The OIL Group of Companies
www.oil.bm
www.ocil.bm
“Tools for Risk Transfer”
Presentation to
University of Houston
April 11, 2013
The Evolution of Energy
Mutuals
TOPS
1993-99
OIL
1972
sEnergy
2002-2011
Traditional
Insurance
Market
AEGIS
1975
NEIL
1980
OCIL
1986
EIM
1986
Insurance Crisis # 1
Why was OIL Formed in 1971?
• Inability of petroleum companies to purchase all-risk
property damage coverage at realistic rates and
capacity.
– Incident – 1967 Explosion and Fire at Cities Service Oil Co.
refinery in Lake Charles , Louisiana.
• Unwillingness of the commercial insurance industry to
sell third party pollution liability to petroleum
companies at any price.
– Incident – 1969 Union Oil Co. oil spill in Santa Barbara
Channel, California.
• Realization on the part of 16 oil companies that the
combined capital & surplus of the petroleum industry
greatly exceeded that of the insurance industry.
Insurance Crisis # 2 (1985-86)
Oil Casualty Insurance, Ltd. (OCIL)
•
Energy industry-owned company insuring
•
•
•
Excess General Liability
D&O Liability (now discontinued)
Assumed Reinsurance (Energy Industry Risks)
•
Formed in 1986 by 14 interested members of
OIL.
•
Lack of D&O capacity was key driver in
OCIL’s formation.
•
Today – 99 Shareholders and Policyholders
headquartered around the world with total
gross assets in excess of $3.5 Trillion.
…and again in 1993
TOPS (Total Loss Only Platform Structures)
•
Petroleum industry-owned company providing highlevel Excess Property Damage coverage for large
production structures located in the North Sea.
•
Established in response to commercial insurance
market’s overpricing of coverage specifically related
to such structures.
•
Formed in 1993 by 16 petroleum companies
headquartered in Europe and North America.
•
No losses in entire history of operations.
•
Liquidated in 1999 when rational pricing returned to
the commercial market.
…and once again in 2002!
sEnergy Insurance Limited (sEnergy)
• Energy industry-owned company providing
• Business Interruption
• Property Damage (excess of OIL)
• Lack of affordable, long-term and stable commercial
market capacity was key driver in sEnergy’s formation.
• Formed in 2002 by 12 energy companies.
• sEnergy operated with an “OIL-like” Rating & Premium
Plan.
• Closed down in 2011.
OIL INSURANCE LIMITED
A Case Study….
The OIL Group of
Companies
• Two energy industry mutual insurance companies:
• Headquartered in Hamilton, Bermuda.
• Established when commercial market:
– Ceased to provide adequate coverages/limits.
– Priced high risk energy operations at unacceptable
levels.
• The two companies have a total combined membership of
over 121 different Shareholders/Policyholders who are
world-class energy companies headquartered around the
world.
Why Mutualize?
• Industry ownership ensures fair treatment of
Policyholders.
• Being a mutual or member owned provide ‘hedge’ against a
frequently volatile commercial insurance market.
• Shareholders maintain active control of the coverages
available to them.
• Highly cost-effective catastrophe insurance facility.
• Generates long-term benefits for Policyholders.
• World’s Largest Energy Mutual
• –by the numbers
Who is OIL?
• Over $2 trillion in assets insured
globally for 52 members
• $300 million broad and stable
“cornerstone” capacity
• $6 billion in assets
• Over $3.0 billion in shareholder’s equity
• Over $11 billion in claims paid over 40
years
• S&P A- rating (stable outlook)
• Expense ratio = approx. 3-6 %
• Not dependent upon reinsurance
• World’s Largest Energy
Mutual
Who is OIL?
• OIL is an Energy Industry Mutual
Insurance Company headquartered in
Hamilton, Bermuda
• Formed by 16 major energy companies
in 1972 after two incidents in the late
60’s that resulted in inadequate
coverage / pricing
• Today, OIL is a world leader in global
energy insurance
• 52 Shareholders / Policyholders medium to large public / private worldclass energy companies headquartered
around the world
• 46% of membership has been with OIL
for over 20 years
Why “Bermuda”?
•
Bermuda is one of the three largest insurance markets in the
world (London and New York being the others.)
•
More than 1,600 international insurers and 1,200 captive
insurers are registered in Bermuda.
•
Favorable tax/regulatory/legal environment.
