Sony Pictures Entertainment Inc.
March 21, 2013
D-R-A-F-T 10
MISSION STATEMENT
PROTECT THE ASSETS OF
SONY PICTURES ENTERTAINMENT
2
RISK MANAGEMENT STRUCTURE
Janel Clausen
Vice President,
Risk Management
Aaron Au
Coordinator
Work Comp
Claims &
Admin Support
for Dept.
Kate Calabrese
Claims/Systems,
Administrator
Media Liab. Claims,
EPL Claims,
Dept. Budget & Risk
Mgmt Systems Mgr.
Douglas Hastings
Claims Manager
GL, Auto, Property
& Production
Claims
Donna Tetzlaff
Director
Global
Corporate Risks
including
Distribution
Activities
Dawn Luehrs
Director
Global Production Risks
Britianey Barnes
Administrator
Global Production Risk
Support, Bonds & Notary
3
Key Risk Management Functions

Risk Identification
•
Understanding SPE and identifying its unique risk characteristics
•
Assessing Film & TV Production and Distribution Risks

Risk Treatment Working with Internal and External Partners
•
Developing a policy on risk to optimize risk retention/transfer methods (Finance)
•
Negotiating and implementing insurance risk transfer program (Insurance Companies)
•
Fixed asset protection and catastrophic risk assessment (Finance & Administration)
•
Liability and litigation control (Legal)
•
Employee and public safety, security & crime control (SEHS)

Risk Administration
•
Claims Management for Sony Pictures Global Operations
•
Maintain insurable asset inventory and exposure data
•
Allocate risk costs to Studio, each Production and all other groups
•
Management Reports
4
SPE Risk Management: The Day-To-Day

Contract reviews
• Corporate (200)
•
Productions Domestic and Foreign(1,500 per year)

Coverage Requests (600 per year)
•
Scope, limits, extensions, amendments

Ongoing Cross-Team communication

Outgoing Certificates Issued and Reviewed (3,000 per year)
•
Same Day Issuance
•
Notice of Cancellation Compliance

Incoming Certificates Reviewed (600)

Special Endorsements (2,000 per year)

Policy Renewals
• Gather and transmit renewal data to insurer for negotiations
• Policies reviewed to verify terms and conditions match quotations received
• Policies summarized updated and maintained
s:file path
5
Production Risk Management – A Dynamic Process
Pre-Production
Production
Post-Production
 Initial Production Notice to Risk
Management – Weekly Production
notifiedAffairs
of new
&•RM
Business
Meetings, Online
Publications, Phone Calls
 Adapt to changes in pre-production
schedule
 Additional Filming and ReShoots
 Location changes
 Claims Finalization
 Script Review, Exposure and
Location Analysis –
Domestic/International
determination
 Contract Review – Standard SPE/NonStandard, Vendor, Supplier and
amendments to Insurance Policies and
Insurance Certificates as needed
 Annual Production Renewal
Process
 Cast declarations, medicals, stop
dates and cast multi-production
utilization
 Claim activities
 Budgeting –Finalize Insurance line,
Identify special insurance
extensions – cast (age, medical
etc.), marine, aviation, railroad,
automobile, stunting, international,
disability, duration of production
 Special Hazard Identification and
Insurance treatment
• Watercraft
• Aviation
• Stunting
• Railroad
• Automobile
 SEHS Coordination
 SEHS Coordination
6
Corporate Risk Management – A Dynamic Process
Risk Management Analysis and Administration



Global Insurance Renewal Process
Identify corporate global risk exposures
•
Review contracts, leases, agreements
•
Monitor changes to locations, human
resources, inventory and warehouses
•
Assess impact of insurance laws and
requirements by country of operation
•
Due diligence for mergers & acquisitions

Activities begin 120 days before renewal and varies by
coverage (Property, Casualty, E&O, D&O, Marine,
Aviation, etc.)

Collect exposure data from SPE entities (values, payrolls,
productions costs, sales, vehicles)

Update claim summaries/status by line of coverage
Analyze insurance solutions for new/changing
exposures
•
International
•
Media
•
Terrorism
•
Cyber Risk
•
Surety Bonds
Respond to internal SPE inquiries (e.g. clearance
procedures, claims, INFOSEC, legal, SEHS)

Partner with broker to finalize submission and renewal
program design and negotiation strategy

Meet with insurers as necessary

Monitor renewal progress and respond to insurer requests

Analyze insurer proposals and make recommendations to
SPE management

Implement renewal and coordinate certificate issuance,
reviews and approves insurers’ premium invoices for
payment.

