Aon Plc · NYSE:AON

Aon — Corporate Update (December 2014)

66 slides from Aon's corporate update, Dec 11, 2014

  1. Slide 1: Aon Guernsey Non-Executive Directors' Seminar

    Aon Guernsey Non-Executive Directors’ Seminar 11 December 2014 Aon Risk Solutions Global Risk Consulting | Captive & Insurance Management

  2. Slide 2: Agenda

    Agenda  Welcome  Charles Winter – Market Review  Jonathan Carter – Compliance Update  Thanks  Drinks & Canapés Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 2

  3. Slide 3: Market Review

    Market Review Charles Winter, COO & Head of Risk Financing Aon Global Risk Consulting UK

  4. Slide 4: Agenda

    Agenda  Insurance Market Conditions & Forecast  GRIP Stats  2015 Outlook  Employee Benefits  BEPS – Summary & developments  Terrorism changes 4 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  5. Slide 5: Insurance Market Conditions & Forecast

    Insurance Market Conditions & Forecast 5 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  6. Slide 6: The Reinsurance Market – Opening Position

    The Reinsurance Market – Opening Position  Reinsurer Capital $410B The involvement of capital market investors in the reinsurance sector through non-equity participations continues to expand. This is evidenced by :  record levels of catastrophe bond issuance in the first half of 2014 (exceeding th

  7. Slide 7: Alternative Capital Inflows to Reinsurance Market

    Alternative Capital Inflows to Reinsurance Market 7 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  8. Slide 8: Market Summary

    Market Summary  Surplus capital in the system – Alternative capital continues to flow into the reinsurance market – Flow down to direct market – Insurers increasing capacity  Insurer results continue to impress – Despite the low investment returns – Despite reserve releases slowing – Despite the s

  9. Slide 9: The Reinsurance Market – Performance

    The Reinsurance Market – Performance  Reinsurer Performance • Underlying trends were negative, as weakening pricing and business mix changes, particularly a shift towards longer-tail proportional contracts, impacted attritional loss and expense ratios. 9 Aon Risk Solutions | Global Risk Consulting

  10. Slide 10: Insurer Results – as reported September 2014

    Insurer Results – as reported September 2014 H1 2014 CR H1 2013 CR H1 2014 Profit H1 2013 Profit Allianz 93.60% 95.10% €3.59bn €3.47bn ACE 88.20% 88.10% $1.51bn $1.84bn AIG 99.90% 100% $4.68bn $4.93bn QBE 96.50% 92.80% $392m $477m Zurich 96.10% 98.10% $2.10bn $1.85bn 10 Aon Risk Solutions | Global R

  11. Slide 11: Market Conditions – GRIP Insight

    Market Conditions – GRIP Insight United Kingdom US (2014) (2014) Rate Q1 Q2 Q3 (Forecast) Rate Q1 Q2 Q3 (Forecast) All LOBs +0.55% -0.33% -1.38% All LOBs +0.51% -0.61% +0.02% Motor +0.97% +4.53% +1.42% Casualty/Liability -0.44% -0.43% +0.69% Casualty/Liability +1.55% -2.17% -4.20% Property +0.79% -0

  12. Slide 12: GRIP Statistics: UK - All Lines of Business

    GRIP Statistics: UK - All Lines of Business % Change in Rate at Renewal 15.00 10.00 5.00 0.53 0.88 0.55 0.45 0.00 % -0.33 -1.38 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 12 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  13. Slide 13: GRIP Statistics: UK - Casualty/Liability

    GRIP Statistics: UK - Casualty/Liability % Change in Rate at Renewal 15.00 10.00 5.00 1.88 1.55 1.06 0.00 % -0.55 -2.17 -5.00 -4.20 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 13 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  14. Slide 14: GRIP Statistics: UK - Employers Liability

    GRIP Statistics: UK - Employers Liability % Change in Rate at Renewal 15.00 10.00 5.00 1.84 0.81 0.18 0.03 0.00 % -0.45 -2.37 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 14 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  15. Slide 15: GRIP Statistics: UK - Property

    GRIP Statistics: UK - Property % Change in Rate at Renewal 15.00 10.00 5.00 0.53 0.00 % -0.74 -1.78 -1.55 -2.26 -2.00 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 15 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  16. Slide 16: GRIP Statistics: UK - Motor

    GRIP Statistics: UK - Motor % Change in Rate at Renewal 15.00 10.00 4.42 4.29 4.53 5.00 2.37 1.42 0.97 0.00 % -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 16 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  17. Slide 17: GRIP Statistics: UK – Directors & Officers

