Zurich North America Risk
Management Council Meeting
DAY ONE
February, 2011
WELCOME & WARM UP!
Valerie Butt
Head of Customer
Relationship Management
Fun quiz about Santa Barbara…
Fun quiz about Santa
Barbara…
Question 1:
Santa Barbara has more of this per capita
than any other city in the U.S.
Beaches
Green space
Botox
Churches
4
Fun quiz about Santa
Barbara…
Question 2:
Santa Barbara was the birthplace of…
The original wine country
Risk management
Hollywood
Jesus
5
Fun quiz about Santa
Barbara…
BONUS:
What film starring Dustin
Hoffman was filmed here?
6
Fun quiz about Santa
Barbara…
Question 3:
In the movie Sideways, filmed in Santa
Barbara County, what was the muchmaligned grape?
Chardonnay
Pinot Noir
Cabernet
Merlot
7
Fun quiz about Santa
Barbara…
BONUS:
Name a winery in
Santa Barbara County?
8
Fun quiz about Santa
Barbara…
Question 4:
What famous hotel chain got its start in Santa Barbara in
1962?
Ramada
La Quinta
Motel 6
Swissotel
9
Fun quiz about Santa
Barbara…
Question 5:
Which fact is NOT true about Gray Whales?
They have only one mate for life,
which is why there is so much
crying at night
They migrate an average of 8,000
to 10,000 miles a year
They have two blowholes, unlike
one for most whale species
They can swim up to 11 miles per
hour
10
Fun quiz about Santa
Barbara…
BONUS:
What is the Gray
Whales’ biggest
predator?
11
INTRODUCTIONS & NEW MEMBERS
Greg Maguire
Head of Customer,
Distribution & Marketing
Welcome New Members
• Linda Elias – First Solar
• Ken Murphy – Research in Motion
© ZurichZurich -RMC – Lombardo June 2008
13
Why a Risk Management Council?
Mission
Provide an open forum for discussion and information
exchange between Zurich in North America and Risk
Managers
Explore current issues and trends affecting the management
of risk
© Zurich North America
Seek collaborative development of contemporary, tangible
solutions for Zurich in North America and its customers
14
Why a Risk Management Council?
Objectives
Encourage constructive dialog between large corporations and Zurich.
Establish two-way communication between Zurich senior management
and industry representatives on economic, regulatory and social
issues which may affect our industry or our customers' industries.
Create an understanding of Zurich and of its customers' product and
service needs so as to align our respective operations to meet these
needs.
© Zurich North America
Provide Risk Managers an opportunity to exchange information.
15
Why a Risk Management Council?
Council structure and terms of service
Risk managers from large domestic and global companies
Three year terms
-Regular meeting attendance (attend 4 of the 6 meetings)
One third of memberships expire each year
© Zurich North America
One third are new
16
© Zurich North America
Council Members-Only
Web Site
Accessible through
your
Zurich Virtual
Concierge!
17
Meeting Agenda
Wednesday, Feb 23 - morning
Time
Description
Speaker
8:15 am
Zurich Update –
General Insurance and Global Corporate
M. Kerner
9:00 am
A New Regulatory Environment
D. Ruggiero
10:00 am
BREAK
10:15 am
Is your International program in
JEOPARDY?!
Contestants:
Host:
V. Butt
© Zurich North America
U. Uhlmann, A. MacKinnon, R. Jacobus
11:15 am
Risk Manager-only Session
18
© Zurich North America
Meeting Agenda
Wednesday, Feb 23 – afternoon/evening
Time
Description
12:15 pm
Depart for Lunch and Whale Watching
(Meet in hotel lobby)
12:45 pm
Lunch and Cruising
2:45 pm
Depart for Bren School (UCSB)
3:15 pm
4:30 pm
4:45 pm
Welcome
How Climate Influences Water Vulnerability
Climate Change
Nanotechnology – Risks & Regulations
Thank You and Day 1 Closing (M. Kerner)
Bren Hall Tour
5:15 pm
Return back to hotel
6:30 pm
Cocktails & Dinner
(Four Seasons – ELMAR Room)
19
© Zurich North America
Meeting Agenda
Thursday, Feb 24
Time
Description
Speaker
7:00 am
Breakfast
(Tydes – same location as Weds morning)
8:00 am
Welcome – Day 2 & Summary of Action
items from yesterday
G. Maguire
8:15 am
Safeway’s Culture of Safety
CA – WC update
W. Ching
B. Zachry
9:00 am
D. Hofmann
10:00 am
Economic Outlook & Global Risk
Update
Open Forum / Q&A
10:45 am
Closing Remarks
M. Kerner
(via phone)
Facilitated by:
V. Butt
Next Meeting – week of Sept 12
Lunch & Box Lunches available
Departures
20
Zurich Update – General Insurance
and Global Corporate
Mike Kerner
CEO, Global Corporate,
North America
ZFS FY 2010 Financial
highlights
In USD millions
for the years ended December 31
2010
2009 (1)
Change
_________________________________________________________________________
________
Business operating profit (BOP)
-13%
Net income attributable to shareholders
3,434
General Insurance combined ratio
-1.1pts
Global Life new business value (2)
Farmers Mgmt Services managed GEP margin (3)
817
4,875
5,593
3,963
-13%
97.9%
96.8%
782
7.3%
7.2%
Shareholders equity
31,984
29,304
Return on common shareholders’ equity (ROE)
11.4%
16.1%
4% (2)
0.1pts
9%
- 4.7pts
(1) Throughout this document, certain comparatives have been restated. Refer to the audited consolidated financial
Business
operating profit (after tax) ROE
12.9%
17.6%
- 4.7pts
statements
for details.
(2) After tax; change in local currency is 7%.
(3) Margin on gross earned premiums of the Farmers Exchanges. Zurich Financial Services Group has no ownership
interest in the Farmers Exchanges. Farmers Group, Inc., a wholly owned subsidiary of the Group, provides management
services to the Farmers Exchanges and receives fees for its services.
ZFS Business operating profit by segment
In USD millions
for the years ended December 31
2010
2009 (1)
Change
____________________________________________________________________________________
_
General Insurance
2,673
3,463
- 23%
Global Life
1,474
1,477
0%
Farmers (including Farmers Re)
1,686
1,554
8%
© Zurich American Insurance Company
Other Operating Businesses
- 801
- 611
-31%
_________________________________________________________________________
__
Total Core BOP
5,032
5,883
-14%
Non-Core Businesses
- 157
- 290
46%
_________________________________________________________________________
__
Total BOP
4,875
5,593
-13%
(1) Throughout this document, certain comparatives have been restated. Refer to the audited consolidated financial
statements for details.
23
Top line development by segment
In USD millions
for the years ended December 31
2010
2009
Change
Change in LC (1)
_________________________________________________________________________________
_______
© Zurich American Insurance Company
General Insurance
GWP and policy fees
33,066
34,157
-3%
-3%
_______________________________________________________________________
__
Global Life
GWP, policy fees and insurance
27,675
26,029
6%
9%
deposits
Annual Premium Equivalent (APE) (2) 3,699
3,667
1%
4%
_______________________________________________________________________
(1) __
Local Currency
(2) Gross new business Annual Premium Equivalent (APE)
Farmers
Farmers management fees
2,778
2,690
3%
24
3%
How we measure ourselves
Customer Centricity
Top quartile customer satisfaction
Growth at or above the overall insurance
market across the cycle
AA-level financial strength
© Zurich American Insurance Company
We aspire to
become the best
global insurer as
measured by our
customers, our
shareholders and
our employees
Employer of Choice
High quality engagement scores
High quality retention rates
Shareholder Value
Top tier performance in each of our businesses
16% BOPaT ROE across the cycle
Paying a sustainable and attractive dividend
Top-quartile Total Shareholder Returns (TSR)
25
General Insurance – key performance
indicators
In USD millions
for the years ended December 31
2010
2009
Change
Change in LC (1)
_____________________________________________________________________________________
______
GWP and policy fees
33,066
34,157
- 3%
-3%
Rate change (2)
2%
3%
- 1pts
__________________________________________________________________________
______
Loss ratio
71.1%
70.9%
- 0.2pts
© Zurich American Insurance Company
Expense ratio
26.8%
25.9%
- 0.9pts
Combined ratio
97.9%
96.8%
- 1.1pts
__________________________________________________________________________
______
Business
operating profit
2,673
3,463
- 23%
-22%
(1) Local Currency
(2) For details, please refer to specific notes on the following slide “Rate Change Monitor”
26
2011 estimated economic and regulatory solvency
Statutory solvency ratio / Group’s Solvency I
Dec 31, 09
195% (2)
Sept 30, 10
245%
Impact Q4-10 Dividend 4 Dec 31,10
+5pts
-7pts
243%
Economic Solvency Ratio
136%
(3)
+8pts
114%
© Zurich American Insurance Company
Impact AFR
Movements and
RBC changes in
Q4-10
January 1
est. for
2010
September 30
est. for 2010
(1)
-3pts
Impact of
dividend
119%
(4)
January 1
est. for
2011
(1) Solvency I requirements in accordance with the Swiss Insurance supervisory law.
(2) Finalized, restated for accounting change and as filled with the Swiss regulator, after 2009 dividend.
(3) Economic financial strength is based on Available financial Resources (AFR) at the beginning of the period and expected risks to be
taken during the period (HBC) Economic financial strength is based on AA calibration.
(4) 2010 dividend proposed to the AGM minus previous pro-rate accrual of dividends in 2010.
27
Zurich GI to deliver its targets by focusing
on 4 elements of our strategy
4 Key strategic thrusts
I
II
Enhancing technical capabilities
and developing our people
Focus on continuously
improving our business and
expense management
Global and simple approach
© Zurich American Insurance Company
III
IV
Focused value-creating growth
initiatives
Zurich GI targets
Improve combined ratio by 3-4
points relative to global competitors
by 2013 while contributing to Group
BOPaT-ROE target > 16%
Reduce expenses (excluding
commissions) by 7% or at least
USD 350m on a run-rate basis by
2013 (included in the USD 500m
Group target)
Hold market position without
compromising on profitability
28
Zurich GI to achieve its CoR target by
focusing on 4 specific sets of actions
4 sets of actions to improve results
Targeted CoR
improvement
1
Reshaping the portfolio
2 - 3pts
2
Achieving technical excellence in claims
3
Reducing expense bases
4
Launching focused growth initiatives
1pt
3 - 4pts
© Zurich American Insurance Company
Total
29
29
© Zurich American Insurance Company
Zurich Newz
Zurich closes the acquisition of PT Mayapada Life in Indonesia,
establishing our presence in one of the fastest growing life
insurance markets in Asia
Zurich closes the acquisition of Compagnie Libanaise
D’Assurances in Lebanon, expanding our operations in the Middle
East by providing products to personal & commercial customers
Advisen names Zurich as one of the top New Product Pacesetters
for 2010
Zurich named the Best European Primary Insurance Company by
Reactions Magazine
Zurich included in Interbrand 2010 Best Global Brands study
Institutional Investor recognizes Zurich with a variety of awards
Zurich accepts EarthShare award for outstanding commitment to
the environment
Surety, Credit and Political Risk voted Best Private Insurer by
Trade Finance magazine
30
© Zurich American Insurance Company
QUESTIONS
31
A New Regulatory Environment
Denise Ruggiero
Vice President - Policy,
Research & Regulatory Counsel
Government and Industry Affairs
(GAIA)
Agenda
 New Environment
 Dodd-Frank: Highlights, Scope and Significance
 Systemic Risk: Activity, Criteria (US & Int.), and
Implications (US & Int.)
 Zurich’s Response
 D&O Insurance
© Zurich American Insurance Company
 Potential Impact to Customers and Marketplace
 Health Care Reform
 What Does this Mean for Zurich Customers
33
New US Environment
Today’s public policy challenges involve:
 New and extensive regulatory activity at the Federal level that impacts all
aspects of our enterprises and others
 Financial consequences and complexity of new laws are broader in scope and
impact all aspects of companies
 New dynamics are causing traditional lobbying channels to change
 Increasing anti-foreign sentiment and aggressive protectionism
© Zurich American Insurance Company
 Increased legislation that is more complex, onerous and has broader
management implications
 Increased and far more fractured regulatory activity at the State level
The US Environment Further Changed on July 21, 2010
34
Dodd-Frank: Legislative Highlights
 Consumer Protections with Authority and Independence – creates an
independent “watchdog” housed at the Federal Reserve.
 Ends Too Big to Fail Bailouts – avoids asking taxpayers to bail out financial
firms by creating a new structure to liquidate firms and impose tough new capital
and leverage requirements.
 Advance Warning System – creates a council to identify and address firms that
pose a systemic risk.
 Transparency & Accountability for Exotic Instruments – provides more
regulation over certain derivatives, asset-backed securities, hedge funds,
mortgage brokers and payday lenders.
© Zurich American Insurance Company
 Executive Compensation and Corporate Governance – provides
shareholders a say on executive compensation and golden parachutes.
 Protects Investors – new rules for transparency and accountability for credit
rating agencies
 Enforces Existing Regulations – strengthens oversight and empowers existing
regulators
35
Dodd-Frank: Scope and Significance for
Insurance Industry
 Creation of Financial Stability Oversight Council (FSOC) to identify non-bank
financial companies for systemic risk regulation.
 Non-bank financial companies designated by the FSOC will be subject to
heightened prudential supervision.
 Systemic Risk Monitoring by the Office of Financial Research (OFR) to collect
data and do research on behalf of the FSOC.
 Designated non-bank financial companies can be required to participate in the
“orderly liquidation fund” after a failure.
© Zurich American Insurance Company
 A Federal Insurance Office (FIO) is created inside the Treasury Department to
provide the federal government with expertise on the U.S. property and casualty
and life insurance sectors.
 Proprietary trading restrictions on banks and shareholder voting requirements
on Executive Compensation will be areas to watch.
36
Systemic Risk – FSOC Activity
October Meeting
Began rulemaking process by establishing designation criteria. Developed detailed committee
structure.
January Meeting
Published the proposed rule on the criteria that should inform the Council’s designation of
nonbank financial companies
GAIA anticipates the FSOC designation review process will begin in April. No information has
been publicly released as to what organizations will be included in the first round.
© Zurich American Insurance Company
Jan 2011
November Meeting
Developed detailed committee structure
Apr 2011
Oct. / Nov 2010
FSOC Activity
37
Systemic Risk – Designation Criteria
(US)
Proposed Criteria Framework
1) Size
2) Substitutability
3) Leverage
4) Liquidity and asset/liability matching
5) Interconnectedness
In addition, the FSOC
reserved the right to invoke a
“subjectivity” factor,
weighing any additional
factors and/or information
that is available at any given
time to make informed
decisions
© Zurich American Insurance Company
6) Adequate regulatory supervision
38
Systemic Risk – Designation Criteria
(Int.)
Definition of System Risk:

Financial Stability Board (FSB) : “The risk of disruption to the flow of financial services that is


caused by an impairment of all or parts of the financial system; and
has the potential to have serious negative consequences for the real economy.”

A potential systemically important financial institution (SIFI) is an institution that performs activities
which pose a systemic risk

Therefore criteria need to be applied on the activities of an institution
Criteria of potential SIFIs (as defined by the Internal Monetary Fund (IMF) and the FSB)
Size
2.
Interconnectedness
3.
Substitutability
4.
Timing (added by the International Association of Insurance Supervisors (IAIS))
© Zurich American Insurance Company
1.
39
Systemic Risk – Designation Implications:
U.S. and Internationally
 Federal Reserve will have the authority to regulate the business of designated nonbanks
 Designated nonbanks will need to allocate financial and personnel resources to comply
with the new regulatory scheme





Heightened prudential standards – capital, leverage and liquidity requirements
Expanded public disclosures
New reporting requirements
Potential limits on acquisition activity
Overall risk management requirements
© Zurich American Insurance Company
 Data now provided to state regulators will be reviewed and interpreted by the FSOC, the
FIO and the OFR
 The Federal Insurance Office, at the direction of the Secretary of the Treasury, will have
authority to develop Federal policy on international insurance matters, and assist the
Secretary in negotiating certain international agreements that impact insurance and
reinsurance
 The extra-territorial scope of U.S. systemic regulation for designated non-bank financial
companies remains unclear
40
Zurich’s Internal Response
Zurich maintains the position that classic insurers, such as Zurich, do not
present a systemic risk to the financial system.
© Zurich American Insurance Company
In order to demonstrate this, internally, we remained engaged in preparing for the
U.S. designation process and potential international designation through:

Identifying and analyzing our organization through what we believe to be the
“FSOC Lenses”

Established and leading internal work streams in key areas (Legal, Finance,
Investment and Group Regulatory)

Created an international working group to shape approach of international
and national regulation on how our enterprises are systemically evaluated

Determining impact to organizations of 85 proposed rules published since
July 21. We are shaping rulemaking on all material issues to ensure
favorable outcomes
41
Zurich’s External Response
Zurich maintains the position that classic insurers, such as Zurich, do not
present a systemic risk to the financial system.
© Zurich American Insurance Company
Externally, Zurich continues to lead the industry in directing and shaping the
rulemaking process through:

Frequent face to face meetings with key state commissioners that target key
areas of concern

Ongoing meetings with Treasury, FSOC staff, Congressional staff,
Administrative officials, Senior Economic policy staff and international
associations and Supervisors to reemphasize that insurers are not
systemically relevant and reiterate the critical differences between insurers
and banks

