** Meeting Summary & Minutes **
Fall 2011 North America Risk Management Council
Palace Hotel, Lucerne, Switzerland
September 14-15, 2011
Risk Management Council Members in attendance (alpha order):
Steve Allison – The Shaw Group, Inc.
Dan Baldwin – Leggett & Platt
Mike Bergines – eBay
Howard Edelstein – Sealed Air Corporation
Linda Elias – First Solar
Paula Gentile – MGM Resorts International
Leslie Lamb – Cisco
Mike Lusk – Archer Daniels Midland
Hector Mastrapa – Marriott International, Inc.
Ken Murphy – Research In Motion Limited
Dora Pisano - ITW
Jeff Purdy - CSC
Pascale Samson – BRP, Inc.
Alain Simard – Saputo Inc.
Claudia Temple – Kraft
Marty Timpano – SYSCO Corporation
Kurt Urquhart – ITT Corporation
Christine Young – Spectra Energy Corporation
Bill Zachry – Safeway, Inc.
Zurich attendees and presenters (alpha order):
Emanuel Baltis – Head of Sales, Distribution & Marketing, Zurich Latin America
Chris Barnes – Chief Claims Officer, Zurich Global Corporate
Francis Bouchard – Head of Sales, Distribution & Marketing, Zurich Global Corporate
Valerie Butt – Head of Customer Relationship Mgmt., Zurich Global Corporate in North America
Matthew Jones – Head of Catastrophe Management, Global Underwriting, Zurich
Paul Horgan – Chief Underwriting Officer, Zurich Global Corporate in North America
Thomas Huerlimann – Chief Executive Officer, Zurich Global Corporate
Mike Kerner – Chief Executive Officer, Zurich Global Corporate in North America
Brenda Lombardo – Head of Marketing, Zurich Global Corporate in North America
Greg Maguire – Head of Customer, Distribution & Marketing, Zurich Global Corporate in North
America
Guy Miller – Chief Market Strategist, Head of Macroeconomics, Zurich Financial Services
Simon Plumridge – Global Head of Product Recall, Zurich General Insurance
Michael Raney – Chief Executive Officer, Zurich Global Corporate Latin America
Petra Riga – Head of IPZ Sales & Distribution, Zurich Global Corporate
Dan Riordan – President, Zurich Specialties, Zurich North America
Jason Schupp – Group Compliance Officer, Zurich Financial Services
Thomas Sepp – Chief Claims Officer, Zurich General Insurance
Tine Thorsen – Head of Marketing, Zurich Global Corporate
Joe Tinetti – Head of Property, Zurich Global Corporate in North America
Urs Uhlmann – Head of Canada, Zurich Global Corporate in North America
Brian Winters – Head of Casualty, Zurich Global Corporate in North America
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Special Guest Customers from Latin America:
Marcos Lima – Odebrecht OCS, Brazil
Christian Mendonca – Schahin, Brazil
Welcome NEW MEMBER:
Hector Mastrapa – Marriott International
Thanks to retiring members:
Steve Allison – The Shaw Group, Inc.
Dan Baldwin – Leggett & Platt
Mike Bergines – eBay
Paula Gentile – MGM Resorts International
Stacy Regan – GE (not in attendance)
Scot Schwarting – Whirlpool (not in attendance)
Executive summary
The Fall 2011 North America Risk Management Council meeting brought risk managers and
Zurich executives together in Lucerne, Switzerland, for spirited discussions covering a broad
range of business issues. The meeting agenda was developed from direct member input on topic
choices.
1. The meeting opened with an overview of the council structure and objectives.
2. GCiNA CEO Mike Kerner provided an in-depth update on Zurich, sharing Zurich CEO
Martin Senn’s aspiration for Zurich to be “the best” global insurer as measured by
customers, shareholders and employees. He also highlighted the strength of
catastrophes in 2011 YTD, and answered member questions on trends in workers comp
and emerging markets.
3. Jason Schupp, Group Compliance Officer, Zurich, then presented a legislative and
regulatory update, focusing on Solvency II (focus on governance structure under
Solvency II), Dodd-Frank, Dodd-Frank whistle blower provisions and managing risks
associated with regulation.
4. Matthew Jones, Head of CAT Management, Global Underwriting, Zurich, gave a
presentation on RMS 11 and engaged members in a dialogue on risk modeling.