    GRIP Statistics: UK – Directors & Officers % Change in Rate at Renewal 15.00 10.00 5.00 2.81 1.93 0.31 0.00 % -0.60 -1.30 -1.77 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 17 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  18. Slide 18: GRIP Statistics: UK - Marine

    GRIP Statistics: UK - Marine % Change in Rate at Renewal 15.00 10.00 5.00 0.73 0.00 % -0.82 -2.07 -5.00 -10.00 -8.83 -8.91 -10.60 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 18 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  19. Slide 19: GRIP Statistics: US – All Lines of Business

    GRIP Statistics: US – All Lines of Business 15.00 % Change in Rate at Renewal 10.00 5.00 1.40 0.71 0.41 0.51 0.02 0.00 % -0.61 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 19 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  20. Slide 20: GRIP Statistics: US – Casualty/Liability

    GRIP Statistics: US – Casualty/Liability 15.00 % Change in Rate at Renewal 10.00 5.00 1.94 0.95 0.73 0.69 0.00 % -0.44 -0.43 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 20 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  21. Slide 21: GRIP Statistics: US - Property

    GRIP Statistics: US - Property 15.00 % Change in Rate at Renewal 10.00 5.00 1.64 0.84 1.18 0.79 0.00 % -0.03 -0.82 -5.00 -10.00 -15.00 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 (Forecast) 21 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  22. Slide 22: Natural Catastrophe Risk

    Natural Catastrophe Risk Natural Hazard Risk: Absolute Economic Exposure Index 2014 22 Aon Risk Solutions | Global Risk Consulting | Risk Finance 22

  23. Slide 23: Natural Catastrophes: Q1 & Q2 2014

    Natural Catastrophes: Q1 & Q2 2014 The global insurance industry covered $21bn (£12.7bn) of losses from disasters in the first half of 2014 as fewer natural catastrophes kept claims below their long-term average. The most costly insured events in the The total economic cost of first half of this yea

  24. Slide 24: Market Conditions – on the shop floor

    Market Conditions – on the shop floor  Highly competitive market – Opportunity to maximise premium savings – Opportunity to review and develop coverage  Organic growth for insurers is difficult to achieve – Cross selling – New products – Client management initiatives  Information is still key – C

  25. Slide 25: Market Conditions – on the shop floor

    Market Conditions – on the shop floor Message consistent with 2013 Significant differentiation in insurer responses based on: Time, preparation and information = best results 25 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  26. Slide 26: Market Conditions - Outlook 2015 renewal

    Market Conditions - Outlook 2015 renewal Aon Benfield: “Non-traditional market participation continues Swiss Re: “The pattern of falling loss ratios has to increase with total capital at USD58.6 billion, an increase of been slowing. Future reserves changes may in more than 18 percent since year end

  27. Slide 27: Employee Benefits Developments

    Employee Benefits Developments 27 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  28. Slide 28: Developments in Employee Benefits

    Developments in Employee Benefits Organic Growth New Developments Adding more Of captives Premium growth Risk/HR Cross class Reinsurance policies into writing EB within captives collaboration aggregates Protection existing captives Previously New regions (e.g. Commissions to unfunded/ M&A Interventi

  29. Slide 29: Base Erosion & Profit Shifting

    Base Erosion & Profit Shifting 29 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  30. Slide 30: Base Erosion and Profit Shifting (BEPS) – Recent Developments

    Base Erosion and Profit Shifting (“BEPS”) – Recent Developments BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations where there is little or no economic activity, resulting in little or no overall corporate tax

  31. Slide 31: Base Erosion and Profit Shifting (BEPS) – Continued

    Base Erosion and Profit Shifting (“BEPS”) – Continued Captives have been specifically referenced in consultation documents with the action points that potentially have the most relevance noted below • Action 3 “Strengthen CFC rules”: Controlled Foreign Companies (CFC) and other anti-deferral rules e

  32. Slide 32: Terrorism Developments

    Terrorism Developments 32 Aon Risk Solutions | Global Risk Consulting | Risk Finance

  33. Slide 33: Pool Re – Proposed Changes and EGM Outcome

    Pool Re – Proposed Changes and EGM Outcome Background HM Treasury proposed changes to the way Pool Re is to be funded. Following negotiation between Pool Re and HMT a revised set f changes has been agreed upon to maintain HMT as reinsurer of last resort. Changes: • HM Treasury proposed to increase t