Manage ongoing relationships with brokers and insurers
until subsequent renewal cycle (e.g. Tokio Marine – major
strategic partner)

Coordinate insurance responses for promotions,
sales, marketing, distribution, studio operations,
digital, the internet

Ongoing claim management

Manage annual insurance budget
7
Annual Total Property & Casualty Premium/Retained Losses
vs. Total Annual Revenues – 2006 thru 2012
$45,000,000
$8,200,000
$40,000,000
$8,000,000
$35,000,000
$7,800,000
$30,000,000
$7,600,000
$25,000,000
$7,400,000
$20,000,000
$7,200,000
$15,000,000
$7,000,000
$10,000,000
$6,800,000
$5,000,000
$6,600,000
$-
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
Retained Losses
$10,316,872
$25,270,899
$4,347,458
$7,818,441
$8,965,623
$4,443,217
Annual Premium
$10,794,859
$15,200,837
$13,347,349
$13,939,807
$13,105,103
$14,840,956
Revenues (in 000)
$8,000,000
$7,500,000
$7,700,000
$7,500,000
$7,000,000
$7,900,000
Annual Revenues
(in 000)
Premium & Losses
Sony Pictures Entertainment Inc
Annual Total Premium & Retained Losses vs. Revenues
2006 thru 2012
$6,400,000
Fiscal Year
8
Annual Workers’ Comp Premium/Retained Losses vs.
US Headcount – 2006 thru 2012
Sony Pictures Entertainment Inc.
Annual Workers' Comp Premium and Retained Losses vs. Domestic Headcount
2006 thru 2012
6,000
5,000
$2,000,000
4,000
$1,500,000
3,000
$1,000,000
Headcount
Total Premium & Retained Losses
$2,500,000
2,000
$500,000
$RETAINED LOSSES
PREMIUMS
HEADCOUNT
1,000
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
$1,142,000
$1,199,000
$1,340,000
$1,344,000
$1,289,000
$1,367,000
$722,005
$627,875
$662,681
$431,715
$407,982
$426,164
5,222
5,677
4,788
4,626
4,507
4,568
0
Fiscal Year
9
Annual Global Property/B&M/Terrorism Premium/Retained
Losses vs. Property Values – 2006 thru 2012
Sony Pictures Entertainment Inc
Property Premiums & Retained Loss vs Total Values
2006 thru 2012
$5,000,000
$2,000,000
$4,000,000
$1,900,000
$1,850,000
$3,000,000
$1,800,000
$2,000,000
$1,750,000
$1,700,000
$1,000,000
Property Values (in 000s)
Annual Property Premiums & Losses
$1,950,000
$1,650,000
$RETAINED LOSSES
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
$150,000
$150,000
$50,000
$50,000
0
$50,000
GLOBAL PROP/B&M/TERR PREM
$3,977,379
$4,590,306
$3,680,890
$3,695,921
$3,950,880
$4,330,010
PROPERTY VALUES (in 000)
$1,753,896
$1,831,736
$1,921,700
$1,918,542
$1,981,686
$1,926,487
$1,600,000
Fiscal Year
10
Annual Production Package Premium/Retained Losses vs. Net
Insurable Production Costs – 2006 thru 2012
$12,000,000
$1,400,000,000
$1,200,000,000
$10,000,000
$1,000,000,000
$8,000,000
$800,000,000
$6,000,000
$600,000,000
$4,000,000
$400,000,000
$2,000,000
$RETAINED LOSSES
Production Cost
Production Package Premum & Retained Loss
Sony Pictures Entertainment Inc
Total Annual Production Package Premium & Retained Losses
vs. Insured Production Cost
$200,000,000
20062007
20072008
20082009
20092010
20102011
20112012
$0
$1,202,357 $2,741,860 $1,201,288 $4,211,947 $2,825,819 $1,809,762
PACKAGE PREMIUM $1,719,086 $5,401,540 $4,453,435 $5,342,573 $4,358,758 $5,277,797
PRODUCTION COST $238,814,44 $992,143,11 $721,306,94 $1,149,266, $541,189,55 $792,148,11
Fiscal Year
11
Risk and Insurance Strategy:
SPE Risk Management Achievements

