they will secure has radically changed since 2000, even portfolio. There could be regulations so as Dr. EMK: The Forum partnered with a could predict that what would happen report suggests. skills; the big risk is accessing and though many feel uncomfortable with the to limit the maximum exposure you can few organizations six years ago with the next would be hundreds of billions of In 2012 the top risk was: income maintaining the right human capital. idea of doing anything else other than the buy. Wouldn’t that create a brand new idea of not necessarily quantifying big dollars moving from very sophisticated disparity. The reality is that 1 percent of How do you retain talented people? This status quo. There will be winners in this investment potential and bring hundreds risks in great detail, but of trying to get a assets to very simple assets, known as “the the population owns 50 percent of the is a big issue in Brazil for instance. new and more dangerous world, and of billions of euros of capital into this better sense of what’s coming in the next fear factor.” And what’s simpler than rice? total wealth and 50 percent of the This is a good example of what I meant there will be losers. The good news is that market, helping risk financing cost to five to ten years. We asked what could Trillion of dollars moved from population owns only 1 percent of it. This earlier by Risk management 2.0. This is many more companies and a few happen in the next ten years, and then we sophisticated CDOs to commodities. disparity is fueling future crises, as I not only about fire risk and workers’ governments have started to become looked at about 50 risks and we surveyed What happened in a very interdependent described in an op-ed for the Wall Street compensation. It’s about adopting a much more strategic about this. They will middle class about 500 top leaders around the world. world, while markets reacted the way they Journal a few days before Davos in January. comprehensive view of what could go be the ones to thrive. The others still trends in many It’s amazing what you can see coming were supposed to, is that the price went wrong and how the world is evolving that think of risk as an old-fashioned two from very far away. I remember vividly in up 100 percent for some commodities. JL: Why is it more an issue today than 20 will affect the assumptions your business dimensional diagram where catastrophe “developing 2007 that in the Davos release of the That’s great if you have invested in these year ago? model is currently based on. risks have to be low probability. For countries represent report, the top risk was called “Asset Price commodities at the right time, but less so Dr. EMK: First, because the gap is much anyone who watches TV, this assumption enormous potential Collapse” and it’s easy now to say well, we for the 2 billion people who are living on larger. Second, because this gap is public JL: After experiencing the recent is clearly outdated, if not amusing. business in the next were right. At that time we weren’t sure two dollars a day information today: Transparency is catastrophic events and the reality of I like to think I’ve helped some whether it would happen this year or the Many people died, and that’s for me a becoming a big deal and with the supply chain risk exposures, we are back countries, firms and organizations to be ten to fifteen years. year after, but clearly the status quo was perfect example of trying to move from development of the Internet and social to the bottom line of risk management among those who now thrive. unsustainable. the silo approach to how things interact media, the very poor now know well about that goes well beyond insurance products. It has been a pleasure talking to you.

24 25 peer reviews. In addition, when all the USING CATASTROPHE components work together, the final model output is expected to be consistent with basic physical expectations of the RISK MODELS TO underlying hazard and unbiased when tested against both historical and real- QUANTIFY, MITIGATE, time information. Why Use Catastrophe AND MANAGE THE “TRUE Risk Models? Catastrophes are rare, but it is exactly their rarity that makes estimating losses RISK” TO PROPERTY from—and preparing for—future catastrophes so difficult. Standard actuarial techniques are insufficient because historical loss data are scarce. The loss data that are available offer a ESTIMATING LOSSES FROM CATASTROPHES IS A limited view of insured properties, as the number and value of properties CHALLENGE THAT RISK MODELS MAY HELP OVERCOME. Figure 2. Example of a loss exceedance probability curve change—along with construction materials, building practices, and the managers, brokers, and underwriters. Catastrophe Risk In the engineering component, the Figure 2 (the result could be developed costs of repair. This is one of the reasons BY AKSHAY GUPTA But is the industry deriving the Model Components measures of intensity (for example, wind for a single building or a portfolio of why (re)insurance companies have PH.D., P.E. maximum benefit from the use of the Catastrophe risk models are speed, ground shaking or peak ground hundreds of thousands of buildings). made using catastrophe risk models models? Or are there better ways of sophisticated computer programs that acceleration, or flood depth) are then The likelihood of experiencing different standard practice. Losses from natural catastrophes have using these tools that allow for improved mathematically represent the physical applied to highly detailed information levels of loss can be directly obtained The purpose of catastrophe risk steadily mounted in the past three catastrophe risk management? characteristics of natural catastrophes, about the properties (commonly referred from such results. (Note that the inverse modeling is to help businesses and decades as businesses operate on an While the issues associated with the exposures, and the engineering to as the primary and secondary of the annual exceedance probability can companies anticipate the likelihood and ever more global scale, resulting in both use of catastrophe risk modeling tools interface between the two. The characteristics of the exposure) that are be read as the return period.) For brevity, severity of potential future catastrophes their physical locations and their are relevant to stakeholders throughout catastrophe risk modeling framework exposed to them. Equations called only this result is being shown; however, before they occur so that they can supply chain networks being at risk the property insurance value chain is shown in Figure 1. damage functions are developed and catastrophe risk models can generate adequately prepare for their financial from multiple hazards. Natural (corporate risk managers, brokers, The hazard component of catastrophe used to compute the level of damage that much more detailed information that impact. By combining mathematical catastrophes—earthquakes, underwriters), this article discusses the risk models answers the questions: is expected to occur to assets (e.g., can be leveraged to manage and mitigate representations of the natural hurricanes, tornadoes, and floods—and issues primarily from the broker Where are future events likely to occur? buildings, facilities, contents) of different the risk, including evaluation of “what- occurrence patterns and characteristics terrorism can have a significant and perspective. Brokers must understand How large or severe are they likely to be? types of construction and occupancies, if” scenarios, such as the impact of of hurricanes, tornadoes, earthquakes, sudden adverse effect on the financial their clients’ exposures and operations, And how frequently are they likely to or usages, for various levels of the hazard hurricane shutter installation on severe winter storms, and other well-being of an otherwise stable, communicating what they learn about occur? Large catalogs comprising intensity. hurricane losses. catastrophes with information on profitable company. Prudent risk the risk to insurance underwriters, and hundreds of thousands of realistic but In the financial component of the The mark of any good model is not property values, construction types, management involves proactively then fashion risk management simulated catastrophes are generated, model, estimates of the physical damage only the science and engineering that assessing and managing an strategies and solutions that meet the representing the broad spectrum of to the assets are translated into estimates goes into building the models, but also organization’s catastrophe risk. As a risk tolerance and budgets of their plausible events. For each simulated of monetary loss. Probabilities are the validation of same. Every component result, the use of catastrophe risk clients. Catastrophe risk models are event, the model then calculates the assigned to each level of loss. An example of a model is carefully verified against modeling has gained widespread instrumental in assisting brokers with intensity at each exposure location of such a result, called the exceedance data obtained from historical events and, acceptance across corporate risk these tasks. within the affected area. probability or EP curve, is shown in where possible, through independent

AKSHAY GUPTA, PH.D., P.E. Figure 1. Catastrophe risk modeling framework VICE PRESIDENT & DIRECTOR – CATASTROPHE RISK ENGINEERING (CRE)

Dr. Akshay Gupta leads AIR’s San Francisco office and the company’s Catastrophe Risk Engineering practice, which focuses on providing corporate risk managers, brokers, and insurers with engineering-based, site-specific risk assessment services for high-value and complex facilities and operations. The San Francisco office also focuses on projects that support disaster risk financing programs for sovereign states. Dr. Gupta has more than 15 years’ experience in natural hazard risk analysis, mitigation, and modeling. He holds a Ph.D. in Structural Engineering from Stanford University. He is a member of various professional organizations and the author of numerous technical papers. Dr. Gupta is a licensed professional engineer and is certified in the practice of structural engineering.