5. GCiNA Chief Underwriting Officer Paul Horgan led a discussion on the risks associated
with Mergers & Acquisitions (M&A), a topic pertinent to many members who had recently
gone through or were at the outset of entering into an M&A transaction.
6. Guy Miller, Chief Market Strategist, Head of Macroeconomics, Zurich, provided in-depth
insight into the current economic and investment environment.
7. Urs Uhlmann, Head of Canada, GCiNA; Simon Plumridge, Global Head of Product
Recall, Zurich, and council member Alain Simard, Saputo, Inc., led a spirited discussion
on the wide-reaching risks and implications of product recall.
8. Day one concluded with an interactive workshop on the essence of the Zurich brand, in
which council members were able to react to various descriptors and slogans associated
with Zurich.
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9. Day two opened with a two-part International Roundtable, with Michael Raney, CEO,
Zurich Global Corporate in Latin America, shedding light on the environment and
challenges in the Latin American region. He was supported by special guest customers
Marcos Lima (Odebrecht OCS, Brazil) and Christian Mendonca (Schahin, Brazil).
10. Part two of the International Roundtable featured a demo of Zurich’s Multinational
Insurance Application (MIA) led by Petra Riga, Head of IPZ Sales & Distribution, Zurich
Global Corporate.
11. Concluding the meeting was an “open forum,” addressing a number of issues and
perceptions key to Zurich customer relationships, including speed of decision making and
claims communication.
Key messages & Action Items
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Zurich listens: A “compliment to Zurich is that you let us talk and really listen to what
we have to say. You are atypical of other insurance companies, you actually try to
make changes and respond. I’ve attended other panels like this and we seem to revisit
the same complaints over and over and nothing ever gets done. Zurich actually listens
and comes up with action plans. In the end, it may not be perfect, but it is progress
toward a commonly shared goal. You put a lot of time and energy into it. You don’t get
defensive right away when we raise issues. You actually strive to get things done.
Claims Communication: Risk Managers have noticed marked improvements in the
past six months, appreciated Zurich’s ability to listen. Some concerns about the
involvement of third-party but overall much improved.
Speed of Decision-Making: Risk Managers feel there is still work to be done with
regards to speed of decision-making. Members lean heavily on RLs and senior
management within Zurich when they need to move quickly. Suggestion that further
empowering underwriters might help improve speed.
Reciprocal Feedback: Council members give feedback to Zurich about how Zurich is
doing; would like to get more feedback from Zurich on how RMs are doing/what
they can do better
Minutes (Refer to Slides for Presentations in Detail)
Greg Maguire, Head of Customer, Distribution & Marketing, GCiNA
Why the Risk Management Council?
Mike Kerner, Chief Executive Officer, GCiNA
“Zurich Update”
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Martin Senn took over as CEO on January 1, 2010; launched strategic review.
Aspiration: To be the best global insurance company as measured by customers,
shareholders and employees.
Three of top four insured earthquakes that have ever occurred—Japan, Chile, New
Zealand—happened during the last 18 months. Seismologists say there is no trend
showing an increase. They are happening in places that are heavily populated. If one hits
in the middle of China where no one lives, you don’t hear about it.
Tornados were more frequent this year, as were severe thunderstorms, flooding, etc. You
could potentially draw a conclusion that a trend is happening, but tornado detection is a
lot better. There does appear to be an upward trend in the last 10 years. This year, many
occurred in populated areas. We may have to adjust pricing models.
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Member question: Anything happening on the workers’ comp, GL or casualty side? Anything out
there that could turn ugly?
Kerner response: Workers’ comp is seeing the most strain in the system. Healthcare inflation
continues to run hotter than regular inflation. Some erosion of tort reforms, but we’re still seeing
some reductions in frequency and severity due to tort reform and better risk management. The
comp market is also under a lot of stress with interest rates down, while severity and frequency
are likely to go up.
Other casualty lines are relatively stable; low inflation has a positive impact on prices.
Member question: Are you seeing much movement from one carrier to the next? If the premium
growth is flat, how do you grow your book?
Kerner response: That’s an issue at the top of mind of people who run insurance companies.
The answer is the emerging markets. Zurich is making investments in Latin America. We
purchased interest in a company in Brazil, and purchased a company in Malaysia. In North
America, the strategy is to attract new customers and strengthen relationships with existing ones.
Not dramatic growth, but positive. We’re having a good year around converting new business
opportunities. Focused more on what’s our pipeline and being flexible.
