Having a Skin in the Game Establishing Maersk Insurance A/S By Lars Henneberg, Vice President Head of Risk & Insurance, A.P. Moller-Maersk A/S Our philosophy In the A.P. Moller – Maersk Group we are committed to manage risks in a manner, where the downside of risks is carefully assessed and balanced against the upside potential APMM at a glance Shipping Oil & Gas Maersk Line Maersk Oil APM Terminals Oil Services Damco Svitzer FPSO DFDS Dansk Supermarked Tankers HÖEGH Autoliners Asset heavy risk management - 1000 owned vessel - 500 chartered vessels - 60 terminals - 26 rigs - 626,000 boepd in 6 countries - Exploration in 11 countries - 108.000 employees - Active in 130 countries Where did we come from? - Decentralised organization - Budget hedging mindset - Limited transparency - Substantial premium spend - Benign claims experience - Recent claims experience Question asked: - Why are we insuring? Our theory of value creation * * * To continuously reduce the Group's total cost of risk by 15% p.a. Through insurance procurement, retention management, loss prevention, claims management, insurance governance and insurance advice Being cost effective, fast, competent, transparent and accessible while fully leveraging the Group's position * * * What did we want to achieve? Drive down our cost of risk by - utilising our risk bearing capacity and risk appetite - simplifying our programme structures - avoiding dollar swapping - reducing our exposure to market volatility - drive mindset towards loss prevention Moving from "budget hedging" to active risk management - Leverage Group position - Retention management - Loss prevention - Strategic relation to insurers How did we get there? Presentation for the Executive Board APMM Project Team and Plan established (1) Captive capitalization FSA approval Submission of FSA application (2) Executive Board approval Meetings with FSA 2011 Q1 Captive feasibility study presented to Executive Board in which proposal to launch a captive project was approved 2012 Q2 (1) Data collection and validation (2) Actuarial modelling (3) Design of captive programme (4) QIS 5 calculations 9 Q3 Q4 Q1 Presentation to APMM Board (1) Initial meetings with potential lead partner markets (2) Broker selection (1) Approach of lead markets (2) Programme marketing Programme inception 1 January Finalise terms, documentation The new programme structure $2bn Risks in MIAS: - General: Physical damage and business interruption - Energy: Rigs, platforms, pipelines, wells and FPSOs - Marine: Vessels - Property: Terminals Insurance Market $500m Insurance Market $150m Insurance Market Captive Market Coinsurance Captive Market Coinsurance Captive BU deductibles BU deductibles Energy Property Damage Control of Well (OEE) Business Interruption Third party liability Marine Hull & Machinery Third Party Liability BU deductibles Property Property Damage Business Interruption Market Coinsurance The business case for MIAS - Substantial annual savings due to  programme consolidation  optimized risk retention  loss prevention - Capitalization of USD 90 mio - 3 staff and outsourcing - Why a captive? Working with MIAS EXCESS INSURANCE REINSURANCE Captive Fronter Group Finance & Risk Management (Risk & Insurance) Risk Insurance GFRM/Risk & Insurance BU Supporting loss prevention -Quarterly reports -Annual meeting Review of Safety Performance Loss Prevention Programme Review of Losses -Analyze incidents -Establish Total Cost of Risk Review of Processes and Assets -Asset surveys -Process interviews Developing MIAS as a strategic risk management tool - 3 year strategy plan - Financial drivers - Growth drivers - Business drivers - Operational drivers The lessons learned  Project planning and execution are key  Importance of stakeholder involvement  Availability and quality of data is key  Value of actuarial work  Be clear on your theory of value creation  Recognize and respect programme drivers  Work around sub-optimization  Importance of transparency  Importance of loss prevention