Product Recall Are You Prepared?

Product Recall Are You Prepared?

Product recalls are increasing A key theme for prudent risk managers 900 US Vehicle Recalls Per Year 1995 2015 800 700 600 Recall Count 500 400 300 Influenced Uninfluenced 200 100 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year Source: NHTSA Interventionist regulators, pressured margins, complex supply chains, better technology and the proliferation of social media have led to an increase in the incidence and severity of product recalls. Globalisation has yielded great benefits for manufacturers in the form of higher productivity and better cost efficiency. The move towards more global business models also creates key risks. Some manufacturing risk can be mitigated using technology, but errors can and do affect even the most prestigious product manufacturers. A spontaneous and overly energetic chemical reaction to humidity within airbag inflators has led to the third consecutive year of losses for a major Japanese automotive component manufacturer. Total recall losses in 2016 came to over US$ 550m. Crisis planning and exceptional quality controls are key to mitigating the risk of product recall. Insurance cannot replace such practices, but product recall insurance can support and complement an effective risk management strategy. 2 willistowerswatson.com

Who do we work with? Who buys Size? Automotive Components Food & Drink Consumer Goods Aviation Components Revenues of GBP 10m to GBP 8bn. Publicly traded or privately owned. Why buy? Where? We work with companies all around the world but most frequently with: Aggressive Regulatory Environment Negative Social Media Complex Supply Chains Contract Stipulations US Europe China Japan The market Taiwan Over 23 Insurers USD 350m Deployable Capital Lloyd s + USA Hubs Australia New Zealand Product Recall Are You Prepared? 3

Key claims statistics and themes Q4 2016: Top auto hazards by % of recalls Injuries 86.7% Fire 9.2% Other 4.1% Airbag Seats Brakes Fuel Related 5 Top passenger vehicle recall causes 7 8 11 30 US recalls per week 22 European recalls per week Top Consumer Categories by # of recalls Top consumer Hazard by % of recalls Toys Clothing, Textiles & Fashion 96 162 Injuries 13.9% Chemical 26.0% Electrical Appliances & Equipment 48 Top food categories by # of recalls Choking 16.8% Electric Shock 18.4% Top Food causes by # of recalls 100s Rest of World recalls per week Produce 162 171 Aflatoxins (Toxin) 151 Nuts/Nut Products/Seeds 96106 Bacterial Contamination 142 Fish/Fish Products 48 76 Chemicals 112 Source: Stericycle Expert Solutions: European Recall & notification index Q4 2016 4 willistowerswatson.com

Specialised product recall vs CGL and generic recall extension Standalone product recall coverage is significantly broader Coverage Specialised Product Recall Extended Product Liability Recall expenses Recall costs * Physical/Chemical analysis of product to establish cover Inspection costs Destruction costs Product replacement costs Slotting and re-slotting fees Rehabilitation of brand (to restore sales and market share) Public Relations assistance Promotional offers Sales and marketing expenses Point of sale notice s Advertising costs Business interruption 12 Months loss of gross profit Overhead s including wages/salaries and depreciation of plant and machinery Clean down and repairing of machinery or plant Subcontracting of manufacturing All affected products included Consultancy advice Crisis Consultancy cover with no deductible Damages Resulting from product liability litigation Triggers Cover for product that would cause bodily injury or damage. Cover for products that fail to perform their intended function. ** Recall ordered by government authority Cover for alleged product safety issues (Adverse/Negative Media) * Not given as standard and likely to be sub-limited. ** Failure to perform coverage (Product Guarantee) only available for certain manufactured products (not food & beverage). Product Recall Are You Prepared? 5

Stages of a product recall Typical indemnity available at each stage Start of crisis Product Repair or Replacement Inspection Costs Safe Product Disposal and/or Salvage Step 7 Disposal Step 6 Retrieval Step 8 Remediation Recall Cycle Step 1 Inspection Step 2 Announcement Step 3 Cancellation Crisis Communications Costs Business Interruption Transportation, Notices, Credits Step 5 Resources Step 4 Reputation Labour Hire, Extra Warehousing Advertising and Promotional Activity + Media Management 6 willistowerswatson.com

