The Role of the Broker as the advocate of the Insurance Buyer

1. The Role of the Broker as the advocate of the Insurance Buyer JANUARY 26, 2012 Andrew F. SteptoweManaging DirectorHouston, TX

2. Marsh & McLennan Companies Inc. MMC is a global professional services firm that helps clients identify, plan for and respond to critical business issues and risks by providing analysis, advice and transactional services. MMC’s subsidiaries: • Marsh • Guy Carpenter • Mercer • Oliver Wyman

3. Energy Teams in: • Tulsa • Dallas • New Orleans Marsh Global Energy - Locations • 300+ employees helping c. 1,750 clients globally • Placing approx. USD 1.8 Billion in insurance premiums into energy insurancemarkets, significantly more than any other broker. • Integrated Global Practice, headquartered in Houston, Texas • Energy practitioners in many more locations around the world Oslo Oslo Calgary Calgary London Madrid New York San Francisco Houston Dubai Singapore Singapore Sao Paulo Perth

4. Large Commercial Insurance Involves 3 Key Parties…. • The Client • The Broker • The Insurer

5. In a world with no brokers…..

6. So why the “Middle Man”? • The Broker is an impartial advisor – not an Agent • The Broker is able to best assimilate the risks faced by the Client to the products available from various Insurers • The Broker is the advocate of the Insured not the Insurer • The Broker also fulfills key administrative functions related to regulation and taxation

7. What other important roles do brokers play? • Development of new products • Market analysis • Distribution network for underwriters

8. GLOBAL BROKERS Marsh Aon Willis DOMESTIC BROKERS Alliant Gallagher Lockton McGriff Seibels John L.Wortham USI The competitive landscape in Houston

9. Being appointed by a Client…. “There are worse things in life than death. Have you ever spent an evening with an Insurance salesman?” Woody Allen

10. How Brokers are chosen • Usually multiple brokers are identified • Certain key criteria will define the most likely candidates • They are then asked to present a conceptual proposal based on a set of service and/or program requirements particular to the needs of the individual client • Sometimes selection is made on an “assigned markets” basis

11. The decision whom to appoint is usually both subjective and objective…..

12. Gaining an in depth knowledge of the Clients business and operations Reviewing insurance policies currently in place to ensure the coverage provided is adequate Gaining an understanding of prior year losses and past experience Benchmarking limits and retentions with similar clients Assessing proposed premium levels against present market trends Identification of key Insurers Developing a marketing plan Having been appointed there is a great deal to be done before approaching Insurers:

13. The Marsh 3D Model

14. Benchmarking • Brokers have access to a significant amount of key data from the clients that they work with • Clients are always interested in the limits, retentions and premiums paid by their competitors • Brokers are always interested in what deals have been done by whom for how much • The end game is to leverage the information we have to get the right deal at the right price for the client. Very rarely is there only one option!

15. Example Benchmarking

16. How do brokers evaluate which Underwriters to approach for a particular risk? • Financial Stability • A proven track record in a particular class of business: • Underwriting expertise • Risk Management capabilities • Claims capabilities • An understanding of the industry in which the client operates • Service • Licensing

17. Domestic ACE Chartis Chubb Liberty Starr St Paul / Travelers WR Berkley Zurich Overseas Lloyd’s Munich Re Swiss Re GARD AXA Bermuda (XL, Torus, OCIL) OIL Major Markets for Energy Business

18. The basic marketing plan • Identify two or three “lead markets” • Prepare a detailed underwriting submission • Arrange face to face meetings between the Insured and Underwriters • Negotiate! • Obtain terms and discuss options with the Client • Refine terms as necessary • Select a market and bind the risk

19. 22 22 1 1 March March April April – – May May Monitor program & Monitor program & nd nd ST ST Strategy meeting with Strategy meeting with Marsh to send Marsh to send Ongoing marketing & Ongoing marketing & Policies received, Policies received, provide superb provide superb Rowan & Marsh teams Client & Marsh teams submission to Market submission to Market information exchange information exchange reviewed & sent reviewed & sent day day - - to to - - day service day service to discuss goals & to discuss goals & to Rowan to Client 4 4 – – 8 8 10 10 – – 12 12 TH TH th th th th th th any issues any issues Underwriter visits Underwriter visits Marsh to present Marsh to present 22 22 - - 31 31 & presentations, & presentations, renewal proposal renewal proposal nd nd st st Rowan to provide Client to provide as required as required to Rowan to Client renewal information Risk Information February February 13 13 – – 20 20 th th th th & Marsh to develop & Marsh to develop Ongoing marketing & Ongoing marketing & Rowan to provide Client to provide submission submission information exchange information exchange Binding instructions APRIL 1st EFFECTIVE DATE Binding instructions JANUARY JANUARY FEBRUARY FEBRUARY MARCH MARCH APRIL APRIL ONGOING ONGOING Setting Expectations An Example of a marketing timeline

20. After the deal is done…. • Issue all payment documentation • Collect funds and pay insurers • Issue documentation: Certificates, Auto ID cards, Policies etc. • Prepare a summary of coverage • Issue a claims procedure manual • Maintain appropriate contact

21. And most importantly….NO SURPRISES!

22. Thank you for your attention I’m sure you must have some questions! …..