There are trends out there helping us. Globalization plays to Zurich’s strengths. As companies
grow in the international business area, their existing insurers can’t handle them, so they come to
us.
Horgan comment: We are growing our accident business, accident and health. We are a large
player in contract surety in the US. Internationally, we see some great opportunities for growth in
surety. Specialty E&O. Security and privacy. Lots of areas for growth.
Jason Schupp
Group Compliance Officer, Zurich
“Current Regulatory and Legislative Developments”
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Presentation focused on:
1.) Solvency II – focus on governance structure under Solvency II
2.) Dodd-Frank
3.) Dodd-Frank whistle blower provisions
4.) Regulators come unannounced; manage risk
Dr. Matthew Jones, Head of Catastrophe Management, Global Underwriting,
Zurich
“RMS 11 & the Impact on Property Underwriting Strategy”
Member question: The models you use – are they developed in-house or are those external
models that you’ve purchased and used in house and adapted?
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We purchase the external RMS models which give us reasonably significant data from
around the world.
We don’t build models from scratch; we take them and pull them apart and adjust them
as we need to; see where there are gaps; we attempt to fill that gap with a Swiss focus.
Member Comment: Is there some way to extrapolate some commonalities in the different
models?
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There are gaps in the models; part of our job is to fill the gaps.
We talk to external scientists; we have natural catastrophe panels; get the key scientists
to provide us with information.
We have in-house expertise as well; risk engineers, claims information.
Things that aren’t in the model; all of these things going into this; don’t build from scratch.
RMS 11 is the new US Hurricane Model.
Updated model; usually done every six to eight years for major change; an interim model
was released in 2006 based on 2005 claims experience, but no major adjustments since
2003.
One of the reasons we don’t build models ourselves is that RMS has 50 people engaged
just to build the US Hurricane model; we can’t do as good a job because we don’t have
the resources; their whole reason for being is to produce and sell these models.
Main changes due to new claims data; new science; faster computers.
Many different drivers of change; not a simple task to evaluate a model change.
Thousands of pages of detailed documentation; scientific literature to read.
Translates into questions; try to find areas where model is good or weak.
It’s nice to build new science in, but science by its very nature can be proven wrong.
Have to be quite careful how much you rely on it.
Member Comment: In determining in the modeling, does is account for incursions farther inland?
Does the model break the hurricane down into components? I’ve been through a number of them
and there are three components, wind, rain, storm surge. By the time you get a substantial
distance inland, storm surge and wind are not as much a factor. On the coast rain may not be a
factor but wind and storm surge are. Do they drill down that far?
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For wind and storm surge, yes. One of the advances in the new model, they have a
proper storm surge model that takes into account how storm surge builds up and
approaches the coast and what happens. That is what they’ve done a lot better.
Rain is not really in the model.
Kerner comment: Our Hurricane Ike experience was an example. The model missed the storm
surge by a large margin. Storm surge used to be an across the board load-in approach, not
specific to local variations. You could have a risk at the point of the bay where the surge comes in
like a tsunami, more than in other areas. Model now reflects that. We had a loss where the model
said it would be $1 million and it turned out to be $50 million because the surge was much worse.
The other piece is that the models do not do inland flood well. River risk not in there at all. Also,
the wind is surviving much farther inland. We had claims from Ike in Ohio, Pennsylvania and the
suburbs of Philly. This storm made landfall in Texas and many days later you have claims in Ohio
and Penn. Hundreds of claims from Ike that the model missed because the model said zero risk
in Ohio, yet we had a lot of claims from it. All models are wrong, but some are helpful. We know
they are wrong, but they can help us in pricing.
Member comment: An issue for risk managers – how much information is relevant to you. We
had a carrier ask us for the latitude and longitude of all of our pipelines. We have thousands of
miles of pipelines. Silly question. We said, here’s a map, figure it out. What is relevant?
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In general, knowing where a location is and the primary occupancy.
Kerner comment: We can work on this together. Where is a particular physical plant located?
We can get the longitude and latitude, but there can be a huge difference in elevation between
the office and production plant. You can literally have the office building outside flood plain, but
the production facility a few hundred yards away in flood plain.
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Paul Horgan, Chief Underwriting Officer, Zurich Global Corporate in North
America
“M&A: What Should a Risk Manager Look For?”
