Samuel M. Garvin, Jr.
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Transcript of Samuel M. Garvin, Jr.
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Samuel M. Garvin, Jr.Samuel M. Garvin, Jr.
Vice President and Chief Financial OfficerVice President and Chief Financial Officer
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Year in Review and Current State of Company
Sam Garvin – Financial Review
Jill Dominguez – Underwriting / Reinsurance
Ann Joslin – Claims Status & Procedures
Robert Schmid – EIS Update
Debbie Gaffney, Southern Co. – IAC Update
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2008FINANCIAL
REVIEW
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12/31/08 12/31/07 CHANGEASSETS
Invested assets $ 998.7 $1,245.5$
(246.8) Reinsurance recoverable 448.8 404.1 44.7 Deferred Taxes 39.5 0.0 39.5
Other 62.7 67.4
(4.7)
TOTAL $1,549.7 $1,717.0$
(167.3)
LIABILITIES AND SURPLUS Loss reserves $964.1 $844.4 $ 119.7
Unearned premiums 100.2 102.4 (2.2)
Policyholder distribution payable 0.0 12.5 (12.5) Payable for investments 4.7 3.2 1.5
Deferred taxes 0.0 72.5 (72.5)
Other 13.4 14.9 (1.5)
Policyholders’ surplus 467.3 667.1
(199.8)
TOTAL $1,549.7 $1,717.0$
(167.3)
(In Millions)SIMPLIFIED BALANCE SHEET
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12/31/08 12/31/07 CHANGEASSETS
Invested assets $ 998.7 $1,245.5$
(246.8) Reinsurance recoverable 448.8 404.1 44.7 Deferred Taxes 39.5 0.0 39.5
Other 62.7 67.4
(4.7)
TOTAL $1,549.7 $1,717.0$
(167.3)
LIABILITIES AND SURPLUS Loss reserves $964.1 $844.4 $ 119.7
Unearned premiums 100.2 102.4 (2.2)
Policyholder distribution payable 0.0 12.5 (12.5) Payable for investments 4.7 3.2 1.5
Deferred taxes 0.0 72.5 (72.5)
Other 13.4 14.9 (1.5)
Policyholders’ surplus 467.3 667.1
(199.8)
TOTAL $1,549.7 $1,717.0$
(167.3)
(In Millions)SIMPLIFIED BALANCE SHEET
12/31/08 12/31/07 CHANGE
Invested assets $ 998.7 $ 1,245.5$
(246.8)
Payable for investments (4.7) (3.2)
(1.5)
TOTAL $ 994.0 $1 ,242.3 $ (248.3)
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FIXED INCOME MANAGERS Pyramis Global Advisors Morgan Stanley
EQUITY MANAGERS SSgA State Street Global Advisors
INVESTMENT ADVISORS Frank Russell Company
INVESTMENT MANAGEMENT
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FIXED INCOME MANAGERS Pyramis Global Advisors Morgan Stanley
EQUITY MANAGERS SSgA State Street Global Advisors
INVESTMENT ADVISORS Merrill Lynch
INVESTMENT MANAGEMENT
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12/31/08 12/31/07
PYRAMIS $ 279.6 29.2% $ 289.3 24.1%
MORGAN STANLEY $ 279.1 29.1% $ 287.3 24.0%
SSgA – US $ 286.6 29.9% $ 427.5 35.7%
SSgA – NON US $ 112.7 11.8% $ 194.7 16.2%
TOTAL WITH MANAGERS $ 958.0 100.0% $1,198.8 100.0%
CASH $ 36.0 $ 43.5
TOTAL $ 994.0 $1,242.3
(In Millions)
INVESTMENT MANAGERS ALLOCATION
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ASSET ALLOCATION - DECEMBER 31, 2008
ASSET CLASS TARGET DRIFT RANGE
U. S. EQUITY 35% 30% - 45%
NON-U. S. EQUITY 15% 10% - 20%
FIXED INCOME 50% 40% - 55%
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12/31/08 12/31/07 CHANGEASSETS
Invested assets $ 998.7 $1,245.5$
