USI Real Estate Practice Group Conceptual Overview

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USI Real Estate Practice Group Conceptual Overview

  1. 1. USI Southwest Broker Services Capabilities Summary Complex Risks in Real Estate, Development and Construction.
  2. 2. About USI Market Leader USI is a portfolio company of Goldman Sachs Capital Partners, Employee Benefits a private equity affiliate of Goldman Sachs & Co. Property and 34% Casualty 57% USI National Presence / Local Expertise Workplace USI has 71 offices in 19 states and 9% approximately 3,500 business professionals serving over 60,000 business clients. Broad Product Resource and Distribution Capability USI provides property, casualty, health & welfare products and financial services in 5 broad categories with over 20 products and services. Geographical Geographic Diversity Broker Services Risk Management Services Property / Casualty Risk Control Health / Welfare Employee Benefits Risk Financing / Alternative Risk Wealth Management Alternative Risk Claim Advocacy Pension / Risk Executive Retirement Information Services USI Workplace Environmental Mitigation Actuarial Analysis Worldwide Market Access Data Collection & Reporting
  3. 3. USI Southwest Real Estate Practice USI Southwest is a full service insurance brokerage and risk management consulting firm focused on the needs of the real estate industry. Our goal is to redefine the role of the insurance broker in real estate financial transactions. We believe that by developing long-term, strategic relationships with real estate firms and their advisors, we can improve the efficiency, structure and investment returns on real estate transactions. We also believe that as a privately held, strategically focused brokerage, we have the flexibility and the speed to react more creatively to deal-specific hurdles and the special needs of real estate companies. Our smaller size does not, however, equate to inexperience: our professionals have over 10,000 transactions to their credit. Our combination of industry experience and responsiveness results in meticulous due diligence, creative and cost-effective insurance solutions, and the development of unique product and financing alternatives. USI Southwest is based in Houston, with offices in Dallas, Austin, Albuquerque, and New Orleans. USI is a portfolio company of Goldman Sachs Capital Partners, a private equity affiliate of Goldman Sachs & Co. Due Diligence USI Southwest does not just sell insurance. We are engaged by real estate firms to analyze business risk, assess risk management practices, interpret coverage adequacy, and design cost effective solutions. How can your agent or broker sell you insurance if they do not take the time to understand your business? USI Southwest applies its unique due diligence perspective to traditional buyers of insurance. Does your broker/agent provide you with a Risk Analysis Report highlighting the business risks, operational risks, and financial risk of your business? Do they analyze historical exposures? Identify future exposures? Discuss current trends? Anybody with a broker's license can sell you insurance. USI Southwest helps you manage risk.
  4. 4. Business Risks Business risks are inherent to most activities undertaken by a company. Many of the risks associated with conducting business are not insurable, such as the risk of a new competitor emerging or that of a company's products becoming obsolete. However, there exists a large body of exposures, particularly those arising from direct or indirect relationships between a company and other parties, which do have insurance implications: • Legal/Contractual Obligations Service commitments Indemnifications provided (and received) Product delivery, performance, and reliability standards Employment contracts Equipment and real estate leases • Strategic and Financing Initiatives Mergers and acquisitions Joint ventures Partnerships Public and private debt and equity issues/placements • Supply Chain Management Vendors Suppliers Resellers/Retailers Contingent business interruption exposures Operational Risks Operational risks are defined as those risks associated with the day-to-day operations of a business enterprise. As one would expect, operational risks are dependent on the operations of the organization. Operational risks for real estate companies are different than those of manufacturing or technology firms. Operational risks are the most easily transferred risks to third parties. The pricing of the risk transfer is the most uniform. • Coverage associated with operational risks include: Workers' compensation
  5. 5. Business interruption Property Liability USI Southwest is uniquely qualified to assess operational risk. We have extensive experience in the real estate industry and the corresponding operational risks. Financial Risks There are numerous financial risks associated with the management of any business. Like any other exposure to loss, certain financial risks are insurable and certain financial risks are uninsurable. Unlike business and operational risks, where the line of insurable vs. uninsurable is clear, the insurability of financial risks are a "moving target". Traditional financial risks are classified as those risks associated with the financing for and financial management of a business. Including: • Interest rate risk • Foreign currency risk • Credit risk (from customers) • Credit risk (to suppliers) Non-traditional financial risks are classified as those risks not associated with the financing of a business but, rather, those risks that have a direct financial impact on the business and are not otherwise classified as business or operational risks. Including: • Risks from shareholder litigation • Risks from third party (non-product related) litigation • Risks associated with political instability (confiscation, contract disruption, war) • Risks from regulators and other governmental agencies • Risks associated with mergers/acquisitions/divestitures USI Southwest has devised unique risk transfer and risk sharing alternatives for clients with exposures in these areas. Geographic Reach USI Southwest is licensed in all 50 states. We have clients in all of them. We work in key foreign countries and we do not cede control of your account to a "correspondent firm".