Shaping the direction of our trade associations and providing leadership and
guidance

Organizing industry summits with like-minded insurers to share information,
ensure coordination and identify international experts to assist with lobbying
strategy
42
D&O Insurance
With increased enforcement of the Foreign Corrupt Practices Act and provisions within the
Dodd-Frank Act that give incentives for whistle-blowers to bypass internal corporate
compliance protocols; Directors and Officer Insurers can face an increase in occurrence and
severity
Foreign Corrupt Practices Act (FCPA)
© Zurich American Insurance Company
2010 saw further aggressive enforcement policies adopted by the government

SEC created a unit dedicated to FCPA enforcement

Increase in criminal prosecutions
– 2004: two individuals charged under the FCPA and $11 million in criminal fines collected
– 2005: five individuals charged under the FCPA and $16.5 million in criminal fines collected
– 2009 and 2010: more than 50 individuals charged under the FCPA and nearly $2 billion collected
– more than 150 ongoing FCPA investigations currently
– about 35 defendants currently awaiting trial on FCPA charges

Proactive investigation
Increase activity and prosecution by the SEC

Prosecuting U.S. parents for conduct of their foreign subsidiaries
43
D&O Insurance Cont.
Dodd-Frank Whistleblower Provision
The SEC has proposed a whistleblower program to reward individuals who provide the
agency with high-quality tips that lead to successful enforcement actions. To be
considered for an award, a whistleblower must:



Voluntarily provide the SEC with original information about a violation of the federal securities
laws, which
Leads to the successful enforcement by the SEC of a federal court or administrative action in
which
The SEC obtains monetary sanctions totaling more than $1 million.
© Zurich American Insurance Company
Major Concern:
 Whistleblowers are not required to report the issue through existing compliance
channels in the organization - they can go straight to the SEC.
44
Dodd-Frank Impact to D&O Coverage
Applies
© Zurich American Insurance Company
 SEC Whistleblower enforcement activity is likely to generate investor litigation
 D&O policies generally cover defense costs for an insured person when there is a
formal SEC investigation; however, significant uncovered defense costs may accrue
before the SEC names an individual, or if the investigation is informal
 Companies must understand policy insuring agreements and exclusions, and evaluate
limits for adequacy
 Robust compliance and internal audit procedures are critical to mitigate exposures
 Dodd-Frank expands on the existing rules for “clawbacks” of executive incentive based
compensation.
 Sarbanes-Oxley allowed recovery of erroneously awarded compensation for CEOs and
CFOs after an accounting restatement that was due to material noncompliance, as a
result of misconduct, with financial reporting requirements under securities laws
 Dodd-Frank Section 954 expands this to include any former or current executive officer,
eliminates the misconduct trigger, and allows a three year look back rather than one
year
 How D&O policies respond to these changes will depend upon the specific policy
language and fact patterns
45
Potential Impact to Zurich Customers
and the Marketplace Generally
As a proponent of a healthy and competitive marketplace, potential consequences
due to the evolving regulatory environment include:
 Overregulation will add costs to the system (e.g. increased fees, assessments
and staff) which could potentially be passed to customers
 Overregulation can stifle innovation and prevent growth by impacting speed to
market needs
 Unnecessary increased capital requirements and regulatory approvals can
stifle merger and acquisition activity and other needed deployment of capital
© Zurich American Insurance Company
 Excessive regulation can dissuade new entrants into the insurance
marketplace thus impacting competition and possible availability of coverage
46
Health Care: Key Recent Activity

Excess Executive Compensation Tax – on December 22nd the IRS released Notice 2011-02, which clarifies that the
PPACA 162(m)(6) deduction limit applies to deferred compensation attributable to services performed in 2010, 2011
or 2012, only if:

The employer was a covered health insurance provider (CHIP) in the year the services were performed to
which the deferred compensation is related, and

The employer is a CHIP in the year such deferred compensation is paid

The Notice also clarifies that an entity will not be a CHIP in 2010, 2011 or 2012 if the premiums received from health
insurance are less than 2% gross revenues for the year in question

For years after 2012, an entity will not be a CHIP if the premiums it receives from health insurance that is "minimum
© Zurich American Insurance Company
essential coverage", (a term yet to be fully defined), is less than 2% of gross revenues

Zurich and other members of the “E&Y Coalition” met with IRS in support of these clarifications and the de minimis
rule

While this guidance is generally favorable to companies with small blocks of health insurance business relative to
their gross premiums, future A&H product development for those companies will need to be monitored for potential
tax impacts

As part of the December 22 guidance, the IRS also asked for comment on differences between stop loss coverage
and fully insured plans and whether there is an attachment point so low that the policy may constitute direct health
insurance. Zurich is working with industry and trade partners to respond appropriately and to preserve current
treatment of stop loss coverage and exclude it from any PPACA-related tax or revenue provisions.
47
Health Care: 2011 Activity
Anticipated at the Federal Level

Several federal agencies, including HHS, DOL and Treasury, will continue to issue proposed
regulations implementing various aspects of PPACA – including market reform policy provisions and
tax provisions


Zurich worked with its industry and trade partners to submit a comment letter to HHS requesting exemption of
ex-patriate plans from the Minimum Loss Ratio standard or alternatively to define them as including only those
plans providing comprehensive major medical coverage
Congress will take a series of symbolic votes on PPACA repeal and will attempt to address various
parts of the law with bi-partisan support including the elimination of the 1099 reporting requirement.
However, outright repeal of the law is unlikely given the Democratically controlled Senate and the
certainty of a Presidential veto
© Zurich American Insurance Company
Anticipated at the State Level

26 states have now joined multi-state litigation looking to challenge the constitutionality of specific
provisions in PPACA, including the individual mandate. Conflicting decisions at the federal court
level almost guarantee the Supreme Court will ultimately decide the issue, although that may not
occur until the new term of the Court begins in October, 2011

Many state legislatures and DOI’s are currently active implementing PPACA at the state level and in
some cases debating expanding the scope of PPACA reforms to products beyond major medical.
Zurich is working to protect those products statutorily “excepted” from major medical requirements
under PPACA.
48
Health Care: 2011 Zurich Activity
© Zurich American Insurance Company
Zurich Activity

An officer position within GAIA has been added to devote full time attention to this
rapidly changing area at the federal and state level

GAIA will continue working closely with our national trades, (AIA, ACLI, AHIP) and tax
coalitions to address issues of concern, including treatment of stop loss, and expatriate plans, potentially expanding the scope and definition of “excepted benefits”
and to mitigate the impact of current and future PPACA tax and fee requirements.

GAIA is actively engaged at the state and federal legislative and regulatory level to
prohibit PPACA application beyond major medical and to preserve excepted benefit
status for the enterprise’s A&H and general insurance products