(246.8) Reinsurance recoverable 448.8 404.1 44.7 Deferred Taxes 39.5 0.0 39.5
Other 62.7 67.4
(4.7)
TOTAL $1,549.7 $1,717.0$
(167.3)
LIABILITIES AND SURPLUS Loss reserves $964.1 $844.4 $ 119.7
Unearned premiums 100.2 102.4 (2.2)
Policyholder distribution payable 0.0 12.5 (12.5) Payable for investments 4.7 3.2 1.5
Deferred taxes 0.0 72.5 (72.5)
Other 13.4 14.9 (1.5)
Policyholders’ surplus 467.3 667.1
(199.8)
TOTAL $1,549.7 $1,717.0$
(167.3)
(In Millions)SIMPLIFIED BALANCE SHEET
12/31/08 12/31/07 CHANGE
Loss reserves $ 964.1 $ 844.4$
119.7
Reinsurance recoverable (448.8) (404.1)
(44.7)
TOTAL $ 515.3 $ 440.3 $ 75.0
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12/31/08 12/31/07 Change
LOSS RESERVES $186.6 $147.3$
39.3
IBNR 325.7 290.0 35.7
LAE RESERVES 3.0 3.0
0.0
TOTAL $515.3 $440.3$
75.0
NET CLAIM RESERVES
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12/31/08 12/31/07 CHANGEASSETS
Invested assets $ 998.7 $1,245.5$
(246.8) Reinsurance recoverable 448.8 404.1 44.7 Deferred Taxes 39.5 0.0 39.5
Other 62.7 67.4
(4.7)
TOTAL $1,549.7 $1,717.0$
(167.3)
LIABILITIES AND SURPLUS Loss reserves $964.1 $844.4 $ 119.7
Unearned premiums 100.2 102.4 (2.2)
Policyholder distribution payable 0.0 12.5 (12.5) Payable for investments 4.7 3.2 1.5
Deferred taxes 0.0 72.5 (72.5)
Other 13.4 14.9 (1.5)
Policyholders’ surplus 467.3 667.1
(199.8)
TOTAL $1,549.7 $1,717.0$
(167.3)
(In Millions)SIMPLIFIED BALANCE SHEET
12/31/08 12/31/07 CHANGE
Unearned premiums $ 100.2 $ 102.4$
(2.2)
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UNEARNED PREMIUM RESERVES
12/31/08 12/31/07 ChangeGENERAL LIABILITY $ 50.8 $ 49.7 $ 1.1
D&O / FIDUCIARY 33.4 36.1
(2.7)
PROPERTY 16.0 16.6
(0.6)
TOTAL $100.2 $102.4$
(2.2)
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STATEMENT OF OPERATIONS
Revenues (In Millions) 2008 2007 Change
Premiums
Gross premiums written $179.6 $194.1 $ (14.5)
Reinsurance premium assumed 2.4 5.4 (3.0)
Decrease in unearned premiums 2.2 8.1 (5.9)Reinsurance premiums ceded (82.4) (92.1) 9.7
Net premiums earned $101.8 $115.5 $ (13.7)
Other underwriting income 2.1 2.7 (0.6)
Investment income - net 40.1 44.4 (4.3) Investment – OTTI Adjustment (40.2) (1.5) (38.7)
Net loss on disposal of investments (0.4) (0.5) 0.1
TOTAL REVENUE $103.4 $160.6 $ (57.2)
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STATEMENT OF OPERATIONS
Revenues (In Millions) 2008 2007 Change
Premiums
Gross premiums written $179.6 $194.1 $ (14.5)
Reinsurance premium assumed 2.4 5.4 (3.0)
Decrease in unearned premiums 2.2 8.1 (5.9)Reinsurance premiums ceded (82.4) (92.1) 9.7
Net premiums earned $101.8 $115.5 $ (13.7)
Other underwriting income 2.1 2.7 (0.6)
Investment income - net 40.1 44.4 (4.3) Investment – OTTI Adjustment (40.2) (1.5) (38.7)
Net loss on disposal of investments (0.4) (0.5) 0.1
TOTAL REVENUE $103.4 $160.6 $ (57.2)
2008 2007 CHANGE
Net premiums earned $ 101.8 $ 115.5 $ (13.7)
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NET PREMIUMS EARNED
12/31/08 12/31/07 Change
GENERAL LIABILITY $ 60.8 $ 60.1 $ 0.7
D&O/FIDUCIARY 33.0 44.7 (11.7)
PROPERTY 5.6 5.3 0.3
ASSUMED 2.4 5.4 (3.0)
TOTAL $101.8 $115.5 $ (13.7)
