SubroGateway Coast Underwriters CG

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SubroGateway Coast UnderwritersCGB
GroupPresentationCRIMS MONTREAL
20 Sept. 2005

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Losses Hitting Canadian U/WRs

• Destruction of clothing in containers in Sri
  Lanka during the Tsunami in S.E. Asia in January
  2005
• Major loss of cargo of bulk concentrate when the
  bulk carrier broke up and sank off the coast of
  Japan
• Various thefts of entire containers in three
  different continents
• Ongoing problems with cargo being discharged in
  Venezuela
• New Orleans - Katrina

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Kevan is an Underwriter

• An Underwriter one who lacks personality to be
  an Actuary.

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Kevan is Well Balanced

• We are all born mad some of us remain so.

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Impacting Rate Fluctuation

• Regulatory Compliance Regimes such as U.K.
  Financial Services Authority (FSA) and Sarbanes
  Oxley (SOX)
• European Union Commission inquiry about to
  commence
• Threat of International Terrorism
• Following 9/11 revised Catastrophe Models
  influencing Reinsurance protection
• More conservative investment strategy
• The Spitzer factor impact of changing business
  models surrounding remuneration

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OFAC

• The Office of Foreign Assets Control ("OFAC") of
  the US Department of the Treasury administers and
  enforces economic and trade sanctions based on US
  foreign policy and national security goals
  against targeted foreign countries, terrorists,
  international narcotics traffickers, and those
  engaged in activities related to the
  proliferation of weapons of mass destruction.
  OFAC acts under Presidential wartime and national
  emergency powers, as well as authority granted by
  specific legislation, to impose controls on
  transactions and freeze foreign assets under US
  jurisdiction. Many of the sanctions are based on
  United Nations and other international mandates,
  are multilateral in scope, and involve close
  cooperation with allied governments.

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Len Notaro

• Insurance Brokers are premium lovers.

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Captives Benefits

• Lower Insurance Costs
• Greater Claims Control
• Cash flow benefits
• Fronting for reinsurance capacity
• Unavailable coverage or cost of cover
• Tax minimization and deferral

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Captives Obstacles

• Up Front Capital Commitment
• Fees (License, Directors, Audit, Fronting)
• Management expenses
• Premium Taxes
• Required Expertise
• Reinsurance Costs
• Sarbanes Oxley (SOX)

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Jerry Giroux

• "The definition of a consultant
• Someone who borrows your watch, tells you the
  time and then charges you for the privilege."

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The New Businessof Insurance
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Old Mission Statement
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New Mission Statement
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Operating Model
P
Profitability
FAST
FAST
Tactical
D
I
Distribution
Infrastructure
Strategic Vision
Behavioral
Leadership
Guiding Principles
Cultural
Core Values
WHERE IS REFERENCE TO THE CUSTOMER?
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Going Forward 2006

• Aggressive Insurance Market
• Premium savings used to buy additional limits
• Cover and conditions negotiable
• Captives and risk retention remain as useful
  alternatives
• Marine markets to offer broader products
• Sarbanes-Oxley mandates for improved risk
  awareness
• Face to face meeting with underwriters
• Retro Rating and Swing Programs

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Captives

• Smoothing effect of losses
• Cash flow benefits
• Unbundling of conventional products
• Consolidating global exposures
• Reduction of government restrictions

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Web Based Solutions Logistics Risk Management
Industry Issues

• Inefficient, paper-based, labor intensive process
• Certificate control often in the clients hands
  leaving room for errors, omissions and fraud
• Inability to access standardized data for risk
  analysis
• High administrative customer service costs
• Submission management
• policy certificate issuance
• premium calculation
• coverage issues special case handling
• billing collection
• claims management

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Web Based Solutions Opportunities For Growth

• Many shippers continue to book insurance through
  freight forwarders for convenience and due to
  lack of known alternatives
• Companies and assureds have embraced
  Internet-based quote, bind and issue applications
  for home, auto life policies and the same
  principles have been successfully applied for
  Marine Cargo (e.g. Oceanwide.com)
• Management of your own data in one environment

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Web Based Solutions Internet Application Basics

• Paperless and easy-to-use
• Accessible using a standard web browser
• State-of-the-art security and encryption
  technologies
• Branded client/partner-facing web sites
• Integration into client logistics management
  systems as well as underwriter back-office claims
  management and accounting systems
• ASP vs. Deployed solution considerations
• Availability and cost of internal IT resources
• Experience with on-line application marketing
• Speed to market

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Web Based Solutions Internet Marine Cargo
System Functionality

