Insurance Communications to Senior Management Annual Insurance Summary

Transcription

1 PROMOTING AEGIS TO SENIOR MANAGEMENT Mike Mee Director, Insurance Exelon Corporation Insurance Communications to Senior Management Annual Insurance Summary Corporate risk and insurance philosophy Determination of limits Summary of key insurance programs D&O, fiduciary, excess liability, property, nuclear Insurance expenses Benchmarking Loss control Contractual risk transfer 1

2 Exelon Communications to Senior Management Report to Risk Management Committee Review and approve Annual Report to Finance and Risk Committee of Exelon s Board of Directors Includes Corporate risk and insurance philosophy Overview of D&O insurance Overview of a major insurance program NEIL update Other current issues (e.g., cyber) Annual insurance summary (separate attachment) Exelon Communications to Senior Management Report to Exelon Board of Directors Annual report on Exelon s insurance program to Finance and Risk Committee Truncated version of Annual Report to Risk Management Committee of the Board Annual insurance summary (separate attachment) 2

3 Corporate Risk and Insurance Philosophy Exelon s corporate risk philosophy aims not only to protect corporate assets and earnings, but to also minimize or eliminate insurance expenses by Maximizing the use of industry mutual and captive insurers where beneficial and prudent in order to Leverage commercial capacity where it is required Share in underwriting profits Ensure stability of premiums Obtain enhanced coverage terms Obtain fair claim settlements Effective utilization of this strategy has the potential to materially reduce (and in some cases completely offset) the overall cost of risk transfer to the corporation) Annual Insurance Summary Insurer capacity spreadsheet Capacity provided to Exelon by each insurer Annual premium A.M. Best rating Continuity credits and distributions in most recent year Highlights industry mutuals (in green) Insurer Capacity Spreadsheet 3

4 Annual Insurance Summary Summary of key insurance programs Policy term Total limits Insurers Industry mutuals (AEGIS, EIM) - $ limits Commercial - $ limits Retention Premium Program chart Highlights industry mutuals (in green) Program Chart PROMOTING AEGIS TO SENIOR MANAGEMENT Erica McNabb Director Risk Management NextEra Energy, Inc. 4

5 Promoting AEGIS to Senior Management NextEra Energy, Inc. (NEE) Perspective Strategic relationships Collaborative efforts Effective solutions NEE values Committed to excellence (continuous improvement) Do the right thing (act with integrity) Treat people with respect Strategic Relationships, Collaboration and Results Evolution of the Excess Liability Relationship Mid-2000s we experienced a decline in the communication on our claims Our portfolio of claims had the potential to negatively develop Opportunity to improve communication, internally and with AEGIS The Plan AEGIS XS Liability UW NEE (RM, Legal and Claims) Brokers 5

6 Strategic Relationships, Collaboration and Results Evolution of the Excess Liability Relationship The plan included the following Identifying open claims from specific years Agreed development period Two-year penalty premium, future applicability contingent upon development of identified claims Enhanced communication between RM, Legal / Claims and AEGIS Including internal training on claims reporting requirements and formal reporting and update process Annual claims review between RM and Legal / Claims, with updates throughout the year as needed Collaborative Efforts and Member Support T&D Risk Managers Team Team of Risk Managers representing multiple member companies (NEE, Southern, Duke, TECO, SCANA, Entergy, CLECO, Center Point, Dominion, AEP) Collaboration on transmission and distribution insurance, or lack thereof AEGIS support and sponsorship Reconvened at the Baltimore PHC for a state-of-the-market No group solution, great collaboration and teamwork 6

7 AEGIS as a Strategic Insurance Partner Excess Liability Rating Increases 2012 Negative position for AEGIS Excess Liability Loss ratio unacceptable for continued viability Rating increases required across the membership Severity driving losses across a common portfolio Communication throughout the membership and to senior management required for understanding, acceptance and continued relationship Understanding the value of the mutual relationship during good and difficult times AEGIS as a Strategic Insurance Partner The Value of Mutuals NEE values the relationship with our industry mutuals Members need to find the time to support, discuss issues and develop potential solutions, and partner for the long-term Supporting NEIL through their rating increases, provided creditability to my senior management in communicating the status of AEGIS business, need for rating increases and the benefit to NEE of our continued support of AEGIS AEGIS represents approximately a third of our major insurance coverage 7

8 PROMOTING AEGIS TO SENIOR MANAGEMENT Karl Zimmel Director, Risk Management Services UNS Energy Corporation (Parent of Tucson Electric) Karl Zimmel Biography Background 32 years corporate risk management experience Risk Manager at four Fortune 1000 sized companies 5.5 years in utility industry Integration into utility industry AEGIS Loss Control Task Force member Mentored by risk managers at APS and SRP 8

9 The AEGIS Difference A Focus on Directors & Officers Liability 1. Stable Pricing Favorable loss experience in utility industry Annual D&O member credit since introduction in Reliable Capacity Many commercial insurers expand & contract with market AEGIS wants to provide $35 million each and every year 3. Broad Coverage Recently updated form to include various enhancements No environmental exclusion unlike most other insurers The AEGIS Difference A Focus on Directors & Officers Liability 4. Trust AEGIS senior management very accessible Annual Policyholders Conference Regional meetings 5. Benefit of the doubt for claims payments AEGIS open to reasonable dialogue AEGIS did not contest plaintiff fees as insurable damages under the D&O policy in our merger objection lawsuit 6. Financial Strength A (Excellent) with positive outlook by A.M. Best 9

10 Real group effort. 10