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Transcript of ENERGY INSURANCE MUTUAL 19th ANNUAL RISK MANAGERS INFORMATION MEETING The Westin Innisbrook Golf...
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ENERGY INSURANCE
MUTUAL
ENERGY INSURANCE
MUTUAL19th ANNUAL
RISK MANAGERSINFORMATION MEETING
The Westin Innisbrook Golf ResortTarpon Springs, Florida
February 27 - March 1, 2005
The Westin Innisbrook Golf ResortTarpon Springs, Florida
February 27 - March 1, 2005
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Jill DominguezJill DominguezVice President - UnderwritingVice President - Underwriting
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2004UNDERWRITING
OVERVIEW
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2004IN REVIEW
2004IN REVIEW
NEW MEMBERSNEW MEMBERS88
MEMBERS AS OF 12/31/2004MEMBERS AS OF 12/31/2004172172
GROSS PREMIUM EARNEDGROSS PREMIUM EARNED $213,843,000$213,843,000
NEW MEMBERSNEW MEMBERS88
MEMBERS AS OF 12/31/2004MEMBERS AS OF 12/31/2004172172
GROSS PREMIUM EARNEDGROSS PREMIUM EARNED $213,843,000$213,843,000
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2004 COMPAREDTO 2003
2004 COMPAREDTO 2003
2004 2003GROSS PREMIUM
EARNED $213,843,000 $179,010,000
CASUALTY $179,370,500 $ 135,814,000
PROPERTY $34,473,000 $ 43,196,000
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WRITTEN/EARNED PREMIUM
WRITTEN/EARNED PREMIUM
10,000,00030,000,00050,000,00070,000,00090,000,000
110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000
Written Earned
10,000,00030,000,00050,000,00070,000,00090,000,000
110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000
Written Earned
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WRITTEN/EARNED PREMIUM
WRITTEN/EARNED PREMIUM
10,000,00030,000,00050,000,00070,000,00090,000,000
110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000
Written Earned
10,000,00030,000,00050,000,00070,000,00090,000,000
110,000,000130,000,000150,000,000170,000,000190,000,000210,000,000230,000,000250,000,000
Written Earned
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Toronto Hydro Corporation 01/01/2004
Alabama Electric Cooperative, Inc. 04/01/2004
Massachusetts Water Resources Authority 06/28/2004
National Energy & Gas Transmission, Inc. 08/01/2004
Complete Energy Holdings, LLC 08/23/2004
Anadarko Petroleum Corporation 09/12/2004
Wolf Creek Nuclear Operating Corp. 12/10/2004
Texas Genco LLC 12/15/2004
NEW MEMBERS IN 2004
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TOTAL MEMBERSHIP
110
120
130
140
150
160
170
180
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
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RETENTIONRETENTION
2004 98.82%
2003 96.05%
2002 99.42%
2001 99.40%
2004 98.82%
2003 96.05%
2002 99.42%
2001 99.40%
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EIM’S PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE
AMOUNT OF CAPACITY
EIM’S PRODUCTS - SUCCESSFUL IN MAINTAINING LARGE
AMOUNT OF CAPACITYGENERAL LIABILITYCapacity $100M as of 01/01/04Availability Depends on Risk
D&O/GENERAL PARTNERCapacity $50M as of 01/01/04$10M to $50M Available Depending on Risk
EXCESS FIDUCIARY LIABILITY$25M Available Depending on Risk
PropertyPrimary and Excess Quota ShareCapacity $15M
GENERAL LIABILITYCapacity $100M as of 01/01/04Availability Depends on Risk
D&O/GENERAL PARTNERCapacity $50M as of 01/01/04$10M to $50M Available Depending on Risk
EXCESS FIDUCIARY LIABILITY$25M Available Depending on Risk
PropertyPrimary and Excess Quota ShareCapacity $15M
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EIM MEMBERSHIP MIX33%
10%32%
22%
1%2%
ELECTRIC GASCOMBINED ISO/RTOWATER TELECOMMUNICATIONS
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2004 CASUALTYPOLICY FORMS