  34. Slide 34: TRIA / TRIPRA Renewal

    TRIA / TRIPRA Renewal Terrorism Risk Insurance Act (TRIA) and Terrorism Risk Insurance Program Reauthorisation Act (TRIPRA) It is a public-private partnership that provides affordable and widely available terrorism cover in the US. TRIPRA was initially enacted to stabilize the insurance market and t

  35. Slide 35: Compliance Update

    Compliance Update Jonathan Carter, Compliance Officer & MLRO Aon Guernsey

  36. Slide 36: Sections

    Sections Topics Section 1 Compliance Update Section 2 Regulatory environment - 2014 Section 3 Regulatory environment - 2015 Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 36

  37. Slide 37: Compliance Update

    Section 1 – Compliance Update Compliance Update Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 37

  38. Slide 38: Contents

    Section 1 – Compliance Update Contents  About your Compliance Officer / MLRO  My perspective, my role  My perspective, you  Compliance function  MLRO function Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 38

  39. Slide 39: About your Compliance Officer / MLRO

    Section 1 – Compliance Update About your Compliance Officer / MLRO  Solicitor  City, in-house life and pensions companies  Formerly, director of GFSC licensed companies  Committee member, Guernsey Association of Compliance Officers Aon Risk Solutions | Global Risk Consulting | Captive & Insuranc

  40. Slide 40: Compliance Update: Employed vs Appointed

    Section 1 – Compliance Update Employed Appointed Insurance Compli- Captive Manager ance Insurer Officer (MLRO) Responsibility (Prescribed Person) Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 40

  41. Slide 41: My perspective – you

    Section 1 – Compliance Update My perspective – you  60 NEDs  2.5 captive directorships / NED  Guernsey resident  Insurance professionals, accountants, lawyers Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 41

  42. Slide 42: Compliance function

    Section 1 – Compliance Update Compliance function Guernsey  Jonathan Carter, Compliance Officer  Stuart Brown, Deputy Compliance Officer  Zoe Carter, Senior Compliance Administrator Aon Dublin  Ann O’Keefe, Group Head of Risk and Compliance, Aon Captive Insurance Managers  AIM Global Compliance

  43. Slide 43: Aon Compliance Guernsey - Mission Statement

    Section 1 – Compliance Update Aon Compliance Guernsey - Mission Statement ‘To assist Aon and its clients to carry out their business with integrity and in accordance with legal, regulatory and ethical responsibilities.’ Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Pro

  44. Slide 44: MLRO function - 2014

    Section 1 – Compliance Update MLRO function - 2014  MLRO - Jonathan Carter  Deputy MLRO – Diana Knott  Nominated Officers – Amanda Helyar and Justin Upson  THEMIS (process simplification) Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | De

  45. Slide 45: Regulatory environment - 2014

    Section 2 – Regulatory environment - 2014 Regulatory environment - 2014 Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 45

  46. Slide 46: Contents

    Section 2 – Regulatory environment - 2014 Contents  PRISM  MoneyVal  GFSC  AML / CFT Exemption (2013) Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 46

  47. Slide 47: PRISM (new for 2014)

    Section 2 – Regulatory environment - 2014 PRISM (new for 2014)  ‘Probability and Risk Impact System’  Insurance division first to adopt in 2013  Model - risk probability vs impact  Risks – strategy / business model, governance, conduct, operational, environmental, credit, market, capital, liquid

  48. Slide 48: MoneyVal

    Section 2 – Regulatory environment - 2014 MoneyVal  Council of Europe - Committee of Experts on the Evaluation of Anti- Money Laundering Measures and the Financing of Terrorism  AML / CFT FATF standards  ‘Satisfactory’ - Report in Spring 2015  Business / client risk assessments, mitigation of AM

  49. Slide 49: GFSC

    Section 2 – Regulatory environment - 2014 GFSC Caroline Bradley Secondment to Channel Islands Brussels Office Returns as Deputy Director Insurance December 2014 William Mason Director General elected to executive committee of International Association of Insurance Supervisors (IAIS) Aon Risk Solutio

  50. Slide 50: GFSC (cont.)

    Section 2 – Regulatory environment - 2014 GFSC (cont.) Industry Presentation 2014, Insurance Supervision and Policy Division  Presentation slides http://www.gfsc.gg/The-Commission/About-Us/Events/Documents/20141121-Insurance- Slides.pdf  Speeches http://www.gfsc.gg/The-Commission/About- Us/Events/

  51. Slide 51: AML / CFT Exemption (2013)

    Section 2 – Regulatory environment - 2014 AML / CFT Exemption (2013) The Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (Amendment of Schedules 1 and 2) Regulations, 2013 (March 28th 2013)  General insurance - AML / CFT regime / GFSC Handbook no longer apply  Insurance mana