(In Millions)
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Revenues (In Millions) 2008 2007 Change
Premiums
Gross premiums written $179.6 $194.1 $ (14.5)
Reinsurance premium assumed 2.4 5.4 (3.0)
Decrease in unearned premiums 2.2 8.1 (5.9)
Reinsurance premiums ceded (82.4) (92.1) 9.7
Net premiums earned $101.8 $115.5 $ (13.7)
Other underwriting income 2.1 2.7 (0.6)
Investment income - net 40.1 44.4 (4.3) Investment – OTTI Adjustment (40.2) (1.5) (38.7)
Net loss on disposal of investments (0.4) (0.5) 0.1
TOTAL REVENUE $103.4 $160.6 $ (57.2)
2008 2007 CHANGE
Investment income – net
Investment – OTTI adjustment
Net loss on disposal of investment TOTAL
$ 40.1
(40.2)
(0.4)
$ (0.5)
$ 44.4
(1.5)
(0.5)
$ 42.4
$ (4.3)
(38.7)
0.1
$ (42.9)
STATEMENT OF OPERATIONS
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NET INVESTMENT INCOME
(In Millions)
12/31/08 12/31/07 ChangeINTEREST AND DIVIDENDS $ 40.1 $
44.4$ (4.3)
REALIZED (GAINS) LOSSES -EQUITIES -FIXED INCOME SUBTOTAL
0.2 (0.6) (0.4)
0.7 (1.2)
(0.5)
(0.5) 0.6 0.1
OTTI ADJUSTMENT -EQUITIES -FIXED INCOME SUBTOTAL
(17.9)
(22.3) (40.2)
(1.3) (0.2)
(1.5)
(16.6) (22.1) (38.7)
TOTAL $ (0.5) $ 42.4 $ (42.9)
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INVESTMENT PERFORMANCE
EIM ANNUAL RETURN
2008 (22.4)% 2003 18.0%
2007 6.5% 2002(6.1)%
2006 12.6% 2001 (1.1)%
2005 6.0% 2000 1.7%
2004 9.2% 1999 7.7%
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-25.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
TOTAL RETURN PERCENTAGES
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TAX ADJUSTED PERFORMANCEVS. BENCHMARKS BY MANAGER
ONE YEAR RETURNS
PERFORMANCEBENCHMARK
COMBINED FUND (22.4) (19.8)
FIXED INCOME PYRAMIS 2.0 (0.9) MORGAN STANLEY (11.1) 4.9
EQUITY SSgA S&P 900 (36.5) (36.9) SSgA NON-US (42.8) (43.4)
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7 Years 2.5 %
5 Years 1.5 %
3 Years (2.4)%
LONG TERM INVESTMENT PERFORMANCEAS OF DECEMBER 31, 2008
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Expenses (In Millions)Losses and loss adjustment expenses
2008 2007 Change
Gross losses and LAE incurred $255.3 $258.0 $ 2.7Assumed losses and LAE 0.5 0.0 (0.5)Reinsurance recoveries (119.6) (133.9) (14.3)Net losses and LAE incurred $136.2 $124.1 $(12.1)
Other underwriting expenses 1.7 1.9 0.2Administrative expenses 9.0 9.9 0.9Total expenses $146.9 $135.9 $(11.0)Policyholders’ distribution 0.0 12.5 12.5Income before income taxes $ (43.5) $ 12.2 $(55.7)Income tax (20.7) (0.9) 19.8NET INCOME $ (22.8) $ 13.1 $(35.9)
STATEMENT OF OPERATIONS
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Expenses (In Millions)Losses and loss adjustment expenses
2008 2007 Change
Gross losses and LAE incurred $255.3 $258.0 $ 2.7Assumed losses and LAE 0.5 0.0 (0.5)Reinsurance recoveries (119.6) (133.9) (14.3)Net losses and LAE incurred $136.2 $124.1 $(12.1)
Other underwriting expenses 1.7 1.9 0.2Administrative expenses 9.0 9.9 0.9Total expenses $146.9 $135.9 $(11.0)Policyholders’ distribution 0.0 12.5 12.5Income before income taxes $ (43.5) $ 12.2 $(55.7)Income tax (20.7) (0.9) 19.8NET INCOME $ (22.8) $ 13.1 $(35.9)
STATEMENT OF OPERATIONS