26 27 occupancy classes, and vulnerability of Figure 3. The insurance value chain taking a standard risk evaluation connection, among numerous other such construction, these simulation approach that involves using the default characteristics. Making explicit, models provide information concerning measure of risk that could be arrived at engineering information within the discrete selections for these the potential for large losses. if one were able to eliminate all sources model to develop risk estimates. For large characteristics not only improves the Catastrophe risk models are tools, of uncertainty, which, of course, is not portfolios, this is an appropriate level of risk estimate but also reduces the albeit sophisticated ones that require possible. The objective of any risk evaluation because the objective is to uncertainty in the estimate of risk. careful thought about how they can be evaluation is, therefore, to obtain the obtain the overall risk metrics for The evaluation can be further used to derive the maximum benefit. best estimate of the true risk along with insurance or (re)insurance purposes. enhanced by making improvements in Consider the full extent of usage of these a quantification of the uncertainty However, if the large portfolio (in the engineering representation of tools, as shown in Figure 3; clearly, the associated with the estimate. Three terms of value) comprises a similar set portfolio-specific characteristics details required in the model input and levels of evaluation can be utilized for of buildings (for example, a hotel chain, resulting in an asset-specific evaluation output are going to be different depending large portfolios that vary according to or large retailer) that have strong of the risk aggregated to the portfolio on whether the tool is being used for a the degree of detail in the exposure and physical similarities in the level. For example, when considering large portfolio of properties for insurance engineering modules of the models (see characteristics of the assets at risk, or structures that are standardized to some rate-making or reinsurance, or by a Figure 4). the assets are geographically extent, such as hotels or stores in a retail corporate risk manager evaluating the For a large portfolio (in terms of concentrated (for example, hotels in chain, the analysis can take into account risk profile across a handful of locations number of assets) comprising a variety of California, a theme park, or a large specific design details and other and perhaps an integrated supply chain asset classes and spread out over a large industrial complex), the “average” or characteristics and incorporate them Figure 5. Example of loss profiles for three “similar” power plants network. This is when the skill in geographical area, it may not be necessary “default” vulnerability view within the into the tool. The more clarity in the risk identifying the right input, appropriate (or valuable) to have a good risk estimate model can be enhanced by improving estimate, the better the applicability assets—something that is not required catastrophe risk model would result in application, and understanding of the for each and every asset; for such large the exposure data to better characterize across the entire insurance value chain. nor, in fact, feasible from either a cost or the loss profiles being essentially limitations and possible enhancements of portfolios of properties, the standard the primary and secondary time standpoint for a large portfolio. The identical for the three power plants. An these tools comes into play to derive level of evaluation is widely used by the characteristics of assets (input to the “True Risk” for advanced evaluation entails gathering advanced evaluation, however, will maximum benefit. industry. This level of evaluation entails catastrophe risk model). Primary Small Portfolios exposure-specific data and conducting distinguish between them, as evidenced using the appropriate probabilistic characteristics include COPE data as For small portfolios (in terms of number an engineering evaluation involving: by Figure 5. This can translate into “True Risk” for catastrophe risk models with the well as height and year built; secondary of assets), brokers can begin at the site-specific hazard assessment; better significant advantages from a risk Large Portfolios available COPE [construction, characteristics include more detailed standard level using catastrophe models disaggregation of exposure values (in management and mitigation standpoint. Every exposure has a “true risk.” The occupancy, public and private fire information, such as roof covering, with available or improved COPE data to terms of component valuations and Such extensions of the catastrophe true risk is the single quantifiable protection, and exposure] data and glazing type, and roof-to-wall obtain a loss estimate. However, this damageability); site investigations to risk models are also very applicable when loss estimate could have significant capture site-specific characteristics; an the business wants to achieve a deep uncertainty. This by no means implies engineering damageability assessment; understanding of the risk associated Figure 4. For large, geographically well distributed portfolios, that the standard level of evaluation isn’t detailed process/network/supply chain with complex, high-value assets that do catastrophe (cat) model output can be enhanced with additional recommended for small portfolios; it is, evaluation for business interruption loss not lend themselves to standard, data and analysis to achieve the best estimate of “true risk” but it should be used for specific evaluation; and the disaggregation of portfolio risk modeling techniques—as applications, such as the preliminary risk risk into constituent components— there is a paucity of historical information ranking of the assets within the small essentially, customizing the various on the loss sustained by such assets—or portfolio to identify the primary risk modules of the catastrophe risk model when the asset/hazard falls outside the drivers and then, as appropriate, subject for business- and site-specific data and conventional modeling domain (for these primary risk drivers to an advanced characteristics. As an example, Figure 5 example, renewable energy assets, catastrophe risk modeling process. shows the component make-up for three supply chains, theme parks, and perils An advanced risk evaluation of a small power plants in close proximity to one not conventionally modeled). portfolio can significantly improve the another. The standard application of the The results from these advanced estimate of the “true risk” with site- assessments offer a distinct competitive specific evaluations of the advantage, particularly to brokers who

28 29 serve clients with unique or highly they are often based on worst-case Figure 6. For small, geographically protected risks. Brokers can leverage the scenarios and do not include the concentrated portfolios with unique or advanced catastrophe risk assessments likelihood or frequency of shutdown, nor highly protected risks, an advanced risk to increase their own value, as they can do they consider the partial shutdown of evaluation is necessary to achieve the best provide better risk mitigation and a single node or the simultaneous estimate of “true risk” management solutions, and corporate disruption of multiple nodes, within a risk managers can develop a deeper fully probabilistic framework. characteristics unique to the portfolios understanding of the drivers of loss. Catastrophe risk models enhanced should be input to result in the maximum These assessments also provide a strong with detailed network analysis provide benefit being derived from the tools. The basis for communication with the the solution because the framework is tools are universally accepted but with decision makers within the organizations fully probabilistic. As a result, partial carefully researched input can provide a and the insurance market. damage and downtime states for all level of reliability, transparency, and There is no guarantee that an advanced nodes can be simultaneously and defensibility that can make the difference risk assessment will result in a lower loss explicitly considered. Furthermore, the between ill-informed and well-informed value—only that it will result in a more level of disruption at each location from decision making. Brokers are in positions accurate value with less uncertainty and multiple perils can be accounted for, thus that call for them to understand the much more detailed information that providing a more realistic and reliable applicability of the tools, their limitations, can be used for risk management and view of downtime and loss. In addition, and their potential in protecting their mitigation. node level reserves, redundancy, and clients’ interests—both from a physical resiliency concepts can be explicitly risk mitigation perspective as well as Quantifying Supply incorporated into the evaluation to financial risk management. Armed with Chain Risk provide the best estimate of the “true reliable quantitative information, the Up until this point, the discussion about risk” to the supply chain (from a broker will stand to gain in a crowded advanced assessments has revolved catastrophe standpoint). field where preserving clients’ best around studying the physical exposures interests and retaining their business are and their vulnerability to various Closing Thoughts paramount. catastrophes. But there is another aspect Facilities are unique. Businesses are to quantifying, mitigating, and managing unique. Risk tolerances, availability of catastrophe risk through advanced capital for risk management, C-suite Dr. Akshay Gupta is vice president and assessments that leverage the catastrophe preferences are all unique, too. The way director of Catastrophe Risk Engineering risk models and enhance them through catastrophe risk modeling tools are used (CRE) at catastrophe modeling firm AIR explicit network modeling: quantifying for quantifying, managing, and Worldwide. For more information contact: supply chain risk. mitigating the risk should also be unique; [email protected] A supply chain is in essence a collection of operational points, or nodes, linked based on functional and revenue stream relationships. Simple examples of nodes include a production facility, a supplier, or a distribution center. When all the nodes in a network are identified and appropriately characterized, quantifying the physical damage potential associated with each node is relatively straightforward—as would be done by using the catastrophe risk models. However, traditional methods for quantifying overall supply chain risk have considerable limitations because Fig 7. Advanced risk evaluations can be used for assessing and managing supply chain risk

30 BROKERSLINK BrokersLink continues to prove its worth to members, partners, and clients, however HISTORY “complex their expectations and needs are.

It should come as no surprise that management experience. The PanAsian representation and know-how was Jamie Crystal and José Manuel Fonseca however complex their expectations and LEARN MORE BrokersLink, today one of the world’s Alliance in the Asia Pacific region, along formed. The member roster experienced strengthened BrokersLink and helped it needs are. In 2011, following the ABOUT THE most active and diverse international with Alinter which focused its activity an incredible rise, and the very first move forward despite difficult economic discontinuation of Alinter organization, PAST OF ONE OF independent broker alliances, has had a in Latin America grew in size and BrokersLink Global Conference took conditions and fierce competition. BrokersLink re-structured its Latin lengthy and challenging climb to the top. diversity, holding important summits place in Hong Kong in 2009. Significant At the core of this well-established yet American presence around two major THE WORLD’S In a market once dominated by giants, and conferences at which BrokersLink new members such as Frank Crystal & still-growing network is the harmony poles, Brazil and Mexico. Today’s GREATEST BrokersLink has helped to redefine and members were able to make meaningful Co. in North America helped the network between specialized local knowledge and BrokersLink is stronger than ever thanks revitalize value within the field of risk connections. achieve greater presence, while the work a broad, global standard for quality. to the dedicated work and vision of those EMERGING management and related services, In 2007, partnership protocols were of prominent executives such as Hei BrokersLink continues to prove its worth who have helped it emerge from its NETWORKS. thanks to the network’s truly global signed among the three networks, and Wong, Gregory Allard, Steve Jackson, to members, partners, and clients, humble beginnings. perspective and quality-drive approach. a closer relationship began. In The very first BrokersLink meeting November of that year, the BrokersLink took place in 2004, where major founder Association was formed, and MDS was joined by Artai, Pérouse, collaboration between the three February 9th June FirstAssur, and Lazam-MDS. Meeting in networks increased. The following year, Porto and focusing on European BrokersLink and Alinter attended the 3rd BrokersLink 4th BrokersLink markets, BrokersLink slowly began to PanAsian Alliance’s annual meeting in Meeting - Lyon expand and welcome new members the Philippines, where the potential of Meeting - London throughout the continent, holding consolidation into a single group was All of BrokersLink members from the very beginning The Lyon Meeting was the crib for the BrokersLink frequent meetings to refine the network’s first discussed. This idea finally were supported by Cooper Gay, that hosted the brand presentation. Under the theme “Turning the vision and reach short-term goals. culminated in the merge into the London Meeting revealing an increasing presence Partnership Tangible” the board presented the Meanwhile, two other regional BrokersLink global alliance in and the importance of a business relationship with image and communication strategy for the networks were working towards uniting November of 2008. BrokersLink. At this meeting BrokersLink welcomed network. An important step to increase its insurance professionals and offering With the union of these capable an important member from Germany: Junge. capability to operate in different environments on a clients a more optimal and flexible risk networks, an alliance with truly global true link basis and to achieve the expansion of the network through new partners on a global basis. 2004 2005

9th July October October 17-18 November BrokersLink is born - 1st Meeting at Porto 2nd BrokersLink FERMA Forum - Lisbon 5th BrokersLink The “Big Bang” happened at a meeting in Porto! It all started with MDS Meeting - Paris The first participation of BrokersLink in FERMA Forum (the Meeting - Vigo (Portugal), Artai (Spain), Pérousse and First Assur (France) and Lazam-MDS bi-annual Risk Management Forum and one of the major (Brazil). The vision for BrokersLink arise out of a reality statement and need European conference designed for the sector) held in 2005 to provide outstanding service to clients worldwide responding to the was a great opportunity to make known the activity of the demands of an increasingly competitive and global market. BrokersLink New members: MDS network recently formed as well as to establish contacts with New members: Junge (Germany); was forged as a horizontally structured alliance with a strong focus on the (Portugal), Artai (Spain), some of the biggest purchasers of insurance and the main Cooper Gay (UK); human relationships between all members. Each member broker is not Pérousse and FirstAssur international insurance companies and brokers. seemed as a branch, but rather as an independent, and entrepreneurial (France), Lazam-MDS (Brazil company, with a mission to deliver outstanding client service. At the time BrokersLink had the honor in counting with the presence of Cooper Gay, one of the leading reinsurance and specialist retail insurance broker and a member to be...