  6. 6. Transparency We are your partner. We act like one. We disclose our compensation. We disclose our insurance company relationships. We certify all of our proposals for accuracy and disclosure. Is there any other way for a partner to act? Resources Most small brokers/agents have limited resources. Most large brokers save resources for their Fortune 500 clients. What about the rest of you? USI Southwest has developed a comprehensive set of specialized resources. We will do whatever it takes to bring the best resources to bear for our clients — regardless of the economic impact to us. Customer Service Some things never go out of style; like having an Account Executive that actually acts like an Account Executive and not a concierge. Our Account Executives service their clients. They do not redirect your phone calls to the appropriate department. They ARE the appropriate department. When you need outside, specialized resources, our Account Executives coordinate them and remain your single point of contact. They know your claims history. They know your safety issues. They know your short-term needs and long-term dreams. Service like that is always in style. Select Client List Select Client List Upon Request
  7. 7. The USI Advantage We match great people with a great process. You get strong, consistent results. Process Most brokers have inferior processes or no process at all. USI Southwest has developed a patented process that is: • Individually Tailored to meet your needs • Measurable so we know if we are performing • Accountable to you • Aligned with your goals and objectives • Proactive, not reactive People Small brokers/agents have limited resources. Large brokers save resources for their Fortune 500 clients. USI Southwest has developed a comprehensive set of specialized resources and expertise to meet the needs of the upper middle market. • Industry Specific Risk Management • Executive Protection • Environmental Risk Mitigation • Advanced Claims Advocacy • Loss Control • Health/Welfare
  8. 8. Real Estate Portfolio Management Property coverage for complex and high-value asset portfolios requires significant market knowledge and structuring capability. USI uses our Risk Management principles to properly assess the risk profile of such asset driven accounts, with the intent to provide each client with the information necessary to make a decision about their level of risk retention, risk funding methodology, and allocation strategy. This process includes actuarial based analysis of historical property losses, payments under deductible and retention limits, and assignment of loss values to each property in the portfolio. By understanding prior outcomes, we can then allocate premium and loss costs for proper billing and budgeting. In some cases, the client may wish to take a high retention under a master policy, fund the retention, and charge out the premium to each property based on a risk allocation model. In such a case, the premium is driven down by increasing retention to a level actuarially out of the money for non-catastrophic losses. The self- funding of the retention is then spread across the portfolio in an equitable fashion. USI drives this process by completing the historical analysis, and placing the coverage in markets that understand such structures. In some cases, foreign markets and third-party wholesale brokers participate by assisting us in covering the worldwide market to the benefit of our clients. Understanding the current difficulties of wind exposure coverage in first tier counties along the Gulf and Atlantic coasts is an important part of structuring retentions. USI leverages the non- coastal portions of the portfolio in the marketplace to improve the overall pricing profile of the program. In some circumstances property owners hire third-party management firms to operate and manage their properties. In such cases, the management firm can allocate costs for insurance and losses under a contractual agreement. Third-party loss and premium data can be incorporated into USI’s loss analysis in such a way to determine if allocations are representative of actual experience of the property being charged. It can be benchmarked to further assure cost controls under contractual arrangements.
  9. 9. Construction Practice The USI Southwest Construction team has the intellectual capital and market access to assist general contractors, construction professionals, project financiers and developers of every size to create strategic risk management solutions. We anticipate trends and issues in the construction industry and develop strategies for our clients to improve risk profiles, lower cost and add profit through customized risk management and financing programs. The USI team is a true partner and works with you to create strategic risk management solutions in the following areas: • Construction All Risk • Workers Compensation • Employers Liability • Third Party Liability • Advanced Loss of Profits • Surety • Contractor Default Insurance • Claims Services and Advocacy • Loss Control • Environmental Risk Mitigation • Enterprise Risk Management The USI Construction Practice takes a broad-based approach to the assessment and effective management of our construction partner’s comprehensive financial risk profile. We use our knowledge and experience to develop a clear understanding of our clients' needs, thereby assisting in the effective analysis, control and transfer of risk.
