Integro Insurance Brokers
Directors’ & Officers’ Liability Current Issues, Updates and Programs October 2013
Michael Klaschka Office: 212.295.5340 | Mobile: 646.265.2561 | [email protected]
Vincent Caracciolo Office: 212.295.8260 | Mobile: 646.251.3838 | [email protected] © 2013 Integro USA Inc.
Agenda
1.
Liabilities and Exposures for Directors
2.
Current Issues and Trends
3.
State of the D&O Insurance Market
4.
Anatomy of a D&O Policy
5.
Excess “Side A” Insurance
6.
Independent Directorship Liability Coverage
7.
Q&A Appendix: About Integro
1
©2013 Integro USA Inc.
1
1 | Liability Exposures and Protections
©2013 Integro USA Inc.
2
Liability Exposures and Protections
• Exposures for Corporate Directors Duties: Eg. Care and Loyalty Alleged Wrongful Acts: Stemming from action and inaction Form of demands: Emails to Class Actions to Derivative Actions, and a whole lot more… • Protection Available Risk Management Indemnification Insurance
3
©2013 Integro USA Inc.
Copyright ©2010, Integro Insurance Brokers 2
Risk Management
Risk Management Risk avoidance and mitigation Cultural focus on duties- loyalty/act with diligence/avoid conflicts Resource dedication Policies and procedures
©2013 Integro USA Inc.
4
Risk Management best practice considerations
Consider Risk management best practices – check with your lawyers before instituting any new practice… – Director education – Procedures for effective meetings – Staff committees with well qualified members – Possible Independent director meetings without management present – Stay informed – Be diligent – Review internal controls, measure risk and performance – Debate issues and be skeptical, avoid simply “rubber stamping” – Investigate red flags – Use advisors – Engage in succession planning – Determine the best form and detail that board meeting records/minutes should take 5
©2013 Integro USA Inc.
3
Indemnification and Insurance
• Indemnification – Sources, authority, payments, implications
• Insurance – Individuals, entities
©2013 Integro USA Inc.
6
2 | Current Issues and Trends
7
©2013 Integro USA Inc.
4
Trends in Securities Litigations
• Overall year over year securities related litigations (class actions, other lawsuits, and enforcement actions) declined in 2012, but remain elevated compared to most previous years; 2013 is similarly paced to see reductions in overall such litigations • Shareholder derivative suits decreased by 10% in 2012, but continue to increase compared to prior years; 2013 similarly is seeing reductions in derivative suits
Merger Objection Suits:
8
©2013 Integro USA Inc.
Sources: Cornerstone and Advisen, January 2013
FEDERAL SECURITIES CLASS ACTION LITIGATION
Securities Class Action Filings - 2012 Update
Number of Federal Securities Class Action Filings 2001 – 2013 YTD Updated as of October 18, 2013
Source: Securities Class Action Clearinghouse
9
©2013 Integro USA Inc.
5
SEC Enforcement Statistics
SEC Enforcement Actions
Alleged misconduct that lead to or arose from the Financial Crisis As of September 1, 2013
Number of Entities and Individuals Charged
161
Number of CEOs, CFOs, and Other Senior Corporate Officers Charged
66
Number of Individuals Who Have Received Officer and Director Bars, Industry Bars, or Commission Suspensions 37 Penalties Ordered or Agreed To > $1.53B
Disgorgement and Prejudgment Interest Ordered or Agreed To
> $800M
Additional Monetary Relief Obtained for Harmed Investors
$400M *
Total Penalties, Disgorgement, and Other Monetary Relief
$2.73B *
In settlements with Evergreen, J.P. Morgan, State Street, TD Ameritrade, and Claymore Advisors
Source: SEC.gov 10-18-13
©2013 Integro USA Inc.
10
Legal & Regulatory Updates • SEC Actions – Investigations, Enforcement Actions • Fiscal 2012 – FCPA
15
– Financial Fraud/Issuer Disclosure
79
– Insider Trading
58
– Market Manipulation – Total Enforcement Actions
46 734
• Fiscal 2013- on pace for a 26% decline – October 2012 through June – Pace suggests 533-585 for all of FY2013 – Why? Investigation activity, change in focus • However … – Settlement Dynamics and Admissions
11
Source: Advisen, Gibson Dunn, Shearman & Sterling, January 2013
©2013 Integro USA Inc.