Even if the PPACA individual mandate is deemed unconstitutional or the entire federal
law is struck down, many states will continue to enact their own version of state based
health reform with state legislatures, DOI’s and the NAIC playing an active role. GAIA
will continue to dedicate resources to this issue regardless of PPACA’s ultimate fate
and remain vigilant in addressing health related legislative and regulatory efforts
nation wide.
49
What does this mean for Zurich customers
who are facing these same challenges from a
risk perspective?
 Dodd-Frank and Health Care Reform is unprecedented in its scope and
complexity
 Increasing regulatory scrutiny is not unique to insurance and few
organizations are immune
© Zurich American Insurance Company
 Organizational dedication to risk management, compliance, and
corporate governance has never been more crucial
 To assist our customers in these challenging times, Zurich is evaluating
the impact to our existing product line and evaluating what products may
be needed to meet our customer’s needs
50
© Zurich American Insurance Company
BREAK
8/13/2010
51
Is your International Program in
JEOPARDY?!
Is your International Program in
JEOPARDY?!
Please welcome today’s host:
Valerie Butt
…and our three contestants:
© Zurich American Insurance Company
Urs Uhlmann
Andy MacKinnon
Rod Jacobus
8/13/2010
53
Products
Services
Regulations
Countries
100
100
100
100
200
200
200
200
300
300
300
300
400
400
400
400
54
Products for 100:
Answer
Question:
The coverage that provides Workers
Compensation Benefits for expatriate
employees while working outside their
country of citizenship.
(This coverage can include Excess Repatriation, Employers
Liability, Emergency Evacuation and Workers Compensation
Benefits equal to those afforded by statute in his/her country or
state of residence or hire.)
Answer
What is:
Foreign Voluntary Workers Compensation
Products for 200:
Locally admitted coverage
Local claims handling and payment of loss
Answer
What is:
The benefits of purchasing a D&O International
Program?
Explanation >>>
Zurich International Program
(MIP) Multinational Insurance Proposition
•
•
Zurich’s global standard method / framework for writing multinational insurance
business in accordance with national and international law (incl. tax and licensing
requirements)
applied to out-of-territory insurance business
How does the multinational insurance program work?
•
•
•
•
•
•
A master policy is purchased by the Insured
Local policies for countries that do not allow non-admitted insurance is purchased and
tied into the master policy
Premium is allocated from the master policy premium
Countries that require taxes be paid by the non-admitted insurer are paid
The Interlocking, Aggregation & Hold Harmless Endorsement is added to the master
policy and local policies (where legally permissible)
Qualified Entity endorsement is added to the master policy to ensure coverage for
entities and individuals in red countries where the likelihood of a claim is low.
59
What is the relevance of International Programs for
Financial & Professional Lines of Business?
•
Certainty of
Coverage
•
Tax
Compliance
Some countries DO NOT legally permit out-of-territory
insurance
- Different licensing rules pertaining to admitted
insurance requirements
- Sanctions on non-admitted insurance policies including
the power to declare a policy void if not compliant
Some countries DO permit out-of-territory insurance, but levy
foreign premium taxes (FPT) on non-life insurance premiums that
must be paid in order for out-of-territory insurance to be considered
valid (Kvaerner Court Decision)
– FPT rules vary by territory and by LoB
– Different parties responsible for payment of taxes
– Necessity of a licensed tax paying entity
60
Products for 300:
A US Government Compulsory Workers Injury
Insurance established in 1941 as part of the
USL&H Law to provide Federal WC Benefits for
all employees of Contractors working on US
Military Bases, US Government Installations or
on US Government sponsored or funded
Contracts outside the United States.
Answer
What is:
Defense Base Act Workers Compensation
Explanation >>>
Defense Base Act
Claims Handling Functions and Protocols
Claims Customer Service Manager:
• Determines service & reporting needs
• Initiates Acct Service Notification form
• Ensures data is entered into claims systems
• Establishes distribution of first report of injury notification
Claims reporting care center:
• Receives all DBA claims centrally (via multiple reporting
channels)
• Collects all pertinent information
• Assigns claim to DBA Major Case Unit (MCU) specialist
Defense Base Act Claims Unit
• Centralized in Dallas, TX with DBA experts
• 9 full-time Defense Base Act specialists.
63
Products for 400:
This refers to the impact of the
popular uprisings in Tunisia and
Egypt on other autocratic Middle
Eastern countries.
Answer
What is:
Middle East Contagion?
Explanation >>>
Political Risks in Today’s World
• Zurich underwrites and insures specific
investments and transactions. Policies have
their unique terms and conditions (including
waiting periods, deductibles, retentions).
• General events of political risk do not
automatically result in losses. However,
these events will lead to a greater awareness
of political risks.
• Protests influenced by the events in Tunisia
and Egypt include Algeria, Bahrain, Jordan,
Libya, Oman, and Yemen, where, for the
most part, Zurich provides Political Risk
66
coverage.
Administration / Service for 100:
One of the main reasons for delays in the
issuance of local policies?
Answer
67
What is:
Different information between 3 channels
(Customer, Broker, Insurer) to their respective
local operations.
68
Administration/Service for 200:
Three cornerstones to “best in class” Claims
Value Proposition:
1. Global Presence with Local Knowledge
2. Understanding Customer Needs
3. Relationship Management using Global Customer Claims
Executives.
Answer
What is:
Zurich Claims Handling approach
Explanation >>>
The Zurich Claims Value Proposition
Three Cornerstones
1. Global Presence/Local Knowledge
 Claims capabilities in over 180 countries
 Technical expertise aligned with local market conditions, legislation, & legal
developments
 Globally consistent claims services
2. Understanding Customer Needs
 Tailored claims services & protocols
 Innovative solutions
 Help in managing loss costs
 Timely resolutions to get our customers back to business
3. Relationship Management
 Partnership to proactively manage claims
 Global Customer Claims Executives – providing a single point
of contact globally
 Nominated claims personnel
 “Whole Account View”
71
Admin/Services for 300:
This assistance service from WTP can
extricate you from a political, medical
or natural disaster.
Answer
What is:
iJet
Explanation >>>
Background on this topic:
WTP’s Security Response Services
Security Response Services offered through iJet
All qualified Zurich customers will receive access to online travel security intelligence reports, so they can best
plan their upcoming trip, with advance information on travel hot-spots, political situations abroad, etc.
They can call our security crisis center for more advice.
For an additional fee, Zurich Travel Assist (ZTA) can coordinate response services of the necessary
companies required to perform the physical evacuation of personnel when conditions warrant in
international locations. ZTA will work with iJet, a provider within our Global Response Network to provide,
as necessary, the following services for the client:
·
Security escort for evacuation and repatriation to the nearest safe haven by:
·
Ground transport/surface transportation.
·
Chartered aircraft.
·
On the ground deployment of third party security personnel.
·
Ongoing provision of referrals and logistics and security coordination.
·
Regular communication of status updates with Client regarding evacuation activities.
·
Close protection of personnel during evacuation.
·
Provision of room and board for personnel during evacuation.
·
Facilitation of communication between client points of contact, evacuees and contracted
companies during the evacuation crisis.
·
Coordination of post-event debrief meetings.
74
Protect
Zurich Travel Assist® – Travel
assistance services
Zurich’s travel assistance services are provided by World Travel Protect, a wholly owned Zurich company. Our
top-ranked Zurich Travel Assist® travel assistance services can be combined with Business Travel Accident
insurance (BTA) to provide a comprehensive program for employers and their traveling employees.
•
More than 6,100 professionals are ready to assist travelers who are more than 100 miles away from home,
providing medical referrals, legal referrals, information services and travel support
•
We work closely with partners all over the world, so wherever travelers go, assistance is close at hand, whether
through on-site locations or via call centers
•
Zurich Travel Assist services include medical coordination and repatriation, vehicle return, emergency personal
cash and repatriation of remains
•
Additional assistance includes passport and visa advice, prescription assistance, translators and even the location