32 33 17-19 May At the core of this well-established yet still-growing network is the harmony between specialized local knowledge and a PanAsian Alliance 15-16 June “broad, global standard for quality. Summit - Shanghai 9th BrokersLink Meeting - Athens During the PanAsian Alliance Summit 2007 held in Shanghai, China, The Athens meeting was crucial to the future of the Partnership Protocols with PAA on BrokersLink in its actual concept of a true global network behalf of BrokersLink were signed. of independent brokers. With the increasingly powerful 2-3 March force in world affairs, driving towards the growing integration of economies and financial markets, 1st PanAsian Alliance Conference BrokersLinks signed, separately with PanAsian Alliance - Hong Kong - Official formation January and Alinter Partnership Protocols. These associations established a close and intense relationship among the Official formation of PanAsian Alliance (PAA) during the first Alinter Meeting brokers’ networks and its leading brokers in their Conference held in Hong Kong, that would be merged to individual territories. BrokersLink network in 2009. There were 10 members from - Mexico To commit towards providing clients with the best and various countries in Asia attending. New World Insurance (now BrokersLink was introduced to Alinter, a most competitive way to manage their risks and protect Nova Insurance) was one of the key drivers. Latin American based network with their investments around the world was the main goal, operations throughout the region. The without losing personalised and local service. Also it was 10 February idea of an upgrade through a merge of the important because of the relevance of knowledge and three distinct networks - BrokersLink, expertise exchanges that aroused from those partnerships. 6th BrokersLink 12-14 May PanAsian Alliance and Alinter - into a It was also at the Athens Meeting that Partnership Meeting - Hamburg single global entity began to take shape. Protocols were signed between BrokersLink and all its 7th BrokersLink Meeting - S. Paulo members, which would serve to strengthen the already existing relationship between all the associared brokers. BrokersLink introduction to the Latin America market 2006 2007

September September 7 December FERMA Forum - Lisbon FERMA Forum 8th BrokersLink - Geneva 21 November Meeting between the leaders of PanAsian Meeting - Porto Alliance, Hei Wong, BrokersLink, José Premier of the first BrokersLink Creation of BrokersLink Manuel Fonseca and Cooper Gay, Toby José Manuel Fonseca was formally elected website - a real communication Esser, for mutual acknowledgement and President of the recently created BrokersLink platform to enhanced proximity with Association brainstorming on a possible cooperation Executive Committee. The Porto Meeting was clients, partners and market in general. It was on the 21st November 2007 that Associação between the networks pursuing a common also highlighted by the expansion of the network Brokers Link (ABL) was born, in Porto, Portugal. The goal: to expand and to develop new partners to the Asian and Eastern Europe market. First formal constitution of the network was finally on on a global basis. time that Hei Wong was present in a Meeting. paper. A milestone in its short history and a major step in the insurance and brokerage sector worldwide. 2 October At the time BrokersLink was already between the eight major broker networks of the world and the first New members: Renomia (Czech 10th BrokersLink one with its decision center out of the main financial Republic; Hungary; Bulgaria); Artai markets. The aim to be one of the main players in the Argentina; Sidarsa (Morocco); Bridge Meeting - Geneva global insurance market took off that day, with (UK); Karavias (Greece); A major step towards the formal BrokersLink 40 independent brokers in more than 50 constitution of BrokersLink took countries and with a +4Bi euros premium managed. place at the Geneva Meeting where At the time BrokersLink had already strong it was decided and approved the partnerships in the US, Canada and Africa. bylaws, regulations and the Declaration of Principles. New members: SRB (Switzerland);

34 35 Today’s BrokersLink is stronger than ever thanks to...those who have helped it “emerge from its humble beginnings.

19-23 April RIMS 2009 - Orlando 18-20 June At RIMS Conference at Orlando, BrokersLink was officially launched after 1st BrokersLink Meeting Global 27 April to 1 May the merger. New brand logo, new Conference - Hong Kong 22-24 May brochure, the first stand. All ready to set Participation at RIMS off towards the new expansion phase “Linking Clients, Markets and Knowledge”: that 2008 - San Diego PanAsian Alliance with already over USD3 billion of was the theme for the first ever global conference of Summit - Boracay premium annually to manage. Board the newly unified network of independent The three networks BrokersLink, Alinter and Members: Steve Jackson (Cooper Gay, insurance brokers around the world - BrokersLink. PanAsian Alliance were together for the first Island - Philippines London), Hei Wong (Nova Insurance, The event was attended by its members from all time at RIMS Conference 2008. Later on this 2008 PanAsian Alliance Summit at Hong Kong/Beijing), José Manuel over the world, as well as important speakers month the idea of a global insurance network Boracay- Representatives from BrokersLink Fonseca (MDS, Portugal), Mauricio within the international insurance sector. It was a was discussed on the 2008 PanAsian Alliance and Alinter were invited to attend the Esquino (Alinter, Mexico City) and James key moment that symbolized the harmonious Summit that was held in the Philippines. PanAsian Alliance Conference at Boracay Crystal (Frank Crystal & Co., New York). gathering of independent brokers coming together Island, the Philippines. During this meeting, based on mutual trust and respect. the idea of merging the three networks into a global insurance network emerged. 2008 2009

12-14 June October 11th BrokersLink 14-16 November FERMA Forum - Prague Meeting - Paris BrokersLink: the global BrokersLink was present at this major event on Risk Management with a booth The three networks BrokersLink, at the exhibition visited by more than 1000 professional all over the worl. Alinter and PanAsian Alliance were network (the merge) together for the first time at RIMS In 2008, at the PAA Excom Meeting held in Bangkok, the Conference 2008. Later on this leaders of BrokersLink, PanAsian Alliance and Alinter month the idea of a global insurance finally decided that they should all operate under a single New members: EIB (Poland); Léons (The Netherlands); Nart (Turkey); PCA (Italy); Frank Crystal (USA); Birla network was discussed on the 2008 brand. And there was a 100% consensus that BrokersLink Insurance (India); Trinity Insurance Brokers (Philippines); Labuan Insurance (Malaysia); Beijing New World PanAsian Alliance Summit that was was the best choice in name and brand. It was at that time Insurance (China); Shangai Asian Insurance (China); Robert Masterman Insurance (Australia); New World held in the Philippines. that it was decided to find and establish a very strong Insurance (Hong Kong); Acclaim Insurance (Singapore); Tri-W Insurance (Taiwan); Aisa-Pacific Risk partnership in the US, with Frank Crystal Co. as the best Consultants (Thailand); Aegis Consultants (Vietnam); Alinter (Mexico); Interseguros (Costa Rica); MSTC possible choice for BrokersLink. It was also agreed that (Chile); Coorecol (Colombia); ROS (Dominican Republic); Seguros AAA (El Salvador); ZHN (Ecuador); first Global Conference of the new BrokersLink was to be Agencia Independiente de Seguros e Finanzas (Guatemala); Conaseg ( Honduras); Interprotección (Mexico); held in Hong Kong in June 2009. Mayorgay Asociados (Nicaragua); Corporación Continental (Panama); Rehder & Asociados (Peru); Carrion, Laffitte & Casellas (Puerto Rico) (Latin America & Caribbean); Coaseguro (Venezuela)

New members: Toren (Israel);

36 37 17-19 June January 27-29 October 2nd BrokersLink Meeting Global Rebuilding Latin America 3rd BrokersLink Conference - Lisbon Restructuration of our Latin America operations to strengthen Meeting Global The BrokersLink Global Conference in Lisbon confirmed our presence in the region. A new company was created, 4-6 February the network development. BrokersLink de México, which integrates five outstanding Conference - Miami Presence, Expertise & Communication was the theme insurance brokerage and risk consulting firms in into a virtual The annual conference is always the BrokersLink Asia-Pacific for this year event attended by 150 delegates from all over single entity to handle BrokersLink related business. year’s key event for BrokersLink. In Conference - Saigon the world, joined by top executives from national and 2011 the motto was “Global Synergy to Vietnam (HoChiMinh) international insurance companies of the insurance and Fuel Local Wins”. Attended by around brokerage sector. 200 people coming for all over the Some major developments were announced during the 24-26 February world the main issues for the Lisbon Conference: Len Battifarano was appointed CEO insurance industry were discussed at of BrokersLink and the admission of a new member BrokersLink Asia-Pacific high levels: from risk trends, to 25-29 April category: Specialized Resources Services. This was economic outlooks, to the discussion obviously relevant to the insurance industry, since it allows Conference - Singapore on the best way to cover specific risks. RIMS 2010 - Boston BrokersLink members to serve their customers in an increasingly comprehensive, integrated manner, bringing to all members expertise across a diverse number of insurance and risk related disciplines. 1-5 May 2010 2011 RIMS 2011 - Vancouver

New members: Herco (Brazil); CG&B October June Group (Canada); Cornes & Co. (Japan); The new BrokersLink 1 October Anzen Insurance (Israel); In2Matrix Filhet Allard as the newst (UK); Safeonline (UK); Hertz &Co. BrokersLink member website was launched Paul Bitner strengthens (Denmark); IBS (Indonesia); CIC (Trinidad & Tobago); Star General BrokersLink as COO for Gregory Allard, from Filhet Allard, to be (Bahamas); Derek Bogle (Cayman confirmed as the new Board member Len Battifarano as the Latin America Islands); Daewoo Ins Korea (South 1st CEO of BrokersLink Korea); AIR Worlwide (USA); Filhet Official membership from Filhet Allard, the 6th largest corporate Allard (France); AFTA (Panama); broker in France headquartered in Bordeaux.

