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HomeMy WebLinkAbout4 Risk and Insurance Services Agenda Item # Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager Date: November 1, 2002 Subject: Consideration of appointing Robb Hubbard of Marsh USA Risk & Insurance Services as the District's Broker of Record to obtain property and liability insurance for 2003-04 and provide other services as proposed. After our 2000-2001 insurance renewal, all but one of the employees in the public entity department at AON Risk Services moved over to Marsh USA Risk & Insurance Services. As you may remember, when the renewal was presented to the Board last April, it was presented by a new representative named Bob Brian. You may also remember that the premiums jumped considerably in price (from $237,652 to $354,634 - a 49% increase). I'm sure that the majority of the price increase had to do with the events relating to 9-11 and the District's increased property values and labor costs. Bob Brian is no longer with AON. I have been told that the reason the staff at AON left the organization was because AON had changed their business model and the staff did not believe that AON's new method of doing business would be beneficial to their customers. In the past, we have always dealt with the same team out of the San Francisco office. Now, when we call to get an answer to a question, we must deal with several different people each time. We're constantly being told that the person we want to talk to is no longer with them. In trying to resolve an invoicing problem, I have had to work with at least three people. We have not been happy with the service since the change. We have only recently received policies and the payment schedule that we asked for did not get implemented properly. As a result, we have asked Robb Hubbard to give us a proposal for brokerage services. You will find that proposal attached. Additionally, I asked him for two things: 1) to propose a flat fee for his services rather than a commission; and 2) to perform a risk assessment and help us to find ways to cut our insurance costs. premium increase in the neighborhood of 20% another re 9 Next renewal, I am expecting P to 25% and I want to find ways minimize that increase. Robb has represented the District over the last several years and we have always had a good working relationship. I feel that we need Robb's expertise and experience to assist us. I'm not sure that with the revolving door at AON, that the District would be getting the best price and the best service. RECOMMENDATION: To appoint Robb Hubbard of Marsh USA Risk & Insurance Services as the Broker of Record for the District to perform brokerage services as outlined in the proposal; such services will be performed for a flat fee of $35,000 annually and will only change based on changes in the consumer price index unless other services in the proposal are requested. This arrangement may be cancelled by either party upon 90 days written notice. Robb Hubbard Marsh Risk&Insurance Services Vice President 3 Embareadero Center,Suite 300 San Francisco,CA. 94111 Phone:415 743 7741 Fax: 415 743 7778 '... robb.hubbard@marsh.corn California License No,0437153 MARSH November 7, 2002 Mary Chapman Truckee-Donner P.U.D 11570 Donner Pass Road P.O. Box 309 Truckee, CA. 96160 PROPOSAL FOR INSURANCE BROKERAGE SERVICES Dear Mary: Truckee-Donner P.U.D. (TDPUD) is a very special client to our team. We are pleased to outline herein, our proposal for Insurance Brokerage and Risk Management Services. We stand ready to resume a level of experienced service to TDPUD and to continue a committed partnership of which we can all be proud. In your evaluation of Marsh, you have the benefit of a 10-year "report card" on the professional services, commitment and leadership our team has displayed to TDPUD. Our team has skillfully guided TDPUD through hard and soft markets, and provided highly competitive insurance programs in both environments, achieving a very solid track record of performance. We have striven for the highest possible satisfaction in our service to you, a difficult goal in this business. We believe we have achieved the trust of the Board and staff over the years. Services Marsh is the largest insurance broker in the United States. Marsh has not worked with TDPUD, but Marsh's San Francisco based Public Entity l Public Utility account team assigned to TDPUD has experience working with you over the last five years. In that time, we provided TDPUD with coverage innovation, pricing consistency combined with a strong service proposition. We are a highly specialized service team that works with nothing but public entities. We have direct experience with a variety of water and power agencies; moreover, we also understand the concerns facing all agencies in the days of tight budgetary constraints. Added to the existing concern is the impact of 9/11/01 on the insurance marketplace. After 9/11, the market has experienced significant change resulting in coverage restrictions and pricing increases. We see very little chance of improvement in the marketplace over the next 24 months. It is exactly that reason why Marsh is the best choice for TDPUD. We understand your operations. We have placed coverage on behalf on TDPUD and have as well, significant experience dealing with insurance carriers in a tough market. Marsh has market clout that other