  52. Slide 52: AML / CFT Exemption (2013) (cont.)

    Section 2 – Regulatory environment - 2014 AML / CFT Exemption (2013) (cont.) General insurers still subject to:  Disclosure laws  Drug trafficking laws  Anti-corruption legislation  Sanctions, etc. Commission still expects NEDs of general insurers to be aware of:  AML / CFT risks  The vulnerab

  53. Slide 53: Regulatory environment - 2015

    Section 3 – Regulatory environment - 2015 Regulatory environment - 2015 Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 53

  54. Slide 54: Contents

    Section 3 – Regulatory environment - 2015 Contents  PQs – On-line portal  Solvency requirements  Accounting rules  Corporate governance  Conduct of business rules  Revision of laws Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | Decembe

  55. Slide 55: PQs – On-line portal

    Section 3 – Regulatory environment - 2015 PQs – On-line portal  Q1 roll out of new on-line PQ regime  Aon involved in pilot testing and initial roll-out  Requirement to submit new on-line PQ via portal  No PDs (next PD will trigger new PQ)  Your personal responsibility to submit / update Cont.

  56. Slide 56: PQs – On-line portal (cont.)

    Section 3 – Regulatory environment - 2015 PQs – On-line portal (cont.)  LMU (‘Licensee Main User’) can monitor submissions by entity – Amanda Helyar (Co. Sec. Officer)  https://online.gfsc.gg/  Part of wider IT programme – e.g. plans for on-line submission of annual returns and notifications Aon

  57. Slide 57: Solvency requirements

    Section 3 – Regulatory environment - 2015 Solvency requirements Insurance Business (Bailiwick of Guernsey) (Amendment) Ordinance, 2014 Addresses certain gaps between Guernsey’s insurance regime and requirements of IAIS particularly:  ICP 16 - Enterprise risk management  ICP 17 – Capital adequacy I

  58. Slide 58: Accounting rules

    Section 3 – Regulatory environment - 2015 Accounting rules  UK GAAP changing to reflect International Financial Reporting Standards (IFRS)  Captives to decide which standard to adopt – IFRS – FRS 101 (IFRS with reduced disclosure for subsidiaries of an IFRS group) – FRS 102 (uses FRS 102)  Captiv

  59. Slide 59: Conduct of business rules

    Section 3 – Regulatory environment - 2015 Conduct of business rules  The ‘Conduct of Business Rules’ issued under the Insurance Managers and Insurance Intermediaries (Bailiwick of Guernsey) Law, 2002 to be replaced by The Insurance Mangers (Conduct of Business) Rules 2014  No material changes – re

  60. Slide 60: Corporate governance

    Section 3 – Regulatory environment - 2015 Corporate governance  Amendment of Licensed Insurers’ Corporate Governance Code, 2002 to reflect IAIS insurance core principals: – ICP 7 – Corporate Governance – ICP 9 – Internal controls  Principle 4 – Duties of individual board members  Draft on GFSC we

  61. Slide 61: Revision of laws – overview

    Section 3 – Regulatory environment - 2015 Revision of laws – overview  Key aims include: – maximising ‘usability’ of laws – creating efficiencies – enhancing clarity – removing inconsistencies  Key driver – next IMF visit  Discussion paper published Nov. 10th 2014, feedback by December 19th 2014

  62. Slide 62: Revision of laws – insurance

    Section 3 – Regulatory environment - 2015 Revision of laws – insurance Sector specific  Gap between Guernsey’s insurance regime and requirements of International Association of Insurance Supervisors mainly being addressed by revisions to solvency regime  Future revision – ‘Group-wide supervision’

  63. Slide 63: Looking forward

    Section 3 – Regulatory environment - 2015 Looking forward Implementation of International Association of Insurance Supervisors ICPs (Insurance core principles). Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 63

  64. Slide 64: And finally…..

    Section 3 – Regulatory environment - 2015 And finally….. Commission enforcement action – Guernsey Insurance Brokers Limited “… within 18 months … Mr. W. is to obtain the Certificate in Company Direction or Accelerated Certificate in Company Direction … or equivalent qualification …” Aon Risk Solutio

  65. Slide 65: Questions?

    Questions? Jonathan Carter Compliance Officer / MLRO +44(0) 1481 707937 [email protected] Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Proprietary & Confidential | December 2014 65

  66. Slide 66: Thank you

    Thank you AION Empower Results®

Aon — Corporate Update (December 2014) on 6ix