New members: Van Dessel (Belgium, Luxembourg); CH Toro (USA); Rainmaker Group (Mexico); Paragon (UK); RSI; (USA); BDO (USA); Contacto (Peru); Orbital (Chile); 2012

BrokersLink has helped to redefine and revitalize value 8-10 March July 18-20 October “within the field of risk management and BrokersLink Asia- Len Battifarano 4th BrokersLink related services. Pacific Conference leaves Meeting Global - Taipei BrokersLink Conference - Madrid

New members: Alpha Insurance (Morocco); Arab Commercial Entreprise (Saudi Arabia); BrokersLink Mexico (Mexico); CINCo (Russia); GIB (South Africa); Hadbrok (Egypt);HighDome (Malta); Kindlon (Ireland); Montealto (Chile); PSC (Australia); RSA (Ecuador); Sterling Insurance (Malaysia); Unity Group Holdings (Central America) 38 39 BROKERSLINK THIRD GLOBAL CONFERENCE, MIAMI

AN EXCITING SETTING AND BROAD ATTENDANCE HELPED TO MAKE MIAMI’S BASH OUR BEST YET.

“Global Synergy to Fuel Local Wins” was the network’s strength is also clearly the motto for BrokersLink’s annual demonstrated by our ability to attract the conference in 2011. This conference was support of key players within the the alliance’s biggest event all year and insurance market.” opened admission to the insurance During the Conference, the market at large during its second day. BrokersLink Annual General Meeting The strong and international range of took place, during which the admission speakers delivered a focus on risk of Gregory Allard Executive Manager at management knowledge and technology Filhet-Allard to the Board of Directors in the insurance industry, including the was granted as part of the network’s US Ambassador Frank Wisner, who strategy for growth across Europe. explored the Arab awakening and future Filhet-Allard is the 6th largest developments in the region, Ernest corporate broker in France, and is Legrand, CEO of WEBCBG who offered headquartered in Bordeaux with 700 a keen perspective on the evolution of staff based in eight locations. technology in the industry and Dr. Erwann Michel-Kerjan, Managing Director of the Risk Management and ...the network’s strength Decision Processes Center at Wharton is...clearly demonstrated by School and Chairman of the OECD Secretary-General Board on Financial “our ability to attract the Management of Catastrophes. Dr. support of key players.” Michel-Kerjan brought a new perspective on emerging global risks and discussed the catastrophic crises that will materialize in the coming years. These were just a couple of the themes that contributed to the fulfillment of audience expectations, leading to great gains in credibility for the BrokersLink Global Conference as an event. With over 200 delegates arriving from around the world, this was once more an opportunity to show BrokersLink’s vitality and the recognition of the caption in here caption in here caption in relevance of such an event. Support and here caption in here caption in here caption interest were also shown by the list of in here caption in here caption in here renowned sponsors, as well as a variety caption in here caption in here caption in of media notices. here caption in here caption in here caption José Manuel Fonseca, Chairman of in here caption in here BrokersLink, said at the time: “This is only our third global event, but we believe it is already becoming an caption in here caption in important fixture in the international here caption in here caption calendar. The relevance of the event and in here caption in here caption in here caption in here caption in in

40 41 BROKERSLINK ASIA- ...another excellent opportunity PACIFIC CONFERENCE “to catch up on the alliance’s most 2012, TAIPEI recent development.

NEW MEMBERS, Under the theme “Synergize Strength, members were present for the first Taiwan as the keynote speaker; his talk Cooper Gay Asia, also gave us valuable caption in here caption in here caption Optimize Opportunities,” this year’s time: IBS Group from Indonesia, took the audience through the new era insights. in here caption in here caption in ENLIGHTENING Asia-Pacific Conference was hosted by Daewoo INS Korea Corp from Korea, of financial consumer protection in With the presence of our Chairman here caption in here caption in TALKS, AND a BrokersLink member in Taiwan: and Sterling from Malaysia. Taiwan. Dr. Cheng-Mount Cheng, Jose Manuel Fonseca, full support here caption in here caption Tri-W Insurance Brokers Ltd. The Once again, BrokersLink secured Director & Chief Economist, Asia from Chartis, and dinners sponsored in here caption in here ENGAGING event was another excellent some of the most experienced Pacific Economic & Market Analysis by Zurich and ACE, our annual caption in here OUTINGS: TAIPEI opportunity to catch up on the speakers in the Taiwanese market, for Citibank Taiwan, presented his Regional Conference was another alliance’s most recent developments each of whom explored themes of professional views on the 2012 global great success this year. HAD IT ALL. and to reinforce the announcement of great relevance to the region. economic outlook and financial The next Asia Conference will be the changes of its internal structure, BrokersLink was pleased to present strategy. Tony McHarg, Asia Pacific held in Bali, Indonesia, around the end all while welcoming new members. Dr. Jan-Juy Lin, Commissioner Regional Manager of Chartis, and of February 2013, and will be hosted by Delegates form three new alliance Financial Supervisory Commission, Stephen Britten, Regional MD of IBS.

caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here in here caption in here caption here ...our“ annual Regional Conference was another great success this year.

42 43 MEETUP AT RIMS

OUR MEETUP PUT THE FINISHING TOUCH ON ONE OF THE INDUSTRY’S MOST IMPORTANT EVENTS.

BrokersLink was also present at one of The Cocktail Reception is also a the biggest annual events in Risk traditional gathering of BrokersLink Management –-RIMS 2012--, held in during RIMS. This year’s Cocktail was Philadelphia between the 15th and co-hosted with Frank Crystal. Over 18th of April. 300 invitees -including clients and As usual, BrokersLink organized its prospects-- enjoyed a very pleasant Board of Directors meeting during evening at the Downtown Courtyard RIMS, which was held at the Chart Marriott, a beautiful historic building House. across from City Hall. Over 300 At the Pyramid Club, on April 16th, invitees attended the event. It was a over 15 members from different major networking success. countries were represented at the In addition to these BrokersLink “Meet the Leadership” event where activities, the RIMS organization senior executives from several large invited our chairman, José Manuel insurers were also present. This was Fonseca, to be a speaker in the sessions, after the traditional Member where he delivered a well-received Breakfast. talk on emerging markets and risks.

caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here

José Manuel Fonseca...delivered “a well-received talk on emerging markets and risks. “Over 300 invitees... “enjoyed a very pleasant evening.

caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here caption in here

44 45 MANUEL PADILLA

INTERVIEWED BY JACQUELINE LEGRAND, COO AT MDS HOLDING.