6
SEC Enforcement
SEC Enforcement Actions Settlement Dynamics and admissions Departure from settlements including “without admitting not denying” Affirmative acknowledgment of wrongdoing 4 part test described by SEC Chairwoman MaryJo White on targeted cases for admissions Many investors have been harmed or the conduct was otherwise egregious; Conduct posed a significant risk to the market or investors; Where admissions would aid investors in decisions of future dealings with subject parties; Send an important message to the market about a particular case.
Commentators view on likely factors underlying the SEC’s targets Dollar amounts of investor losses Individuals seniority at organizations who engaged or permitted alleged violations Intent Duration Cooperation or obstruction with SEC investigation ©2013 Integro USA Inc.
12
SEC Settlements
Recent SEC Settlements Falcone and Harbinger Capital
JP Morgan Chase
13
©2013 Integro USA Inc.
7
Insurance Implications
Admissions:
Wordings in settlement agreement and policies
Conduct Exclusion triggers: Admission sufficiency? Loss Definitions: disgorgement , fines and penalties Severability issues: Exclusions and applications Defense cost levels: Shifted timeline/nature of civil enforcement defense dollars migrating to a criminal defense model
©2013 Integro USA Inc.
14
13 | State of the D&O Insurance Market
15
©2013 Integro USA Inc.
8
State of the D&O Insurance Market in 2013 The Insurance Market Remains in Transition 2011 was the most catastrophic accident year ever at $109B in losses Up until Q4, 2012 saw minimal catastrophic losses. Super Storm Sandy is estimated to generate excess of $20B in insured losses. AIG’s , a leading D&O insurer, Q4 ’12 combined ratio of 125.1 (vs. 107.1 last year)
In spite of significant insured losses we have not seen significant pressure on rates beyond what we saw in 2012 With little to no investment income, insurers cannot make up for continued losses with investment income and must try to underwrite their way to profitability
16
©2013 Integro USA Inc.
State of the D&O Insurance Market in 2013 D&O Insurance Specific Issues The universe of public companies has dropped – down 42% from the peak in 1997. This means there are fewer opportunities for insurers to effectively spread their D&O risk across a larger pool of companies and therefore less overall premium to offset losses Securities class action filings in 2012 and 2013 are below 1995-2011 averages, including reduction in merger objection suits. At current pace, year end filings will be approximately 148 versus 190 on average. Capacity remains available which is helping mitigate some of the overall market pressure on rates for high quality risks (for now) but this capacity is becoming increasingly selective
17
©2013 Integro USA Inc.
9
State of the D&O Insurance Market in 2013 What Does This all Mean Primary layer D&O pricing continues to be firm as insurers are trying to push for/regain rate wherever possible and premium reductions are becoming infrequent if available at all
Typical primary rate increases range from 5% to 10% depending upon the individual risk being considered and the particular circumstances Pricing for excess layers continues to remain very competitive and therefore there is minimal to no increases on excess programs Differentiating between risks remains critical to preserve program
©2013 Integro USA Inc.
18
14 | Anatomy of a D&O Policy
19
©2013 Integro USA Inc.
10
Overview of Directors & Officers Liability Insurance
• Liability exposures for Directors and Officers – – – –
Wrongful Acts and Claims Regulatory Actions Shareholder Claims Derivative Actions
• Structure of a Directors & Officers Liability Policy:
Claims Against Directors & Officers
Claims Against Entity
Indemnification? No
Yes
• Insurer pays loss directly • $0 self-insured retention • Personal asset protection
• Insurer reimburses corporation for amounts paid as indemnity • Self-insured retention applies
• For public companies, applies only to securities claims. No public company coverage for nonsecurities claims • Insurer reimburses corporation • Self-insured retention applies • Balance sheet protection
• Balance sheet protection
SIDE A
SIDE B
SIDE C ©2013 Integro USA Inc.
20
Program Structures
Sample Program #1 “Traditional” A, B & C tower, combined limits of liability of $30M, with $0 SIR for Side A claims, and $1M SIR for claims under Sides B and C.
Excess A/B/C $10M x $20M
21
Sample Program #2 “Traditional” A, B & C tower with limits of $20M, adding $10M “Side A Only” policy, with “Difference in Conditions,” or “DIC” feature that enables policy to “drop down” in the event underlying limits are unavailable.