2004 CASUALTYPOLICY FORMS
All Forms Have Been Updated to Include:
EIM’s Change of Address
10 Day Notice of Cancellation for Nonpay
One Year Discovery Period Wording
NO CHANGES TO COVERAGE
All Forms Have Been Updated to Include:
EIM’s Change of Address
10 Day Notice of Cancellation for Nonpay
One Year Discovery Period Wording
NO CHANGES TO COVERAGE
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UPDATE BYLINE OF BUSINESS
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EXCESSGENERAL LIABILITY
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EXCESS GENERAL LIABILITY OVERVIEW
EXCESS GENERAL LIABILITY OVERVIEW
$90,301,000 Gross Premium Earned (2004)
$71,530, 000 Gross Premium Earned (2003)
171 EGL Policyholders
$73M Average Limit
$38M Average Attachment Point
$90,301,000 Gross Premium Earned (2004)
$71,530, 000 Gross Premium Earned (2003)
171 EGL Policyholders
$73M Average Limit
$38M Average Attachment Point
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EXCESS GENERAL LIABILITY OVERVIEW
EXCESS GENERAL LIABILITY OVERVIEW
BEHIND THE NUMBERSEight New MembersThree Members Placed Under ParentPricing AdjustmentsAdditional Premium for Additional LimitsAdditional Premium for Coverage Enhancements, e.g. EPLI, WC
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EXCESSGENERAL LIABILITY
EXCESSGENERAL LIABILITY
EXCESS FORM CAN ALSO INCLUDE: Excess EPLI (53% of Membership) Excess Workers Comp. (20% of Membership) Excess Professional Liability* (12% of Membership)
$65M Max Sublimit Drop Down Over Specific Aggregates in Underlying
Policy (61% of Membership)
* Usually ISOs/RTOs
EXCESS FORM CAN ALSO INCLUDE: Excess EPLI (53% of Membership) Excess Workers Comp. (20% of Membership) Excess Professional Liability* (12% of Membership)
$65M Max Sublimit Drop Down Over Specific Aggregates in Underlying
Policy (61% of Membership)
* Usually ISOs/RTOs
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EXCESS DIRECTORS AND OFFICERS LIABILITY
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EXCESS DIRECTORS AND OFFICERS/FIDUCIARY OVERVIEW
EXCESS DIRECTORS AND OFFICERS/FIDUCIARY OVERVIEW
102 EDO Policies
$43M Average Limit
$46M Average Attachment Point
$89,069,000 Gross Premium Earned (2004)
$64,284,000 Gross Premium Earned (2003)
102 EDO Policies
$43M Average Limit
$46M Average Attachment Point
$89,069,000 Gross Premium Earned (2004)
$64,284,000 Gross Premium Earned (2003)
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SOME GOOD NEWS IN 2004
SOME GOOD NEWS IN 2004
Top Three Industries with LARGEST Numbers of Securities Class Action Lawsuits*:
•Food and Beverage•Agricultural and Pharmaceutical•Technology and Communication
Top Three Industries with LEAST Exposure:
•Industrial•Basic Materials•UTILITIES
*Source: PLUS 2005 D&O Symposium, Cornerstone Research and Stanford Law School
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D&OISSUES AND TRENDS
D&OISSUES AND TRENDS
POSITIVESUtilities going “back to basics” seeing positive results.
UTILITIES’ CLAIMSUSCEPTIBILITY* FREQUENCY
2003 31% 2003 1.042004 30% 2004 .85
EIM CLAIMS FILED:2000 10 2003 242001 17 2004 222002 37
*Ten year periodSource: Tillinghast
POSITIVESUtilities going “back to basics” seeing positive results.
UTILITIES’ CLAIMSUSCEPTIBILITY* FREQUENCY
2003 31% 2003 1.042004 30% 2004 .85
EIM CLAIMS FILED:2000 10 2003 242001 17 2004 222002 37
*Ten year periodSource: Tillinghast
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S&P UTILITIES(ELECTRIC, GAS, PIPELINE, WATER)
S&P UTILITIES(ELECTRIC, GAS, PIPELINE, WATER)
UPGRADES DOWNGRADES2004 18 332003 8 1392002 15 1822001 29 81
Outlook still predominantly negative but declined dramatically in 2004.