of the nearest ATM
•
NEW! Qualified Zurich customers receive access to online travel security intelligence reports, to plan their
upcoming trip, with advance information on travel hot-spots, political situations abroad, etc. They can call our
security crisis center for more advice.
Here’s what some of our customers are saying…
From a customer who was medically evacuated from Kuwait:
“All of Zurich Travel Assist’s support was OUTSTANDING! The customers arrived safely and without incident to the
hospital... Everything went smoothly as planned. Please pass on our thanks and gratitude to your staff for their
assistance.” –Major Defense Contractor
When we provided medical assistance for a customer in France:
“We don’t know how we would have done it without your assistance.”
–Large Beverage Manufacturer
75
Administration / Service for 400:
Can an insured or broker get on-line access to
claims and policy data for their
International Program with Zurich?
Answer
76
What is:
No, not yet.
(However, we have the ability to provide you
with a variety of reports in electronic format,
not only showing claims information but also
Program efficiency information. )
77
Regulations
for 100: :
The result when the principles of the
MIP and the information contained
in the MIA are applied in
developing an International
Program from Zurich?
Answer
What is:
Compliant Premium
Allocations
Explanation >>>
Regulations
for 200:
Name of the Global Insurance industry’s
most comprehensive single source IT
system used for Program Implementation,
Local Policy Issuance Requests, Loss Data,
Premium Invoice and Performance
Metrics.
Answer
The Zurich MIP Process has 3 steps
Output
Input
1
Map customer’s
risk profile and
structure using
MIA
Example of a solution
2
Devise solution
and allocate
premiums
MIA is at
the heart of
the MIP
process
2
USIR
Count ries
t hat allow
nonadmit t ed
Financial Int erest Cover
t o prot ect parent ‘s
int erest in case cover
and/or limit s can not be
f ully export ed
CND
HK
AU
M aster
Switzerland
LP
LP
EEA => FoS
DIC / DIL
LP
LP
F
LP
D
LP
I
LP
USA
LP
LP
LP
SK
J
C
LP = Local policy
19
© Zurich -
3
Use MIA to
calculate &
document
insurer
premium taxes
Tax
81
What is:
Zurich’s International
Program System
Explanation >>>
Zurich’s Global Systems
• IPS (International Program System)
Global online policy ordering
Connected to all Zurich owned operations, direct
partners and Hub offices
Customer reports: premium and claims by country
Performance management monitoring policy
issuance, invoicing and cash flow timelines
Enhanced to accommodate specialty programs (e.g.
D&O, umbrella, environmental)
•
Activity-based fee model in place to competitively price our global services and
network costs
•
Multinational Insurance Application (MIA)
83
Regulations for 300:
African country where Zurich issues the most
local policies?
Answer
84
What is:
South Africa issues the most local policies on
the continent
85
Regulations for 400:
A benefit of this coverage is that it
provides compliance for regulatory,
legal, and tax obligations in 30
countries – under one policy.
Answer
What is
an FoS Policy?
Explanation >>>
What is FoS?
What is Freedom of Services?
FoS is sometimes called ‘the single license’ or ‘single passport’ system, because the insurer based in a
EEA country can write cross-border business, without establishing a presence in countries other
than its own. Since FoS policies are considered admitted insurance, they avoid the awkwardness
of non-admitted insurance.
FoS enables an insurer based in one country of the EU or EEA to underwrite and service risks in any of
the other EU or EEA countries*. Every insurer must seek prior authorization through a
registration process in each country into which it wishes to write such business.
The Best use of FoS
Where a small risk needs to be covered
Where there is a large deductible
Where there is a proven history of low frequency of claims in a particular country and a low severity of
loss
Why?: The key here is that the local coverage is low touch. Note that there is no benefit of
local claims handling with an FoS policy.
Primary Benefit of FoS
Ensures compliance with regulatory topics in all territories (pre-registration, reporting to local
insurance supervisory authorities) where the legal entity is license to write on a FoS basis.
Taxes are invoiced to customer based on country exposure (and allocated premium.)
88
What is FoS? (cont’d)
Freedom of Services
Legal Requirements
Mandatory legal requirements for the issuance of a FoS policy:
• Insurer must be established in EEA, and
• Insurer must be authorized to write FoS business in the country of risk,
• Insurer must adhere to all local legal insurance requirements (within the country where the exposure lies)
including having access to all compulsory pools, and
• Insurer must be licensed for the Line of Business in question.
It is not important whether the policyholder has its domicile in the EEA, but via an FoS solution, Zurich can
only cover risks located within the EEA.
- Note that a local broker is not required.
The following European Economic Area (EEA) countries are permitted to write coverage utilizing FoS.
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece,
Hungary, Iceland, Republic of Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, The
Netherlands, Norway, Poland, Romania, Portugal, Slovakia, Slovenia, Spain, Sweden & UK. (As of
January 1, 2008).
89
Countries for 100:
Could an insured end up paying Canadian
Excise Tax for the insurance on their
Canadian operation despite of having a
locally admitted policy?
Answer
90
What is:
Yes, Revenue Canada recently started to
interpret the Federal Excise Tax act more
stringently and has levied excise tax on
locally admitted policies placed through a
foreign broker.
Explanation >>>
91
•
•
•
•
In 2010 Revenue Canada tasked its GST auditors with the audit
for Excise Tax (10 % Federal, various rates by province)
Some of our “Foreign” headquartered customers were forced to
pay excise tax despite of having a locally admitted policy.
Revenue Canada for that relies on paragraph 4 of the excise tax
act, which states that the policy must be sold by a Canadian
licensed broker and established some rules to define the term
“sold”.
In order to avoid excise tax an insured must make sure that the
Canadian broker has a BOR for the customer and that binding
orders are provided to that Canadian broker, either from the
Corporate Risk Manager or its Canadian contact
92
Countries for 200:
The Venezuelan government
body that administers
currency exchange.
Answer
What is:
CADIVI
(Comisión de Administración de Divisas –
Commission for the Administration of Currency Exchange)
Explanation >>>
Venezuelan Currency Environment
•
•
Exchange controls were adopted in 2003 to limit capital flight, in the aftermath
of a two-month strike/lockout aimed at toppling the government, which saw
GDP fall 27% during the first four months of 2003.
According to the Bank for International Settlements, "The Central Bank of
Venezuela (BCV):
– fixes a monthly allocation of foreign currency to be administered by CADIVI;
– purchases foreign currency from residents;
– sells foreign currency to the public and private sectors subject to approval from
CADIVI.
•
•
•
Under Venezuelan law, PDVSA (State oil company) must sell its foreign
exchange to the Central Bank, thereby providing the bulk of foreign currency
in Venezuela.
The Venezuelan private sector requires more foreign exchange for imports than
it generates for exports, and is dependent on the Bank to satisfy the difference.
Zurich's Currency inconvertibility products protects investors and borrowers
from the inability to convert and transfer foreign exchange. In Venezuela, we
have assisted our insureds through the CADIVI process to receive their returns
on their investment outside of Venezuela.
95
Countries for 300:
Major changes proposed in Brazilian
insurance regulations.
Answer
96
What are:
(There are two major proposed changes)
• Local retention on foreign reinsurance
cessions will be increased to 40 % again.
• Reinsurance cessions can’t be between
companies within the same financial group
Explanation >>>
97
How does this affect Zurich’s customers
•
•
•
We currently have agreements in place, that should allow
secure any policy renewing before August 1st.
We are working on a solution, should indeed that
regulation be implemented as proposed.
We do expect that cessions out of Brazil will end up
limited to a maximum of 60 %
98
Countries for 400:
Can my captive reinsure my policies in India?
Answer
99
What is:
Yes, in most cases a share of the risk can be
ceded out of the country. However, volume
and conditions depend on the local market
appetite for the risk and the fronting carrier.
100
Final
Audience choice of question
Click on screen to continue
Questions?
103
THANK YOU!
104
11:15 am
Risk Manager only Session
AFTERNOON
SCHEDULE
(stay in this room)
12:15 pm*
© Zurich American Insurance Company
Meet in Hotel Lobby for
Departure
*(remember to bring your
jacket and monocular)
8/13/2010
105
Risk Manager
Only Session
1. How can Zurich help you
build a constituency for
ERM among key decision