First – When undergoing an M&A situation, how ingrained is the risk management function? How
did you get yourself positioned the right way?
Second – Opposite case – the organization says “We just made this deal, so deal with it.” You’re
in it at the back end. How did you approach that? Lessons learned?
Do you have formal M&A checklist? Risk management goes into action?
Member comment: Depending on size, yes, we have a checklist. In reality, there are two kinds
of deals. If it’s a smaller company, there may not be a formal risk management process.
Horgan comment: What are the top three pieces on the checklist?
Member comment: First thing is who do I need to know at the other company as a source of
information, because I know nothing about this company. What I do know came off the internet.
Who is the go-to person? Second thing to find out is who their key insurance players are. Third,
who are the key contacts at broker and insurance carrier? After that, it’s just a checklist.
Member comment: It depends on what we are looking at. Is this an asset deal? Stock? Is this a
$20 billion a year company, or is it a couple guys working out of a basement?
Member comment: We do a lot of acquisitions and you really have to understand the loss history
of that company. It can screw up your whole program if you don’t have the right information. It can
sabotage a program that took15 years to build. There may be a reason someone wants to get rid
of that company.
Member comment: In one case, we were scheduled to be in a lawyer’s office for three days
working on a deal. The people from the other company walked in with two boxes of insurance
records. The second box said “Pending Asbestos Litigation.” OMG! They were heavily involved in
asbestos litigation. We called the airlines and got out of there.
Member comment: We are going through a situation with a merger now, and some of the people
we are talking to are going to be looking for work. They are not happy. I’m trying to get answers
and they are looking at me like a mortal enemy. It’s become a cultural war with subtle battles
going on.
Member comment: The surprises are the ones that are not in our core job. The things that
surprise me. There were HR issues. We were going to have to lay people off and we ended up
being involved in gathering and securing the data. Had nothing to do with our day-to-day jobs.
Member comment: We also get asked what the synergies are going to be among HR, risk
management, treasury. Everyone is asked what synergies we think we can make.
Horgan comment: How do you position yourself to answer that question?
Member comment: We try to work with the business development team as much as we can and
say how are you valuing this company and how are you incorporating risk into that valuation?
Most of them are finance guys so they do it wrong. We show them how to calculate risk into the
business. They may not use our number, but it gets us to talk about different scenarios. We have
helped to drop the price of some companies we were purchasing.
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Member comment: For me, one of the most important areas to start with is your own D&O
coverage. Do you have the right D&O insurance? Are you creating an exposure that you might
not have had? That’s a piece that’s important.
Member comment: Our risk management department is embedded with the M&A team so we
build that relationship. We have a War Room. We have found risks we never had before. Other
thing I read is contracts. Have found some doozies in there. Environmental risks, etc.
Horgan comment: Does a review of the contracts lead you to question why they have the
coverages?
Member comment: I look for weird issues – why did they have a particular line of insurance?
Then I start looking in the contracts. Always analyzing risks, looking for “what ifs” and surprises.
Member comment: We did not do a deal with a company because of something we disclosed in
a contract review. Company was doing aviation servicing work and had a contractual requirement
to provide aviation insurance, and they did not have it. Serious management issues.
Member comment: If you see something that just shouldn’t be there, you wonder why.
Kerner comment: How do you think about the priority of consolidating insurance programs?
Member comment: The more I know about them, the more comfortable I am about them joining
our program. The less I know about them the less comfortable I am. It depends on each
acquisition.
Member comment: Depends on the acquisition and what they do. If there is something valuable,
we will let it go, unless there is a red flag.
Barnes comment: One possible tool we can offer to help you if you are doing an acquisition of a
high-frequency program. We can do an apples-to-apples comparison of your program and theirs
to show you if we can save you money by integrating with Zurich. Or, we may tell you that it is a
good program and advise you to keep it for the time being.
Horgan comment: When you get into these issues and you are time stressed, pick up the phone
and call your relationship leader. Maybe we can help you out.
Guy Miller, Chief Market Strategist, Head of Macroeconomics, Zurich
Financial Services
“Current Economic & Investment Environment”
Member comment: Do you think there will be a spate of hard assets from Asia to Europe?
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Over the last couple days, Chinese were speaking warmly about their relationship with
Europe; not a spate but it will happen.
Capital will seek opportunities to buy well-known brands; provided Eurozone does not
impose capital controls.