• Policy issuance / accessibility
• Certificate generation with policy compliance
  validation automated referral workflow for
  special-case shipments
• Shipment/storage declarations and premium
  calculation (Marine, War, Storage, Vessel
  Penalties and taxes)
• First notice of loss entry and claim status
  reporting
• On-line claims file for settling agents, brokers
  assureds
• Flexible exception-based alerts, emails and
  reporting
• Real-time underwriting control over policy
  conditions, limits, rates and access
• Automated billing, payment and receivables
  management
• Sophisticated data analysis reporting tools
• Detailed audit trail
• Clause library and reference table lookups to
  speed entry

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Web Based Solutions Benefits for Clients

• Eliminates paperwork redundant typing
• Speeds up certificate preparation bordereau
  reporting
• Enhances workflow efficiency through
  collaboration between shippers, brokers and
  underwriters
• Eliminates errors helps prevent/detect fraud
• Integration with existing systems offers ultimate
  ease of use and efficiency while providing
  complete shipment detail for risk management
  purposes
• Improved risk management offers potential for
  lower costs

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Terms of Sale

• 1. The Carrier Covers My Losses
• 2. I Export F.O.B.
• 3. I Import C.I.F.
• 4. Nothing Will Happen To My Goods
• 5. I Already Have My Own Cargo Policy

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SubroGateway
Applicable Laws

• US COGSA
• HAGUE RULES
• HAGUE-VISBY
• HAMBURG RULES
• TRUCK TRANSPORT ACT
• Q.C.C. (NOTICE)
• New CIFFA STCs

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Agency Role - Other Clauses

• The Company does not assume a role as principal
  by delivering a fixed price quotation or invoice.
  The Customer acknowledges that the difference
  between the amounts payable to third parties
  retained to carry out the Customer's instructions
  and the fixed price represents the Company's
  gross profit for its services.

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Forwarder New Conditions 2005

• When acting as an agent, the Company acts solely
  on behalf of the Customer in engaging the
  services of third parties on the usual terms and
  conditions on which the third parties offer such
  services for the carriage, storage, packing or
  handling of any goods, or for any other service
  in relation to them, thereby establishing a
  direct contract between the Customer and the
  provider of such services capable of being
  enforced by the Customer as principal, whether or
  not the Customer is identified in the contract.
  The Company shall on demand by the Customer
  provide evidence of any contracts made on its
  behalf.

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2. I Export F.O.B.

• At Which Point Does The Insurance Attach?
• Portions Of The Trip May Be Uninsured
• Lethal If Combined With Extended Payment Terms
• Weak Currencies Abound
• Trade Law And Business Law
• Sellers Interest ... At Minimum

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INCO TERMS COMPARED 1. FOB Free On Board
Buyer
Seller
SELLERS COST
BUYERS COST
SELLERS RISK
BUYERS RISK
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3. I Import C.I.F.

• This Is As Bad As Exporting F.O.B.
• What Is I?
• Insurance Cost Is Hidden
• Where Does Cover Cease?
• Third Rate Currency?

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INCO TERMS COMPARED 2. CIF Cost, Insurance,
Freight
Buyer
Seller
Buyers Cost
SELLERS COST
Buyers Risk
Sellers Risk
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Rule of Thumb

• Export C.I.F.
• and
• Import F.O.B.

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INCO TERMS COMPARED 1. FOB Free On Board
Buyer
Seller
SELLERS COST
BUYERS COST
SELLERS RISK
BUYERS RISK
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3. I Import C.I.F.

• This Is As Bad As Exporting F.O.B.
• What Is I?
• Insurance Cost Is Hidden
• Where Does Cover Cease?
• Third Rate Currency?

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INCO TERMS COMPARED 2. CIF Cost, Insurance,
Freight
Buyer
Seller
Buyers Cost
SELLERS COST
Buyers Risk
Sellers Risk
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3PL 4PL

• Why outsource?
• Can someone else do it better or cheaper?
• Can someone else do it for less than our cost of
• capital?
• Does someone else have a better means of
• achieving end-to-end visibility?
• Do we have the necessary skills to orchestrate a
• complex supply chain?
• Outsource the execution of a process but not its
• control

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BPO - Did You Know?

• Claims staff process recovery early
• Improved cash flow
• Underwriters write superior risks
• Your deductible is recovered
• Rates up! Cover cut back! Deductible up!
• So what? Now what? Learning Culture
• Demands on capital Personnel and Expertise
• Large technology investments
• ID Goodwill vs. Liability
• Offer Solutions.

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SubroGateway Inc.Open the Gate to a Smart Claims
and Recovery SolutionSubroGateway Inc. the
choice of your Marine Underwriters!

• Our Services Include Asset
  Recoveries and Subrogation (no cure-no pay)
• Abandoned goods
  Collection of bad debt
  Deductible recovery
• FF lien positions
  Claims management
  Marketing of salvage
• Assisting your customer
• Covering your NVOCC position with carriers
• Education and Seminars on Marine Insurance
  
• Proud to be a member of CIFFA
• Jerry Giroux, President Ph416-365-0184