Leadership, Knowledge, Solutions…Worldwide.
The Role of the Broker as
the advocate of the
Insurance Buyer
University of Houston - January 27th, 2011
Andrew Steptowe – Marsh Energy Houston
Introduction
Andrew Steptowe, Managing Director,
Marsh Energy Practice
•
30 years experience in the Marine & Energy Insurance Market
• Has worked in London, Toronto and Houston
• Practice Leader of Marsh’s US Upstream Energy Business
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Marsh & McLennan Companies Inc.
MMC is a global professional services firm that helps clients identify, plan for and
respond to critical business issues and risks by providing analysis, advice and
transactional services.
MMC’s subsidiaries:
Marsh
Guy Carpenter
Mercer
Oliver Wyman
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Marsh Global Energy - Locations
Oslo
Calgary
San Francisco
London
New York
Madrid
Houston
Dubai
Energy Teams in:
• Tulsa
• Dallas
• New Orleans
Singapore
Pert
h


300+ employees helping c. 1,750 clients globally
Placing approx. USD 1.8 Billion in insurance premiums into energy insurance
markets, significantly more than any other broker.
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
Integrated Global Practice, headquartered in Houston, Texas

Energy practitioners in many more locations around the world
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Large Commercial Insurance Involves 3 Key Parties….
 The Client
 The Broker
 The Insurer
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In a world with no brokers…..
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So why the “Middle Man”?
 The Broker is an impartial advisor –
not an Agent
 The Broker is able to best assimilate
the risks faced by the Client to the
products available from various
Insurers
 The Broker is the advocate of the
Insured not the Insurer
 The Broker also fulfills key
administrative functions related to
regulation and taxation
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What other important roles do brokers play?
 Development of new products
 Market analysis
 Distribution network for underwriters
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The competitive landscape in Houston
 GLOBAL BROKERS
 DOMESTIC BROKERS
– Marsh
– Alliant
– Aon
– Gallagher
– Willis
– Lockton
– McGriff Seibels
– John L.Wortham
– USI
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Being appointed by a Client….
“There are worse things in life than death.
Have you ever spent an evening
with an Insurance salesman?”
Woody Allen
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How Brokers are chosen
 Usually multiple brokers are identified
 Certain key criteria will define the most likely candidates
 They are then asked to present a conceptual proposal based on a set of
service and/or program requirements particular to the needs of the individual
client
 Sometimes selection is made on an “assigned markets” basis
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The decision whom to appoint is usually both subjective
and objective…..
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Having been appointed there is a great deal to be done
before approaching Insurers:
 Gaining an in depth knowledge of
 Benchmarking limits and retentions
the Clients business and operations
 Reviewing insurance policies
with similar clients
 Assessing proposed premium
currently in place to ensure the
coverage provided is adequate
 Gaining an understanding of prior
year losses and past experience
levels against present market
trends
 Identification of key Insurers
 Developing a marketing plan
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The Marsh 3D Model
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Benchmarking
 Brokers have access to a significant amount of key data from the clients that
they work with
 Clients are always interested in the limits, retentions and premiums paid by
their competitors
 Brokers are always interested in what deals have been done by whom for
how much
 The end game is to leverage the information we have to get the right deal at
the right price for the client. Very rarely is there only one option!
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Example Benchmarking
Account
Exp
Total Insured
Date
Values
PD Deductible
BI Deductible
Net Rate on
Values &
Full
Indemnity
Period
Policy Limit
Company A
May-10
$27,292,797,418
$5,000,000
30 Days
0.0307
$750,000,000
Company B
Jul-10
$1,649,869,000
$1,000,000
30 Days
0.0737
$400,000,000
Oct-10
$332,732,460
$1,000,000
30 Days
0.0553
$50,000,000
Oct-10
$1,891,739,309
$10,000,000
21 Days
0.0375
$100,000,000
Oct-10
$1,593,073,036
$5,000,000
-
0.0303
$60,000,000
Jun-10
$1,147,873,615
$750,000
15 Days/
45 Days
0.0631
$50,000,000
May-10
$10,424,635,829
$1,000,000
30 Days
0.0884
$405,000,000
May-10
$2,223,964,977
$1,000,000
45 Days
0.0788
$300,000,000
Sep-10
$34,530,620,982
$2,000,000
30 Days
0.0270
$750,000,000
Sep-10
$4,033,338,340
$2,000,000
45 Days
0.0669
Not Known
May-10
$1,030,685,100
$1,000,000
30 Days
0.2373
$230,000,000
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How do brokers evaluate which Underwriters to
approach for a particular risk?
 Financial Stability
 A proven track record in a particular class of business:
– Underwriting expertise
– Risk Management capabilities
– Claims capabilities
 An understanding of the industry in which the client operates
 Service
 Licensing
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Major Markets for Energy Business
 Domestic
 Overseas
– ACE
– Lloyd’s
– Chartis
– Munich Re
– Chubb
– Swiss Re
– Liberty
– GARD
– Starr
– AXA
– St Paul / Travelers
– Bermuda (XL, Torus, OCIL)
– WR Berkley
– OIL
– Zurich
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The basic marketing plan
 Identify two or three “lead markets”
 Prepare a detailed underwriting submission
 Arrange face to face meetings between the Insured and Underwriters
 Negotiate!
 Obtain terms and discuss options with the Client
 Refine terms as necessary
 Select a market and bind the risk
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Setting Expectations
An Example of a marketing timeline
22nd
Strategy meeting with
Rowan
Client &&Marsh
Marshteams
teams
to discuss goals &
any issues
22nd - 31st
Rowan
Client to
toprovide
provide
renewal
Risk Information
information
& Marsh to develop
submission
1ST
Marsh to send
submission to Market
March
Ongoing marketing &
information exchange
4TH – 8th
Underwriter visits
& presentations,
as required
10th – 12th
Marsh to present
renewal proposal
to
toRowan
Client
February
Ongoing marketing &
information exchange
13th – 20th
Rowan
Client to
toprovide
provide
Binding instructions
April – May
Policies received,
reviewed & sent
to
toRowan
Client
Monitor program &
provide superb
day-to -day service
APRIL 1st
EFFECTIVE DATE
JANUARY
FEBRUARY
MARCH
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APRIL
ONGOING
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After the deal is done….
 Issue all payment documentation
 Collect funds and pay insurers
 Issue documentation: Certificates, Auto ID cards, Policies etc.
 Prepare a summary of coverage
 Issue a claims procedure manual
 Maintain appropriate contact
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And most importantly….
NO SURPRISES!
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Thank you for your attention
I’m sure you must have some questions! …..
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www.marsh.com