supply chain issue without first increasing and the impact is significant. their rating evaluation process. ISO 3100 A RISK MANAGEMENT EXECUTIVE TALKS ABOUT identifying the supply chain exposures. For some organizations, cyber security and ISO 31010 identify international issues are a part of the supply chain topic. standards for risk management programs HIS BIGGEST CHALLENGES AND WHAT’S AHEAD. What is your perspective on cyber In addition to our internal risk analysis, and processes. These are a few of many security? we are subject to audits by customers and requirements –-there are more Tell us a little bit about your background. in the first place. Challenges can be from an administrative perspective. I am This is one of the most challenging topics industry group representatives. This is a internationally that are similar. I expect I was born in Brooklyn, New York, and was created through internal change of risk of the opinion that standardization is not I face. We engage a lot of financial and topic that will continue to develop and that these requirements will continue to raised primarily by my grandparents who appetite or change in our physical risk a key value benefit. I recognize that the physical resources on this topic. We hold change just as quickly as technology be refined over the next few years. migrated to the United States from Puerto profile. Other challenges can be created organization of a process is critical, but it fairly detailed conversations with our changes. Rico in the 1950s. I graduated from East through external means and are beyond should not discard the important underwriters on the security issues we I see that the future is bright for the risk New York Vocational High School in 1982 our immediate control. For instance, a differences in how insurance issues are have implemented or those that we How do you see the future of risk manager. There is the current pressure of with a concentration in Engineering change in the legal or regulatory landscape handled throughout the world. In manage. It is the type of function where management and risks managers in the the economy and how it affects career Mechanical Design and Construction. I may force us to reconsider how we contrast, the single broker entity model, you try to stay one step ahead of the people next few years? momentum, however there will be a need enlisted in the United States Navy and manage risk entirely. That same change in my opinion, stifles critical thinking and or groups trying to do you harm. The level The practice of risk management has for a professional to continue to perform served between 1982 and 1988. My may negate the need for risk transfer the development of new ideas. of sophistication by third parties is become more of a standard operating the function at major organizations. The primary professional duties were entirely or force us to completely requirement and in some cases is challenge I see for risk managers is in shipboard engineering, and I served for a re-evaluate our risk appetite. For me, the Could you share with us your view on required under statutes. In the past, only demonstrating their direct and indirect brief time as an Assistant Master at Arms primary key is in the identification of the supply chain management? mature organizations maintained formal value to the organization. The job on a military airbase in California. I challenge before it becomes one. I This is a very important topic and has risk management programs. There was description is also becoming more defined attended the College of Insurance (now confront this on a daily basis. always been practiced to some degree in no clear standard as to how broad a and there is a movement to mature into St. John’s School of Risk Management) business. The issue is so critical that there program needed to be. The Sarbanes- the next role which is an Enterprise Risk and graduated in 1992 with a Bachelor’s What are the benefits you expect while are professional certifications and Oxley Act now requires an internal Manager (ERM). I think most risk Degree in Business (Cum Laude) and a using a network such as Brokerslink? recognized standards that have been control framework which includes managers are engaged in the activities Certificate in Multi-Lines Underwriting. I expect broad expertise and quality developed in the discipline. My view on risk assessment. The Securities and required by ERM. Those who are not need I was a student involvement program service. I am a big believer in local market supply chain management is that it needs Exchange Commission requires to expand their horizons and become participant at the Risk and Insurance knowledge and in developing personal focus by the procurement, distribution, that a company address fraud risk more involved in their organizations. A Management Society Conference (RIMS) relationships with the markets and operations, and risk management assessments. The New York key note is to be visual to management in 1991. As a result of this experience I intermediaries. The Brokerslink business departments in a group setting. Each Stock Exchange governance and to make yourself a recognized focused my career towards the risk model suits the way we operate our member of this group should add value to rules require an audit committee resource within the organization. This is management discipline. In early 1992 I businesses. It allows us the ability to the risk analysis portion of the process. As to assess and manage the best done through personal interaction. accepted a position as an Insurance identify key issues quickly. I have had the risk managers we tend to respond to the company’s exposure to risk. Analyst with my current employer and pleasure of dealing with a number of your direct financial impact of an interruption Standard & Poor’s has initiated a have now been on their team for over 20 members and have always been impressed in the supply chain. The other groups requirement for companies to discuss years. with their professionalism and knowledge react to everyday issues which may have their risk management plans in of the industry. The management team is nothing to do with physical damage. What is your role at MAFCO? very proactive and very keen on providing Everyone in the group is at a disadvantage I serve as the Director of Risk good customer service. Some of the if there is no clear understanding of the Management. My primary responsibilities alternatives to the Brokerslink model try direct and indirect impact of a supply I have had the include all facets of the risk management very hard to standardize processes in an chain problem to the organization. There pleasure of dealing with a process and any ancillary activities related attempt to make things simple to handle are a number of risk transfer products that “number of [BrokersLink] to this function. I am actively engaged in address an interruption in the supply members and have risk analysis, claims administration, Challenges can chain. For me, the key is to first identify engineering loss control and health and the supply chain exposure and then always been impressed be created through safety initiatives on a global basis. properly design a risk transfer mechanism with their professionalism “internal change of or loss control approach to address that and knowledge What are the key challenges that keep risk appetite or exposure. For some, the analysis may you up at night? identify that there are alternative sources of the industry. That is an intriguing question. Challenges change in our or even a replacement process that can present themselves every day. An physical risk profile. effectively deal with the exposure. In important point is to recognize that there my opinion a company cannot put is a challenge that needs to be dealt with together a program to deal with the

46 47 JAIME BORRÁS

THE ARTAI CEO SHARES HIS THOUGHTS ON SPAIN, THE BROKERSLINK NETWORK, AND WHAT LIES AHEAD.

1 | What are the key milestones of your experience in common decided to start in Latin America, where the Artai Group Artai’s client portfolio boasts more than career? Please tell us a little bit about a new project. As a result, Artai was has plans for an ambitious expansion. three companies listed on the IBEX. the history of Artai. born. Finally, I was lucky to come into 2012 has been an exciting year for the My first job was working for Banco Our objective was to aim for the contact with José Manuel Fonseca 6 development of Artai. We acquired the Vitalicio, part of the Generali Group. I Spanish middle market by offering good years ago. He informed me of his idea to brokerage firm CNA in Navarra, one of was based in Galicia for the first four service to the fishing and timber sectors. create an international network the most stable areas for midsize years and later moved to Madrid for Our hopes were to capture the largest --BrokersLink, which was launched on businesses in Spain, adding 800,000 another four as an inspector general in share possible of the market and to be the 20th anniversary of MDS in Porto. EURO to our annual revenue. We also Spain’s marine industry. This gave me a constantly pushing ourselves Mr. Fonesca, myself, Thierry Perrouse, acquired the consulting firm Asur great opportunity to see how the market professionally. and Donald Begg of Cooper Gay were Credito that provides advice and worked on a national scale. My time at In 2005 HHC was integrated with present at this important event --one services to our credit clients. Banvo Vitalicio spanned the beginning Artai. HHC was an independent which distinguished my career through We created our own risk of 1971 to late 1978. brokerage firm in Leon, where it had my role as a founding member. Today, management consulting firm, Following my work with that firm, I established itself as the leader in road we continue to develop and practice the James Steel Services, to operate as moved to Gil y Carvajal as Director for insurance for the passenger transport original vision of collaboration and surveyor and adjuster, the Galician Region. Gil y Carvajal was sector. With this integration came the diligence. complementing our current risk a highly professional and well respected acquisition of two experienced and management activity. The brokerage firm. It was in this role, reputable professionals, Joaquin 2 | What is Artai today? company will be involved in influenced by the company’s vision of Huergo and José Ramon Higon, further Artai aspires to be the leading assessments, suppliers control and the market, that I became acutely aware strengthening the team at Artai. independent private professional claims management platforms. of the importance of both customer This year, we’ve also introduced the brokerage firm in Spain and Latin Going forward, we plan to acquire service and the need to have a complete insurance brokerage firm HENNER- America. To achieve this, the team must 33% shares of a Moroccan brokerage understanding of business risk. I started ARTAI. The firm specializes in health be very clear in its objectives. The value firm, then increase our participation in out in the London market, working with insurance, a line of business of good business ethics, the value of full to integrate the company into brokers such as Willis, Hogg, Seascope, experiencing major growth. Another hard work and commitment, and the Artai’s Group in a one year timeframe. and others, and I had the great fortune decisive and important milestone was value of talent are all central to our It is an important strategic decision that to get to know some great professionals the creation of Argentina Artai. Esteban success. These values help strengthen will position Artai as the first Spanish like Mark Garwaith, John Welleslay, and Luis Sanchez, together with their our foundation. broker in North Africa. We believe David Southwood, and Nick Taylor. team, have proven reliable and Our motto is that success can only North Africa is the market of the future The experience I gained working with competent throughout their work with result from a job well done; it’s never an for both Spanish and European these professionals on a day to day basis us, and we’re proud to have them on end in itself. Artai employees, a team of investments. would prove invaluable to me in the board. Argentina Artai is our main base more than 100 people managing the risk Artai Argentina also created their future. I learned the importance and and insurance of our clients, look to this own enterprise risk management potential of an international network. motto throughout their work. We aim consulting firm to monitor the services We began to travel to Argentina to place The value of good to achieve notoriety and trust as delivered by suppliers to our clients. Spanish ship-owners risks on the local business ethics, the specialists and as a reference point in This service is in high demand markets. certain sectors such as Maritime in Latin America and I I was part of the company’s executive “value of hard work (Fishing and P+I), Transport of believe Esteban team, headed by Santiago Gil (one of the and committment, Passengers by Road, Public best insurance professionals of the last and the value of Administration, and the general market century), and I was also a shareholder in via the manufacturing of timber, what was then the first Spanish talent are all central textiles, and so on. In 2011 we humbly brokerage firm. to our success. began to introduce ourselves to the In 1993, five people with extensive world of high exposures through professional expertise and over 15 years’ Eduardo Llinas, and at the moment,

52 53 We believe BrokersLink should continue to be involved in management leadership “and professional development.