2008 2007 CHANGE
Net losses and LAE incurred $ 136.2 $ 124.1 $ (12.1)
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12/31/08 12/31/07 Change2008 $ 86.2 $ 0.0 $ (86.2)2007 39.8 119.8 80.02006 (12.5) (3.4) 9.12005 (13.2) 0.6 13.82004 (3.0) (5.8) (2.8)2003 18.2 19.4 1.22002 26.2 3.3 (22.9)PRIOR (5.7) (12.4) (6.7)TAIL 0.2 2.6 2.4
$ 136.2 $ 124.1 $ (12.1)
(In Millions)NET LOSSES AND LAE
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Gross Net
2008 138.9% 133.8%
2007 132.2% 120.4%
LOSS RATIO
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(In Millions) Gross Net
Initial 12/31/08 Change Initial 12/31/08 Change
2008 $ 190.4 $ 190.4 $ 0.0 $ 86.2 $ 86.2 $ 0.0
2007 252.6 320.4 (67.8) 119.7 159.6 (39.9)
2006 132.6 80.9 51.7 72.8 52.8 20.0
2005 155.5 275.5(120.0)
82.1 103.5 (21.4)
2004 125.8 55.9 69.9 79.5 33.4 46.1
2003 147.8 188.9(41.1)
59.6 114.8 (55.2)
2002 262.1 453.2(191.1)
103.1 299.9 (196.8)
2001 149.2 106.1 43.1 60.1 66.0 (5.9)
2000 120.7 82.0 38.7 73.9 72.7 1.2
All CoveragesINCURRED LOSSES BY ACCIDENT YEAR
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(In Millions)Total Current Prior Tail
2008 $ 136.2 $ 86.2 $ 49.8 $ 0.2
2007 124.1 119.7 1.8 2.6
2006 99.3 72.8 28.5 (2.0)
2005 74.1 82.1 (12.1) 4.12004 157.2 79.5 87.8 (10.1)2003 118.5 59.6 56.8 2.12002 47.4 103.1 (53.5) (2.2)
2001 1.3 60.2 (56.3) (2.6)2000 61.0 73.9 (18.0) 5.11999 18.4 39.4 9.4 (30.4)1998 79.4 40.8 43.6 (5.0)1997 31.1 43.8 6.4 (19.1)1996 (6.4) 38.8 (13.5) (31.7)
All Coverages NET INCURRED LOSSES BY ACCIDENT YEAR
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($75)
($25)
$25
$75
$125
$175
Total Current Prior Tail
NET INCURRED LOSSES BY ACCIDENT YEAR(In Millions) All Coverages
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$25
$50
$75
$100
$125
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Current Linear Trend
CURRENT YEAR NET INCURRED LOSSES(In Millions) All Coverages By Accident Year
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$0
$20
$40
$60
$80
$100
$120
$140
$160
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
NET LOSS PAYMENTS
(In Millions)
All Coverages
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TOTAL CLAIMS PAID1986 - 2008
Claims Paid
GENERAL LIABILITY $ 271,962,582
D&O / FIDUCIARY 584,546,648
PROPERTY 83,532,292
REINSURANCE 51,733,316
$ 991,774,838
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Gross IBNR $519.3 Million
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CHANGE IN POLICYHOLDERS’ SURPLUS
BEGINNING SURPLUS $667.1
Plus:Net loss $ (22.8)Unrealized loss of investments $(177.0)
Change $(199.8)
ENDING SURPLUS $467.3
(In Millions)
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2009 A. M. BEST RATINGENERGY INSURANCE MUTUAL LIMITED
BEST’S RATING: A (EXCELLENT) OUTLOOK: STABLE
“The rating reflects the Company’s excellent capitalization, historically strong operating returns, and
conservative leverage position.”
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Jill DominguezJill Dominguez
Vice President-UnderwritingVice President-Underwriting
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WHAT’S GOING ON AT EIM?