Casualty, Property and Executive Risk

Financial
•
Collateral reduction of $900,000 in 2012
•
Implemented International Master Control Program 2010-2013; savings of $243,000
•
Workers’ Compensation program moved from ACE to Tokio Marine in 2010
•
Work Comp Medical Bill Review pricing shifted from percentage (25%) of savings to per bill ($12.50).
Estimated cost savings in excess $100,000

Major Insurance Claim Settlements
•
Marvel - $3,000,000
•
SPE Cyber Attack - $400,000
•
Grouper - $15,000,000
•
Pinewood - $15,000,000
•
Crime and Employment Claims –$1,400,000

Program Enhancements
•
Lowered Workers’ Compensation deductible from $750,000 to $500,000
•
Expanded CA Earthquake Coverage from $70,000,000 to $100,000,000
•
Increased Property Program Loss Limit from $400,000,000 to $500,000,000
•
Cyber Liability program was separated from the Multimedia/Technology program and now has a separate
$20,000,000 limit with expanded coverage
•
Cyber Liability amended to provide coverage for the care, custody and control of Third Party Intellectual
Property Assets
12
Risk and Insurance Strategy:
Sampling of SPE Risk Management Achievements

Program Enhancements (cont.)
•
•
•
•
•
•
•
Terrorism Coverage - Expanded Policy Form to include Coverage For Political Violence; Secured
Coverage For $193,000,000 International Office Schedule at No Charge; Expanded Policy To Provide
$1,000,000 in Coverage For Previously Excluded Territories
Regular testing of Broker Offerings with RFP's in 2007 and 2011
Maintaining experienced staff while developing new staff assuring quality service continuity with regular
staff evaluations and goal setting
Unique claim settlements (Pinewood property claim, certain E&O claims, 9/11 Civil Authority)
Implementation of Risk Management Information System (RMIS)
Reduction of Cost of Risk over the last few years despite upward cost pressure from insurers
Production Program
 Redesign in 2011 reduced overall costs by $1,000,000 by going to a guaranteed cost program
 Cast clearance extensions negotiated for higher risks
 Anna Nicole Smith
 Grown Ups 2
 London Calling
 Michael J. Fox Project
 One Direction
 Increased coverage for Ingress/ Egress (relevant for Hurricane Sandy claims est. $300,000)
 2013 renewal enhancements:
 Additional premium savings of $600,000
 Increased sub- limits
 Increased covered artists from 20 to 25
13
SPE Business Partners & Resources
INTERNAL
Procurement
Legal/Litigation
Business Affairs
Studio Operations & Facilities
Real Estate
Corporate Safety/Security & Environmental Affairs
Information Security
Compliance
Corporate Communications
Information Technology
EIS Infrastructure
Marketing & Publicity for MPG/TV and HE
Digital Group – SPI, SPII, SPA, SP Technology
Production Acquisitions for Sony Pictures
Classics, Worldwide
Corporate Acquisitions and Mergers
Corporate Events
SCA/SEL/SME Risk Management
Finance
Medical Department
People & Organization
Transportation
Tax
Labor Relations
Home Entertainment
Post Production
International Groups
14
SPE Business Partners & Resources
EXTERNAL
Adjusters
Artists
Business Managers
Attorneys
Physicians/Nurses
Studio Risk Managers
Insurance Brokers & Carriers
Appraisers
Vendors/Contractors/Consultants
Investigators
Muni/Government Agencies
Finance Companies
15
SPE - A Specialized Risk Profile

Studio Property Assets
•
Fire and Earthquake
•
Business Interruption

Off-Site Production Risks
•
International
•
Marine
•
Aviation

Intellectual Property Risks
•
Media
•
Cyber/Technology

Mergers, Acquisitions & Divestitures
•
Claim legacy (e.g. Grouper)

Employee and Third Party Safety
16
Risk and Insurance Total Cost of Risk – Fiscal Year 2014

Premiums: $18,000,000
(includes all U.S./Canada and Master International)

Retained Losses: $5,200,000 - $6,700,000 Estimated (?)
(includes: auto, general liability, workers compensation, errors & omissions/media and cyber, production)

