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Agenda v Review of topics v Class structure INTERACT v Take-aways v Industry facts v Little fun
Our Valuable Teachers v v v v v Steve England – AIG, Resident Vice President Mitch Harless – AIG, Vice President Global Energy Claims Donna Pettersen Mc. Ginnis – Consultant for D&O at Dynegy Cindy Chapman – Apache, Corporate Risk Manager Robert D. Stauffer – President , OIL O. J. Sanchez – Principal, Decision Strategies James Hughes – Director of Corporate Risk Management Conoco. Phillips James Ferguson – Assoc. Gen Council and Director of Risk Management, Halliburton Ted Gobillot – Assoc. General Council, Rowan Bob Hixon – Managing Director, John L. Wortham & Son
Class Structure How did we learn from this class? v Real-life experience of lecturers v Interaction through Q&A v Constant commitment through written assignments v Reinforcement of knowledge through presentations v Practice of team working
How else could we have learned? v No way! This was the best way! v v No way! This was the best way! v No way! This was the best way! v. No way! This was the best way! v. Any other ideas?
Take-Aways v What did we learn from the class? v Concepts from the energy industry v. Fundamentals in the oil and gas sector v. Cyclicality of commodity prices v. The magnitude of the operations v Notions of risk and how to insure and manage that risk v. Impact of natural catastrophic events v. Risk management is both an art and a science
Gasoline Prices Source: U. S. Bureau of Labor Statistics
Earth by Night Source: NASA (Nov 2000)
Earth by Night
Insured Loss & Claim Count for Major Storms of 2005* Hurricanes Katrina, Rita, Wilma & Dennis produced a record 3. 2 million claims *Property and business interruption losses only. Excludes offshore energy & marine losses. Source: ISO/PCS as of February 8, 2006; Insurance Information Institute.
Outlook for 2006 US Hurricane Season Average * Named Storms 9. 6 Named Storm Days 49. 1 Hurricanes 5. 9 Hurricane Days 24. 5 Intense Hurricanes 2. 3 Intense Hurricane Days 2. 3 Net Tropical Cyclone Activity 100% *Average over the period 1950 -2000. **As of December 4, 2005. Source: Dr. William Gray, Colorado State University, December 6, 2005* 2006 F * 26 17 115. 5 85 14 9 47. 5 45 7 5 263% 195%
Top 10 Most Costly Hurricanes in US History, (Insured Losses, $2005) Seven of the 10 most expensive hurricanes in US history occurred in the 14 months from Aug. 2004 – Oct. 2005: Katrina, Rita, Wilma, Charley, Ivan, Frances & Jeanne Sources: ISO/PCS; Insurance Information Institute.
Global Insured CAT Losses, 1970– 2005 (Property and Business Interruption) Billion USD, at 2004 prices There has been a huge increase in the insured value of global CAT losses in recent years Source: Swiss Re, sigma No. 1/2005 & 2/2006. Record $78 billion in insured natural CAT losses in 2005, compared to $5 B in man-made disasters
Types of Risks v Financial risk v Credit risk v Interest rate risk v Legal risk v Liquidity risk v Market risk v Reinvestment risk
Steps in Managing Risk v v Establishing the context Identifying Assessing Treating v v Transfer Avoidance Reduction (Mitigation) Acceptance (Retention) Creating the plan v Implementing v Reviewing and evaluating v
Types of Insurance v Health insurance v Life insurance v Property insurance v Casualty insurance v Credit insurance v Reinsurance v Self insurance v Travel insurance
Property and Business Interruption Losses
Did You Know? History of transferring of risk v Smoking is bad! – risk and insurance v K&R insurance v Celebrities insured: v v v Bruce Springsteen Marlene Dietrich Fred Astaire Tina Turner Dolly Parton
Famous Quotes v You don’t need to pray to God any more when there are storms in the sky, but you do have to be insured. (Bertold Brecht – german poet) v For almost seventy years the life insurance industry has been a smug sacred cow feeding the public a steady line of sacred bull. (NYTimes – Ralph Nader – 1974)
Jokes The cowboy was trying to buy an insurance policy. The insurance agent was going down the list of standard questions. v v v v "Ever have an accident? " "Nope, nary a one. “ "None? You've never had any accidents…" "Nope. Ain't never had one. Never. " "That's hard to believe. No accidents at all? “ "Well, rattler bit me one time. “ "Wouldn't you consider that an accident? “ "Hell no. Damned varmint bit me on purpose. "