Problem I have right now is the polarization of the political parties in the US; it is hard to
get any kind of bi-partisan agreement, and we need it.
Listening to the debates I don’t feel any more optimistic.
One party saying austerity only, other party wants stimulus. Frankly you need both.
Have to have the political will to change it.
US dollar is still the currency of last resort, China pegs to the dollar, but that could
change.
Not the debt level that is the problem.
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If US interest rates creep up, then it’s a problem funding the debt; economy will have to
grow just to fund the interest.
Urs Uhlmann, Head of Canada, GCiNA
Simon Plumridge, Global Head of Product Recall, General Insurance
Alain Simard, Saputo, Inc.
“Product Recall Overview & Group Discussion”
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Urs Uhlmann: Product recall process can be defined as narrowly as you want.
Could be just getting products out of customer hands or off shelves.
Could be fixing the product or replacing the product.
Could be a very involved process involving not only your company but also suppliers,
distributors, etc.
Changes in legislation in some countries have increased the probability of getting
products off the shelves quickly.
Alain Simard: Product risk has always been one of the most difficult risks to underwrite
or even to assess.
In property insurance, if you are simply looking to assess the quality of risk, you look at
combustible analysis, likelihood of fire at one of your facilities.
If you compare to earthquake risk, you would look at those risk models to pinpoint where
you have exposure; what is your cost of risk?
You could then purchase an insurance program or relocated to less hazardous regions.
Product recall is a very difficult animal; you don’t know where it will hit.
Can have the best quality assurance program looking at the products you are making, but
you could be hit in your supply chain or distribution chain.
Property loss is simple; will you be filing a claim or paying for it yourself?
Earthquake is the same thing; damage to buildings.
Product recall is a very different situation.
In Canada, Section 19 of the Canadian Food Inspection Agency says that if the Minister
believes on “reasonable grounds” that the product poses a threat, the Minister can order
a recall, even if did not actually sustain a loss.
Ministry has the authority to make you recall all the products.
In the US, Food Safety Modernization Act gives the FDA new authority to order a recall.
Congress voted $1.4 billion for the FDA to do inspections on foreign manufacturing
facilities; doubles every year for five years.
Product recall is an especially significant risk for food producers.
“Spiderweb” – a concept drawn from quality assurance, explains how and where a recall
may start; you don’t know where it will lead or where it is coming from.
EXAMPLE: Company X operates dairy plants in the US producing a variety of dairy
products.
Also owns a small factory that manufactures skim milk powder; not much finished product
and not high on the risk management radar; small facility complying with FDA and food
safety regulations.
Powdered product, long shelf life; product where inventory can build-up in the warehouse
and with the customer.
A dairy farmer warns Company X about a problem with feed; animal feed supplier gave
him the wrong feed for his dairy herd; antibiotics.
Why different? Dairy operations are governed by different laws; farmers will use drugs
and antibiotics to treat cattle, but not allowed in the milk industry.
Test samples; 70 percent are positive with presence of antibiotic; FDA orders 100
percent of all products to be put on hard hold and dump all the milk.
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“Spiderweb” starts:
o Milk went to three cheese plants.
o One of three plants makes its own whey from milk.
o Whey has significant protein and lactose; use in finished goods.
o Protein powder sold for other products, including baby food.
o Other cheese plants used powder.
o Sell fat to butter plant owned by Company X.
o Butter to retail market.
o Butter went to chocolate factory.
Small plant making a small amount of finished goods can lead to catastrophe.
Tine Thorsen, Head of Marketing, Zurich Global Corporate
“Brand Essence Workshop: What the Zurich Brand Stands For”
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Four very broad directions
o “Helpfulness” – For next five years focus brand direction on helpfulness;
finding solutions, partner, someone who knows my business, long-term,
shares, value added, flexible and quick to respond, quick decision making,
proactive, anticipate.
o “Management of Risk” – Innovation, forecasting, strategic, new ideas,
focus on management, empirical, know data.
o “Fairness” – Claims management, pricing and claims handling, negative
element, not positive, hiding something we don’t know about?
o “Delivering” – Responsive, efficient, timely, action-oriented, proactive,
keeping a commitment, fulfilling a promise, meeting expectations, deliver on
time.
Split into four teams; each team works on one of the areas.
Thoughts on strengths and weaknesses of HelpPoint?
Management of risk – Really good risk people, experts in risk; best in serving our
customers; motivated to do our best for you; insurance demands technical expertise; but
focus on what our customers need; people who care.