Update on 2008
Expectations for 2009
Reinsurance treaty update
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NEW MEMBERSIN 2008
Central Arizona Water Conservation DistrictOptim Energy LLCCity Public Service of San Antonio, TXAES CorporationEnel North America, Inc.Vermont Electric Power Company
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MEMBERSHIP GROWTH 1986 - 2008
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MEMBER RETENTION RATE
2008 97%
2007 98%
2006 97%
2005 96%
2004 99%
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MEMBERSHIP MIX
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2008 MEMBERSHIP
One Acquisition by Non-EIM Member
Three Non-Renewals2 no longer needed limits1 lost because of price/terms
Four Member/Member Mergers
ENDED 2008 WITH 173 MEMBERS
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MEMBER LONGEVITY
87% of membership has been with EIM at least 5 years
Years with EIM Number of Members
20+ years 30
Between 15 – 20 years 41
Between 10 – 14 years 41
Between 5 – 9 years 38
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GROSS WRITTEN PREMIUM2008 VS. 2007
2008
$179.6M
2007
$194.1M
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GENERAL LIABILITY
$89.5M Gross Written Premium
162 EGL Policyholders
$75.6M Average Limit
$37.7M Average Attachment Point
48.5% of excess GL Policies Written for Maximum $100M Limit
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GENERAL LIABILITY ENHANCEMENTS
EPLI 55%
Worker’s Compensation 22%
Drop Down Joint Venture 45%
Drop Down Over Specific Aggregates
Professional Liability($65M Sublimit)
71%
10%
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BREAKDOWN OF UNDERLYING CARRIERS
GLAEGIS – 95%
AIG – 1%
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$25M Wildfire aggregate each memberCalifornia Wildfires
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ASH PONDS AND STORAGE LANDFILLS
Requirements to line?Inspections/maintenance
How often?Outside third party used?Formed by products vs. natural materials?
LocationsRural?“Downstream” exposure?
Monitoring procedures i.e.Groundwater monitoring systems
CapacityIs it at limit?Disposal onlyPotential to sell to others?
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WHERE DOES THIS INFORMATION COME FROM?10-K Environmental disclosures
(not consistent though)
Dam Inspection Reports
EIA form 767 and subsequent forms (EIA 923 form)
Presentations, include photographs
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DIRECTORS AND OFFICERS LIABILITY
$51.4M Gross Premium Written
88 EDO Policyholders
$38M Average Limit
$42.4M Average Attachment Point
45% of D&O policies written for maximum $50M Limit
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BREAKDOWN OF UNDERLYING CARRIERS
D&OAEGIS – 73%
AIG – 11%
Chubb – 2%
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FIDUCIARY LIABILITY
$5.85M Gross Written Premium
44 Policy Holders
$22.4M Average Limit
$38.4M Average Attachment Point
73% Buy Maximum Limits
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PROPERTY
Premium
$5.9M EIM Only
$21.5M NEIL Only
Total policies written
Primary layer – 45
Excess layer - 20
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PROPERTY
Capacity =
$35,000,000
11% of members buy $30M or more
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OVERALL VIEW
Longterm view of market
Will entertain Builder’s Risk Placements
Not a primary market for programs that are predominantly catastrophe exposed
Will continue to front for NEIL
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REINSURANCE
2009
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REINSURANCE RELATIONSHIPSON CORE BUSINESS – GL AND D&O
Various Lloyd’s Syndicates have reinsured EIM since December 1, 1986.
NEIL first reinsured EIM on January 1, 1994.
Basically the same group of reinsurers since January 1, 2004.
Personal relationships are extremely important and proved invaluable at renewal.