makers within your
organization?
2. What are the most
meaningful best practices
in the design and
implementation of a global
program?
© Zurich American Insurance Company
3. What strategies, if any,
does your organization
have in place to assess the
risks and leverage the
opportunities of today's
social media?
8/13/2010
106
Zurich North America Risk
Management Council Meeting
February, 2011
DAY TWO
WELCOME – DAY 2
Greg Maguire
Head of Customer,
Distribution & Marketing
Meeting Agenda
Thursday, Feb 24
Time
Description
Speaker
8:00 am
Welcome – Day 2 & Summary of Action
items from yesterday
G. Maguire
8:15 am
Safeway’s Culture of Safety
CA – WC update
W. Ching
B. Zachry
9:00 am
D. Hofmann
10:00 am
Economic Outlook & Global Risk
Update
Open Forum / Q&A
10:45 am
Closing Remarks
M. Kerner
(via phone)
Facilitated by:
V. Butt
© Zurich American Insurance Company
Next Meeting – week of Sept 12
Lunch & Box Lunches available
Departures
8/13/2010
109
Creating a Sustainable Culture of Safety
Approach and Lessons Learned
Zurich North American Client Council Meeting
February 23, 2010
Santa Barbara, California
William Zachry
VP Risk Management
Safeway Inc.
Ward Ching
VP Risk Management Operations
Safeway Inc.
What We are Going To Discuss Today
A brief overview of the California Workers’
Compensation Market Environment
Safeway’s Culture of Safety
Approach and Implementation
COS Key Learnings
111
California Workers’ Compensation
• Appointments
• Legislation
– Permanent Disability
– Mischief
112
Agenda
Safeway’s Culture of Safety
Approach and Implementation
113
Safeway’s Culture of Safety Opportunity
The Safeway Culture of Safety (COS) is a core transformational opportunity for
SWY to further execute its as a World Class Service Strategy within the food
retailing, manufacturing and distribution industry.
The key opportunities include:
– The real and sustained removal of significant Workers’ Compensation and
GL loss costs from the Division’s Total Cost of Risk (TCOR).
Economics: Substantial sustainable claims and premium cost reduction
– The real and measurable integration of robust company-wide behaviorally –
based Risk Management, Loss Control/ Safety programs into the operational
work habits throughout the SWY Retail platform
114
Opportunity, continued
• The central acknowledgement that safety is a core value of the
Company. By embracing safety as a core value and linking safety to
service, Safeway extends its current retail service advantage.
• Much of Safeway’s Risk Management, Safety / Loss Control
infrastructure, needed to execute the COS, already exists but was in
need of focused recalibration, redirection and redeployment.
– Focus should be on behaviors, not tasks.
• Best of all: the Retail / Backstage leadership and store associates
recognize and embrace the need for this transformation.
115
COS Initiative: Background
Safeway’s senior leadership recognizes the importance of driving a more
comprehensive Culture of Safety (COS) throughout the organization.
Corporate Risk Management has been tasked with defining and
implementing a sustainable and measurable Culture of Safety throughout
Safeway.
• Achieve a significant Total Cost of Risk reduction over 2-3 years
• Consolidate, standardize and enhance Risk Management, Safety / Loss
Control activities across Retail Operations
• Create and implement appropriate performance metrics that engages,
incents and rewards Retail Operations to empower a strong, visible and
sustainable Culture of Safety
• Establish a clear financial and operational connection between safety
and the prevention of accidents (workforce and customer) to the quality
of the customer service experience and the profitability of the company.
116
COS Initiative Background, continued
Central Questions:
– As a self-insurer, what is the current state of the cost reduction programs
being implemented by Risk Management to appropriately manage Workers’
Compensation and GL claims?
– What is the current state of the Loss Control / Safety programs in the retail
portion of our business?
– How do the functional/operational components within Safeway, including
labor, embrace change?
– What functional barriers to success exist?
overcome or transformed in the past?
How have these barriers been
– What effective, measurable and sustainable actions can Risk Management
take to prevent the incidence of Workers’ Compensation and PLPD losses
from taking place?
Corporate Finance and Risk Management concluded that a more robust and
company-wide application of a true Culture of Safety was required to achieve
defined financial and operational cost reduction targets.
117
COS Project Work Streams
SWY COS Project Team
• RM Project Office
• Project Advisory Group
• Project Logistics
Current State
Diagnostic
Field
• Safety Program Doc Review
• Frequency/Severity Data
Review
• Culture Drivers
• TCOR Review/Development
• Key Questions:
What do we currently know
about Safeway’s safety culture,
attitudes towards safety and
how a safe working
environment gets managed?
What information has already
been captured?
Is there a culture we can
already build upon?
• Vendor/Broker Input
Survey
• Field Survey Design
• Hypothesis Set Design
COS Plan
Design
COS
• Retail Focus only
• Backstage Impact
• Scaled and Rhetorical
Question set design and
pretest on Backstage
• Retail Impact
• Retail Store Survey
5% - All Divisions
• Results Analysis
Blueprint Devl.
• Culture Conveyer
• COS Blueprint buildout
• Retail Focus only
• Retail Execution sequencing
• Financial Opportunity
Assessment
• Communications
• COS Framework, Tools
and Implementation
Design
• Corporate and Division
Risk Management/Loss
Control Transformation
COS Blueprint Retail Implementation
Project
Initiation/Project
design
• Required infrastructure
118
COS Financial Savings Opportunities
(Stuff I can’t really show you)
• Premiums
• Direct Costs
• Indirect Costs
• Impact on Sales
• Impact on P&L
• Impact on competitive position by geography
119
Opportunity by Division
2008 Actual vs Corporate Target
Goal – $41.5M Savings
8.8
7.8
7.8
7.3
6.5
5.9
5.8
5.6
4.2 Co. target* x.xx
Div 1
Div 2
Div 3
Div 4
Div 5
Div 6
Div 7
Div 8
Div 9
$4.5M
$1.3M
$3.0M
$16.5M
$1.2M
$3.5M
$5.6M
$0.0M
$5.9M
*4.54 Incurred Dollar Accidents per 200,000 Hours Worked
*Assumes Severity Stays Constant
Source: Risk Management Analytics group
120
COS Value Proposition
Integrating safety into the World Cass Retail Service approach will
enable SWY to lead the retail industry in achieving lowest
incident rates of lost time injury or customer accidents
Impact to Safeway
•
Integrating the working elements of safety and world class service will eliminate
excess insurance cost and promote a superior retail working environment
• Integrating service and safety metrics will assure a sustained and permanent
Retail focus on safety
• COS success drives competitive advantage - low cost advantage
121
COS Guiding Principles –
How we stayed grounded
• Design simplicity
– Clarity of purpose
• Clear line of sight
– Eliminate institutional barriers to success
• Stay focused on moving the financial cost reduction needle
• Fact-based decision making
• Anticipate and mitigate all project risks
122
Driving the Data –
What you need to know
• What are your core economics?
–
What is your “equilibrium” WC/GL frequency levels?
– Peer group validation
– Impact on sales and organization
• Does a Culture of Safety already exist within your retail environment:
– Backstage
– Retail
• What is your core operational culture?
– Backstage
– Retail
• Is there a desire for change?
– Does management embrace it? How do you know?
123
Driving the Data, continued
• 7 behaviorally focused
hypothesis :
– Is safety visible?
– Does a safety culture exist and is it
backed operationally/financially
within company?
• Retail field survey targeting –
How much is enough?
• Who to talk to:
–
Store Managers
–
Assistant Store Managers
–
Department Managers
–
– Is Personal responsibility for safety
important and recognizable?
Front End/Customer Service
Associates
–
Backstage Associates
– Are Safety incentives important
–
Safety Chair
–
Department Clerks (Deli, Meat, Bakery,
Produce, Floral, Grocery,)
–
Cashier
–
Training Coordinator
–
Courtesy Clerks
– A recognizable overall culture
exists within Company?
– Is Retail field is aware of the
financial and operational
consequences of a WC or GL loss
• Setting up the Survey
• Backstage Interviewing by video
conference for all Divisions
124
Culture
of
Safety
Operations and Leadership
 Robust, Enterprise-wide
Risk Mgmt. Capability
 Consistent and Focused Financial
Risk Management
 Improved Employee
Communication
 Shared/Enhanced Coaching
Experience
 Enhanced Customer
Retail Experience
Metrics
 Frequency, Severity – Actuarial
 S-Curves/Cascade Rpt
 Leading Indicators
- Enhanced
Sweep Log
- Safety
Champions (Person
and Process)
- Observation
Program
- Experience
Modification (Div,
District, Department)
- Shopper
Scores
(Div., District)
127
Tools
 Leading Indictors
•
Enhanced Sweep Log
•
Safety Champion (Person and Poster)
•
Observation (E2E, S2E, Backstage2S/E)
•
Experience Modification by Division, by District,
by Store
•
Enhanced Service Scores
 Lagging Indicator Dashboard