brokers can only talk about. Thus, our experience handling your account, clout with the An MMC Company inuro kue proposal doc Marsh Risk&Insurance Services Page 2 November 7, 2002 Mary Chapman marketplace and our understanding of public accounts, makes us the right choice to be your broker. We would propose that the TDPUD appoint Marsh as your broker of record; as we detail below, we would propose to work on a fee basis versus a commission on the following insurance policies: ➢ General Liability ➢ Property ➢ Umbrella ➢ Automobile ➢ Crime ➢ Inland Marine ➢ Boiler and Machinery ➢ Public Officials Errors and Omissions ➢ Earthquake ➢ Aboveground Pollution ➢ Fiduciary Liability. We would work on a standard commission's basis if you prefer. Marketing We will market all lines of coverage with commercial insurance carriers and we will ascertain the best coverage and pricing for TDPUD. With the experience of our service team and our strong marketing credentials, we are the best bet for keeping your overall costs in line to the extent possible. Marsh is generally the largest producer for many insurance carries. For instance, Marsh is the largest broker sending business to St. Paul, your current lead insurer. This market clout not only with St. Paul, but many other insurers means that we have a great deal of leverage with these insurers. We also focus our marketing efforts though our Global Broking Division. Global Broking, in concert with the Client Executive, directly negotiates with carriers creating a "client triangle" where our Client, Global Broking and the Client Executive work in concert with the designated market. We encourage our client's to become part of this process both to make certain "your" story is told correctly and also to provide you with direct understanding as to how the marketplace is viewing your risks. Specifics would include: ➢ Negotiation of coverage terms with various carriers ➢ Review of your account with carriers ➢ Development of coverage and pricing options We cannot guarantee what will occur on renewal. In today's marketplace we would be remiss in not telling you that conditions projected for next May would indicate that a further pricing increase will be likely. intrro letter proposal.doe Marsh Risk&Insurance Services Page 3 November 7,2002 Mary Chapman Administration We will provide all the routine but necessary services directly with the TDPUD; we do not use a service center that is located in a distant City. Your service team will be located in San Francisco. Marsh will also assign an Account Administrator to work on our account with Mr. Hubbard. This allows you to have several direct contacts that know your account and to whom you can communicate. We will handle the necessary backroom work as a part of our services including: ➢ Issuance of certificates ➢ Completion of policy summaries and policy handbooks ➢ Issuance of additional insured requests ➢ Preparation and handling of specifications to go to the market ➢ Issuance of binders ➢ Billings ➢ Policy reviews for accuracy Processing underwriting and risk changes such as adding new vehicles or equipment to the policy ➢ Regular reports and communications Marsh.com is our communications portal and is an easy means for our accounts and their service teams to keep abreast of existing or new issues. A description of the service, which is included at no expense, will be submitted under separate coverage. Risk Management Perhaps one of the chief areas where we believe our prior experience with TDPUD will be the most useful is for us to complete a risk management survey on your behalf. This process, called a Business Needs Risk Assessment, or BNRA, is designed to allow us to evaluate your exposures compared to the coverage carried. This allows us to assure that you both have appropriate coverage with exposures dealt with as needed. As the TDPUD grows by purchase or acquisition of other water/power customers, having a strong understanding of your exposure allows us to do a better job on your behalf. The BRNA process would include: ➢ An insurance policy review ➢ Completion of risk analysis using a risk quantification survey(questionnaire)where members of the TDPUD staff would be interviewed to compare their understanding of risk/exposure to that which actually exists ➢ To include a survey of perception of risk to allow for the completion of a risk map, quantifying exposure on a frequency and severity axis ➢ A financial analysis comparing balance sheet and ledger items with actual schedules presented to the commercial marketplace ➢ Interviews with not only management,but other staff would be included in the process ➢ Completing a summary report setting findings intrro letter proposal.doe Marsh Risk&Insurance Services Page 4 November 7, 2002 Mary Chapman Claims Assistance As needed, Marsh will supply claims assistance to the TDPUD in the event that problems arise in the manner in which claims are handled.Please refer to our work plan. Fee Presently, we estimate that the TDPUD is paying about$44,000 annually in commissions on the business being handled by our competitor. That figure would not include workers compensation. Renewal terms will likely increase the income on the account even further. We would propose a fee of $35,000 annually, with changes based on changes in the consumer price index or if other services, as noted in the proposal are requested. If