Excess DIC Side A Only $10M x $20M
Sample Program #3 “Traditional” A, B & C tower with limits of $20M, adding $10M “Excess DIC Side A Only” policy, and $10M Independent Directorship Liability Insurance. Independent Directorship Liability $10M x $30M Excess DIC Side A Only $10M x $20M
Excess A/B/C $10M x $10M
Excess A/B/C $10M x $10M
Excess A/B/C $10M x $10M
Primary A/B/C $10M
Primary A/B/C $10M
Primary A/B/C $10M
Self-Insured Retention $0/$1M/$1M
Self-Insured Retention $0/$1M/$1M
Self-Insured Retention $0/$1M/$1M ©2013 Integro USA Inc.
11
4 | Excess “Side A” Insurance
©2013 Integro USA Inc.
22
Overview of Excess “Side A” Insurance
Excess coverage for Non-Indemnifiable Losses incurred by Directors and Officers Protection for individual D&O’s in the event that limits of liability available under the traditional D&O Liability insurance package are not available or exhausted Limits of liability cannot be eroded by losses incurred or indemnified by the company Possibility to select “Differences in Conditions” provisions and to fill gaps in coverage in the underlying D&O insurance policy Protections against bankruptcy cases Non Indemnifiable Loss coverage scenarios: – Insolvency – Bankruptcy – Severability provisions and rescission issues – Failure to fulfill indemnification statute standard – Certain derivatives actions: Defense costs can generally be advanced, but settlement costs may not be indemnifiable – Prosecutorial pressure to deny indemnification – Entity coverage limits dilution – Retention-related issues 23
©2013 Integro USA Inc.
12
5 | Independent Directorship Liability Coverage Liability Insurance
©2013 Integro USA Inc.
24
Why just a “Side A” policy may not be sufficient for an Independent Director
Policy limits can be exhausted by covering the CEO, CFO or officers with high liability exposure Risk for other Directors and Officers, especially Independent Directors & Officers, to be left with insufficient coverage to resolve claims made against them Insurance-related decisions are generally taken by officers within the company, but Independent Directors and Officers may need a dedicated protection Independent Directors and Officers have the possibility to maximize their financial protection by considering Independent Directorship Liability insurance
25
©2013 Integro USA Inc.
13
Overview of Independent Directorship Liability (“IDL”)
Designed to provide an extra-measure of protection for Independent Directors and Officers, covering services provided to one or several committees or organizations Independent Directors are subject to specific statutory and regulatory requirements, which require coverage to be specifically tailored Coverage can be purchased by or for the benefit of Independent Directors and Officers Possibility to insure: • All independent directors on a board • Specific individuals and/or committees • A unique independent Director or Officer • An independent Director or Officer in all companies in which he or she serves
26
©2013 Integro USA Inc.
Advantages of an IDL policy
The number of Independent Directors and Officers has significantly increased during the past years, and offering additional insurance protection is an incentive to attract and retain qualified Directors and Officers
Coverage designed for Independent Directors and Officers, can be adapted to apply to specific risk exposures Covered directorship generally includes public, private and not-for-profit organizations Most IDL policies have fewer exclusions than Side A policies. Fraud and illegal personal profit exclusions are generally absent “Drop-down” provisions and flexible coverage terms and conditions Coverage is non-rescindable Spouses and domestic partners are generally included
27
©2013 Integro USA Inc.
14
QUESTIONS?
©2013 Integro USA Inc.
28
APPENDIX | About Integro
29
©2013 Integro USA Inc.
15
Fast Facts
>2,000 >$1 billion >98%
Integro clients as of January 2012
Annual volume of insurance premiums placed
Client loyalty rate
#6 >21%
Integro is the 6th largest private broker in the U.S. Consistent double-digit annual growth Business Insurance rank in Leading U.S. P/C Retail Brokers survey; rank #13 in Business
#14
Insurance Most Productive Agents & Brokers Survey (source: Business Insurance “Driven Producers” November 2011 Publication)
#15
>40
#1
Fastest growing London broker, ranking in top 15 as Lloyd’s market and reinsurance broker. Since 2006, over 40 Integro brokers are recipients of Risk & Insurance magazine’s Power Broker™ award, including several “40 Under 40” Power Broker designations. Named #1 for Client Satisfaction in Greenwich Associates’ annual industry survey of risk managers for the fifth consecutive year, beating Marsh, Aon & Willis.
©2013 Integro USA Inc.
