Market Making
Developing and Accessing
Alternative Capital to Meet Client Demand
12 Growth Industries for the Next 10 Years: Insurance Solutions Needed
Health Care
Health Sciences
Agriculture
Technology
(incl. Biotechnology)
Light Manufacturing
Export-Oriented Industries
Shipping (Rail,
Source: Insurance Information Institute
Insourced Manufacturing
, Trucking)
1
Energy Consumption in Emerging Economies is Growing
-In 2010 energy
consumption
growth reached
5.6%. The highest
rate since 1973
- China’s share of
the global energy
consumption was
20.3%; the world’s
largest
Source: BP Statistical Review of World Energy and US Energy Information Administration
2
Cumulative Projected Investment in Global Energy Infrastructure, 2011-2035
Coal, $1.1 , Biofuels,
$0.3 , 1%
3%
Projected energy
infrastructure
investment through
2035 total $38
trillion;
Implies substantial
incurrence of risk
Natural Gas,
$9.5 , 25%
Oil, $10.1 ,
27%
Source: International Energy Agency, World Energy Outlook 2011.
Power,
$16.9 , 44%
3
Client Capacity compared to Carrier Capacity
1. Captive A - $1.5bn
1. Berkshire Hathaway - $500m+
2. Captive B - $1.4bn
2. Chartis - $200m
3. Captive C - $500m
3. ACE - $200m
4. Captive D - $200m
4. QBE - $150m
5. Captive E - $175m
5. Lancashire - $125m
5
Cat-in-a-Box Vehicle
• The Cat-in-a-Box vehicle was designed to overlay areas of insurers exposure that are of
concern and to respond to hurricane category winds from Category 2 to Category 5
• The catastrophe model proves to be useful in not only identifying areas and assets of
concern, but also by using a catastrophe model, different box sizes and positions around
the Gulf of Mexico can be analyzed to determine their probabilities of being triggered by
a hurricane event
• It should be noted that there is of course material basis-risk to such a vehicles
7
8
Developing an innovative insurance solution for oil and gas
decommissioning activities
Current situation
• During the next decade many UK North Sea oil and gas installations will need
to be decommissioned
Challenge
• Currently, decommissioning oil and gas facilities is a costly, complex
challenge. Over $47bn will be spent in the UK Continental Shelf alone, over
half of this total to be spent on the removal of platforms
• The lack of meaningful lifting capacity drives increased cost and risk for
Operators. Decommissioning costs are estimated to have tripled from 2006
to 2011
• Operators are seeking a cost-effective, safe and environmentally sound
solution
9
Developing an innovative insurance solution for oil and gas
decommissioning activities
• Client owns lifting technology for the
offshore oil and gas industry, particularly in
decommissioning. The system has a
maximum lift capacity of 34,000 tonnes,
larger than any other active lift vessel in
Europe. The system is ready for construction
and is in discussions to participate in several
decommissioning projects in the UK North
Sea
• An innovative solution was developed with a
leading insurer to enable client to offer a
fixed price package for platform removal, not
currently available in the insurance market
10
Working together to develop a high value solution
•Aon is working with others in the industry (clients and
markets) to develop a high value solution for the energy
sector
•Work we are doing is subject to confidentiality
•What we are doing is developing a product
• with very high limits
• provides protection to large, mid-size and small oil
companies and contractors
• provides meaningful risk transfer
12
Developing a long term sustainable solution
•A lot of the capacity has come from client captives
• Innovation has usually come after a major loss/event
• As an industry we need to drive innovation and a sustainable
long term solution prior to a major loss/event
• When the industry understands what clients value and work
together to build a clear solution then there is a demand for
innovation
13