we were appointed to handle the workers compensation placement, there would be an additional fee for that service. If placement required a commission (some insurance carriers will not issue a policy without a commission), we would reduce the fee to offset that commission received. Full disclosure is the rule within Marsh Risk& Insurance Services. Other Services Our risk-consulting professionals keep us advised of new developments in the law as well as new products and services available to our clients. As the leading provider of brokerage and consulting services to the public sector, Marsh has a wealth of insurance-related information of potential value to TDPUD. We will constantly review Marsh's database or resources for topics of interest to TDPUD, and make them available electronically and in hard copy at Board meetings or retreats. Typical other services would include: ➢ Consulting relating to work force strategies, including behavioral risk management, absence management, cumulative injury management; ➢ Environmental risk consulting services; ➢ Claims services other than those specified above,including catastrophic claims,mass tort claims, claims advocacy services and archival research; ➢ Non-recurring insurance placements involving significant quantitative or actuarial analysis or modeling,placements of risks with financial institutions other than insurance carriers,and placements of risks not customarily accepted by insurers; and ➢ Employee benefits services These services would be priced separately. We have included for your review various draft documents, including a fee for services agreement, a sample broker of record letter,my bio, and our services plan outline tailored for TDPUD. These documents are designed to demonstrate our commitment to the handling of your insurance and risk management program. In closing, we appreciate the opportunity to present our service proposal. We hope you will choose Marsh Risk and Insurance Services to be your risk partner. We are eager to work with you as you begin to address the challenges of emerging risk management issues in a very hard and difficult market. intnro letter proposal.doc Marsh Risk&6rsurance Services Page 5 November 7, 2002 Mary Chapman Since ly, f j Robb H/brd f Sr. Client Executive Public Entities intn o letter proposal.doc MARSH An MMC Company Robb Hubbard Public Entity Practice — Western Region Current Robb is a Vice President and Senior Client Executive of the Marsh Responsibilities Public Entity Practice located in San Francisco. This is a specialized industry oriented Brokerage position dedicated to developing sales and serving the insurance and risk management needs of governmental entities and assisting Marsh offices in the Western Region in producing and retaining public entity clients. Experience Prior to joining Marsh, he was the Aon Public Entity Practice Sales leader working with various offices nationally in sales development efforts and also managed various pooled and individual governmental accounts. Prior to re joining the brokerage community, Robb was an independent risk management consultant specializing in governmental and utility district services, including alternative financing,pool development, coverage and risk management reviews. Robb served as the Administrator/General Manager of one of the first pools dedicated to dealing with environmental issues at a state level. The pool managed financial responsibility needs for 2,400 clients and also administered a$200,000,000 cleanup reimbursement program. Robb has claims and underwriting experience and has been associated with the industry for 30 years in various positions. In 1996, Robb was elected as a President of the Society of Risk Management Consultants association. He has spoken before many national, regional, statewide and local conferences and seminars on the topic of insurance, environmental issues and risk management. He has authored several articles on Risk Management practices, cost containment and enterprise risk management. Education Mr. Hubbard received his a B.A. degree from Western Illinois University and has completed 9/10 parts of CPCU. Affiliations PRIMA, PARMA,CAJPA, STRIMA Member ofMarsh Industry Practices (Current Date) Marsh Risk& Insurance Services California License No. 0437153 P.O. Box 193880 San Francisco, CA 94119-3880 and Other Concerned Parties: Be advised that effective we have appointed Marsh Risk & Insurance Services, Incorporated to act as our exclusive Insurance Representative of Record and to represent us in all matters pertaining to (Lines of Insurance) Insurance. This appointment shall remain in full force and effect until our notification in writing to the contrary is received by you. We ask that you not object to this appointment and waive any waiting period that you may require for acceptance. This appointment supersedes all other appointments and all other letters of authorization on record. Marsh Risk & Insurance Services, Inc. is hereby authorized to negotiate directly with any interested company as respects changes in existing insurance policies and in closing, changing, increasing or canceling insurance carried under temporary binders or cover notes. We understand, however, that they will not share responsibility for any deficiencies in the insurance program to which this letter applies until they have had a reasonable opportunity to make a