Exposures
•
Revenue: $9,000,000,000
•
Property Assets (Total Insured Values): $1,920,000,000
(Replacement Cost inc. Bus. Intrp + Extra Exp.)
•
Workers Compensation Payroll (subject payroll): $722,300,000 (Head Count 6,000+)
•
Production Cost: $900,000,000+
(TV, MP, Home Entertainment, Digital and Studio)

Protection
•
18 Major Lines of Coverage
•
Over 50 Underwriters providing over 70 Policies plus numerous local and international policies for nonUS production offices
17
ProgramStructure
Structure––Major
MajorCoverage
Coverage
Limits
Program
Limits
SIR/Deductible
$150M
Umbrella & Excess Liability
Up to $150m xs of Primary
$80M
CA EQ $ 70M
P$500M
$100M
$150M
$50M
$50M
$20M
$10M
$1M
$1M
GL $2M
AL $3M
$1M
$10M
$2M
$75K
$250K
GL $100K
AL $25K
500K
$10M
$10M
P $50K
EQ 5%
Various
$5K
$1M
$15M
$15M
$50K
$50K
$5M
$50K
$25M
$5K
18
SPE Risk Management
Partner with Insurance Broker

Risk Assessment – conduct annual review of SPE’s risk profile, highlighting changes which could impact coverage
requirements.

Quantitative Analysis – assess recent and historical loss trends. Emphasize improvements which can result in
deductible / structure improvements

Marketing – annual marketing is undertaken to identify best-in-class insurers capable of responding to the SPE Risk
Management Standards.

Program Negotiation – negotiate optimal program structure with cost effective balance between deductibles and
premiums. Program must provide the most comprehensive coverage with the flexibility to respond quickly to SPE’s
inherent and contractual exposures.

Day-to-Day Administration – timely and accurate responses to SPE’s unique day to day requirements.

Review, analyze and negotiate claim service pricing and agreements with Third Party Administrator and carriers

Assist Productions in claim reporting and in resolving difficult or unusual claims

Coordinate bi-annual claims review with ESIS and with Tokio Marine

Review statistical loss runs and claim status on legacy CNA and current Chartis Insurance Services programs

Review claim reserves and evaluate the accuracy of reserve levels on casualty programs

Procure annual claim data files for actuary utilization and loss forecasting

Monitor claim status and disposition plans on legacy programs

Evaluate bi-annual Workers' Compensation Trend & Loss Analysis reports

Review carrier position on any denied claims for challenge to coverage applications
19
SPE Risk Management
Insurance Company Relationships

Identify insurance company partners that will provide long term stability

Production Package market is limited and Fireman’s Fund has been identified as a preferred partner

Tokio Marine has been a preferred partner since the Sony acquisition and participates on major portions of the
property & casualty programs

Hiscox has emerged as a strategic partner for the specialized Media Liability risks of SPE

Insurance Company providers are continually assessed for their financial stability and a long term commitment to the
Entertainment Industry
20
Risk Management Insurance Program Development
MARKETING SPE’s: Property, Casualty, Executive/Professional Risks

Working with our Risk Management Partners, establish desired program options, limits, retentions, structure,
pricing and terms

Assess market relations and leverage existing partnerships and facilitate new competitive alliances

Establish a Renewal Timeline

Build the SPE Marketing and Risk Story

Deliver a best-in-class submission

Drive the market through knowledge, leverage and competition

Direct interaction with underwriters to tell “The SPE Story”

Update Insurer Security Status
s:file path
21
Risk Management and Insurance Strategy

Central to our role as SPE’s Risk Management Department is the rigorous process utilized to assess SPE’s exposure to
risk on a long term strategic basis and day-to-day project basis.

Inherent to anticipating and proactively addressing SPE’s risk exposures, we:
•
Understand SPE’s objectives in designing and implementing a superior insurance program, using specialized
professional resources as needed, in formulating cost efficient risk management and insurance solutions.
•
Formulate action plans to leverage SPE’s strengths and opportunities of SPE’s risk techniques relative to overall
financial and operational conditions, the business environment as well as insurance market conditions.
•
In partnership with External Risk Management Professionals, we continually identify / evaluate opportunities and
threats which arise and implement processes and procedures to address them.
22