  10. 10. Risk Management Philosophy The USI Risk Management Division provides services to clients in the middle and upper middle market segments, which is traditionally underserved by multinational brokers with similar skill sets. Our clients have the need for risk management related service, support and analysis, but typically have a small risk management staff, if any. Our philosophy is to partner with our clients to become an extension of the risk management department by performing the tasks necessary for internal support, including providing reporting information suitable for board level review. The risk analysis is strategic as well as technical. Strategic analysis is a joint effort with our clients to determine the current risk profile of the company, the economic impact of that profile, and the proper risk finance methodology. In some cases, we are present at the formation of a new risk management department, and can assist in the structure of the program from the outset Technical analysis is an ongoing service designed to provide risk specific, actuarial, and claims data in the time and format most useful for the client. These can be bundled or unbundled services including Environmental Risk Analysis, Loss Control, Actuarial Based Analysis and Reporting, Claims Advocacy, and Program Design and Placement supported by our Service Model. We are not simply selling products; we are providing capital-based and information-based solutions. Our capacity to provide such solutions is based in the understanding that insurance is just another form of capital. It is fungible and by its nature is often the most efficient financial solution available, as proven by its commoditized nature. We think with our clients in terms beyond commoditized product sales, and instead, take the view of a risk manager, using insurance as one available tool. This allows us to give our clients a broader view of available options.
  11. 11. Directors & Officers Coverage In 2006 USI was chosen as the partnering retail broker by NASDAQ to support their wholly owned Directors and Officers Insurance operation in the Southwest. This exclusive relationship significantly expands USI’s D&O information resources and placement capability. In alignment with our Risk Management philosophy, we take a consultative rather than a transactional view of D&O insurance. Our expanded team consists of over 70 industry professionals dedicated to professional lines of coverage, including: Directors and Officers Liability, Employment Practices Liability, Fiduciary Liability/Crime, Errors & Omissions, and Mergers & Acquisitions. We jointly consult and place D&O coverage for over 350 public companies and over a thousand private companies in a variety of industries – from microcap to Fortune 500. We use NASDAQ’s proprietary D&O database with multiple years of data to benchmark client accounts. Benchmarking is based upon Securities Litigation Trends, Projected Settlement Analysis, Pricing, and Peer Purchasing Trends. The unique resources available to our clients through this relationship are unmatched in the industry. Major carriers use us for new product definition. We have routine inquiries and referrals from major law firms throughout the country. We provide our clients with high-level policy summaries and comparisons. Service standards and timelines are part of the placement and ongoing account service methodology to ensure management of the process to each client’s standards.
  12. 12. Environmental Risk Mitigation Single Source Environmental Strategic Resources. Risk Management Specialized Skills. Specific Solutions. Providing an array of environmental risk The USI Environmental Risk Mitigation Group management solutions: capability cuts across industries. ERMG provides • Environmental Risk Profiles strategic information and specific solutions to • Environmental Exposure Analysis environmental problems and opportunities utilizing • Risk Mitigation Structuring our unique environmental resources. • Environmental Law Profiles Decision-makers benefit from direct access to a • Environmental Loss Modeling national network of seasoned professionals who • Environmental Insurance provide the most accurate, up-to-date information, Program Evaluation linking the various disciplines of environmental risk • Insurance Policy Form Analysis management. • Environmental Insurance Program The Power of Professional Marketing Relationships • Remediation Cost Caps for Developers Selected from the ranks of environmental • Lender Liability Protection underwriters, attorneys, marketers, educators and • Web Based Interactive environmental risk managers, this superior Environmental Risk Management resource group offers a breadth of specialized Programs for Clients knowledge and technical skills –and the ability to • Education and Training Programs deliver innovative solutions to meet your business objectives. ERMG uses as its network platform the online Environmental Knowledge Delivery System (www.environmentalriskmanager.com). This relationship makes available the benefits of our licensing agreement with the International Institute Environmental Risk Management (“I2ERM”) in conjunction with Texas State University, allowing USI to obtain for our clients the latest information, knowledge, and solutions for environmental risks.
  13. 13. Program Design & Placement Each risk management program includes elements of self-insurance, risk transfer, risk avoidance and risk reduction. Our objective is to assist clients in the identification of exposures to loss and determine the most economical means of dealing with each risk. The outcome is a comprehensive plan that maximizes positive economic impact and minimizes catastrophic exposure to the balance sheet and current year cash flow. A crucial part of program development is identifying and quantifying expected losses and pass-through loss costs then structuring a plan to address those known losses. Our Risk Management Division helps clients quantify those losses by use of actuarial principles and the latest catastrophe modeling software. Identification of burning layers in the context of each client’s risk appetite will combine to determine the most economical structure by In addition to plan structure, an understanding of the insurance marketplace and having relationships with those carriers capable of providing coverage are necessary. USI has access to and works with financially stable domestic and international markets to ensure the ability to place any structure we jointly conceive with our clients. Non-traditional risks need to be analyzed and mitigated, as well. We have specific resource capabilities to resolve domestic and international non-standard risks. We advise and place alternative risk products, risk finance options, contingent risks and weather derivatives. These tools can be used in concert with traditional retention and insurance models to mitigate differences in conditions or risk aggregation problems.