Average Rating - Mid-BBB (48%)*Source: Standard & Poor’s Research - “US Utility Downside Rating Actions Moderated Significantly in 2004”
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NOW FOR SOME BAD NEWSNOW FOR SOME BAD NEWS
• More Institutional Investors Suing
• Suits Seeking Damages of More Than $100M Becoming Commonplace - EIM Coverage a “Working Layer”?
• Average Cost of Securities Class Action Settlements in 2004 up from $25M to $33M in 2003- in 2000, average settlement was $15M.*
*Sources: William Lerach, PLUS 2005 D&O Symposium, and Advisen
• More Institutional Investors Suing
• Suits Seeking Damages of More Than $100M Becoming Commonplace - EIM Coverage a “Working Layer”?
• Average Cost of Securities Class Action Settlements in 2004 up from $25M to $33M in 2003- in 2000, average settlement was $15M.*
*Sources: William Lerach, PLUS 2005 D&O Symposium, and Advisen
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D&O ISSUES AND TRENDSD&O ISSUES AND TRENDS
STILL A LOT OF UNCERTAINTYTRENDS Merger/acquisition activity picking up
Three mergers involving six members announced
According to Tillinghast’s 2004 D&O liability survey, six percent of D&O shareholder claims allegations are from merger/acquisitions
EIM’s experience: $16,250,000 paid in merger/acquisition activity related claims
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D&O ISSUES AND TRENDSD&O ISSUES AND TRENDSISSUES
SECTION 404 COMPLIANCEUnclear what implications are from regulatory enforcement or private action perspective
EFFECT OF SETTLEMENTSStill in pipeline - D&O claims estimated at $10B to settle minimum; probably $25B total
EIM $256M in case reserves as of 12/31/04
At the same time, more capacity, lower rates in market
Competition on difficult D&O renewals!
Source: “The Buyers Perception of D&O Realities and Latest Trends” - Towers Perrin-Tillinghast
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D&OISSUES AND TRENDS
D&OISSUES AND TRENDS
TREND?Capacity In Market Rebounding*Total Capacity In Market:
(Expressed in billions of dollars)
1999$1.55 2000$1.5752001$1.552002 $1.52003$1.352004 $1.5
*Tillinghast 2004 D&O Survey Report
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D&OISSUES AND TRENDS
D&OISSUES AND TRENDS
Viable Utility Capacity
$325M - $500M
Source: Research by McGriff, Seibels and Williams
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EXCESSFIDUCIARY LIABILITY
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EXCESSFIDUCIARY LIABILITY
EXCESSFIDUCIARY LIABILITY
Maximum Limit of Liability Offered to Members: $25M
Member Must Have at Least $35M
in Underlying Limits
43 Members (25%) Purchase Excess Fiduciary Liability
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EXCESSFIDUCIARY LIABILITY
EXCESSFIDUCIARY LIABILITY
$6.9M Written Premium$23M Average Limit$38M Average Attachment Point$5.75M Claims Paid in 2004
$6.9M Written Premium$23M Average Limit$38M Average Attachment Point$5.75M Claims Paid in 2004
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PROPERTY
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PROPERTYPROPERTYParticipation in Members’
Property Programs
12/31/2002 2512/31/2003 4012/31/2004 53
We are currently involved with 75 Programs.
Participation in Members’ Property Programs
12/31/2002 2512/31/2003 4012/31/2004 53
We are currently involved with 75 Programs.