30
Services Overview Core Practices: Management Risk
Integrated model and applied analytics: The foundation of our approach
Property Casualty
Best Industry Talent & Technology
Reinsurance Surety Specialty Risk Services:
Private Client Services Aviation Marine & Cargo Healthcare Environmental Trade & Logistics Political Risks Entertainment
Pre- and Post-Claim Advocacy
Insurance Program Placement & Services
Complementary Services: Analytics & Risk Modeling Transactional Liability International Network Risk Management Services
31
Risk Management Services
Advanced Risk Modeling
©2013 Integro USA Inc.
16
Integro’s Approach to D&O Limit Adequacy
• The traditional broker approach to determining appropriate D&O limits is to survey the historical limits purchased by companies of similar size. Although this approach is simple to automate and execute, it is not the optimal way to demonstrate that appropriate limits are in place. • Integro instead performs an analysis of the appropriate levels of D&O limits relative to the risk that directors are assuming. We ask: “What is the probability that your directors will suffer a claim and not be indemnified by either their company or its insurer?”
• Our model calculates this probability based on the risk characteristics of the company, its financial strength in the event of a claim, and the size and structure of its insurance program.
©2013 Integro USA Inc.
32
Our Locations
UNITED KINGDOM
USA & BERMUDA
London
Anaheim, CA
Nashville, TN
Pasadena, CA - HQ
Montreal
Integro Insurance Brokers, Ltd.
Argo Insurance Brokers Inc.
Frost Specialty Inc.
The Rule Group
Integro (Canada) Ltd.
100 Leadenhall Street,
5101 E. LaPalma Avenue, Suite 101
1117 17th Avenue South
115 N. El Molino Ave.
115 N. El Molino Ave.
2nd Floor
Anaheim, CA 92807
Nashville, TN 37212
Pasadena, CA 91101
Pasadena, CA 91101
London EC3A 3BP, England
CA License #: 0660864
Phone: 615.322.9171
CA License #: 0601746
Phone: 514.787.7200
Phone: +44 207 444 6000
Phone: 714.701.0668
www.frostspecialty.com
Phone: (626) 795-9000
www.integro-international.com
www.argoinsurance.com
www.integroglobalspecialty.com
Atlanta, GA
CANADA
New York, NY - HQ Integro Insurance Brokers
www.therulegroup.com
San Francisco, CA
Toronto Integro (Canada) Ltd. 199 Bay Street
Ardleigh
Integro Insurance Brokers
1 State Street Plaza, 9th Floor
Integro Insurance Brokers
Commerce Court West, Suite 4800
Allan Chapman & James Insurance Brokers, Ltd
1000 Abernathy Road NE,
New York, NY 10004
One California Street, 4th Floor
P.O. Box No. 240
Suite 850
Phone: 212.295.8000
San Francisco, CA 94111
Toronto, Ontario M5L 1E8
CA License #: 0E77964
Phone: 416.619.8000
7 Blue Barns Business Park Old Ipswich Road Ardleigh, Colchester, CO7 7FX Phone: +44 1206 500000 www.acjltd.co.uk
“www.integrogroup.com for all offices unless otherwise noted"
33
Atlanta, GA 30328 Phone: 404.439.8000
Newport Beach, CA
Boston, MA
3620 Birch St.
The Rule Group
Integro Insurance Brokers
Newport Beach, CA 92660
Two Financial Center
CA License #: 0601746
60 South Street, Suite 800
Phone: (949) 474-1550
Boston, MA 02111
www.therulegroup.com
Phone: 617.531.6000
Pleasant Hill, CA
Chicago, IL
Argo Insurance Brokers Inc.
Integro Insurance Brokers
2300 Contra Costa Boulevard, Suite375
190 South LaSalle Street,
Pleasant Hill, CA 94523
Suite 2000
CA License #: 0660864
Chicago, IL 60603
Phone: 925.682.7001
Phone: 312.780.8000
www.argoinsurance.com
Phone: 415.365.8000
ReSource Intermediaries, Inc. One California Street, 4th Floor San Francisco, CA 94111 Phone: 415.433.0600 www.resource-re.com
Vancouver Integro (Canada) Ltd. 777 Hornby Street, Suite 1460 Vancouver, BC V6Z 1S4 Phone: 604.608.6182
Bermuda Integro (Bermuda) Ltd. Maxwell Roberts Building, 3rd Floor 1 Church Street, P.O. Box HM884 Hamilton HM EX, Bermuda Phone: 441.279.8000
©2013 Integro USA Inc.