•
Highly developed markets in all lines of insurance coverage.
•
Sophisticated on-Island business infrastructure.
Why Bermuda?
•
•
•
Source:
Bermuda Monetary Authority 2011 Annual Report
•
Second largest insurance / reinsurance market in
the world
– Over 1200 international insurers and reinsurers
listed on its books
– Writes nearly $108 billion in gross written
premium
– Capital & Surplus nearly $185 billion
– Total assets of approximately $525 billion
World’s largest captive domicile
– Home to 600+ licensed captives
– Total assets over $86Bn and $21Bn in annual
gross premium
Location: quick access from main hubs (East
Coast / London)
Friendly regulatory environment
The OIL Group of Companies
“Mutual/Member Owned” Structure
•
Basic structure similar to any other corporations:Shareholders, Board of Directors, Board
Committees, Officers & Staff.
•
Major differences:
Shareholders are the Customers (Insureds.)
Directors are elected from the Shareholder Body.
•
The Investment companies are directed by a
separate Board of Directors, which includes senior
financial officers from major Shareholder
companies.
•
In case of OIL, no “Underwriting” per se - each
Policyholder treated equitably; premiums are
formula-based—”Post lost funding”.
Corporate Governance
Elects Board
Annually
BOARD OF
DIRECTORS
(3-5) Meetings per year)
Chairman
Nominates
Committee
members
and Board
Approves
Governance
Committee
Audit
Committee
SHAREHOLDERS
(Annual Meeting)
Compensation
Committee
All Officers and
Support STAFF reside
in Management Company
Executive
Committee
OMSL
MANAGEMENT
The OIL Group of Companies
Operational Structure
OCIL and OIL have no employees, The Companies are administered by
Oil Management Services Ltd.
Oil Management
Services Ltd.
(“OMSL”)
Oil Insurance
Limited
(52 members)
Oil Investment
Corp. Ltd.
(OICL)
Property Damage
Well Control,
Pollution
Oil Casualty
Insurance, Ltd.
(112* members)
Oil Casualty
Investment Corp. Ltd.
(OCICL)
Excess General Liability
Excess Property
Facultative Reinsurance
*112 Members at December
31, 2012
58 Shareholders.
OIL: An Alternative
Insurance Solution
• Today, OIL continues to be a very real and attractive option
to many insurance buyers in the energy industry.
• OIL’s $300 Million limit is one of the largest net line
capacity insurers currently available to the energy
industry.
• OIL does not buy reinsurance so it is not subject to annual
changes in conditions or restrictions on terms offered – in
this way full terrorism coverage continued to be offered
after September 11th.
• Any rate increase in OIL is due to increased losses by the
membership - not internal or external pressures - and
hence is transparent.
Who are OIL’s 52 Members?
• Big Companies, such as:
ConocoPhillips
TOTAL
Chevron
• Small Companies, such as:
Tesoro Petroleum
Murphy Oil
LOOP LLC
• Electric Utility/Power Generation Companies, such as:
Electricity de France (EDF),
DTE Energy
• Other members of varying sizes and business focus
within the broadly-based Energy Industry.
Current OIL Members
Apache Corporation
Arkema*
BASF SE*
BG Group plc*
BHP Billiton Petroleum (Americas)
Inc.
Buckeye Partners, L.P.
Canadian Natural Resources Ltd*
Canadian Oil Sands Limited
CEPSA*
Chevron Corporation
Chevron Phillips Chemical
Company LLC
CITGO Petroleum Corporation*
ConocoPhillips*
DONG Energy A/S*
Drummond Company Inc.
DTE Energy Company
EDF Group*
Energy Transfer Partners, L.P.
ENI S.p.a.*
Galp Energia S.A.*
Hess Corporation*
Hovensa LLC
Husky Energy Inc.
LOOP LLC.
Lyondell Chemical Company*
Marathon Oil Company
Marathon Petroleum Corporation
MOL Hungarian Oil and Gas
Company*
Murphy Oil Corporation
Nexen Inc.*
Noble Energy, Inc.
Nova Chemicals Corporation*
Occidental Petroleum
Corporation*
OMV Aktiengesellschaft*
Paramount Resources
Phillips 66 Company
Puerto Rico Electric Power
Authority
Repsol YPF, S.A.*
Royal Vopak N.V.*
Santos Ltd.*
Sempra Energy
Sinclair Companies (The)
Statoil ASA *
Suncor Energy Inc.