Member comment: Our feeling is that your insurance should be client-focused,
motivated and targeted, want the customer to feel that you are willing to be a partner,
understand the customer’s business, what the customer needs and help meet those
needs.
Member comment: If you want to be more client-focused in your business, most of us
felt that Zurich needed a bit of a cultural shift, so that if you are targeting customers in a
helpful, partnership way, you need to concentrate efforts more on relating to your
customers.
Member comment: We need a partner who can help us find solutions to tough
problems; need to do it in partnership; relationship; expertise is necessary.
Delivery – We are all about delivery, delivering to our customers drives every single thing
we do; love rising to the challenge, whether handling a claim, problem-solving or planning
for the future; count on us to deliver.
Where does Zurich stand?
Member comment: Rising to the challenge, any success we can hear from those
initiatives can help. Handling claims, good experience.
Member comment: I need more flexibility in my wording; being reasonable; flexibility.
Fairness – Clarity; we know you value clarity; when need to make an insurance claim;
the last thing you need is added complexity; easier to see, easier to do; clarity of action
by doing what we say we will do when we say we will do it.
Member comment: Elimination of unnecessary complexity; not just communicate
verbally and on TV: crystal clear, focused thinking.
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Michael Raney, CEO, Zurich Global Corporate Latin America
Marcos Lima, Odebrecht OCS, Brazil
Christian Mendonca, Schahin
“International Roundtable 1: Latin America (Brazil/Argentina)”
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Providing perspectives of the region and some of the challenges.
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Introduction: Marcos Lima – Odebrecht OCS, Brazil. Head of OCS, in-house broker and
risk management function for billion-dollar, Brazil-based construction and petrochemical
company; Odebrecht has grown 22 percent per year for the past five years; doing
business in 18 countries with ambitions to get to $200 billion by 2020 and move to 30
countries.
Introduction: Christian Mendonca – Schahin, Brazil. Risk manager for Brazil-based
company with $5 billion in annual revenues, construction and commercial real estate
development, fast-growing, pinned to oil reserves.
Introduction: Emanuel Baltis – former head of engineering lines; veteran Brazil guy;
joined in Sao Paulo; our Greg Maguire of Latin America.
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Member comment: Are there any unusual quirks about getting claims money into Brazil, tax
issues?
Mendonca: As long as you have a local policy there, you have no issues; the problem is if you
have no local policy.
You have to comply with the regulations; risk in the country must have insurance policies in the
country, unless there is no way to cover a risk with a local policy.
Similar regulations in Argentina, but not quite as onerous, another set of hurdles; we will deal with
those with a local reinsurance subsidiary of Zurich.
In the meantime we have treaties in place and don’t see the same issues in Argentina.
Raney: Political risk and trade credit are two of the newest additions in product capabilities in
Latin America.
We are looking at local customers who are investing in other emerging markets nearby and are
looking to protect their investments against expropriation or currency inconvertibility.
Petra Riga, Head of IPZ Sales & Distribution, Zurich Global Corporate
“International Roundtable 2: Multinational Insurance Application Demo”
Member comment: Do risk managers and brokers have access to this?
 One of the global brokers is testing the application; training staff to use it; they like it very
much; another broker has already purchased the application; a lot of interest.
Member comment: What about access to customers?
 Having a meeting to discuss this in two weeks time; it’s a little bit different; in order to use
it you need to understand the business scenarios; a lot of training effort.
 We are willing to share, just need to fine a reasonable way to do it.
Bouchard comment: In Europe, there is a debate about an international standard for
international program business. In the US, it doesn’t seem to be the same clamoring from the
customer base for such a standard. Zurich feels that you, the buyers of international programs,
would benefit greatly if there was more consistency about the interpretation of these 240 country
rules. It would be nice if we were all building off as consistent a base as possible. Our effort to
offer to brokers is an indication of our desire to syndicate to brokers and the market. What is
critical is that you have a compliant, effective international program so that you won’t end up in
the news, so we are making this available to more and more players.
Member comment: How often do you update?
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We go out with a very comprehensive questionnaire on each of these scenarios once a
year.
 In addition, the law companies are very proactive about providing information about any
immediate changes.
 We have invested $20 million US dollars to create this, and it costs us $5 million a year to
maintain this data and make sure it is updated.