Cascade Rpts
 Retail Executive Training/Coaching Tools
 Recognition Program
•
No Lost Time Injury Store and Backstage
•
Signage and Postings
•
Celebration of Accomplishments
 Risk Management Reengineering
•
RMO
•
Field Risk Management,
LCM, Supervisor Redirection
128
Service
 Enhanced Emphasis on Safety
Elements
 Realignment of Measurable
Attributes
 New Reports
129
Agenda
Safeway’s Culture of Safety
Approach and Implementation
COS Key Learnings
130
Division Z’s WC Claims
2009 -2010
25
System Change
UCL = 17.55
Announcement
of store closing
20
UCL = 14.14
15
X = 14.41
X = 9.43
10
LCL = 11.27
5
LCL = 4.72
0
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan09
09
09
09
09
09
09
09
09
09
09
09
10
10
10
10
10
10
10
10
10
10
10
10
11
131
Division Z’s GL Claims 2010
System Change
V
14
UCL = 12.87
12
8
6
_
X = 6.59
_
X = 3.44
4
2
LCL = 0.27
52
50
48
44
42
40
38
36
32
30
28
26
24
34
Week 2010
46
LCL = 0.00
0
22
C
L
A
I
M
S
UCL = 9.72
10
20
G
L
Division Z’s
Observation/ Frequency Correlation
20
12
18.5
16.12
Frequency Rate
16
16.12
14
10
9.88
8.90 8.89
7.83
8.09
12
8
6.92
10
5.19
6.32
5.51
6
8
8.03 5.05
6
Average
18
4
3.92
5.37
2.68
4
2.68
2
2.68
0
0
2
0
0
0
41
42
43
44
__ Frequency
__ Avg Score
45
46
47
48
49
50
51
52
Week
133
Division X’s Management Observations
Management Observation Ratings District G2
Goal = 94%
Store
Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
32
140.63% 101.92%
125.00% 166.67% 114.29%
49
165.00% 110.00%
97.73%
77.27%
95.83%
345
70.00% 100.00%
61.36% 127.27% 110.42%
633
134.38% 102.78%
118.75% 137.50% 106.82%
921
100.00%
75.00%
103.85% 101.92% 101.92%
1003
92.31%
83.33%
83.33% 100.00% 100.00%
1005
90.91%
62.50%
81.82% 127.27% 102.08%
1408
87.50%
86.11%
108.33% 125.00% 120.45%
2011
95.83%
95.83%
102.27% 104.55% 106.82%
2036
100.00% 131.25%
104.55%
84.09%
95.45%
3001
30.00%
38.89%
78.57% 103.57%
86.11%
3020
108.33% 108.33%
102.08% 110.42% 104.17%
3022
116.67% 102.08%
103.57%
96.43% 106.67%
3035
125.00% 100.00%
109.62% 100.00% 103.57%
3037
100.00% 100.00%
100.00%
96.15% 100.00%
3041
100.00% 102.78%
91.67% 113.89% 100.00%
4014
114.58%
93.75%
100.00% 106.25% 108.33%
Eastern District G2 Average
Week 8
Week 9
DR = Division Ranking
Week 10
Week 11
Week 12
DR
2
9
30
4
25
29
28
19
21
15
33
12
16
11
23
18
17
Genuardi's Grand Total
Current Quarter Avg Score
160.00%
140.00%
Q4
129.70%
109.17%
93.81%
120.05%
96.54%
91.79%
92.92%
105.48%
101.06%
103.07%
67.43%
106.67%
105.08%
107.64%
99.23%
101.67%
104.58%
102.11%
86.21%
Management Observations
133.56%
123.35%
112.50% 108.66%
107.29% 104.97% 104.69% 103.65%
102.09% 101.74%
120.00%
Division Avg. - 103.75%
99.62%
99.04%
100.00%
95.19%
90.63%
89.74%
921
1005
1003
80.00%
60.00%
40.00%
20.00%
0.00%
32
633
49
3035
3020
2036
3022
4014
Store Number
3041
1408
2011
3037
Division X’s Management Observations
Employee Observations Ratings District G2
Goal = 35%
Store
Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
32
19.83% 177.69% 145.54% 154.55% 174.38%
49
35.71%
34.69%
39.80%
34.69%
31.63%
345
11.83%
16.13%
8.60%
38.71%
30.11%
633
27.68%
27.68%
29.46%
33.04%
24.11%
921
20.37%
33.33%
44.44%
48.15%
51.85%
1003
15.65%
20.00%
26.09%
45.22%
34.78%
1005
10.26%
16.67%
20.51%
47.44%
38.46%
1408
45.76%
45.76%
22.03%
22.03%
38.98%
2011
25.00%
25.00%
25.00%
57.50%
40.00%
2036
46.74%
68.48%
42.39%
43.48%
46.74%
3001
10.91%
10.91%
29.09%
40.00%
29.09%
3020
36.84%
42.11%
35.09%
35.09%
29.82%
3022
35.92%
30.10%
33.01%
35.92%
30.10%
3035
24.81%
6.98%
57.36%
37.98%
39.53%
3037
37.37%
27.27%
29.29%
31.31%
33.33%
3041
22.22%
19.05%
52.38%
25.40%
31.75%
4014
38.46%
35.90%
37.18%
33.33%
34.62%
Eastern District G2 Average
Week 8
Week 9
Week 10
Week 12
DR
1
11
31
23
10
25
28
15
17
6
29
9
16
19
20
21
11
Employee Observations
Current Quarter Avg Score
Week 11
Grand Total
Q4
134.40%
35.30%
21.08%
28.39%
39.63%
28.35%
26.67%
34.91%
34.50%
49.57%
24.00%
35.79%
33.01%
33.33%
31.71%
30.16%
35.90%
38.63%
39.23%
160.00%
140.00% 134.40%
120.00%
100.00%
80.00%
Division Avg - 39.23%
60.00%
49.57%
39.63% 35.90% 35.79% 35.30% 34.91% 34.50% 33.33% 33.01%
31.71% 30.16% 28.39% 28.35%
40.00%
26.67%
20.00%
0.00%
32
2036
921
4014
3020
49
1408
2011
3035
3022
3037
3041
633
1003
1005
Division X’s Huddles
Huddles Ratings District G2
Goal = 94%
Store
Week 1
Week 2
Week 3
Week 4
Week 5
Week 6
Week 7
32
166.67% 128.57% 133.33% 152.38% 138.10%
49
71.43% 100.00% 100.00% 100.00% 100.00%
345
100.00% 100.00% 100.00% 100.00%
95.24%
633
100.00% 100.00% 100.00% 100.00%
85.71%
921
142.86% 200.00% 204.76% 219.05% 166.67%
1003
80.95% 100.00%
76.19% 100.00% 100.00%
1005
128.57%
95.24% 109.52% 147.62% 147.62%
1408
95.24% 100.00%
95.24%
61.90% 100.00%
2011
100.00% 100.00% 100.00% 100.00% 100.00%
2036
100.00% 100.00% 100.00% 100.00% 100.00%
3001
33.33%
71.43%
76.19%
76.19% 100.00%
3020
109.52% 119.05% 100.00% 109.52% 100.00%
3022
90.48% 123.81% 100.00%
90.48% 100.00%
3035
100.00% 100.00% 114.29% 119.05% 114.29%
3037
104.76% 100.00% 104.76% 100.00% 100.00%
3041
100.00%
85.71% 100.00% 100.00% 100.00%
4014
100.00% 104.76%
95.24% 100.00% 100.00%
Eastern District G2 Average
Week 8
Week 9
DR = Division Ranking
Week 10
Week 11
Week 12
DR
7
27
23
25
5
28
8
29
14
14
32
10
13
9
12
25
14
Grand Total
Q4
143.81%
94.29%
99.05%
97.14%
186.67%
91.43%
125.71%
90.48%
100.00%
100.00%
71.43%
107.62%
100.95%
109.53%
101.90%
97.14%
100.00%
121.14%
126.44%
Huddles
Current Quarter Avg Score
160.00% 186.67%
200.00%
180.00%
140.00% 133.56%
123.35%
160.00%
143.81% 112.50%
120.00%
108.66% 107.29% 104.97% 104.69%
103.65% 102.09%101.74% 99.62% 99.04%
140.00%
125.71%
Division Avg. - 126.44%
95.19% 90.63%
100.00%
89.74% 89.66%
109.53%
120.00%
107.62% 101.90%
100.95% 100.00% 100.00%100.00% 99.05% 97.14% 97.14%
94.29%
Division
Avg. - 45.66
91.43%
90.48%
100.00%
80.00%
80.00%
60.00%
60.00%
40.00%
40.00%
20.00%
20.00%
62.76%
71.43%
0.00%
921
32
633
32
1005
49
3035
3020
2036
3037
3022
4014
2011
3041
2036
1408
4014
Store Number
2011
345
3037
633
3041
921
1005
49
1003
1408
345
3001
Stretch
Break!
All’s Well That Ends Well
The Global Economy in Perspective
Daniel Hofmann
Group Chief Economist
Zurich Financial Services
Agenda
Five Topics
1.
At the verge of sustainable growth?
2.
At the price of inflation?
3.
A trend reversal in interest rates?
4.
The euro zone remains at risk
5.
Industry performance
Initial concerns about double dip…
Econom ic act ivit y in Germ any, t he UK and t he US
© Zurich American Insurance Company
Standard deviations from mean
2
1
0
-1
-2
Values below -1
denot e a recession
-3
-4
-5
-6
1995
1997
1999
Unit ed St at es
2001
2003
Unit ed Kingdom
2005
2007
2009
Germany
Source: Thomson Datastream, Zurich
8/13/2010
141
...turned out to be ill founded
Econom ic act ivit y in Germ any, t he UK and t he US
© Zurich American Insurance Company
St andard deviat ions f rom mean
2
1
0
-1
-2
Values below -1
denot e a recession
-3
-4
-5
-6
1995
1997
1999
Unit ed St at es
2001
2003
Germany
2005
2007
2009
Unit ed Kingdom
Source: Thomson Datastream, Zurich
8/13/2010
142
Encouraging forward looking indicators
© Zurich American Insurance Company
6-mont h percent change (annualized)
OECD Leading Indicat ors f or m ajor econom ies
10
8
6
4
2
0
-2
-4
-6
-8
-10
2003
2004
2005
2006
USA
GBR
Euroland
2007
2008
SUI
2009
CHN
2010
2011
JAP
Source: Thomson Datastream, Zurich
8/13/2010
143
Equity markets recovered nicely
120
Index; Jan 2010 = 100
115
S&P 500
EuroFirst 300
TOPIX
MSCI Emerging Markets
110
105
100
95
© Zurich American Insurance Company
90
85
Jan 2010
Jun 2010
Dec 2010
Source: Thomson Datastream, Zurich
8/13/2010
144
Financial markets were nervous...
US f inancial st ress index
Week of August 20, 2010
Novem ber 19:
Fear of huge
credit card debts
© Zurich American Insurance Company
St andard deviat ions f rom mean
6
Oct ober 8:
Global slump
of equity markets
5
M arch 6:
Renewed concerns
about banks' healt h
4
M arch 17:
Collapse of
Bear Stearns
3
2
1
Values higher than 2
indicate severe stress
Sept em ber:
Collapse of Lehman
and AIG
0
April:
Sovereign debt
crisis in euro area
-1
-2
01/07
07/07
01/08
07/08
01/09
07/09
01/10
07/10
Source: Thomson Datastream, Zurich
8/13/2010
145
...but stress has now been put to rest
US financial stress index
Week of February 4, 2011
© Zurich American Insurance Company
St andard deviat ions f rom mean
6
Novem ber 19:
Fear of huge
credit card debts
Oct ober 8:
Global slump
of equity markets
5
M arch 6:
Renewed concerns
about banks' healt h
4
M arch 17:
Collapse of
Bear Stearns
3
2
1
Values higher than 2
indicate severe stress
Sept em ber:
Collapse of Lehman
and AIG
0
April:
Sovereign debt
crisis in euro area
-1
-2
01/07
07/07
01/08
07/08
01/09
07/09
01/10
07/10
01/11
Source: Thomson Datastream, Zurich
8/13/2010
146
A three-speed recovery
Growth rates Q/Q, annualized
12
10
Emerging economies
8
6
World
4
2
0
-2
-4
Advanced economies
© Zurich American Insurance Company
-6
-8
-10
2007
2008
2009
2010
2011
2012
Source: IMF, WEO January 2011 update
8/13/2010
147
Agenda
Five Topics
1.
At the verge of sustainable growth?
2.
At the price of inflation?
3.
A trend reversal in interest rates?
4.
The euro zone remains at risk
5.
Industry performance
The flipside is inflation
600
Commodity price inflation is well entrenched
Metals
Index Jan 2000 = 100
500
Food
400
Crude oil
Gold
300
200
© Zurich American Insurance Company
100
0
2000
2002
2004
2006
2008
2010
Source: Thomson Datastream
8/13/2010
149
Initially well anchored expectations...
M arket -based inf lat ion expect at ions
5-year breakeven rat es
4
Inf lat ion in %
3
2
1
0
© Zurich American Insurance Company
-1
-2
01/05 07/05 01/06 07/06 01/07 07/07 01/08 07/08 01/09 07/09 01/10 07/10
Unit ed St at es
Unit ed Kingdom
Euroland
Source: Bloomberg
8/13/2010
150
...are no longer firmly anchored
Market-based indicators slightly elevated
4
GBR
3
2
Eurozone
1
0
USA
© Zurich American Insurance Company
-1
-2
2005
2006
2007
2008
2009
2010
2011
Source: Bloomberg
8/13/2010
151
Inflation dashboard
Advanced economies
Policy variables
Money
supply
Bank
lending
Public debt
/GDP ratio
Leading
indicators
Inflation
expectations
USA
X
GBR
X
Yield
curve
Pipeline
pressure
Import
prices
Producer
prices
Concurrent indicators
Headline/core
inflation
Output
gap
Claims related
Capacity
utilization
Service
sector
inflation
X
Overall
Health
sector
inflation
X
X
X
GER
SUI
ESP
© Zurich American Insurance Company
ITA
X
IRL
High inflation alert
Neutral
Medium inflation alert
Deflation alert
X
Change
White cells: no data available
8/13/2010
152
Inflation dashboard
Emerging economies
Policy variables
Money
supply
Bank
lending
Public
debt/GDP
ratio
Leading
indicators
Inflation
expectations
Yield
curve
Pipeline
pressure
Import
prices
Producer
prices
Concurrent indicators
Headline/core
inflation
Output
gap
Claims related
Capacity
utilization
Service
sector
inflation
Overall
Health
sector
inflation
ARG
X
BRA
CHI
X
MEX
X
X
X
X
X
CHN
X
IND
TUR
HKG
© Zurich American Insurance Company
UAE
High inflation alert
Neutral
Medium inflation alert
Deflation alert
X
Change
White cells: no data available
8/13/2010
153
Agenda
Five Topics
1.
Growth and inflation
2.
At the price of inflation?
3.
A trend reversal in interest rates?
4.
The euro zone remains at risk
5.
Industry performance
A trend reversal in interest rates
5
10-yr government bond yields
Italy
4
GBR
France
USA
3
© Zurich American Insurance Company
Germany
2
01/2010
05/2010
09/2010
01/2011
Source: Thomson Datastream
8/13/2010
155
Short-term stress on markets...
2011 refinancing needs
5
Corporate bonds
Financial sector bonds
Loans
Sovereign
4
3
2
© Zurich American Insurance Company
1
0
USA
Europe
Source: IIF
8/13/2010
156
... and a deeper structural shift
Demand for investment
© Zurich American Insurance Company
In % of global GDP
26
Supply of saving
Consensus
growth
Slower
growth
24
Weak global
recovery
22
20
18
2.4
2.2
0.8
2030 saving shortfall in USD trillions
Source: McKinsey Global Institute
8/13/2010
157
Agenda
Five Topics
1.
At the verge of sustainable growth?
2.
At the price of inflation?
3.
A trend reversal in interest rates?
4.
The euro zone remains at risk
5.
Industry performance
Stress levels still elevated
5-year CDS spreads for GIPS
1200
1000
Greece
800
Ireland
600
Portugal
400
© Zurich American Insurance Company
200
0
01/2010
Spain
04/2010
07/2010
10/2010
01/2011
Source: Bloomberg
8/13/2010
159
But concerns also at the core
5-year CDS spreads for large advanced economies
300
Italy
250
200
150
France
Japan
100
GBR
GER
© Zurich American Insurance Company
50
USA
0
01 2010
04 2010
07 2010
10 2010
01 2011
Source: Bloomberg
8/13/2010
160
Heavily concentrated exposures
Foreign exposures to GIPS
2'500
© Zurich American Insurance Company
USD billions
Total USD 2.3 trillions
2'000
635.7
1'500
352.9
ROW
USA
370
GBR
410.2
FRA
512.7
GER
1'000
500
0
Source: BIS
8/13/2010
161
Agenda
Five Topics
1.
At the verge of sustainable growth?
2.
At the price of inflation?
3.
A trend reversal in interest rates?
4.
The euro zone remains at risk
5.
Industry performance
Sovereign crisis mirrored in sectors
5-year CDS spreads banking sector
5-year CDS spreads insurance sector
500
500
Eurozone
300
200
GBR
100
© Zurich American Insurance Company
400
0
01/2010
USA
05/2010
09/2010
01/2011
in basis points
in basis points
400
USA
300
Eurozone
200
100
0
01/2010
GBR
05/2010
09/2010
01/2011
Source: Thomson Datastream
8/13/2010
163
...and performed exceptionally well
GPW grow t h f or 20 large euro zone insurers
RoE f or 20 large euro zone insurers
(Maximum, minimum, int erquart ile dist ribut ion)
(Maximum, minimum, int erquart ile dist ribut ion)
50
30
40
30
Z
Z
Z
10
10
Z
0
Z
Z
Z
Z
Z
2009
Q1
Q2
Q3
Z
Z
Z
Z
Z
-10
RoE in %
Annual change in %
20
20
0
-10
-20
-30
-20
© Zurich American Insurance Company
-40
-50
-30
2006
2007
Zurich
2008
2009
Q1
Q2
2010
Q3
2006
Zurich
2007
2008
2010
Source: ECB, Zurich
8/13/2010
164
Our economic solvency1 remains strong
35
30
25
27
28
26
26
23
20
21
137
127
113
27
29
30
41
40
38
34
107
118
34
96
30
28 27
30
15
10
5
© Zurich American Insurance Company
0
1
RBC AFR
RBC AFR
RBC AFR
RBC AFR
RBC AFR
RBC AFR
RBC AFR
RBC AFR
RBC AFR
Jan. 1
2003
Jan. 1
2004
Jan. 1
2005
Jan. 1
2006
Jan. 1
2007
Jan. 1
2008
Jan. 1
2009
Jan. 1
2010
Jan. 1
2011
Available to policyholders
40
Change from EV to MCEV
in USD billions (rounded)
Economic financial strength is based on Available Financial Resources (AFR) at the beginning of the period and expected risks to be taken
during period (RBC).
8/13/2010
165
Zurich has gained in market standing...
M arket capit alizat ion of large insurers
Change in m arket cap
3%
Ace
-16%
Zurich
-17%
Travelers
-27%
M unich Re
-30%
Sw iss Re
-43%
Generali
-48%
Allianz
-50%
Aviva
-56%
Axa
-57%
Hart f ord
-62%
AIG
-96%
0
40' 000
120' 000
80' 000
160' 000
200' 000
.
© Zurich American Insurance Company
Chubb
Q2 2007
Q4 2010
Source: Thomson Datastream, Zurich
8/13/2010
166
Thank you
daniel.hofmann@zurich.com
Facilitated by:
Valerie Butt
© Zurich American Insurance Company
OPEN
FORUM
8/13/2010
168
Risk Manager
Only Session
1. How can Zurich help you
build a constituency for
ERM among key decision
makers within your
organization?
2. What are the most
meaningful best practices
in the design and
implementation of a global
program?
© Zurich American Insurance Company
3. What strategies, if any,
does your organization
have in place to assess the
risks and leverage the
opportunities of today's
social media?
8/13/2010
169
Closing
© Zurich American Insurance Company
Mike Kerner
CEO, Global Corporate,
North America
8/13/2010
170
Thank
You!
SAVE the DATE:
Week of SEPT 12
Lucerne,
Switzerland
© Zurich - Risk Engineering Global Workshop 2006
171