Talisman Energy Inc.*
Tesoro Petroleum Corporation
TOTAL*
Valero Energy Corporation*
Westlake Chemical Corporation
Williams Companies, Inc. (The)
Woodside Petroleum Limited.*
Yara International ASA*
Membership “Count”*
100
87
90
78
80
84
82 83
70
60
61
50
40
30
20
10
0
* Year-end member count, net year on year change.
60
56
56 54
52
2012- 2013 Membership
Changes
Members as @ 1/1/2012
New Members
52
2
Merger/Acquisitions
(1)
Departures as @ 12/31/2012
(1)
Members as @ 1/1/2013
52
2013 Membership
by Industry Segment
2% 2%
8%
26%
Electric Utilities
Integrated Oil
19%
Chemicals
Pipelines
E&P
Refining & Marketing
24%
11%
8%
Mining
Other
OIL Shareholders by
Headquarter Location
12-31-2013
Globally diversified membership with an increasing
interest from non-US companies.
Canada
15%
USA
49%
Europe
30%
Australasia
Caribbean 4%
2%
OIL: Risks Insured
Eight Business Sector Coverages
1. Physical damage to first party property.
2. Well Control, including Restoration and Redrilling.
3. Third party Pollution Liability, (non-gradual).
4. Limits = $300 million per occurrence, no annual
aggregate.
5. Single Event Limit = $900 Million.
6. Deductibles = $10 Million minimum, increasing in $5
million increments.
Winstorm Coverages: Onshore and offshore (ANWS only)
 Coverage Grants same as 1, 2, and 3 above.
 Limits= $150 Million p/o $250 million per occurrence


Single Event Limit = $750 Million.
Coverage is automatic for exposed assets, but
member can effectively opt out of the coverage.
What’s Covered?
Automatic coverage for:
• Worldwide Coverage for an Energy
Company and its Consolidated
Subsidiaries / Affiliates
• A member’s interest in a JV or other
non-consolidated affiliate (if interest
equates to less than 1% of Gross
Assets)
• Coverage for non-owned assets
where a member has a contractual
obligation to repair / replace
OIL vs. Commercial Market
• Membership is exclusive to energy companies
• Members are all shareholders / policyholders and
have vested interests
• “Mutualized” sharing of losses
• Easy annual renewal.
• Premiums are formula and performance based i.e. no
underwriting
• One policy form for all members per the OIL
Shareholders’ Agreement
• OIL uses gross assets from audited balance sheets
while the market uses insured values
Oil Limits – 8 Business Sectors
• No Annual Aggregate.
• Joint Ventures – full Limits available. Limits do not
scale for working interest but deductibles scale for
interest.
• Aggregation Limit – maximum payout of $900 Million
(non-windstorm) on multiple shareholder claims arising
out of one occurrence.
• Reduced limits are available (minimum limit is $100M)
subject to a warranty as respects the absence of other
insurances (warranty does not apply to windstorm).
• Limits can apply as primary, excess, quota share,
ventilated and different limits may be elected by sector.
Rest of the World (RoW)
• For windstorm coverage outside of the ANWS zone (i.e.
South China Sea, North Sea, Australia etc.), the
windstorm limit is $300M (not $150M part of $250M) and
the Aggregation Limit is $900M.
• ROW coverage, by geographic region, will be restricted
only after incurring a Loss Trigger Event:
– A single loss event of $750M
– Cumulative losses of $1B over a 5 year rolling basis
• After a threshold trigger is met, windstorm coverage and
pricing will automatically change in the next policy year
unless the Board of Directors determines otherwise
OIL Rating & Premium Plan
Eight Business Sector Coverages only
•
Formula basis – no traditional “underwriting.”
•
Premiums paid by Policyholders is a function of
their Gross Assets.
•
Gross Assets = Gross value (historic cost) of
property, plant & equipment before deprecation,
depletion, and amortization, plus inventories,
materials, and supplies.
•
Gross Assets are then adjusted for operational risk
and coverage profile (i.e., sector and deductible
weightings) = Weighted Gross Assets.