  14. 14. Catastrophe Loss Analysis Catastrophic Modeling Catastrophes can strike at any time and in many forms, from hurricanes to earthquakes to terrorism. When we see the effects of a Hurricane Katrina or the Indonesian earthquake and tsunami of 2004, we are reminded not only of the personal tragedy and cost in human lives, but also the incredible financial risk to which each of our client companies is exposed. To prepare for and minimize the impact of a catastrophe on a company’s assets, a comprehensive risk management strategy must be developed. The foundation of this plan must be built upon the accurate quantification of physical values exposed paired with the likelihood and extent of the catastrophic event. USI provides the tools to develop a sound catastrophic risk management program. Natural catastrophe models are a complex Loss Estimates from system of algorithms that incorporate the Modeling assist with the fundamental physical characteristics of catastrophic events and expresses them following: mathematically. These characteristics are then •Manage areas of high exposure to applied to a geographical distribution of catastrophic loss. exposures. In addition to loss probability, the •Estimate consistent and reliable loss characteristics of a portfolio’s physical assets, costs for all locations. such as age, construction, and zip code, must •Develop data to more effectively also be considered when formulating and negotiate property insurance terms and evaluating ultimate financial risk. USI provides conditions. this analysis so that clients can make informed •Purchasing appropriate limits. decisions on limits, retention levels and •Demonstrate sound risk management whether to retain, mitigate with loss control or practices. contractually transfer the risk through an insurance product.
  15. 15. Owner Controlled Insurance Owner-controlled insurance programs (OCIPs), also called wrap-up insurance, are insurance programs designed for large construction projects. Under such plans, the project owner procures certain insurance coverages for all tiers of contractors and sub-contractors performing jobsite operations. This program replaces the traditional approach where owners require contractors to provide proof of Workers Compensation, Liability and Property insurance. Under an OCIP, the owner assumes the insurance burden by defining the insurance limits, establishing and supporting OCIP administration, establishing the risk sharing profile of the program, assuming the responsibility for safe workplace operations to include the work of all contractors, and purchasing the insurance Increased Popularity of OCIPs The use of OCIPs is expanding from several factors: • The increase in the number of large capital improvement projects undertaken to repair the nation’s deteriorating infrastructure. • The booming economy fueled by the growth and expansion of high-tech businesses. • The implementation of less stringent insurance regulations. OCIPs generally produce lower insurance costs to the owner compared to the • A highly competitive construction conventional approach. This is driven by insurance market. increased buying power by pooling coverage, reduced construction cost by eliminating overhead and mark-up in contractor bid amounts, elimination of inter-insurance company litigation, elimination of duplicate coverage, fewer accidents due to central oversight and workplace safety methods, reduced administrative costs compared to collection and auditing of contractor policies, and potential cash-flow benefits by master financing of the project premium.
  16. 16. Private Equity Practice USI is redefining the role of the insurance broker in private equity transactions. By developing long-term strategic relationships with private equity firms and their various partners we can consistently improve the efficiency, structure and investment returns on private equity transactions. As a privately held company owned by a significant private equity firm we have the experience, flexibility and the speed to react more creatively to deal-specific hurdles and the special needs of private equity companies. The USI Advantage We match great people with a great process, so you get consistently strong results. People - Small brokers/agents have limited resources. Large brokers save resources for their Fortune 200 clients. USI Southwest has developed a A Dallas-based private equity firm comprehensive set of specialized resources and expertise to meet the reduced employee benefit costs needs of the upper middle market. Risk for two of its portfolio companies Management, Executive Protection, by more than two million dollars Environmental Risk Mitigation, in annual fixed expenses. Utilizing Advanced Claims Advocacy and USI’s Benefit Portfolio Solution Health/Welfare. resulted in a larger multiple on Process - Most brokers have inferior EBITDA, dramatically increasing processes or no process at all. USI the firm’s capital gain at liquidity. Southwest has developed a patented process that is individually tailored to Our combination of strong experience in meet your needs, is measurable so we diverse industries and our responsiveness know if we are performing, is results in meticulous due diligence, accountable to you, is aligned with your creative and cost-effective insurance goals and objectives and is proactive, solutions, and the development of unique not reactive. product and financing alternatives.