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Each LossDeductible
Aggregate Retention Participation
$5,000,000 $50,000,000 each lossand
$75,000,000 in theaggregate
28.00%
$5,000,000 $60,000,000 each lossand
$95,000,000 in theaggregate
57.00%
$5,000,000 $70,000,000 each lossand
$115,000 000 in theaggregate
15.00%
100.00%
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Each LossDeductible
AggregateRetention
ReinsuranceRecovery 2008
ReinsuranceRecovery 2009
AdditionalRetention
First $100million loss
$ 5,000,000 $58,700,000 $ 45,000,000 $ 36,300,000 $ 8,700,000
Second $100million loss
$ 5,000,000 $33,700,000 $ 70,000,000 $ 61,300,000 $ 8,700,000
Third $100million loss
$ 5,000,000 0 $ 95,000,000 $ 95,000,000 0
Total $15,000,000 $92,400,000 $210,000,000 $192,600,000 $17,400,000
GENERAL LIABILITY EXAMPLE
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2009 REINSURANCED&O LIABILITY
RETENTIONS
$5,000,000 Each And Every Loss
$29,000.000 Each Loss And
$58,000,000 In The Aggregate
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2009 MAJOR CASUALTY REINSURERS
Lloyd’sLed by Aspen Syndicate and Catlin SyndicateNuclear Electric Insurance LimitedPlatinum ReTransatlantic ReOdyssey ReAWAC
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2009 REINSURANCEPROPERTY
Up to February 1, 2007 50/50 quota share arrangement with endurance, Bermuda.
From February 1, 2007 excess of loss arrangement with Lloyd’s, Odyssey Re Hannover Re and Neil.
From February 1, 2008 excess of loss program with NEIL.
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2008 RISK MANAGER SURVEYRESULTS
EIM follows reasonable, prudent, and sound underwriting practices:
98%
Agree/Strongly Agree
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EIM provides added value in form of broad coverage, price stability, consistent limits, and financial strength:
2008 RISK MANAGER SURVEYRESULTS
99.25%
Agree/Strongly Agree
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Overall, EIM meets my expectations in level of service:
2008 RISK MANAGER SURVEYRESULTS
99%
Agree/Strongly Agree
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Ann JoslinAnn Joslin
Claims ManagerClaims Manager
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In an ideal world, claims do not approach EIM limits.
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Unfortunately, that is not always the case.
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CLAIMS OVERVIEW AND GENERAL ADMINISTRATIVE
INFORMATION
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CLAIMS NOTICE CATEGORIES
CATEGORY ONE Highly improbable that it will impact EIM; requires only
periodic review to ensure that it is not adversely developing.
CATEGORY TWO Requires continuous monitoring and specific actions.
CATEGORY THREE Meets the accepted requirements for setting specific loss
reserves
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OPEN CLAIMS - 2008CATEGORY 1 CATEGORY 2 CATEGORY 3
GENERAL LIABILITY
449 23 9
DIRECTORS & OFFICERS LIABILITY
36 5 4
FIDUCIARY LIABILITY
16 1 3
PROPERTY 28 11 120
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CATEGORY 2 AND 3GENERAL LIABILITY LOSSES
Electric Contact 1
Fire 11
Gas Explosion 11 Flooding 3 Pollution 3 Land Claim 1 Steam Pipe Rupture 1
Transformer Explosion 1
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REPORTING CLAIMS
1. Liability claims should be reported to Ann Joslin. Electronic reporting is acceptable. E-mail address is [email protected].
2. Property claims should be reported to Ann Joslin, with a copy to Larry Baccari. E-mail for Larry is [email protected].
3. Reporting via fax or regular mail is also available.
4. No special form is required.
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CLAIM REPORTING REQUIREMENTS
• Always refer to your policy language for guidance
• Following is sample policy language for GL, D&O and Fiduciary EIM policies
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EXCESS GENERAL LIABILITY
(H) Notice of ClaimAs a condition precedent to any rights under this policy, the Insured shall give written notice of claim to the company of any claim against the Insured for an amount in excess of one-half of the amount listed as the attachment point in item 4 of the declarations. Such notice of claim shall be given as soon as practicable.
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DIRECTORS AND OFFICERS
(H) Notice of Claim
As a condition precedent to any rights under this policy, the Directors, Officers and/or the Insured shall give a written notice of claim to the company of any claim which appears likely to exceed $1,000,000. Such notice of claim shall be given as soon as practicable.
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EXCESS FIDUCIARY LIABILITY
(I) Notice of Claim
As a condition precedent to any rights under this policy, the insured Persons and/or the insured shall give written notice of claim to the company of any claim which appears likely to exceed $1,000,000. Such notice of claim shall be given as soon as practicable.
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GENERAL PARTNERS LIABILITY
(H) Notice of claim
As a condition precedent to any rights under this policy, the General Partners and/or the Limited Partnership shall give a written notice of claim to the company of any claim which appears likely to exceed $1,000,000. Such notice of claim shall be given as soon as practicable.