• By Geographic Region
of Physical Loss
$4.0
$3.5
$3.0
Net Incurred Losses
Since 1972*
$2.5
$2.0
$1.5
$1.0
$0.5
$0.0
USA
Europe
Canada
W/Storm
GOM
As at December 31, 2012
Expressed in billions of U.S. dollars
* untrended
North Sea
Other
Areas
Repayment Schedule
for Losses Incurred
2007-2011
Sector Weighting for Risk
•
Policyholders’ Gross Assets are adjusted to
recognize differences in operational risk between
Business Sectors:
– Offshore E&P
-- Pharmaceuticals
– Onshore E&P
-- Mining
– Pipelines
-- Other
– Electric Utilities
– Refining & Marketing/Chemicals
– ANWS-Onshore
– ANWS-Offshore
•
Weighted Gross Assets are used to calculate
individual Policyholders premiums.
8 Business Sector Pricing
(Non-Windstorm)
• ELECTRIC UTILITY
PIPELINES*
• Utilizes sector and deductible •weightings.
• MINING
• Gross Assets are adjusted for operational
• OTHER*
risk (sector weighting) and coverage
profile (limit/deductible weighting) to
generate Weighted Gross Assets which is
used to determine pool % and calculate
individual premiums.
8 Business Sector
Gross Assets
Unmodified Gross Assets by Industry Segment
($2,214 Bn)*
Weighted Gross Assets by Industry Segment
($1,166 Bn)*
E&P
Offshore
51%
Business Sectors
* as of December 31, 2011

E&P Offshore

Mining

E&P Onshore

Utilities

R&M / Chemicals

Pipelines

Pharmaceuticals

Other
R&M
Chemical
s
26%
Other
2%
Utilities
7%
Mining
Pipelines 2%
E&P
3%
Onshore
9%
•Premium Calculator
Example
•- 8 Business Sector
GROSS ASSETS
BY BUSINESS
SECTOR
X
X
Weighting Factors
Offshore E&P = 1.50
Pipelines = 0.25
Gross Assets
Offshore E&P = $25B
Pipelines = $5B
Total = $30B
WGA =
38.75B / $1,046B
(GROUP WGA) =
3.7%
SECTOR /
DEDUCTIBLE / LIMIT
WEIGHTING
FACTORS
X
MEMBERSHIP
ANNUAL LOSSES
(20%)
WEIGHTED
GROSS ASSETS
(WGA)
Weighted Gross Factors
Offshore E&P = $37.50B
Pipelines = $1.25B
Total = $38.75B
=
ANNUAL
PREMIUM
OIL’s History: 40 Years
Membership
Shareholders’ Equity
Assets
Gross Assets Insured
1972
16
$160 Thousand
$160 Thousand
$48 Billion
12/31/2012
52
$3.6 Billion
$5.5 Billion
$2.3 Trillion
Inception To Date:
+$13.5 Billion
Net Premiums Earned
- $13.8 Billion
Net Losses & Loss Expense *
+$ 5.2 Billion
Investment Income **
- $ .8 Billion
Dividends Paid ***
+$ .4 Billion
Preference Shares
Operating, Financing & Other Costs - $ .9 Billion
$ 3.6 Billion
* Includes IBNR/IBNE
** Net of Interest Expense
*** Excluding Preference Share dividends paid
Consolidated Balance Sheet
Assets
Cash and Cash Equivalents
Investments
Investment sales pending settlement
Accrued investment income
Accounts receivable
Amounts due from affiliates
Retrospective premiums receivable
Other assets
Total assets
31-Dec-12
($ in 000's)
31-Dec-11
($ in 000's)
671,927
5,603,471
32,488
25,936
12,584
36
102,115
2,100
6,450,657
282,441
5,255,944
82,853
30,220
22
59
91,741
2,725
5,746,005
Consolidated Balance Sheet
31-Dec-12
($ in 000's)
31-Dec-11
($ in 000's)
Liabilities
Outstanding loss and loss expense
Retrospective premiums payable
Premiums received in advance
Securities sold short
Investments purchases pending settlement
Accounts payable
Amounts due to affiliates
2,461,518
3,769
25,587
224,842
109,235
11,112
2,823
2,280,278
1,313
22,666
116,433
285,023
5,622
1,523
Total liabilities
2,838,886
2,712,858
Shareholders' equity
Preferred shares
Common shares
Retained earnings
Total shareholders' equity
344,654
530
3,266,587
3,611,771
402,458
520
2,630,169
3,033,147
Total liabilities and shareholders' equity
6,450,657
5,746,005
Statutory capital and surplus
4,867,109
4,221,387
Consolidated Income Statement
31-Dec-12
($ in 000's)
633,963
38,522
672,485
31-Dec-11
($ in 000's)
558,141
(14,716)
543,425
Discount earned on retro-premium receivable
Losses and loss expenses incurred
Acquisition costs
Underwriting income (loss)