  17. 17. Surety Specialization USI has contract and commercial surety specialists within our construction practice dedicated to the creation and management of programs specifically designed for the construction industry. Surety bonding has been used in the construction industry for more than 100 years. Most contractors are required at some time to provide a bond to guarantee performance. Frequently bonds are the key to a construction project and the inability to become bonded may lose a contractor work. Ability to secure credit can be adversely affected by changes in the worldwide financial markets and bank lines of credit may be particularly vulnerable. A surety facility gives a contractor an advantage in overcoming such uncertainties. Contractors need a reliable bonding facility at a competitive cost. Although bonds can be provided by either banks or insurance companies, a bond obtained from a bank may impact upon a contractor's borrowing facilities since banks tend to consider bonds as a financial liability and reduce the contractor's credit facility accordingly. Commercial surety bonds provided by an insurance company offer a dynamic financial management tool often providing off-balance-sheet credit on terms and conditions more favorable than other financial instruments. An alternative to subcontractor bonding is contractor default insurance (CDI). CDI indemnifies the insured for losses incurred as the direct result of a subcontractor or supplier default. It also provides coverage for losses that are the indirect result of a default such as liquidated damages, acceleration of other subcontracts or extended overhead. CDI delegates control of default remedy to the insured. Thus empowered, general contractors can act more quickly to address potential defaults and mitigate the impact if they do occur.
  18. 18. Service Standards InServ Service Standards InServ is a service platform that allows each service team to track the activities needed in the servicing, marketing and management of an account. Most large brokerage firms have defined service standards, however, it is incumbent on the account manager to track and adhere to agreed performance standards. Given the service slippage that can occur in such an environment, USI has developed automated support to our servicing platform to track service requirements. Over time we expected to continually increase the level of automated support we now enjoy. The Inserv model is implemented via our account • 120 day renewal lead times management system. A timeline is created with • Risk manager submission each client that identifies tasks that require action approval on specific dates throughout the policy year. A • Policy delivery within 60-days graphic timeline is provided to the client to illustrate of binding the agreed service plan. As the account data is • 24-hour endorsement subsequently entered into our account management request and certificate system, the pertinent dates in the timeline are issuance diaried so that automated notices are generated to ensure timely response to the agreed actions. Each • Quarterly TPA/Claims team member is required to create such an activity reviews support plan with automated diary entries so that we • 180-day stewardship meeting can initiate the required activity at the right time. Accounts are internally audited three months after the effective date for compliance to these service standards.
  19. 19. International The world is smaller today than ever. In fact, many USI clients are multinational corporations, with multiple foreign locations and workers, transacting business with the entire world. Some are manufacturing their products overseas for distribution here in the US while others are also selling their products to a vast international marketplace. Never has a comprehensive global risk management expertise and philosophy been more necessary. At USI, we have the experience, the network, and the markets to implement the international International Coverages • Foreign Casualty risk management philosophy of our clients. Our people • Foreign Property • Kidnap & Ransom have structured international programs for some of the • Employee Benefits largest corporations in the country and they bring that • Political Risk • International Transit & Cargo expertise to each client’s account. USI can place a • Stock Throughput • Product Recall and Expense simple trip travel policy or structure a global loss • Foreign Products Liability • Currency Conversion sensitive program that will minimize a client’s cost of risk • Work Comp/Social Security while maximizing their use of foreign currency. Understanding various legal systems, insurance laws and languages can be a daunting prospect when implementing a global risk management program. As members of the Worldwide Broker Network, USI has access to the technical, legal and professional resources of over 8,500 insurance professionals in more than 75 countries. Empowered with this resource, USI helps our clients overcome country-specific insurance policy and claims issues. In addition, USI has direct access to all of the international markets and then, through the WBN, we have access to the local markets that we must access to provide the necessary admitted coverage.