Member comment: Incredibly impressive, but Francis, to your point, a lot of these things are
still under debate as to the issues involved. I would caution that using it internally is great on
behalf of brokers and customers you work with, but I would caution you about giving this
information to brokers that they might rely on to do business with other companies. What if
you have a weak link in Egypt who is not the best at construing local laws? Then, someone
writes a program in Egypt on the information you have in your database and a mistake is
made and a claim cannot be paid.
Riga: This has been developing for seven years.
 At the very beginning, when we brought it out and came up with MIP, we got challenges
from all over the market.
 Now we can say that the data is very accepted.
 We have a team of five that does nothing but make sure the data is updated.
 Constant contact with local law companies, not just once a year but on a regular basis.
Member comment: Knowledge is power. As risk managers, we add value to our corporations by
saying that there is a challenge in that country. Especially the tax issues and getting money in to
pay claims; just need to be aware. I applaud Zurich for this effort; it’s never perfect, but boy it’s
better than just being ignorant. In international business you had really better pay attention.
Member comment: Sharing with regulators, I can see scenarios where the regulators get this
information and see that their country or province is not competitive; internal financial factors in
the country. I can see this product moving some regulators to be more flexible.
Kerner comment: In US, that hasn’t worked too well. Not shared yet, but it would be cool to get
regulators to manage it and it would be standardization that would be useful.
Member comment: Canada is a lot like Brazil. People in the US presume that it is close to home
in rules and regulations, but there is now a 50 percent tax for non-admitted. You have to know
this stuff and have people on the ground.
Riga: You are just seeing one piece of MIA; most important piece is how MIA is embedded in the
underwriting process now
 We make sure that all taxes, DIC / DIL coverages are arranged from the beginning;
automatically done by MIA; MIA also generates tax reports; most important thing.
Valerie Butt, Head of Customer Relationship Management, GCiNA
“Open Forum”
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Let’s start with collateral buy-backs; some strong opinions.
Member comment: The only question from us was who was your target audience? We
did not feel it was Global Corporate. If you were looking for it to be us, if we needed that
capacity we would not want to give it up because we would be so cash constrained we
would be downgraded. Maybe more of a middle market issue. Our guess is that you are
buying credit default swaps on the back end and they do not have the best records.
Butt comment: For a small subset, it may make sense.
Member comment: We came up with the same consensus. At Cisco, it did work out in
our best interest. Our CFO was happy to pay a small fee to keep a large amount of cash
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for acquisitions, for some unique circumstances. Overall, we agreed with the other group.
One-off special situations.
Member comment: It is for quality credit risks, big or small. Not looking to buy
acquisitions unsecured. Supplement with a Letter of Credit, but we do not need whole
product. Supplemental for the larger companies and a real asset for the smaller
companies, trying to transition out of their old collateral. When people are trying to
transition there are a lot of problems, redundancies. Incumbent comes in and offers you
lower collateral to stay.
Horgan comment: We are using excess capacity, not hedging on the back end. We do
credit analysis on all of our customers, not just D&B’s.
Member comment: Corporate guarantees are worse than LOCs. Not to be done.
Member comment: Sitting in our group we couldn’t understand the reason for the
product. On the data sheet you should provide scenarios that show it to be a useful
product. We couldn’t figure it out from the sheet.
Member comment: Seems odd because you are not selling insurance.
Butt comment: Let’s move on to customer communication. This came out of our TRI*M
Study, which is a customer satisfaction study. Speed of decision making. Slower than you
would like. Transparency. Getting better metrics in how we go about making decisions.
Where do we have impediments?
Member comment: We felt that there are still some opportunities for Zurich in this area. I
have seen improvements, but we still lean heavily on our RLs and senior management to
get decisions made more quickly. This year we started early and stayed on top of things
to keep from getting down to the wire. At other times, it seemed like everything ran down
to the wire on decisions anyway. It may have cost you some business. We feel like we
have to go higher up the food chain to get decisions before it’s too late.
Member comment: Sometimes we are working on something way before renewal, but
you still can’t get a decision until two days before the renewal. That decision needed to
be made much sooner. I have an example. I have an additional insured report that I
thought what I was asking for would be highly beneficial to Zurich. Here I am three weeks
after my renewal and I still don’t have an answer. Started working on it six months ago.
Butt comment: Specific lines of business or across the board?