Sanchez, President of Artai Argentina, related to our business while networking Finally, the important post- better served by wholesalers. Information systems over the next few will have the opportunity to share with and collaborating is sure to spark great conference stage will help us to properly Already, many insurance agents are years are going to be vitally important, the BrokersLink community his things. I hope a prominent outcome is understand and use the advantages and working simultaneously through three and I think our field as a whole will be experience in this activity. a shared feeling among our members synergies arising from the conference. or more insurance companies. The better equipped to take on coming Through Artai Argentina, we plan to that they’re part of the same team. This will help us to continue to generate Spanish branches of the mega-brokers challenges. complete the expansion of our footprint All BrokersLink staff are actively visibility, ensuring our media reach have begun exploring this line of Communication will also be essential, in Uruguay and Chile this year. working in the preparation of our --and our future-- is strong. business, and we in Artai are also and I think video conferences will be a conference. Jacqueline Legrand, investigating this potential as well. vital part of the business worldwide. To 3| What should be the role of Liliana Baptista, Elisa Vázquez, 5 | What are the trends in Spanish Before success can be achieved in this continue to offer value, we need to be BrokersLink in regards to Artai? Javier Huergo, and of course José insurance brokerages? area, however, all parties involved must more efficient and to optimize our We’re a founding member of Manuel Fonseca and myself are Without doubt there are profound work to rebuild trust and mutual resources, and our service must improve BrokersLink, and believe this network’s working diligently to assure the changes taking place in the understanding. every step of the way. foundation and success has been vital success of the conference. intermediation and insurance Meanwhile, an exciting growing for us and for other medium-sized There are three main components assessment sectors in Spain at the trend is the increase in services related 8 | What are your favorite places in independent brokers determined to to this success, as I see it. First there’s the moment. The Spanish market consists to management risks. Madrid and/or Spain? Do you have any offer global service to their clients. pre-conference phase, where of nearly 3,000 brokerage firms, as well recommendation for our BrokersLink We’ve enjoyed being a part of communication will play a leading role in as close to 2,000 independent 6 | How does the current economic members? BrokersLink’s international team, and preparing and advertising the conference insurance brokers. No matter how you situation in Spain impact the As the Spanish son of Argentinian we’ve certainly benefitted from its between our members, as well as in the look at it, these numbers are very large, insurance market and the brokerage parents and Portuguese grandparents, capabilities in information and skill sector itself. After this, of course, the and in the end this means that offering industry? it’s a luxury to me to live in this great city, exchange. The strength of BrokersLink conference itself will occur, and the competitive prices requires a The impact is direct due to the fact that from which hundreds of thousands of is directly linked to the strength of its visibility and strength of our compromise in quality for many service tens of thousands of companies have immigrants set off to Latin America, to members. We believe BrokersLink network will be displayed in providers. closed in recent years in Spain. Primarily, later be welcomed back again at the should continue to be involved in all its glory. Many of these providers find businesses related to the construction beginning of the last century. Madrid management leadership and themselves in a very difficult sector, such as the timber industry, the has one of the most pleasant climates of professional development. The network situation economically. As a result textile industry, the household Spain, and its beauty and culinary should also analyze and act upon the of falling premiums and related appliances industry and so on were the excellence are unequalled. potential for greater collaboration factors, several companies have hardest hit. Many others have seen a Madrid is also the city with the between members. been forced to close. This will, reduction in both their turnover and highest rate of growth in what is now without doubt, cause a major business activity. the European Union over the last 4 | As the chairman of the event, how streamlining within the The excessive increase in hundred years, increasing from 10,000 do you see this 4th BrokersLink Global brokerage sector. Clients construction debt, the collapse of the inhabitants to nearly 400,000 today. Conference and what are your of struggling brokerage financial sector, and the excessive over- The people are very entrepreneurial and expected outcomes? firms may well be reliance on the housing sector has the city boasts a pioneering role in the For Artai it is an honor to have Spain provoked a substantial fall in consumer world’s fishing industry. chosen as the host country, and this demand. All of this naturally results in I’ve travelled throughout Spain over means something very special to me less activity, less capital insured, less a long period of time, and this country personally. I still remember the transport, and less credit. is easily one of the most diverse I’ve ever beginning of BrokersLink in Porto, I think Our work is focused on serving experienced. Places such as Andalucía, when we only had three members, and “ companies, so if business suffers, we Levante, País Vasco, Asturias y after just a few years, more than 65 video suffer as well. Santander, and Cataluña, which hosts countries will be represented at our conferences Barcelona, one of the most beautiful conference-something which is will be a vital 7 | How do you see the future of the cities in the Mediterranean region, all absolutely incredible. As far as the insurance brokerage activity, in Spain have much to offer visitors. results, I expect them to be exciting part of the and in general? Overall, Madrid is a city that believes and plentiful. Having more than 200 [insurance In my opinion, Artai needs to amplify in itself and which has tremendously professional members together, business services and to work towards being advanced in recent years. All of Spain is along with leading figures in the worldwide. pioneers in risk management for our special to me, and I’m sure conference world of international insurance, clients to stay competitive in the attendees will find many special venues discussing the most burning issues Spanish market and beyond. of their own.

54 55 ARE MULTINATIONAL MANY MULTINATIONALS REALIZE organization could plan attacks of CORPORATIONS large scale and opt for financial targets THAT TERRORISM THREATS as well as political targets. The CONSTITUTE REAL RISK -BUT ARE terrorist threat has since continued to UNDERESTIMATING develop on a smaller scale while social THEY RESPONDING EFFECTIVELY? and political events shaped by political violence are emerging. EVOLVING TERRORIST The results of the Global Risk report 20115 illustrates the fact that THREATS? multinational corporations perceive political violence as a high probable risk. The factors that are of particular sector, target the whole country and can, Terrorism the 2005 public transportation concern are political radicalization, BY GREGORY RANC thus, affect the functioning of the Terrorist risk can generally be defined bombings in London, the 2008 attacks religious radicalization, social business operating there. Examples in four categories; Islamic extremist across Mumbai, and the suicide fragmentation, economic disparity, A decade after the attacks of September include a government’s decision to terrorism (Al-Qaeda); bombing in 2011 at the Domodedovo geopolitical tensions, and the existence 11, 2001, terrorism remains a significant forbid the transfer of currencies or the Separatist terrorism (ETA – Euskadi airport in Moscow. Within the four of fragile States. Multinational risk for corporations throughout the outbreak of civil war. Ta Askatasuna/Basque Fatherland and general definitions of terrorism, the corporations are aware of threats due world. To address the financial and Government instability can be Liberty in Spain); Anarchist terrorism more active and organized group is to social change and wealth disparity, operational fallout from an attack, identified as political risk when described as “left”(A Exarhia in Greece); represented by Al-Qaeda. as supported by the following statistic: multinational corporations can mitigate governmental authority is exercised Terrorism described as “right” (Anders 63 percent believe that their businesses loss through insurance, reinsurance, and legally or illegally. Many government Behring Breivik in Norway)2. Al-Qaeda Today face political violence due to their risk management tools. Over the years risks, notably those that are specific to Due to international interpretations Osama Bin Laden’s death on May 2nd relationship with and role in the since the 9/11 attacks the terrorist threat business, contain an ambiguous mixture and complex characteristics, there is no 2011 raises questions about the future capitalist system. Additionally, three has evolved, leaving many multinational of legal and illegal elements. Actions unique or unified definition of direction of Al-Qaeda. Firstly, after Bin out of five business leaders predict that firms unaware of new or changing ranging from a legitimately enacted tax terrorism. For companies buying Laden, Al-Qaeda is likely to decentralize the operational risks associated with exposures. These firms need to ensure hike to an extortion ring that is insurance, its meaning depends on the itself more, making its threat more political violence will increase during that adequate procedures and resources authorized to operate (e.g. directed and country in which a business is based. For diffuse. While still alive, Bin Laden the five next years. The Middle East and are in place while securing the insurance supported by a corrupt local police force) example, the governments of Canada or succeeded in unifying his operations the United States are considered the and reinsurance solutions that are can be considered as risks linked to Switzerland do not have the same as intrinsically anti- American but two main regions exposed to these appropriate for their specific risk profile. government. The dangers of government experience addressing terrorism as does no foreseeable successor can speak threats6. There are three categories of risk to be instability can result in political unrest, Spain or the United Kingdom. The with the same authority as him. In 2011, this risk was at the heart of a considered when managing these for example when conflicts arise between United Nations attempted to develop a The future of the organization movement called the “Arab Spring”, threats; political risk, terrorism, and distinct members of a government common definition but were may see Al-Qaeda become a which unleashed a wave of peaceful political violence. Consequences and fighting for succession or from responses unsuccessful. The different collection of commanders demonstrations through Tunisia, losses due to these risks can arise to the deterioration of social conditions, interpretations that exist throughout only united by their resulting in the ousting of president following a single catastrophic event or such as massive and wide scale riots. the world converge towards describing beliefs while divided Zine el-Abidine Ben Ali. After the through a chain of events that build Political violence is therefore part of an act of terrorism as “an action up in autonomous uprising in Tunisia, protests in Egypt slowly. political risk. In addition to strikes, urban perpetrated by an effective person in the territories presided in January and February 2011 forced riots, and civil wars, the following events name of or in relation with an over by a central president Hosni Mubarak to resign. Political Risk can be included when defining political organization that exercises coordinated governing body. Nevertheless, the quick overthrow of It is important to note the distinction violence exposures: wars, social activities towards the overthrow, or the Secondly, the death the presidents of Tunisia and Egypt did between political risks specific to disorders, insurrections, rebellions, and influence of, a sovereign government of Bin Laden does not not yield the same results elsewhere in business and the political risks regarding revolutions. or on a government’s public by force, mean the end of the the region. While other small scale operations specific to the business’s host violence, or fear”3. world-wide terrorist demonstrations took place in almost country1. Political risks specific to Due to Although no comparable objectives of Al-Qaeda. every other Arabic country in the business are those risks that target a international attacks to the World Trade The declared elevation region, the governments of Bahrain, business’s operations based on Center in 2011 have been of Ayman Al Zawahiri as Libya, Syria, and Yemen deployed discriminatory political differences and “interpretations and repeated, the threat has the organization’s leader troops to withstand the call for change. agendas. For example, the risk of a host complex always been present and has suggests that Bin Laden’s In some countries civil war was county’s government cancelling its characteristics, since taken new forms. insistence declared. In Libya, civil revolt contract with a business as opposed to a there is no unique or International terrorism culminated with the capture and death terrorist group that targets the physical continued after 2001, Political Violence of Colonel Kadhafi. In Yemen, operations of the company. unif ied def inition of most notably with the The events of September 11, President Ali Saleh stepped down and There can be political risks specific to terrorism. 2002 Bali nightclub 2001 had an unprecedented ceded power to his deputy; and in Syria a country that, while not directed against bombing, the 2004 train impact by raising global civil unrest currently rages on presently a particular company in the private station bombings in Madrid, awareness that a terrorist without an end in sight.