  20. 20. Claims Advocacy & Data Services USI recognizes the value of claims handling and claims information to the present and future viability of a client’s account. There are prevailing industry problems with each aspect of claims management that we individually target, with a goal to improve the overall claims handling process, claims costs, settlement procedures, and data collection and reporting. When each of these operating segments is not properly controlled and managed, the result can be costly in a variety of ways. USI partners with our clients in an oversight, process management and data collection role. In this role we enhance the existing services provided by TPAs and insurers, augment the usefulness of claims data with specialized reporting, and provide direct professional guidance and oversight on claims management. This includes tracking specific large claims in concert with the TPA efforts. It also includes taking measure of the methods and practices used by your TPA and making advisory recommendations to improve the process, reduce costs, control costs, eliminate process bottlenecks, and streamline the operating method as necessary. The raw information is transferred to RiskEnvision, USI’s internal automated data collection system. The system provides for consistent aggregation of claims data. Once transferred, the data becomes uniform, eliminating the problems of varying reporting formats from different insurers, incomplete data sets, unsuitability to various sorting options, and tight limitations on report generation capabilities. By further benchmarking this information, third-party operator efficiency can be documented against peers and industry standards. Within the resulting framework, Loss Control standards can be created, and cost management steps can be initiated.
  21. 21. Risk Control Services USI Risk Control Services assists clients by Risk Control Services supplementing or providing a range of Loss •Reduce Employee Injury Rates Control services for development & and Related Risk Costs implementation of Risk Management strategies. Our in-house loss control professionals utilize • Reduce Fleet, Property & General loss and experience data to enhance safety and Liability Cost of Risk improve work environment risk profiles • Asset Protection Program • Coordination of Insurance Carrier This is accomplished by developing a forensic Safety Services understanding of each client’s operational profile, • OSHA Benchmarking related exposures for loss, prevailing corporate • OSHA Compliance Assistance culture, client specific appetite for risk, and risk management driven objectives. From this • Employee or Management information, USI develops a Risk Control plan Training tailored to each client, and then assists in • Accident Investigation operational implementation and oversight until the objectives are met. A national property management and real estate developer, was able to reduce losses by more than 30% in year over year losses after implementing USI’s recommended risk control plan. USI’s Risk Control representatives attributed success of the plan to program development, follow-through and continued oversight by USI’s Risk Control representative.
  22. 22. Risk Management Services Technical Services The USI Risk Management Division uses actuarial principles to provide services to our clients in need of technical information to support risk management decisions. These services are provided automatically to clients when we act as broker and place their corresponding coverage. Services can also be unbundled and provided on a contract basis. Our RMD services are provided by personnel in our Houston regional office. Collection, Interpretation and Analysis of Loss Data In concert with our claims support function, USI can import loss data from a variety of disparate sources (TPAs, insurance company databases, etc) and collate it into a single system. The data is then parsed for analysis and interpretation. Loss Forecasting Loss triangles and reserve analyses are created to provide the client with reasonable expectations of future claims costs on past losses. Similarly, loss projections frame expectations for future WORKERS COMPENSATION INCURRED LOSS TRIANGULATION claim experience. The information can be used As of MARCH 31, 2006 Losses for program design and placement, for corporate Policy Inception (Oldest to 106 Current) 10 Months 22 Months 34 Months 46 Months 58 Months 70 Months 82 Months 94 Months Months 118 months budgeting purposes, and for determining LOC/ 96/97 100,000 268,245 268,245 268,245 485,706 486,303 515,199 236,420 231,233 231,233 2.68 1.00 1.00 1.81 1.00 1.06 0.46 0.98 1.00 security needs for casualty lines of coverage. 97/98 100,000 216,965 2.17 227,371 1.05 231,022 1.02 201,992 0.87 215,241 1.07 215,241 1.00 215,241 1.00 215,242 1.00 215,242 98/99 191,240 238,347 257,767 353,066 263,161 263,161 263,161 266,011 263,351 263,351 1.25 1.08 1.37 0.75 1.00 1.00 1.01 99/00 174,541 503,201 581,892 657,150 540,372 540,372 540,372 545,776 540,318 540,318 2.88 1.16 1.13 0.82 1.00 1.00 Benchmarking 00/01 64,085 235,390 3.67 187,422 0.80 256,752 1.37 262,832 1.02 299,956 1.14 302,956 305,985 302,925 302,925 01/02 75,000 191,516 274,442 268,974 329,642 342,828 346,256 349,719 346,221 346,221 Client data can be compared to peer data sets 02/03 220,584 2.55 640,253 1.43 625,891 0.98 569,054 1.23 614,578 639,161 645,553 652,009 645,489 645,489 2.90 0.98 0.91 via USI’s national subscription database source. 03/04 272,529 348,372 1.28 208,291 0.60 231,203 249,699 259,687 262,284 264,907 262,258 262,258 04/05 711,110 415,405 419,559 465,711 502,967 523,086 528,317 533,600 528,264 528,264 The resulting comparatives provide insight into 2005/6 348,929 0.58 774,622 782,369 868,429 937,903 975,420 985,174 995,026 985,075 985,075 peer coverage limits, premium costs, and Avg. Incremen tal LDF X 2.22 1.01 1.11 1.08 1.04 1.01 1.01 0.99 1.00 Cumulati retention limits. ve LDF X 2.82 1.27 1.26 1.13 1.05 1.01 1.00 0.99 1.00 Cl i Ad d D t