Member comment: Role of the RL, in some ways it’s like a Band Aid to force
communication and still want to make the company customer-centric, so they are
reacting. What we are saying is that you can work as far ahead as you want, but in the
end if you have someone else who needs to make a decision, we just turn off.
Butt comment: Sounds like there is still a lot of escalation.
Member comment: We figure it will take a long time to change the culture. Maybe you
should give some kind of reward for doing something early enough. Within our group,
there were three pieces of business that were lost due the decision-making process. If
you work with the local underwriters, one of our concerns is that is there any chance that
our access to RL is actually inhibiting that change of culture.
Member comment: For a long time, Zurich had these steps and processes in place
where culturally it took a long period of time and stages. Then, all of a sudden you
empower people at a lower level to make decisions. But for 20 years they didn’t know
how to make those decisions, now it’s theirs. You have a whole chain of command that
has not been accustomed to it.
Member comment: Part of this discussion is that a lot of people are using the word
inflexibility, part of what I think Howard is alluding to. If you have the database that Petra
showed us, it depends on how you present it to your groups on the ground. If this is a
guideline that tells you what you cannot do, that’s the way it will be viewed. Stuff you
cannot do, rather than here are some issues that you need to look at and consider that
perhaps can be done, but you have to see whether you can find a workaround.
Member comment: Most of us are fairly large companies. The whole concept of
empowerment is good, but we are going to push most of the local underwriting offices
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pretty damn hard. At the end of the day, they are not going to feel empowered to make
the kind of decision we are trying to influence. It will take an executive to get involved in
that decision if we are talking about major programs. That’s where we hit the roadblock.
You guys want that local office to be empowered, but we are pushing pretty hard on
them. And they are going to say, man, I don’t know if I can make that decision. It has a
big impact from an underwriting position. Maybe it’s about empowering, but an executive
has to be shadowing that renewal for a major corporation early in the process because it
probably needs signoff that only a senior level executive can do because of the size of
the deal.
Butt comment: This is not indicative of all customers. Your programs are outside the
box.
Kerner comment: Empowerment also means allowing someone to make mistakes and
not punishing them as long as they don’t keep making the same ones. It’s part of the
process.
Member comment: We’ve definitely noticed an improvement this year. Saw a huge
improvement. But if, at the end of the day, we have to cut to the chase and have a senior
person on the program, let’s do that. It should just work. Either way is fine, either
empower person on our program or get a senior person on it.
Horgan comment: Only thing in our world that requires heavy involvement is on property
if it is $1 billion or higher. Other than that, one of the changes we’ve done has been to
move to a much more regional structure. We have pulled a lot of decision-making into
regions. We have the right infrastructure in place.
Butt comment: Last area is claims communication; improving communication, more
transparency about reservation of rights, etc.
Member comment: Again, we had a bit of discussion on this. Saw a marked
improvement in the last six months.
Member comment: Sometimes, and this is a compliment to Zurich, we had a claim
where it was very important to have specific knowledge to adjust the claim, not just the
claims expertise of an insurance company. We had two carriers on the claim, one was
Zurich. The quality of the people Zurich hired to understand the claim was so much better
than the other carrier. Really made you wonder about the other carrier. Like night and
day.
Member comment: If you hire an idiot then you become the idiot.
Member comment: We assume that when you hire a third party, they presume that they
have to be your watchdog and be aggressive to manage the claim. Zurich may want to be
more helpful but may not have communicated that to the third party. The third party
lawyer may want to be more aggressive. Do you set the tone with your third party?
Member comment: Another compliment to Zurich is that you let us talk and really listen
to what we have to say. You are atypical of other insurance companies, you actually try
to make changes and respond. I’ve attended other panels like this and we seem to revisit
the same complaints over and over and nothing ever gets done. Zurich actually listens
and comes up with action plans. In the end, it may not be perfect but it is progress toward
a commonly shared goal. You put a lot of time and energy into it. You don’t get defensive
right away when we raise issues. You actually strive to get things done.
Member comment: One of the things that came out of our discussion, was that you get
feedback from us about how you are doing – we would like you to give us some feedback
about what we can do better.
Mike Kerner, Chief Executive Officer, GCiNA
“Concluding Remarks”
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Thanks for joining us; we appreciate all the comments and the constructive criticism.
I’ve been with the company over 20 years now, and I have seen the whole issue of
decision-making evolve.
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We have worked hard to see that we have the authority in North America to do everything
we need to do; help us make it work.
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