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PRACTICAL CLAIM REPORTING CONSIDERATIONS – GL
• There is generally no need to report minor incidents, especially those involving minor injuries, property damage, or as another example, discrimination alleged by one employee who is not highly compensated.
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PRACTICAL CLAIMS REPORTING CONSIDERATIONS - GL
• As a practical matter, it is a good idea to report major catastrophic events, even though it is unclear whether exposure will reach one-half of underlying limits for a general liability situation.
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PRACTICAL CLAIM REPORTING CONSIDERATION - GL
• Examples of types of claims to report include fires or explosions with multiple fatalities and/or serious injuries and/or extensive property damage.
• Ideally these incidents would be reported to EIM at the time of reporting to the underlying carrier.
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PRACTICAL CLAIM REPORTING CONSIDERATIONS - GL
• If a claim is reported to EIM at a later time, at a point when a claim is made for one-half of the attachment point, there are certain issues that should be considered at the time of reporting, as they will bear on administrative and substantive handling.
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EXAMPLE OF ADMINISTRATIVE ISSUES• Explosion occurs on 2/10/08.
• Written notice of occurrence is sent to Underlying Carrier A on 2/12/08, even though no claims have been made against the insured as yet.
• A letter of representation dated 6/18/08 is the first claim made against the insured.
• On 8/30/08, a demand is made for settlement in the amount of $40 million.
• On 9/5/08, the insured sends a copy of the demand letter to EIM due to the amount claimed, and stating this is notice to EIM.
• The current policy period is 4/10/08-4/10/09. The prior policy period is 4/10/07-4/10/08.
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EXAMPLE OF ADMINISTRATIVE ISSUES – GL – CONTINUED
• First, EIM needs to know the date the claim was first made against the insured to properly set up the claim administratively. So, a copy of the original letter of representation would be needed.
• Second, Underlying Carrier A will have the claim set up under the earlier policy year, due to the notice of occurrence being sent prior to the claim being first made.
• The claim will be set up under the later year at EIM, because notice to the Company (defined as EIM in the policy) was not given prior to the claim first being made against the insured, which happened in this example in the later policy year.
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REPORTING A CLAIM AT A LATER DATE - GL
• We realize that there may be a variety of reasons you may not want to report a claim until it is clear that exposure will approach one-half of the attachment point.
• EIM will need to have certain information for both administrative (as in the prior example) and substantive reasons.
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EXAMPLES OF ITEMS NEEDED IF REPORTING A CLAIM AT A LATER DATE - GL
1) The initial written notice of claim, be it a letter of representation, a lawsuit, or some other type of written demand.
2) Copies of past and current defense status reports, if applicable.
3) Factual investigation information.4) Any evaluations of damages that have been
completed.5) Any amended complaints, pertinent motions, and
orders issued, if the claim has been in litigation.6) List is not meant to be exhaustive, but to give general
guidance on items that should be sent to EIM with notice.
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CLAIMS REPORTING – D&O, FIDUCIARY, GENERAL PARTNER
• These matters are generally reported immediately to EIM, and so we do not often run into the same issues as in a general liability claim that is reported after the claim has developed for a length of time.
• However, in the event a claim is reported later to EIM than to the underlying carrier, the same types of documents should be included with the notice as outlined in the GL presentation.
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CLAIMS STATUS AND UPDATES
• Once a claim is reported, you should send periodic updates.
• If a claim is settled within underlying limits, please advise EIM so that we can close our claims file.
• If an incident was reported, but no claims were made as a result, please let us know so we can close our file.
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CLAIMS STATUS AND UPDATES
• For claims that are Category 2 or Category 3, Baker & McKenzie works closely with EIM in monitoring developments. You will typically receive a letter asking that the monitoring attorney at the firm be copied on all status updates.
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CLAIMS CLOSINGS
• After a claim is reported and there has been no further correspondence or update indicating exposure to EIM, you may receive a letter indicating EIM is closing its file.
• Immediately notify EIM if the claim has adversely developed such that the claim should be re-opened. Otherwise, the letter is for your information and records.