  23. 23. Health / Welfare Careful strategic planning, ongoing evaluation and our unique service platform are the main drivers that assure a comprehensive and competitive employee benefit program. We approach this process by defining your objectives and developing an organized action plan to achieve those objectives. Based on information gathered from both the client and the carrier we provide a complete analysis of the client's existing plans and contractual arrangements; as well as, demographic analysis, historical claims and reserve analysis. These analyses allow us to effectively advise you regarding plan design, funding options and administrative support. USI Compliance Department Our ERISA and compliance attorneys regularly meet with our clients regarding new developments and issues related to Welfare plans. They guide our clients through intricate and complex risks associated with: • COBRA, HIPAA and FMLA • HSA / FSA • Sick Leave and Re-Hire Provisions • Wellness Guidelines within ERISA • Medicare Part D We establish a baseline by reviewing cost • Contribution Modeling containment and wellness strategies, • SPD Evaluations evaluating provider networks for • Non-Discretionary Employee applicability and access, and by reviewing Eligibility Classes the executive benefit programs. Plan design alternatives that could positively impact claim cost and/or administration expense are identified and evaluated. Various stop loss and pooling level options are studied based on the client’s risk tolerance. We know that efficient implementation and effective employee communication is critical and our proven process insures a successful role out and enrollment. Our USI Service Timeline insures that all deliverables are identified and addressed during the program year.
  24. 24. Employee Benefit Communication Workplace Benefits Communication / Data Cleansing USI Workplace Benefits is a wholly owned subsidiary of USI. USI Workplace Benefits is the leading benefits enrollment company in the country, providing services to more employees than any other of its type. This unique service is a one-on-one automated The steps include the following: benefits enrollment service to public and • A USI representative works with your private companies across the country. human resources department to It is typically not possible for the human download your benefits data into the resources department of a company to have Benefits Communication system. one-on-one contact with each employee to • During the annual enrollment period, discuss benefits. This is especially true if USI representatives meet with each employees are spread across the country. and every employee personally or by Regardless of the employee count and telephone to guide them through the location, during the benefits enrollment benefits selection process. period, a USI representative will personally • A dependent audit is performed at talk to each and every employee, guiding the enrollment point to cleanse the them through the benefits election process. enrollment of any non-qualifying Having a union workforce is not an issue with participants implementing this enrollment product. In fact, unions typically embrace the process. Like • This can be done on a no-cost basis. USI Workplace offers additional the human resources department, the union voluntary benefits to employees at rarely has a vehicle through which they can enrollment. The income from the have one-on-one contact with its members. voluntary benefits pays for the We have enrolled companies with both union communication and data cleansing. and non-union employees, and used the enrollment to convey union information to its members.
  25. 25. Alternative Risk Solutions In some circumstances standard insurance coverage can not address the risks a company faces. Similarly, traditional capital sources are typically not available to fund or offset non-standard risks. Clients find themselves retaining financial and operating risks they’d prefer to transfer. Alternative risk finance solutions are creative ways to either transfer such risks, or, to retain them in a way that minimizes the financial downside. Completed Projects • Enhanced over $1 billion in securities for Petrobras • Enhanced the first government backed securitization for the country of Belize • Enhanced the first mortgage securitization for the country of Ukraine • Eliminated risk elements for a $55 million funding for offshore Pemex construction • Sourcing funding and insurance for an existing client for a $100 million pipeline supply project USI develops innovative solutions that help clients mitigate complex or difficult-to-address risks by combining insurance, financial and capital market strategies. Risks that create capital inefficiencies are targeted on a domestic and international scale. Our alternative risk experts have solved problems for mid-cap to large-cap corporations around the world. Our role varies from advisory, to structuring, from consulting to providing capital through our partnering relationships. The answers are not product driven, but capital driven, and they manifest themselves in a variety of ways – insurance policies, derivatives, senior or mezzanine capital, project finance and self-funded facilities designed to smooth the volatility of a risk over time. We begin creating solutions where the traditional markets end.