review to provide us with their recommendations. This letter also constitutes your authority to furnish Marsh Risk & Insurance Services, Inc.'s representatives with all information they have requested as it pertains to our insurance contracts, rates, rating schedules, surveys, reserves, retentions and all other financial data they may wish to obtain for their study of our present and future requirements in connection with the insurance program to which this letter applies. We request that you do not communicate such information to anyone else. Please render our new Broker any assistance they may request on our behalf. Very truly yours, By: SAMPLE ENGAGEMENT LETTER (For Fee-Based Compensation) Dear We are pleased that you have chosen Marsh Risk and Insurance Services Inc. to be your insurance broker. We look forward to developing a mutually rewarding and long-standing relationship with Truckee- Donner Public Utility District. Our goal is to provide a level of service that assures your satisfaction. The first step in realizing this goal is to ensure that we share a mutual understanding of our relationship. To this end,we have agreed to provide our traditional property, boiler& machinery,primary liability, umbrella, automobile, directors & officers,fiduciary liability, employment practices, crime, etc., as noted in our proposal dated 1117102 insurance brokerage services to you at an annual fee of$ 35,000,payable as follows: . Compensation will be reviewed and negotiated on an annual basis. Additional services such as,but not limited to risk management claims information systems-STARS, benchmarking-Dimensions, strategic risk assessment, specialized loss control& safety consulting, employee benefits) can be negotiated for a separate fee. In the event there is a significant change in your operations which affects the nature and scope of your program,we both agree to renegotiate this fee as appropriate.With respect to insurance placed by us on your behalf, we will disclose to you any commissions received by us and credit them against the annual fee. In the event such commissions for a contract year exceed our annual fee for that year, then excess commissions will be returned to you if permitted by law. Otherwise, excess commissions will be carried forward and applied against our annual compensation for subsequent years. Such commissions do not include compensation that we may receive, in accordance with the custom in our industry, under arrangements with certain insurers which provide for payments based upon such factors as the overall book of business placed by us and our affiliates, the performance of that book or the aggregate commissions paid for that book. We will utilize the services of other intermediaries to assist in the marketing of your insurance, when in our professional judgment it is necessary or appropriate. Such intermediaries may be affiliates of ours or other intermediaries not related to us.The compensation of intermediaries/wholesalers is not included in our fee and will be paid by insurers out of paid premiums. In certain cases,placements which we make on your behalf may require the payment of surplus lines taxes and/or fees to state regulators,boards or associations. Such taxes will be charged to you and identified separately on invoices covering these placements. We will monitor published financial information of your current insurers and alert you when their status falls below our minimum guidelines. We will not,however,be responsible for the solvency or ability to pay claims of any insurance carrier. Insurers with whom your risks are placed will be deemed acceptable to you, in the absence of contrary instructions from you. Our retention by you shall be continuous until terminated. Both parties retain the right to terminate this service arrangement upon 90 days written notice. In the event of termination, we will assist you in arranging a smooth transition. However, our and our affiliates' obligation to provide services to you will end upon the effective date of the termination. In the event of a mid-service year termination by you, our annual compensation will be earned according to the following schedule: CAtemodpud Client Svc Engmt Ln-Fee&C 60% at inception 75% after four months 100%after seven months If we terminate our arrangements with you, our annual compensation will be deemed earned on a pro-rata basis. We appreciate your business and we look forward to working with you.Unless you inform us in writing to the contrary,we will presume that this letter accurately reflects the terms of our engagement. Sincerely, Robb Hubbard Ctemp,tdpud.Clievt Svc E,V Lxr-Fee doc Truckee- onnerPU Work - Plan Title/Goal Objective Estimate Hours Staff Assigned ) Products and Services Ongoing Activities Marsh will monitor the risk - Issue insurance endorsements/certificates for policies financing needs of members for placed by Marsh or handled by Marsh 20 RH /staff the purpose of identifying, • Respond to coverage questions relative to all coverage developing or modifying risk in place. included RH /staff financing products and risk and insurance management services • Maintain information regarding current purchase needed by members. options.Annually review these products to ensure the 20 broadest possible coverage. RH /staff • On an annual basis provide members with a report containing all current insurance policies, group purchase programs, endorsements, coverage summaries etc. 10 staff - Establish alternate group purchase options by providing risk identification and coverage information to members. included RH /staff • Assist if needed with mid-term insurance coverage modifications and ancillary insurance placements included staff Projects • Semi-annual meetings and annual stewardship report included RH • Develop information regarding renewal strategy, pricing and coverage changes for the Truckee-Donner PUD insurance programs. 