17
Michael Klaschka Office: 212.295.5340 | Mobile: 646.265.2561 | [email protected]
Vincent Caracciolo Office: 212.295.8260 | Mobile: 646.251.3838 | [email protected] © 2013 Integro USA Inc.
Agenda
1.
Liabilities and Exposures for Directors
2.
Current Issues and Trends
3.
State of the D&O Insurance Market
4.
Anatomy of a D&O Policy
5.
Excess “Side A” Insurance
6.
Independent Directorship Liability Coverage
7.
Q&A Appendix: About Integro
1
©2013 Integro USA Inc.
1
1 | Liability Exposures and Protections
©2013 Integro USA Inc.
2
Liability Exposures and Protections
• Exposures for Corporate Directors Duties: Eg. Care and Loyalty Alleged Wrongful Acts: Stemming from action and inaction Form of demands: Emails to Class Actions to Derivative Actions, and a whole lot more… • Protection Available Risk Management Indemnification Insurance
3
©2013 Integro USA Inc.
Copyright ©2010, Integro Insurance Brokers 2
Risk Management
Risk Management Risk avoidance and mitigation Cultural focus on duties- loyalty/act with diligence/avoid conflicts Resource dedication Policies and procedures
©2013 Integro USA Inc.
4
Risk Management best practice considerations
Consider Risk management best practices – check with your lawyers before instituting any new practice… – Director education – Procedures for effective meetings – Staff committees with well qualified members – Possible Independent director meetings without management present – Stay informed – Be diligent – Review internal controls, measure risk and performance – Debate issues and be skeptical, avoid simply “rubber stamping” – Investigate red flags – Use advisors – Engage in succession planning – Determine the best form and detail that board meeting records/minutes should take 5
©2013 Integro USA Inc.
3
Indemnification and Insurance
• Indemnification – Sources, authority, payments, implications
• Insurance – Individuals, entities
©2013 Integro USA Inc.
6
2 | Current Issues and Trends
7
©2013 Integro USA Inc.
4
Trends in Securities Litigations
• Overall year over year securities related litigations (class actions, other lawsuits, and enforcement actions) declined in 2012, but remain elevated compared to most previous years; 2013 is similarly paced to see reductions in overall such litigations • Shareholder derivative suits decreased by 10% in 2012, but continue to increase compared to prior years; 2013 similarly is seeing reductions in derivative suits
Merger Objection Suits:
8
©2013 Integro USA Inc.
Sources: Cornerstone and Advisen, January 2013
FEDERAL SECURITIES CLASS ACTION LITIGATION
Securities Class Action Filings - 2012 Update
Number of Federal Securities Class Action Filings 2001 – 2013 YTD Updated as of October 18, 2013
Source: Securities Class Action Clearinghouse
9
©2013 Integro USA Inc.
5
SEC Enforcement Statistics
SEC Enforcement Actions
Alleged misconduct that lead to or arose from the Financial Crisis As of September 1, 2013
Number of Entities and Individuals Charged
161
Number of CEOs, CFOs, and Other Senior Corporate Officers Charged
66
Number of Individuals Who Have Received Officer and Director Bars, Industry Bars, or Commission Suspensions 37 Penalties Ordered or Agreed To > $1.53B
Disgorgement and Prejudgment Interest Ordered or Agreed To
> $800M
Additional Monetary Relief Obtained for Harmed Investors
$400M *
Total Penalties, Disgorgement, and Other Monetary Relief
$2.73B *
In settlements with Evergreen, J.P. Morgan, State Street, TD Ameritrade, and Claymore Advisors
Source: SEC.gov 10-18-13
©2013 Integro USA Inc.
10
Legal & Regulatory Updates • SEC Actions – Investigations, Enforcement Actions • Fiscal 2012 – FCPA
15
– Financial Fraud/Issuer Disclosure
79
– Insider Trading
58
– Market Manipulation – Total Enforcement Actions
46 734
• Fiscal 2013- on pace for a 26% decline – October 2012 through June – Pace suggests 533-585 for all of FY2013 – Why? Investigation activity, change in focus • However … – Settlement Dynamics and Admissions
11
Source: Advisen, Gibson Dunn, Shearman & Sterling, January 2013
©2013 Integro USA Inc.