  26. 26. Weather Derivatives Weather Call Options This coverage is structured as a derivative instead of an insurance indemnity policy on an annual cumulative or weekly basis for risks of rain, snow and/or wind at selected locations. Proof of loss is not required, simply proof of event, which allows you to estimate extra-expense and revenue shortfalls correlated to weather events, and recover the loss on a call option basis, creating a fixed cost cap on the risk. For example you determine that snowfall or freezing temperatures can cause disruptions or delays resulting in loss of cash flow or trigger additional expenses such as liquidated damages, the aggregate effect of which you want to cap in your budgeting process. You can enter into an option agreement that would include a traditional insurance styled actuarial approach. We would determine the 25–year average weekly snowfall at the locations in question during the months desired. Let’s assume that number is 8-inches at each location. A retention would be added – let’s use 2 additional inches per location per week. We would determine the amount of potential losses/expenses to be incurred under the scenario described; let’s assume its $500,000 per week. An option contract would be written and an option fee charged. If, then, at any time during the designated period, more than 10-inches of snow fell at a designated location, the call would be exercised and the counterparty would pay $500,000. There would also likely be an aggregate cap in the option contract. Since there is no insurance involved, there is no proof of loss. This is event driven. If the event happens, the option is exercises. This is easy to do with weather since there is significant data available from weather stations everywhere. In your case, it’s even easier since the weather station is usually at the airport.
  27. 27. Team Chart USI Southwest REAL ESTATE PRACTICE TEAM LEADER / COORDINATION Property Engineering Account Risk Specialist Specialist Executive Management Program Design COPE Service Data Analysis Placement Primary Coordination Risk Finance Secondary Characteristics Environmental Property Senior Account Specialist Intermediary Manager USI ERMG Placement Catastrophe Account Modeling Maintenance Specialist Claims PML Analysis Advocacy Values Exposed Complex Claims Surety Account Specialist Manager Program Design Business Technical Loss Placement Impact Support Prevention Specialist USI Loss Control BI Analysis Claims Manager Management Claim Liability For additional information on the D&O Specialist USI Southwest Real Estate Risk Coordination Services Practice Group, please contact: Perry Smith Shawn Heiser, CIC, ERM RE Practice Director - Senior Vice Client Executive & President Environmental Risk Specialist USI Southwest USI Southwest 1445 Ross Avenue, Suite 4200 1445 Ross Avenue, Suite 4200 Dallas, Texas 75230 Dallas, Texas 75202 (Office) 214.443.3155 (Office) 214.443.3103 (Cell) 214.957.1575 (Cell) 228.383.5946 perry.smith@usi.biz shawn.heiser@usi.biz Jill Webster, CPCU, ARM, CIC Donnie Whitworth Account Executive Client Executive USI Southwest USI Southwest 1445 Ross Avenue, Suite 4200 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 Dallas, Texas 75202 (Office) 214.443.3137 (Office) 214.443.3123 (Fax) 214.443.3900 donnie.whitworth@usi.biz jill.webster@usi.biz
  28. 28. Sue Myers, CPCU, AIC, ARM Linda Hoover, CPCU, CIC, SCLA, CRM Technical Underwriting Coordinator Risk Management/Claims Advocacy USI Southwest USI Southwest 1445 Ross Avenue, Suite 4200 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 Dallas, Texas 75202 (Office) 214.443.3184 (Office) 214.443.3196 (Fax) 214.443.3900 linda.hoover@usi.biz sue.myer@usi.biz Steve Campo Rusty Compton Practice Leader - Management Senior Vice President – Group Professional Services Health Benefits USI Southwest USI Southwest 1445 Ross Avenue, Suite 4200 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 Dallas, Texas 75230 (Office) 214.443.3168 (Office) 214.443.3110 steven.campo@usi.biz rusty.compton@usi.biz Lynn Owen, CIC Joella Heath Regional Account Executive - MPS Claims Representative USI Southwest USI Southwest 1445 Ross Avenue, Suite 4200 1445 Ross Avenue, Suite 4200 Dallas, Texas 75202 Dallas, Texas 75202 (Office) 214.443.3114 (Office) 214.443. 3150 lynn.owne@usi.biz joella.heath@usi.biz USI Holdings Corporation is a leading distributor of insurance and financial products and services to businesses throughout the United States. Founded in 1994, USI has grown – organically and through acquisitions – to become, according to Business Insurance, the ninth largest insurance broker in the United States. USI is located in 19 states and is headquartered in Briarcliff Manor, New York. For more information regarding our value-added insurance products and services, visit our Web site at www.usi.biz. USI Southwest Real Estate Practice 1445 Ross Avenue, STE 4200 Dallas, TX 75202

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