215
(612,540)
(526)
59,634
1,062
(599,109)
(323)
(54,945)
Interest income
Dividend income
Investment gains (losses) [realized & unrealized]
Interest expense and financing costs
Investment advisory and custodian
Net investment income
102,052
27,486
506,652
(705)
(27,631)
607,854
103,667
31,807
(143,904)
(787)
(22,619)
(31,836)
General and administrative expenses
Net income (loss)
(21,385)
646,103
(17,855)
(104,636)
Other changes in Shareholders' Equity:
Preferred share dividend
Gain on preferred share repurchase
(12,687)
3,002
(24,515)
3,060
Premiums written
Retrospective premiums
Premiums written & earned
The OIL Group:
Efficiency & Control
Why we are different from the Commercial Market…
PREMIUM
Insured
(Buyer)
Member
Commercial
Market
LOSS PAYMENT
~30-40% Expense
Ratio
PREMIUM
“OIL Group”
• LOSS PAYMENT
• OWNERSHIP
• CONTROL
• RETURN ON
CAPITAL
~ 5%
Expense Ratio
Marketing
•
Broker Consulting Agreements
– OIL has signed global service agreements with 4 key
brokers to assist OIL in its efforts to attract “Quality”
new members.
– The services include:
o Prospect Identification & Qualification.
o Market Intelligence/Research
o Product Development
o Member opportunities/issues
o Training
– These agreements do not include any contingent
compensation arrangements.
Marketing
•
In 3rd year of a global marketing plan
– Building global broker network capabilities
o Oil has been “on the road” globally engaging brokers
– Delivering new global marketing materials
o Web site
o Brochures
o Tools
– Launching the OTA (Oil Technical Accreditation)
o Launched in December 2012
• Oil Technical
Accreditation
• New On-Line Tutorial & Official Accreditation
Register @ www.oil.bm
“OTA”
• Investment Management
Investment Objectives
Investment objectives are to provide
adequate liquidity to meet OIL’s future
obligations, and endeavor to both
preserve and enhance value over a
market cycle.
The Investment Board reviews the
investment objectives, investment
policy, and asset allocation strategy at
least annually.
Current Asset Allocation
as at December 31, 2012
6%
6%
31%
Cash
Bonds backing Pref Shares
Global Bond
Fund of Hedge Funds
10%
47%
Global Equity
Update: as approved by the Investment Board, 25% of Global Bonds
(benchmark and portfolio) were shifted to short duration on October
1, 2012. This shift was made to reduce interest rate risk, locking in
gains following a period of declining interest rates and protecting
against potential losses from future interest rate rises.
Investment Portfolio Returns
as at December 31, 2012
25
20
20
15
10
10
13
14
13
11
8
10
8
% Return
5
0
0
-1
-5
-1
Update: 1 Month ended January 31, 2013
-10
-15
-20
OICL Benchmark
1.6%
OICL Portfolio
2.1%
OIL Total (incl cash)
1.9%
-17
-19
-25
-24
-30
2012
2011
OICL Benchmark
2010
OICL Portfolio
2009
2008
OIL Total (incl cash)
Current Events:
Natural Catastrophes
Historical Hurricane “Tracks”
Impacting OIL
Ivan
$581M
121132mph
Ike
$750M
104109mph
Rita
$1,000M
121-138mph
Katrina
$1,000M
127161mph
Gustav
109115mph
Hurricanes – Past Payout Patterns
As of 31 Dec 2012
Hurricane
Lili
(2002)
Hurricane
Ivan
(2004)
Hurricane
Katrina
(2005)*
Hurricane
Rita
(2005)*
Hurricane
Ike
(2008)*
< 1 Year
0%
9%
5%
2%
2%
< 2 Years
81%
78%
42%
20%
27%
< 3 Years
97%
79%
56%
35%
57%
Current
100%
99%
100%
100%
74%
Total
Reserve
$96M
$558M
$1,000M
$1,000M
$750M
Members
6
8
19
20
13
Years
Net Incurred Losses since 1972*
by Geographic Region of Physical
Loss
$4,000
$3,500
$3,000
$2,500
$2,000
$1,500
$1,000
$500
$0
As at December 31, 2011
Expressed in millions of U.S. dollars
* untrended
Net Incurred Losses by Industry
1972-2011 (39 yrs)
*Aggregate Value =
$11.8Bn (untrended)
Pipelines
4%
Onshore E&P
7%
Other
2%
Mining
2%
Electric Utilities
1%
Petrochemicals
9%
Offshore E&P
48%
Refining &