Why choose us? Expertise/Credentials Approx. 25% of the full-time Product Recall specialists in the London market making it the largest team Placement undertaken for large and complex listed companies FTSE 100 and Fortune 500 Expertise in all product recall areas First to establish an Aviation Product Warranty Facility. Testimonials Such an amazing experience for working together! What you provided to us is just what we really need. Willis Towers Watson, Taiwan The timeframe was very tight for this renewal. However, thanks to the service and expertise of the UK Recall team we always succeed in completing the renewal in the timeframe required. Willis Towers Watson, The Netherlands Team size means we can advocate in the same detail for small businesses to the very LARGEST Major market share of automotive recall business Claim professionals with over 50 years combined experience Experienced, qualified and well-thought of team, including two ex-underwriters Our client was concerned that their complex risks weren t being recognised by a standard recall insurance policy. WTW Recall team listened carefully and then sourced extended coverage that not only addressed the client s main concern, but also significantly reduced costs and deductibles. WTW Recall provided the client with confidence in the knowledge that their policy would respond to an adverse event. Willis Towers Watson, UK Risk Solutions Leader Product Recall Are You Prepared? 7

About Willis Towers Watson A truly compelling combination Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas the dynamic formula that drives business performance. Together, we unlock potential. Willis Towers Watson can be found all around the world Business Segments 4Corporate Risk and Broking Exchange Solutions Human Capital and Benefits Investment, Risk and Reinsurance We ve been putting clients first Since 1828 5 Values Client Focus Teamwork Integrity Respect Excellence A strong client focus, an emphasis on teamwork, unwavering integrity, mutual respect and a constant striving for excellence are the values at the core of the new Willis Towers Watson organisation. 14,040 People North America Great Britain 6,240 People 7,020 People Western Europe Willis Towers Watson is trusted by the world s leading organizations 11,700 People 140+ International We have 40,000 employees serving countries and territories We work with... 78% of the Fortune Global 500 86% of the FTSE 100 81% of the Fortune 1000 80% of the S&P/ TSX 60 8 willistowerswatson.com

Product Recall Are You Prepared? 9

Contacts UK Jamie Webb Executive Director 51 Lime Street, London, EC3M 7DQ, UK T: +44 20 7558 9379 m: +44 7956 289031 E: jamie.webb@willistowerswatson.com USA Kevin Velan National Product Recall Broking Specialist 223 South Wacker Drive, Ste 2000, Chicago IL T: +1 312 288 7140 m: +1 312 257 8833 E: kevin.velan@willistowerswatson.com George Beattie FCII Divisional Director 51 Lime Street, London, EC3M 7DQ, UK T: +44 20 3124 7523 m: +44 7899 924137 E: george.beattie@willistowerswatson.com Brandon Sielen National Product Recall Broking Specialist 1144 W Washington St, Scottsdale AZ T: +1 602 787 6058 m: +1 602 245 3338 E: brandon.sielen@willistowerswatson.com Louise Dorrian Cert CII Account Executive 51 Lime Street, London, EC3M 7DQ, UK T: +44 20 3124 8527 m: +44 7960 559319 E: louise.dorrian@willistowerswatson.com About Willis Towers Watson Willis Towers Watson (NASDAQ: WLTW) is a leading global advisory, broking and solutions company that helps clients around the world turn risk into a path for growth. With roots dating to 1828, Willis Towers Watson has 40,000 employees serving more than 140 countries. We design and deliver solutions that manage risk, optimize benefits, cultivate talent, and expand the power of capital to protect and strengthen institutions and individuals. Our unique perspective allows us to see the critical intersections between talent, assets and ideas the dynamic formula that drives business performance. Together, we unlock potential. Learn more at willistowerswatson.com. Willis Limited, Registered number: 181116 England and Wales. Registered address: 51 Lime Street, London, EC3M 7DQ. A Lloyd s Broker. Authorised and regulated by the Financial Conduct Authority for its general insurance mediation activities only. FP2235/20208/04/17 willistowerswatson.com