6
SEC Enforcement
SEC Enforcement Actions Settlement Dynamics and admissions Departure from settlements including “without admitting not denying” Affirmative acknowledgment of wrongdoing 4 part test described by SEC Chairwoman MaryJo White on targeted cases for admissions Many investors have been harmed or the conduct was otherwise egregious; Conduct posed a significant risk to the market or investors; Where admissions would aid investors in decisions of future dealings with subject parties; Send an important message to the market about a particular case.
Commentators view on likely factors underlying the SEC’s targets Dollar amounts of investor losses Individuals seniority at organizations who engaged or permitted alleged violations Intent Duration Cooperation or obstruction with SEC investigation ©2013 Integro USA Inc.
12
SEC Settlements
Recent SEC Settlements Falcone and Harbinger Capital
JP Morgan Chase
13
©2013 Integro USA Inc.
7
Insurance Implications
Admissions:
Wordings in settlement agreement and policies
Conduct Exclusion triggers: Admission sufficiency? Loss Definitions: disgorgement , fines and penalties Severability issues: Exclusions and applications Defense cost levels: Shifted timeline/nature of civil enforcement defense dollars migrating to a criminal defense model
©2013 Integro USA Inc.
14
13 | State of the D&O Insurance Market
15
©2013 Integro USA Inc.
8
State of the D&O Insurance Market in 2013 The Insurance Market Remains in Transition 2011 was the most catastrophic accident year ever at $109B in losses Up until Q4, 2012 saw minimal catastrophic losses. Super Storm Sandy is estimated to generate excess of $20B in insured losses. AIG’s , a leading D&O insurer, Q4 ’12 combined ratio of 125.1 (vs. 107.1 last year)
In spite of significant insured losses we have not seen significant pressure on rates beyond what we saw in 2012 With little to no investment income, insurers cannot make up for continued losses with investment income and must try to underwrite their way to profitability
16
©2013 Integro USA Inc.
State of the D&O Insurance Market in 2013 D&O Insurance Specific Issues The universe of public companies has dropped – down 42% from the peak in 1997. This means there are fewer opportunities for insurers to effectively spread their D&O risk across a larger pool of companies and therefore less overall premium to offset losses Securities class action filings in 2012 and 2013 are below 1995-2011 averages, including reduction in merger objection suits. At current pace, year end filings will be approximately 148 versus 190 on average. Capacity remains available which is helping mitigate some of the overall market pressure on rates for high quality risks (for now) but this capacity is becoming increasingly selective
17
©2013 Integro USA Inc.
9
State of the D&O Insurance Market in 2013 What Does This all Mean Primary layer D&O pricing continues to be firm as insurers are trying to push for/regain rate wherever possible and premium reductions are becoming infrequent if available at all
Typical primary rate increases range from 5% to 10% depending upon the individual risk being considered and the particular circumstances Pricing for excess layers continues to remain very competitive and therefore there is minimal to no increases on excess programs Differentiating between risks remains critical to preserve program
©2013 Integro USA Inc.
18
14 | Anatomy of a D&O Policy
19
©2013 Integro USA Inc.
10
Overview of Directors & Officers Liability Insurance
• Liability exposures for Directors and Officers – – – –
Wrongful Acts and Claims Regulatory Actions Shareholder Claims Derivative Actions
• Structure of a Directors & Officers Liability Policy:
Claims Against Directors & Officers
Claims Against Entity
Indemnification? No
Yes
• Insurer pays loss directly • $0 self-insured retention • Personal asset protection
• Insurer reimburses corporation for amounts paid as indemnity • Self-insured retention applies
• For public companies, applies only to securities claims. No public company coverage for nonsecurities claims • Insurer reimburses corporation • Self-insured retention applies • Balance sheet protection
• Balance sheet protection
SIDE A
SIDE B
SIDE C ©2013 Integro USA Inc.
20
Program Structures
Sample Program #1 “Traditional” A, B & C tower, combined limits of liability of $30M, with $0 SIR for Side A claims, and $1M SIR for claims under Sides B and C.
Excess A/B/C $10M x $20M
21
Sample Program #2 “Traditional” A, B & C tower with limits of $20M, adding $10M “Side A Only” policy, with “Difference in Conditions,” or “DIC” feature that enables policy to “drop down” in the event underlying limits are unavailable.