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PROPERTYPROPERTY
EIM $ 3,202,440
EIM and NEIL $29,129,409
NEIL FRONTS $ 3,321,764
EIM $ 3,202,440
EIM and NEIL $29,129,409
NEIL FRONTS $ 3,321,764
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PROPERTYPROPERTYOPEN CLAIMS ACTIVITY
2001 12002 42003 92004 18
LOSS RATIO2001 1%2002 19%2003 23%2004 24%
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2004 HURRICANE SEASON
2004 HURRICANE SEASON
EIM LOSSES
$600,000
EIM LOSSES
$600,000
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PROPERTYPROPERTY
Please consider advising your broker to send EIM your property submission. If a large portion of your property coverage is with a direct writer or one carrier, we ask that you consider EIM’s involvement.
Please consider advising your broker to send EIM your property submission. If a large portion of your property coverage is with a direct writer or one carrier, we ask that you consider EIM’s involvement.
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COVERAGE CAN BE CONSIDERED ON A PRIMARY BASIS IF:
COVERAGE CAN BE CONSIDERED ON A PRIMARY BASIS IF:
Account is a quality-engineered and maintained risk
Account is a quality-engineered and maintained risk
Deductibles meet minimum guidelines for equipment at risk and coverage requested
Rates contemplate the exposures presented by the risk, claims experience, and coverage form
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CAPACITY AND SUBLIMITS
CAPACITY AND SUBLIMITS
Capacity Provided on a Quota Share Basis Only
Maximum Capacity is $15M
Earthquake, Flood, and Wind Exposures Will Be Monitored
Accounts with Zone A Flood and/or Catastrophe Exposures May Be Subject to Reduced Capacity and/or Limits and/or Higher Deductibles
Earthquake and Flood Must Be Written with Annual Aggregates
Capacity Provided on a Quota Share Basis Only
Maximum Capacity is $15M
Earthquake, Flood, and Wind Exposures Will Be Monitored
Accounts with Zone A Flood and/or Catastrophe Exposures May Be Subject to Reduced Capacity and/or Limits and/or Higher Deductibles
Earthquake and Flood Must Be Written with Annual Aggregates
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TERRORISMPOSITION
TERRORISMPOSITION
CASUALTY PROPERTY
TRIA-Certified is offered. TRIA-Certified is offered.
Do not exclude noncertified, but cap GL to $25M per Member, $125M EIM-wide.
Non-certified is offered only for U.S. and Puerto Rico.
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TERRORISMPOSITION
TERRORISMPOSITION
UPDATE ON TRIA MODELING
Currently evaluating EIM book to determine exposure
EIM may provide limits equal to policy limit, a sublimit, or decline to write
UPDATE ON TRIA MODELING
Currently evaluating EIM book to determine exposure
EIM may provide limits equal to policy limit, a sublimit, or decline to write
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INSURANCE ADVISORY COMMITTEE
William R. Powell, ARM, CSP (Chairman)Manager, Risk Management Salt River Project Deborah S. GaffneyRisk and Insurance ManagerSouthern Company James O. Hess, Jr.Director Liability and Financial InsuranceDuke Energy Michael C. Hulsey, CPU, CLU, ARMRisk ManagerCity of Richmond, Dept. of Public Utilities John E. LuleyManager – Corporate InsurancePepco Holdings
Donna Pedersen McGinnisVice President, Risk Management and InsuranceDynegy Inc.
George Schuitema, ARMManager, Corporate Risk ManagementThe Peoples Gas Light and Coke Company
Robert J. Semet, CPCU, ARM, AReInsurance DirectorExelon Corporation
Michael G. Whelan, CPCURisk Services ManagerTXU Business Services
Michael L. WilsonDirector, Risk ManagementEntergy Services, Inc.
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HOW ARE WE DOING?2004 RISK MANAGER SURVEY
EIM follows reasonable, prudent, and sound underwriting practices:
98%Agree/
Strongly Agree
98%Agree/
Strongly Agree
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EIM provides added value in form of broad coverage, price stability, consistent limits, and financial strength:
HOW ARE WE DOING?2004 RISK MANAGER SURVEY
94%Agree/
Strongly Agree
94%Agree/
Strongly Agree
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HOW ARE WE DOING?2004 RISK MANAGER SURVEY
Overall, EIM meets my expectations in level of service:
100%Agree/
Strongly Agree
100%Agree/
Strongly Agree
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