56 57 The reinforcement of multinational businesses’ information on terrorism “and political violence risks is a major aspect to ensure proper risk management. • Certification of an act of terrorism by products available in the market is strong producing operations. The crisis that the government is not required (for growing Europe and other western economies example the United States requires • The largest markets with capacity for face is becoming a spark for political governmental certification before solutions are Chartis and Lloyd’s of violence (for example, Greece or Great compensation is paid); London Britain), which can in turn become a • No minimal loss requirement to reach • Underwriting capabilities and stand- potential generator of terrorist acts. Managing Evolving Risk each loss would present. Three specific a whole they manage the same risks. the intervention threshold above an alone terrorism forms have been Moreover, multinational corporations Overall, the level of preparedness of categories to be considered when insuring Some exceptions, such as France, offer a agreed deductible; developed over the past decades as the must deal with other catastrophic risks multinational corporations to protect against assets targeted by terrorism; wider cover. • Fire damage and loss as a result of a private market has grown. such as natural events like earthquake, themselves from terrorist threats is human resources (employees); physical Various approaches to provide terrorist act is included in the coverage; flood, tsunami, volcanic eruption, and favorable, but that distinction depends resources (buildings, machinery); and solutions are being created and financed • Coverage can be extended beyond the Insurance Markets Evolving hurricane exposures. Natural disaster on the criteria that is chosen to measure intangible resources (the business’s by private insurance companies. Their expiration of national programs (2014 for to Meet New Risks risks are defined and covered separately the level of preparedness. Awareness is reputation and/or its computer data). intervention is fueled by the retention the United States) The risks linked to terrorist threats are from terrorism and political violence growing and these threats seem well Because multinationals operate in that is imposed on them (or threshold Originally, the capacities of the increasingly sophisticated and wider in risks, as the latter are man made integrated in most risk management several countries, they are more likely to from which the State intervenes), by the terrorism insurance market offset the scope. This evolution tends to ensure catastrophes. These risks can be just as approaches. Although, as risk awareness be exposed to terrorist and political financial contribution linked to the exclusion of terrorist risk from property that the development of the stand- destructive with serious implications for is a necessary component of risk violence risks than a business located in reinsurance cost, and to bolster their policies added after September 11, 2001. alone market in this space will continue. the financial accounts of companies, management, most firms do not have one nation. This risk is diverse and can be corporate responsibility by offering this The absorption potential of the losses With regard to insurance products, especially as the frequency of recorded sufficient safeguards in place. a destabilizing force for both their coverage to employees. Regardless of has increased significantly in the last 10 terrorism and political violence risks are disasters during the last decade has Establishing performance tools and financial health and operations, should private sector solutions, the total years, from a few hundred million to over more likely to be covered by a single increased compared to previous years. procedures to assure the continuity of an act occur. withdrawal of any financial support from $2 billion today. contract. For example, Hiscox is one of This leads reinsurers to make estimates operations and crisis management is In the aftermath of September 11, 2001, the State is not probable, even in the This significant increase underscores the pioneers on this type of coverage. in terms of insured losses. Today, the essential. On this particular point, many many countries, starting with the United current situation of excessive debt that two major points: Recently, Bermuda-Hiscox Ltd. black swan theory9 plays an increasingly multinational corporations do not have States and France, established programs most of the governments (guarantors of • Demand for terrorism insurance developed an insurance product significant role in risk managers’ policies in place to avoid delays in recovery with insurance and reinsurance these funds) are experiencing. designed specifically for U.S. hospitals reflection and strategy. if any of these types of events occur. companies to allow coverage against to deal with terrorist threats. This new Multinational corporations are The reinforcement of multinational terrorist risks to become readily available. Limited Capacity of the product offers up to $50 million for full intelligently run organizations that businesses’ information on terrorism Before the September 11 attack, other National Programs coverage against liability related to have proven in the past to be and political violence risks is a major countries like Spain and the UK, having From an ethical point of view, terrorism, the risks of nuclear, chemical, appropriately flexible when facing aspect to ensure proper risk already experienced terrorist attacks of government intervention is a necessary and radioactive terrorism, changes in their industries as well as management. It requires a deeper their own, had established similar function. Terrorism affects several public compensation for the security and emerging global challenges. They can understanding of the financial, social, compensation strategies. In 1986, France issues such as national security, national evacuation of victims, and casualty count on their internal strengths. Crisis political and humanitarian situations of created a compensation fund for victims interest, compensation for domestic triage expenses8. Management and Business Continuity the respective countries in which they of attacks within its borders and for victims, and the overall economy of Reaching appropriate levels of plans are efficient tools to reinforce operate. Collaboration with local French nationals who are victims of the country. All forms of political protection and optimum preparation to their capacity to proactively respond to authorities and other local decision terrorism abroad. In 1990, the organization (republic, federal, state, address terrorism and political violence Natural Disasters, Terrorism or Political makers help address these factors. In compensation for victims of terrorism, monarchy) are concerned about risks lead to substantial financial Violence perils. The hypothesis is thus countries with fragile security and previously managed by the State, were terrorism and are facing its challenges. investments for any company. In today’s formulated that these businesses will political environments, local reserved to a new fund, the FGTI7. Government programs provide current period of economic crisis, adapt themselves through public, commitment is a significant advantage Multinational corporations must rely on limited coverage in terms of value, multinational corporations often decide private and internal solutions to meet for international corporations. Indeed, a the local regulations in the countries including such limitations as restrictive to cut these expenditures in efforts to the challenges of prevention and multinational business’s involvement in where they operate to determine conditions on covered perils. As this post profits and allot funds to expenses coverage of terrorism and political the local economic and social life exposures. The terms and conditions coverage is usually insufficient, deemed more essential for revenue violence risks. (financial development and that frame these local programs vary the market has a fundamental role to humanitarian initiatives) contributes to from one country to another but it is a provide additional coverage or a more the strengthening of a positive corporate non negligible element that must be appropriate solution for corporations image of the company. considered by corporations when and insurance firms. The crisis that Europe creating global terrorism insurance The coverages available on the private and other western Solutions programs. insurance and reinsurance markets offer “economies face is Currently, the definition of “terrorist Today, 12 of the 34 countries that make the following advantages: threats” covers a wider spectrum than ten up the Organization for Economic • Ability to extend coverage to include becoming a spark for years ago, and the risks linked to these Cooperation and Development possess perils otherwise unavailable such as political violence. threats logically follow. Multinational insurance and reinsurance programs for nuclear, biological, chemical, and This Viewpoint was corporations are therefore concerned the compensation of victims following a radiological attacks; war; and civil written by Gregory Ranc, a about insuring several aspects of their terrorist attack. Altogether, 20 different authority exposures; broker in the International operations and the levels of consequence models are in place around the world, as • Broader coverage in more territories; Division at Frank Crystal & Co.

58 59 EDUARDO ROMERO A vital legacy to risk managers worldwide.

Regretfully, 2012 saw the disappearance Even though he of Eduardo Romero, former president was retired, he was of the Spanish risk management association - AGERS – and former “still very active in the member of the FERMA board. insurance and Eduardo Romero was a prominent risk sectors. personality among risk managers worldwide with a lifetime dedicated to the industry and a career worth noticed at Grupo Dragados (Spain), where he worked for 30 years in several areas, both in Spain and abroad. Even though he was retired, he was still very active in the insurance and risk sectors. Known for his passionate work, his loss it’s felt all over the main institutions and personalities of the Eduardo Romero at the 1st BrokersLink insurance and risk sector, mainly in Meeting (2004). At the time MDS was Europe. celebrating its 20th anniversary where he In 2004 he was the key note speaker was guest of honour. and a guest of honour at the 20th anniversary of MDS (held in Porto). “The memory of Eduardo Romero will remain first of all as a friend but also as Maurizio Castelli Testimonial a man of respect between his betters Former FERMA President and his peers. He was a model of professionalism. We regret such loss I had the pleasure and honor to work with Eduardo in the period 1999-2001, but his memory and legacy will go on”, in the preparation of the second FERMA Forum of the “new FERMA” era. At says José Manuel da Fonseca, Chairman that time I was the president of FERMA which had recently moved away from of MDS Group. holding the biannual congress in Monte Carlo and started moving in different Eduardo Romero presided over countries and cities around Europe. Barcelona had been chosen as the second AGERS between 1999-2003. Also in city, after Berlin, to host this event, which had been completely renewed also 1999 he became a member of the in its format and contents, starting to make it the wonderful European event executive committee of FERMA, that we know today. Eduardo was the perfect choice to be the Chairman of the having been the Barcelona Forum Forum and he took this role very seriously and professionally, but also with the President in the year 2001. touch of humanity and good spirit which was one of the many virtues of Throughout his career he also Eduardo. Therefore it was easy, and a pleasure, to team-up with him, and it collaborated with articles in the was rewarding, for the entire FERMA team to have such a great local person as specialized press and in different the central reference in Spain for the organization of the Forum. The great universities within courses and success of FERMA 2001 in Barcelona, was certainly as always a teamwork, but seminars on risk management. to a large extent it was Eduardo’s merit. And for me it was the opportunity to In 1999, Romero received a life time build up a friendship that continued until the sad time of Eduardo’s passing achievement award from Strategic away. In the following years I had in fact several further opportunities, as Risk. co-chairman of the Forum in Rome, as chairman of IFRIMA and later on in my “new life” at XL, to appreciate Eduardo’s professional and personal qualities. I will miss him a lot; I’m sure he’s now teaching Risk Management to the angels.

Ignacio Martinez Baroja Testimonial President of AGERS

61 SPAIN INSURANCE IN TODAY’S TOUGH ECONOMY, SPAIN IS FACING A RANGE OF CHALLENGES. MARKET (NON-LIFE) HOW WILL IT EMERGE?