10 RH 80 hours 229 estimated hours per year for projected work activities Title/Goal Objective Estimate Hours Staff Assigned Communications Marsh will strive to maintain Ongoing Activities effective channels of - Establish semi-annual communication pieces regarding communication with Truckee- insurance and risk management issues. g staff Donner PUD to ensure responsiveness and to make - Issue State of Insurance Marketplace report in January Global Brokinq RH Truckee-Donner aware of the • Provide report annually regarding status of Marsh work Marsh resources . plan. 10 RH • Provide annual commission/fee disclosure report at request of Truckee-Donner PUD included RH • Provide Marsh.com to expand access to Marsh materials and resources through online sources. included RH Projects • Provide a training session to help representatives understand and access the resources of Marsh to maximize the potential benefits. g RH 26 hours Title/Goal Objective Estimate Hours Staff Assigned ) Marsh Client Advocacy Oversight Ongoing Activities Marsh Sr. Client Manager will • Review the work and services provided by Marsh monitor staff activities and consultants, Provide periodic updates to the Board of performance, Company activities, Directors detailing the quality of these services. 8 RH operation results, market trends . Develop and distribute annual Stewardship Report and other sources to assess the detailing Marsh activities and accomplishments. 20 RH /KG overall operation of Marsh as respects the satisfaction of • Maintain plan to ensure the knowledge and skills of staff Truckee-Donner PUD members. are regularly updated to stay current with new issues, regulation, products, trends, etc. included RH Projects • Complete a risk management consulting review of overall operations of the PUD. 20 RH 48 hours Title/Goal Objective Estimate Hours Staff Assigned C) Renewal Process Develop marketing strategy and • Renewal strategy meeting: Internal included RH &staff prepare underwriting • Develop marketing information questionnaires 5 RH &staff specifications to place Truckee- . Distribute to Truckee-Donner PUD members Donner PUD programs. included RH &staff • Assist members with application completion 5 RH &staff • Contact Marsh Market Intelligence for updates included RH • Receive underwriting data 3 RH &staff • Perform claims/reserve/data analysis 3 RH &staff • Prepare submissions to market 5 RH &staff • Renewal strategy meeting with Truckee-Donner PUD included RH &staff board • Estimate premiums for member budget purpose by 3 RH &staff February meeting 1 RH &staff • Refine program objectives 5 RH &staff . Negotiate terms wit!] markets 5 RH & staff • Receive and analyze market proposals • Discuss/review proposals with Truckee-Donner PUD 2 RH risk management committee. Make recommendations 1 RH & staff • Advise Truckee-Donner PUD of carrier financial 1 RH &staff acceptability to Marsh 2 RH & staff • Make renewal presentation to Board • Bind coverage, issue binders. Title/Goal Objective Estimate Hours Staff Assigned Renewal Process (con't) • Review rates and verify carrier invoices and issue invoices to Truckee-Donner PUD included RH &staff • Receive and check policies for terms and conditions accuracy include RH &staff • Issue policies to members d RH & staff -------------- 42 hours Title/Goal Objective Estimate Hours Staff Assigned D) Claims Advocacy Marsh will provide high quality Ongoing Activities and expert claims advocacy • Monitor member compliance with established claims representation as well as claims protocols with excess carriers 1 2 Claims staff consultation to Board, staff and TPA. Monitor claims filed with carriers by Truckee-Donner 2 Claims staff • Assist Truckee-Donner PUD in resolving claims and 2 Claims staff coverage issues with carriers • Monitor and review loss-reporting protocols to ensure claim reports and loss runs meet carriers needs and 2 Claims staff expectations Projects • Assist members and TPA in the development of procedures to ensure proper handling of claims by 2 Claims staff 8 hours Title/Goal Objective Estimate Hours Staff Assigned E) Risk Management Services Ongoing Activities Marsh will compile, promote and • Maintain a database of exposures 10 RH effectively disseminate a wide • Assist Truckee-Donner PUD to manage its Risk range of risk management, safety Management Assessment process. and loss control information to members and continue to • Work with the General Manager and Risk develop, improve and expand Management Committee to create and update a methods to serve as a resource Risk Assessment instrument. 1 5 RH for members. • Conduct risk management survey and review included RH • Provide updated reports to the Risk Management Committee regarding risk findings. • Maintain virtual library thru Marsh.com detailing risk Included- RH analysis, insurance industry news available to members through Marsh and its resources. 