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OTHER INFORMATION• EIM does not have a claims staff other than me and
Jane Murphy, who assists in claims administrative matters. All claims correspondence, including notices of new claims, should be directed to me.
• This presentation was designed to give a general overview and may not apply to all situations, since each claim is unique (especially when the EIM attachment point is involved). Please feel free to contact me if you have any questions about reporting, updates, or other claims matters.
• My number is 813-490-0925.
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Thank you for your attention this morning and I hope you enjoy the remainder of this
year’s meeting.
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Robert P. SchmidRobert P. Schmid
Vice President and Chief Operating Officer - EISVice President and Chief Operating Officer - EIS
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ENERGY INSURANCESERVICES
2008
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2008 REVIEW
OPERATIONS
FINANCIAL ENVIRONMENT IMPACT
TAX EXAMINATION
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2008 REVIEWFINANCIAL HIGHLIGHTS
2008 2007
Assets $ 1.6 Billion $ 1.8 Billion
Wr. Premium 65 Million 80 Million
Paid Losses 78 Million 68 Million
Inv/Cash 550 Million 600 Million
MBP Equity 53 Million 71 Million
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2008 REVIEW EIS OPERATIONS
• Accelerated Delivery of MBP Financial Reporting for Consolidation Purposes
• Improved Regulatory Review Cycle when SCDOI Approval Is Required
• Finalized and Populated Secured Web Portal for all Programs
• Established One New Program
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FINANCIAL TREMORS
• Celebrated Wachovia Bank’s 130th Year of Existence
• Established Multiple Brokerage Accounts In Lieu of Bank Deposits
• Sought Safe Harbor in Direct Treasuries and MM Funds with Reduced Credit Risk
• Circled the Wagons - Wells Fargo to the Rescue
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FINANCIAL TREMORS 2009 IMPLICATIONS
• Significantly Reduced Return on Assets
• Concerns Surrounding Reinsurers Stability
• Expanded Alternative Risk Activity as Market Conditions Harden
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EIS IRS EXAM
• Concluded Field Exam Activities in Early Fall
• Received a Favorable Technical Analysis of One Cell from the IRS Chief Counsel in September
• Agents Issue Final Report in November Excludes Any Reference to Chief Counsel Advice
• Appealed the Field Agents Final Report in December
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EIS IRS EXAM 2009 IMPLICATIONS
• Timing of Appeal Process is uncertain but likely a 2009 Event
• EIS Conformance with Revenue Ruling 2008-08 and Corresponding Analysis provided by IRS Chief Council’s Advice Memorandum Forms a Solid Basis for a Sustained Appeal
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THE FUTURE OF EISTHE FRUITS OF REDOMESTICATION
• Removal of Reputational and Political Risk Inherent with an Offshore Address
• Achievement of Significant Operational Improvement
• Elimination or Major Reduction of Tax Uncertainty for Protected Cell Captives
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EIS 2009 ANNUAL CONFERENCE
October 19th – 23rd
at the Westin Poinsett
in Greenville, South Carolina
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Debbie GaffneySouthern Company
Debbie GaffneySouthern Company
Insurance Advisory CommitteeChairman
Insurance Advisory CommitteeChairman
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IAC• Deborah S. Gaffney, CPCU (Chairman) - Southern Company• Randall L. Martin, CPCU (Vice Chairman)- American Electric
Power
• John E. Luley - Pepco Holdings, Inc.• Robert J. Semet, CPCU, ARM, Are - Exelon Corporation• Mark E. Blair - Ameren Services Company• Robert W. Dillard – Knight, Inc.• Jack R. Hadsall, CPCU - City Utilities of Springfield, MO• Sandra K. Hart - Northwest Natural Gas Company• Julie R. Jackson, ARM, CPCU, CLU, FLMI, - Targa Resources, Inc.• Gary Y. Little, ARM, CPCU - Progress Energy, Inc.
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Task Force
Carbon SequestrationRandy Martin (Chair), Jack Hadsall &John Luley
Cyber LiabilityJulie Jackson (Chair), Bob Dillard, Gary Little, John Luley & Randy Martin
Annual SurveyDebbie Gaffney (Chair), Sandra Hart & Mark Blair
Energy SchoolBob Dillard & Debbie Gaffney
TerrorismJohn Luley (Chair) & Bob Semet,
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The Energy School