Excess DIC Side A Only $10M x $20M
Sample Program #3 “Traditional” A, B & C tower with limits of $20M, adding $10M “Excess DIC Side A Only” policy, and $10M Independent Directorship Liability Insurance. Independent Directorship Liability $10M x $30M Excess DIC Side A Only $10M x $20M
Excess A/B/C $10M x $10M
Excess A/B/C $10M x $10M
Excess A/B/C $10M x $10M
Primary A/B/C $10M
Primary A/B/C $10M
Primary A/B/C $10M
Self-Insured Retention $0/$1M/$1M
Self-Insured Retention $0/$1M/$1M
Self-Insured Retention $0/$1M/$1M ©2013 Integro USA Inc.
11
4 | Excess “Side A” Insurance
©2013 Integro USA Inc.
22
Overview of Excess “Side A” Insurance
Excess coverage for Non-Indemnifiable Losses incurred by Directors and Officers Protection for individual D&O’s in the event that limits of liability available under the traditional D&O Liability insurance package are not available or exhausted Limits of liability cannot be eroded by losses incurred or indemnified by the company Possibility to select “Differences in Conditions” provisions and to fill gaps in coverage in the underlying D&O insurance policy Protections against bankruptcy cases Non Indemnifiable Loss coverage scenarios: – Insolvency – Bankruptcy – Severability provisions and rescission issues – Failure to fulfill indemnification statute standard – Certain derivatives actions: Defense costs can generally be advanced, but settlement costs may not be indemnifiable – Prosecutorial pressure to deny indemnification – Entity coverage limits dilution – Retention-related issues 23
©2013 Integro USA Inc.
12
5 | Independent Directorship Liability Coverage Liability Insurance
©2013 Integro USA Inc.
24
Why just a “Side A” policy may not be sufficient for an Independent Director
Policy limits can be exhausted by covering the CEO, CFO or officers with high liability exposure Risk for other Directors and Officers, especially Independent Directors & Officers, to be left with insufficient coverage to resolve claims made against them Insurance-related decisions are generally taken by officers within the company, but Independent Directors and Officers may need a dedicated protection Independent Directors and Officers have the possibility to maximize their financial protection by considering Independent Directorship Liability insurance
25
©2013 Integro USA Inc.
13
Overview of Independent Directorship Liability (“IDL”)
Designed to provide an extra-measure of protection for Independent Directors and Officers, covering services provided to one or several committees or organizations Independent Directors are subject to specific statutory and regulatory requirements, which require coverage to be specifically tailored Coverage can be purchased by or for the benefit of Independent Directors and Officers Possibility to insure: • All independent directors on a board • Specific individuals and/or committees • A unique independent Director or Officer • An independent Director or Officer in all companies in which he or she serves
26
©2013 Integro USA Inc.
Advantages of an IDL policy
The number of Independent Directors and Officers has significantly increased during the past years, and offering additional insurance protection is an incentive to attract and retain qualified Directors and Officers
Coverage designed for Independent Directors and Officers, can be adapted to apply to specific risk exposures Covered directorship generally includes public, private and not-for-profit organizations Most IDL policies have fewer exclusions than Side A policies. Fraud and illegal personal profit exclusions are generally absent “Drop-down” provisions and flexible coverage terms and conditions Coverage is non-rescindable Spouses and domestic partners are generally included
27
©2013 Integro USA Inc.
14
QUESTIONS?
©2013 Integro USA Inc.
28
APPENDIX | About Integro
29
©2013 Integro USA Inc.
15
Fast Facts
>2,000 >$1 billion >98%
Integro clients as of January 2012
Annual volume of insurance premiums placed
Client loyalty rate
#6 >21%
Integro is the 6th largest private broker in the U.S. Consistent double-digit annual growth Business Insurance rank in Leading U.S. P/C Retail Brokers survey; rank #13 in Business
#14
Insurance Most Productive Agents & Brokers Survey (source: Business Insurance “Driven Producers” November 2011 Publication)
#15
>40
#1
Fastest growing London broker, ranking in top 15 as Lloyd’s market and reinsurance broker. Since 2006, over 40 Integro brokers are recipients of Risk & Insurance magazine’s Power Broker™ award, including several “40 Under 40” Power Broker designations. Named #1 for Client Satisfaction in Greenwich Associates’ annual industry survey of risk managers for the fifth consecutive year, beating Marsh, Aon & Willis.
©2013 Integro USA Inc.