Marketing
27%
* Pure Loss—Excludes loss expense
Net Incurred Losses
By Industry Sector – 2012
only
1%
Aggregate Value =
$599M*
1%
5%
7%
Offshore E&P
Onshore E&P
11%
Refining & Marketing
Electric Utilities
Pipelines
75%
*$294M – North Sea Blowout Loss
Other
OIL Capital Structure Summary
$5,000
$ in Millions
$4,000
$3,000
$2,000
$1,000
$0
2006
2007
2008
2009
2010
Catalyst Statutory Capital Credit
TWP BMA Statutory Capital Credit
Perpetual Preferred Shares
Shareholders' Equity (excluding preferred shares)
2011
2012
OIL Capital Structure
•
In June 2006, OIL issued 600,000 Series A perpetual preferred shares (“Series A
preference shares”) and received proceeds from the issuance, net of direct issuance
costs, of approximately $586,842,000. Upon dissolution of OIL, the holders of the Series A
preference shares are entitled to receive a liquidation preference of $1,000 per share, plus
accrued unpaid dividends.
•
Dividends on the Series A preference shares from the date of original issuance through
June 30, 2011 are payable semi-annually in arrears in cash, when and if declared by the
Board of Directors, out of funds legally available for the payment of dividends under
Bermuda law. Such dividends are payable on June 30 and December 30 of each year, at
the annual rate of 7.558% per $1,000 liquidation preference until June 30, 2011.
•
After June 30, 2011 if the shares are not called, dividends will accrue at an annual rate of
3-month LIBOR plus a margin equal to 298.2 basis points per $1,000 liquidation
preference, payable quarterly in arrears. The Company may redeem the Series A
preference shares on or after June 20, 2011, at a redemption price of $1,000 per share.
•
During 2012, the Company repurchased and retired 59,100 of the Series A preference
shares. As of December 31, 2012, OIL had 352,382 Series A shares outstanding.
Theoretical Withdrawal Premium
(TWP)
• Both Standard & Poor’s and the Bermuda Monetary
Authority now give OIL capital credit for TWP
• Credit is calculated as follows:
─ Remove all sub-investment grade TWP amounts for
individual members from the aggregate TWP
amount
─ Discount future premium flows by 5% for 3 years
─ Discount each member’s TWP amount by their
credit default risk factor (S&P Capital Model)
What about OCIL:
The Evolution of Energy Mutuals
TOPS
1993-99
OIL
1972
sEnergy
2002
(in runoff)
Traditional
Insurance
Market
AEGIS
1975
NEIL
1980
OCIL
1986
EIM
1986
OCIL’s Historical Mission and
Value Proposition
• OCIL = historically significant
– Founded at a time when capacity was scarce
– Hedge against commercial market “knee-Jerk”
reactions, irrational underwriting and
erratic pricing
– Owned and controlled by Shareholders
• OCIL’s original mission
– To provide its policyholders with Directors &
Officers Liability coverage on policy forms that
were comparable to or broader than coverage
available in the commercial market
– To offer substantial limits at reasonable
prices, which are reliable over the long-term in
lines (Excess General Liability and D&O) that
are often volatile or restrictive by
commercial markets
– To maintain capacity, pay claims that arise,
and ensure fair treatment of members
Major Differences: OCIL vs. OIL
Organization
Premium
calculation
OCIL
OIL
Member owned
Mutual
Flexible; Underwriting
discretion
Formula driven
Mutualization of
losses
No
Yes
Avoided Premium
Surcharge &
Theoretical
Withdrawal
Premium
No
Yes
Aggregation limit
No
Yes
Follow Form
capability
Yes
No
Ability to Assess
Membership
No
Yes
Financial Ratings
OIL
Financial Strength
Standard &
Poor’s
A.M. Best
A-
A2
OCIL
Financial Strength
BBB+
Moody’s
A- Stable
Consolidated Balance Sheet
30-Nov-12 30-Nov-11
($ in 000's) ($ in 000's)
Assets
Cash and Cash Equivalents
Investments
Investment sales pending settlement