With over 40 years’ experience in principal ports and industrial centers, and indebtedness and one of the most banks’ exposure to toxic property assets. insurance policy is one that may be issued Article 55 of the Insurance researching and delivering insurance is also famous for its architecture, art, and stagnant labor markets in Europe. There are no obvious growth catalysts to abroad or the risk(s) may be included in a Intermediation Law categorizes as “very industry intelligence, Axco provides fashion. The city hosted the Olympic Consumer demand has dropped revive the economy. Spain’s appeal as a global master policy by an insurer serious” the acts of operating as an business-critical compliance and market Games in 1992. Over five million people significantly as households have reduced business location is expected to improve unauthorized in that country. An insurance intermediary without the data on non-life, life and benefits, personal live in the metropolitan area. spending. Unemployment, which tripled slightly over the next five years, however, authorized insurer is one which is necessary authorization or placing risks accident, healthcare, and employee Valencia - population 46,200. Valencia in the four years to 2011, has also depressed partly due to market opportunities and permitted to do business in a country (or with unauthorized insurers. These may benefits markets across the globe. is the capital of the autonomous region of domestic confidence. Fiscal constraints policies that favor private enterprise, region) by the local supervisory authority. give rise to the cancellation or suspension The following article contains extracts the same name and is Spain’s third largest have required spending cuts and tax competition, and foreign investment. Please refer to the text below for the of the license to operate, a fine of between from Axco’s Non-Life (P&C) Insurance city. It is on the Mediterranean coast a few increases, as the government has sought Standard and Poor’s reported in June regulations that apply to non-admitted EUR 15,001 (USD 18,927) and EUR 30,000 Market Report for Spain. miles inland from the port of El Grao. The to reduce its budget deficit, estimated at 2012 that Spain’s sovereign debt was rated insurance for this country. (USD 37,854) and the publication of the city lies in the midst of a fertile plain, 8.9% of GDP in 2011. Labor mobility was BBB+ with a negative outlook. infraction. General Country Information which supports a thriving horticultural expected to improve somewhat with the Summary Please note that this is an extract from Population industry specializing in the cultivation of approval of temporary contracts for up to Supervision and Control Non-admitted insurance is not permitted Axco’s available regulatory and tax The last census was held in 2001 and oranges and lemons. The metropolitan four years from 2011. A sample of Spanish compulsory in Spain because the law provides that compliance information. To obtain a recorded a population of 40.85 million. population is estimated to be over The economy entered recession in late insurance is listed below: insurance must be purchased from locally comprehensive understanding of the According to the National Statistical 800,000. 2011 and a severe contraction is forecast • Motor third party liability. authorized insurers with some licensing requirements, please refer to the Institute the population in January 2011 Seville - population 27,701. Seville is the for 2012, which will keep Spain in recession • Workers’ compensation exceptions. full report. was estimated to be 47.19 million. capital of Andalucía. It is an ancient city until the end of that year. Real GDP is (state scheme). Insurers from European Economic In recent years, an influx of economic standing largely on the left bank of the expected to shrink 2.2% in 2012 and grow • Passenger liability (personal accident) Area member states (European Union Insurance Market Overview migrants has changed the population Guadalquivir River. Its cathedral is said to by 0.3% in 2013. in respect to public passenger countries plus Norway, Iceland and The Market Today structure, with immigrants arriving from be the largest Gothic church in the world. In May 2012 Spain was obliged to rescue transport. Liechtenstein) may provide insurance Summary and Trends Latin America, North Africa, Eastern Spain’s first high-speed train line was Bankia, its fourth-largest bank and then, • Hunters’ liability. under freedom of services legislation. The key issues now facing insurers and Europe, and elsewhere. In 2011, it was constructed to link the city with Madrid in June, the government was forced to ask • Professional indemnity for insurance brokers arise from the global recession estimated that some 5.75 million residents, in 1992. Over 700,000 people live in the its Euro area partners for help, securing a and reinsurance intermediaries, ship Fines/Penalties and the financial problems of the Spanish 12.2% of the total population, were metropolitan area. loan of up to EUR 100bn to bail out the inspectors, auditors, companies In accordance with Article 41 of the Law economy. Business closures and cut- originally from outside Spain. country’s banking sector. Rather than offering investment services, on the Regulation and Supervision of backs have resulted in little new business Economy feeling reassured, the markets feared professional companies, and Private Insurance, the penalty for becoming available in any class. Largest Cities Economic Performance Spain would become unable to service its prevention services working in operating as an insurer or reinsurer Meanwhile, good results for insurers Capital Historically the Spanish economy was burgeoning debts; these concerns, agronomy and occupational health without a license comprises the over many years up to 2011 led to increased Madrid - population 232,858 (central). based on agriculture, but the services together with the downgrading of 18 on behalf of some autonomous publication of the offence by the General competition: it became market practice to Madrid is both the capital of Spain and of sector is now the main economic force. Spanish banks, led to the interest rate on regions. Directorate of Insurance and Pension grant wider cover at no additional cost the autonomous Community of Madrid. Retail, banking, and telecommunications 10-year Spanish bonds being increased to • Decennial cover for private dwellings. Funds and a fine corresponding to 1% of and rate concessions were the norm. It is the political and cultural heart of the contribute considerably to the sector, but 6.8% shortly afterwards. Inflation is • Third party liability for pleasure craft the offending company’s capital or Therefore, insured parties now expect a country. It is the highest capital city in tourism is the dominant service industry. forecast to decline to an average of 1.6% in and sports craft owners. between EUR 150,000 (USD 189,270) and reduction in the price of their policies at Europe, situated 2,165 ft. (660 m) above sea Foreign direct investment averaged 3.0% 2012, as wages are held back and consumer • Third party liability for vehicle EUR 300,000 (USD 378,539) if 1% of the renewal. The market is price-driven and level on an upland plateau almost exactly of GDP annually between 2007 and 2011. demand remains low. They are then testing stations. capital is less than EUR 150,000. all policy terms and conditions are open in the center of the Iberian Peninsula. The The outlook for the next few years is expected to rise to 2.1% in 2013. • Aircraft third party cover in city has expanded considerably during the poor, as policymakers face a collapsed Total public debt is much lower than accordance with EU legislation. past 40 years as people have migrated housing market and construction sector, that of Greece, although Spain has high A complete list of compulsory AXCO UPDATES - MARCH 2012 there in search of work. The metropolitan a fragile banking sector, consumer private sector debt, dominated by the insurance can be found in Axco’s Non-Life population exceeds three million (P&C) Insurance Market Report for Spain. It has been reported in the press that the government is preparing to issue a residents. Please contact [email protected] for royal decree containing a provision that bankruptcy administrators will be further details. required to carry liability insurance. Other Major Areas/Cities ...a severe Law No 12/2011 of 23 May 2011 established compulsory liability insurance Population estimates shown below are for contraction is forecast Non-Admitted Insurance for operators of nuclear facilities. The entry into force of the law depends on the city centers in January 2011. “for 2012, which will keep Regulatory Position the ratification of the amendments to both the Paris Convention and the Barcelona - population 132,870. Definition. Non-admitted insurance Brussels Convention by all signatories. Barcelona is the capital of the ancient Spain in recession until refers to the placing of insurance outside Liability insurance for companies that grant credits or act as credit brokers principality and modern autonomous the end of that year the regulatory system of the country in is now compulsory under the terms of Royal Decree No 106/2011. region of Catalonia. It is one of Spain’s which the risk is located. A non-admitted

62 63 to negotiation, so that prudent the crisis. justify having specialist insurers such as underwriting practices have been Insurers and brokers are pessimistic those which concentrate on professional abandoned and commercial about the immediate future, however, indemnity business or those writing only considerations predominate. foreseeing a continued reduction in rates funeral expenses. Most of the major Insurers are taking different approaches and widening of conditions, and also the foreign insurance groups are present in to this situation. Some are targeting all deterioration of their results, a fear the market. new business and renewals aggressively so confirmed by initial figures for 2012. No In December 2011 the Spanish that risks that would once have been hardening of the market is expected in insurance market comprised 188 limited rejected are now accepted at competitive 2012 or 2013 unless all the major liability companies, 73 branches of foreign terms while others are concentrating on companies begin to experience trading insurers, 34 mutuals and co-operatives, the retention of existing business, losses. and two domestic reinsurance companies, reducing rates to do so; few have decided for a total of 297 companies in the life and to maintain their standards and accept a Market Size non-life market combined, compared reduction in market share as a result. In In 2011 the Spanish non-life market was in with 362 in 2002. In addition, 534 non-life addition to falling business levels, wider tenth place in world rankings and in fifth insurers were registered to write business covers, and rate reductions in many place in Europe. under freedom of services arrangements. classes, insurers are also facing increased Premium in USD MM: Some insurers are part of broader financial difficulty in collecting premiums, as rising Life: 41,401.54 services groups. unemployment means that many insured Non-Life: 31,792.15 parties are simply unable to pay them. Personal Accident and Health: 11,482.07 Market Structure There have also been delays in payments Total: 84,675.76 The Spanish non-life market comprises from some municipal authorities. the major multinational foreign insurers, Despite these underwriting problems, Market Participants including ACE, Allianz, AXA, Chartis, cash flow difficulties, and falling Summary and Trends Generali Seguros, RSA and Zurich Espana investment levels, insurer solvency is not The majority of insurance companies in Compania de Seguros y Reaseguros SA, under threat as the market is well Spain are limited liability corporations and local insurers including Caser, capitalized and successive years of good but mutuals and co-operatives are also Catalana Occidente and MAPFRE, which results should enable insurers to weather common. The market is large enough to is the largest by far.

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