30
Services Overview Core Practices: Management Risk
Integrated model and applied analytics: The foundation of our approach
Property Casualty
Best Industry Talent & Technology
Reinsurance Surety Specialty Risk Services:
Private Client Services Aviation Marine & Cargo Healthcare Environmental Trade & Logistics Political Risks Entertainment
Pre- and Post-Claim Advocacy
Insurance Program Placement & Services
Complementary Services: Analytics & Risk Modeling Transactional Liability International Network Risk Management Services
31
Risk Management Services
Advanced Risk Modeling
©2013 Integro USA Inc.
16
Integro’s Approach to D&O Limit Adequacy
• The traditional broker approach to determining appropriate D&O limits is to survey the historical limits purchased by companies of similar size. Although this approach is simple to automate and execute, it is not the optimal way to demonstrate that appropriate limits are in place. • Integro instead performs an analysis of the appropriate levels of D&O limits relative to the risk that directors are assuming. We ask: “What is the probability that your directors will suffer a claim and not be indemnified by either their company or its insurer?”
• Our model calculates this probability based on the risk characteristics of the company, its financial strength in the event of a claim, and the size and structure of its insurance program.
©2013 Integro USA Inc.
32
Our Locations
UNITED KINGDOM
USA & BERMUDA
London
Anaheim, CA
Nashville, TN
Pasadena, CA - HQ
Montreal
Integro Insurance Brokers, Ltd.
Argo Insurance Brokers Inc.
Frost Specialty Inc.
The Rule Group
Integro (Canada) Ltd.
100 Leadenhall Street,
5101 E. LaPalma Avenue, Suite 101
1117 17th Avenue South
115 N. El Molino Ave.
115 N. El Molino Ave.
2nd Floor
Anaheim, CA 92807
Nashville, TN 37212
Pasadena, CA 91101
Pasadena, CA 91101
London EC3A 3BP, England
CA License #: 0660864
Phone: 615.322.9171
CA License #: 0601746
Phone: 514.787.7200
Phone: +44 207 444 6000
Phone: 714.701.0668
www.frostspecialty.com
Phone: (626) 795-9000
www.integro-international.com
www.argoinsurance.com
www.integroglobalspecialty.com
Atlanta, GA
CANADA
New York, NY - HQ Integro Insurance Brokers
www.therulegroup.com
San Francisco, CA
Toronto Integro (Canada) Ltd. 199 Bay Street
Ardleigh
Integro Insurance Brokers
1 State Street Plaza, 9th Floor
Integro Insurance Brokers
Commerce Court West, Suite 4800
Allan Chapman & James Insurance Brokers, Ltd
1000 Abernathy Road NE,
New York, NY 10004
One California Street, 4th Floor
P.O. Box No. 240
Suite 850
Phone: 212.295.8000
San Francisco, CA 94111
Toronto, Ontario M5L 1E8
CA License #: 0E77964
Phone: 416.619.8000
7 Blue Barns Business Park Old Ipswich Road Ardleigh, Colchester, CO7 7FX Phone: +44 1206 500000 www.acjltd.co.uk
“www.integrogroup.com for all offices unless otherwise noted"
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Atlanta, GA 30328 Phone: 404.439.8000
Newport Beach, CA
Boston, MA
3620 Birch St.
The Rule Group
Integro Insurance Brokers
Newport Beach, CA 92660
Two Financial Center
CA License #: 0601746
60 South Street, Suite 800
Phone: (949) 474-1550
Boston, MA 02111
www.therulegroup.com
Phone: 617.531.6000
Pleasant Hill, CA
Chicago, IL
Argo Insurance Brokers Inc.
Integro Insurance Brokers
2300 Contra Costa Boulevard, Suite375
190 South LaSalle Street,
Pleasant Hill, CA 94523
Suite 2000
CA License #: 0660864
Chicago, IL 60603
Phone: 925.682.7001
Phone: 312.780.8000
www.argoinsurance.com
Phone: 415.365.8000
ReSource Intermediaries, Inc. One California Street, 4th Floor San Francisco, CA 94111 Phone: 415.433.0600 www.resource-re.com
Vancouver Integro (Canada) Ltd. 777 Hornby Street, Suite 1460 Vancouver, BC V6Z 1S4 Phone: 604.608.6182
Bermuda Integro (Bermuda) Ltd. Maxwell Roberts Building, 3rd Floor 1 Church Street, P.O. Box HM884 Hamilton HM EX, Bermuda Phone: 441.279.8000
©2013 Integro USA Inc.
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