Accrued investment income
Losses recoverable from reinsurers
Accounts receivable
Funds withheld
Prepaid reinsurance premiums
Other assets
Total assets
116,120
780,541
14,640
5,894
220,912
35,978
30,840
16,517
10,428
1,231,870
52,934
740,982
43,475
6,621
187,179
12,620
19,359
13,684
5,409
1,082,263
Consolidated Balance Sheet
30-Nov-12 30-Nov-11
($ in 000's) ($ in 000's)
Liabilities
Outstanding loss and loss expense
Unearned premiums
Securities sold short
Investments purchases pending settlement
Loan payable
Reinsurance premium payable
Amounts due to affiliates
Accounts payable
Total liabilities
429,412
78,273
10,294
36,785
150,334
27,578
490
9,233
742,399
307,448
44,327
5,383
86,573
150,334
21,537
544
5,000
621,146
Shareholders' equity
Common shares
Retained earnings
Total shareholders' equity
300
489,171
489,471
305
460,812
461,117
1,231,870
1,082,263
629,398
606,306
Total liabilities and shareholders' equity
Statutory capital and surplus
Consolidated Income Statement
30-Nov-12 30-Nov-11
($ in 000's) ($ in 000's)
UGL premium written
Assumed reinsurance premium
Premiums written
59,460
86,410
145,870
53,345
28,760
82,105
Premiums earned
Premiums ceded
Net premiums earned
111,924
36,551
75,373
64,919
27,588
37,331
Losses and loss expenses incurred
Commission and brokerage fees, net
Underwriting income (loss)
(100,583)
(7,782)
(32,992)
(193)
(1,296)
35,842
Interest income
Dividend income
Investment gains (losses) [realized & unrealized]
Interest and debt expenses
Investment advisory and custodian
Net investment income
21,624
1,344
65,018
(12,523)
(3,125)
72,338
22,114
1,435
(4,665)
(12,482)
(2,834)
3,568
General and administrative expenses
(10,987)
(9,796)
Net income (loss)
28,359
29,614
OCIL Asset Allocation
as at November 30, 2011
10%
4%
Global Fixed Income
11%
Fund of Hedge Funds
Global Equity
Cash
75%
Portfolio Returns By Asset Class
Fiscal Year Ended November 30
40
34
25
% Return
20
0
4
-20
-40
-60
2 2
6 6 8 5
9
9
5
-1 -2
Update: 3 Months ended February 29, 2012
Global Equity Benchmark
-9
-16
-19
11.6%
Hedge Fund Benchmark
2.8%
Global Bond Benchmark
3.2%
2011
Global Bond
8
22
2010
2009
Fund of Hedge Funds
Global Equity
13 15 10 8
-12
-41
2008
OCICL Portfolio
2007
OCICL Benchmark
Investment Portfolio Returns
Fiscal Year Ended November 30
18
20
% Return
10
6
2
2
9
9
17
7
6
9
2
0
-10
-10
-16 -16
-20
2011
2010
OCICL Benchmark
2009
OCICL Portfolio
2008
OCIL Total
2007
8
Cat Bond Definition
• Cat Bond is short for Catastrophe Bond:
– A corporate bond with special language that
requires the bondholders to forgive or defer some
or all payments of interest or principal if actual
Catastrophe losses surpass a specified amount, or
trigger.
• Cat Bonds were originally developed by insurance
companies in the early to mid 1990’s who were
looking for additional capacity to reinsure natural
Catastrophes, ie: earthquakes, wind storms,
hurricanes.
• Historically, Cat bonds have provided risk
securitization for purely Catastrophic events –
Avalon Re, Ltd. was the FIRST (and probably last)
company to issue a Casualty Catastrophe Bond
Conclusions
OIL Business Model
•
Business model that has worked successfully to service the
energy industry for over 30 years.
•
Insurance facility is tailored to the needs of the energy industry.
•
Mutualization of losses assures fairness and recovery of losses.
•
Among the largest limits available in the world market.
•
Highest form and reliability of coverage.
•
Strong access to capital markets when necessary.
•
Investment strategy promotes capital growth, as well as, security.
•
Low cost, most efficient vehicle for managing major risk transfer.
•
Biggest Challenge: Natural Catastrophes. How do we insure them?
How do we allocate premium for them in a mutual setting?
Thank you!