10 RH • Provide Contract Review I Insurance specifications — — — — — consulting as required 25 hours Global Technology Services MARSH p on Top of Your Risk Issues Marsh.com Marsh.com delivers the How You Benefit From Marsh.com knowledge you need to Marsh.com offers you several benefits.You can plug into your team of Marsh experts and your account information anytime, from anywhere.We put our risk intelligence, stay informed on industry industry resources, and business applications at your fingertips.Your customized Marsh.com web site can help you reduce your total cost of risk by digitizing tradition- trends and developments ally labor-intensive tasks such as publishing procedure manuals and service plan- affecting your insurance ning.It also reduces the need for traditional certificates of insurance. decisions. Marsh.com Overview Business Task Tools: ■ Procedure Manuals it also enables us to work - Publish your firm's risk management policies and procedures in a template designed with you in assessing your for easy access and maintenance(contract review,claims handling,etc.) ■ Service Planning risk options and coming up - Know the status of your risk and insurance projects using a project tracking facility with state-of-the-art - Access your firm's history of account activity with Marsh ■ Policy Summary solutions. - Access your firm's policy summaries online - Retrieve historical policy data for up to five years ■ Certificates Your Marsh.com web site - Publish evidence of insurance on a web site(Memorandum of Insurance) - Request a certificate of insurance online provides a secure ■ surety environment containing - Request bonds over the Web the tools you need to - view online reports conduct business with your Communication/Information Resources: ■Discussion Forums Client Executive and your - Collaborate with your Client Executive and service team online in real time service team. - Access and search previous discussion threads ■ Marsh Intellectual Capital - Read articles by Marsh experts that address your industry and risk concerns ■ Market Information - Find reports on the financial condition/status of 10,000+insurance providers (Marsh's market analysis,ratings from AM Best,Standard&Poor's,and Moody's,etc.) ■ Country Information - Look up insurance requirements and risk updates for countries around the world ■ Regulatory Compliance - Find requirements and statutes that affect your insurance decisions on a state level ® In the News - Access third-party news feeds you can sort by industry or source ■ Key Links - Links to insurance and business-related web sites MARSH Questions and Answers about Marsh.com for Clients How do I sign up for Marsh.com? Is my Marsh.com web site protected from Contact your Client Executive to become registered for access unauthorized access? to the Marsh.com portal.We will work with you to determine Marsh.com uses the latest web authentication,password pro- which tools are right for your business.After your Client tection,and encryption solutions to ensure that your firm's Executive submits your account setup request,you will receive security is never compromised.Your Marsh.com web site is your Marsh.com user name in 3-5 days. user name and password-protected to ensure that no unauthorized users will be able to access your firm's account How do I get to my Marsh.com web site? information. Your Marsh.com web site is accessible from any computer con- nected to the Internet.Just go to Marsh's public homepage at What can I expect from Marsh.com in the future? www.marsh.com and click on Login from the left menu.Enter Plans for enhancements to your Marsh.com web site are your Marsh user name and password and you will gain entry already underway. Marsh is committed to delivering technolo- into your Marsh.com web site. gy best practices to our clients and this means that we are always working to improve our offering so that you find it easy How many user names and passwords can my firm be to use,comprehensive,and valuable to your business. '..., issued?What about access rights? You can request an unlimited number of user names and We welcome your insights and recommendations as we passwords to give your firm's designated users access to your develop your Marsh.com web site through future releases.You Marsh.com web site.Marsh understands that our clients'risk will find a Feedback button on the top of your homepage for management teams can vary greatly in size and we this purpose. accommodate for these differences. What will my Marsh.com look like? During the registration process,we will work with you to Below is a sample view of your Marsh.com homepage.The determine appropriate access levels for the different users you tools available are customized according to your needs. designate.We have the ability to grant access rights to individual users that range anywhere from full editorial access Pt-Vi, to read-only access.We can also grant access to users on a perapplication basis. How do I learn how to use my Marsh.com web site? MARSH Once you receive your user name and password from Marsh, - you can access the Help area within your personal view and F download a Quick Reference Guide designed to help you get started with our system.The Quick Reference Guide presents n -M°M`k ,v en k+==°^,wen Marsh.com's offering at a high level. °a neie°'"'°""°"°""°"'poofnd..,a^b`b°abt",`O cp1bbi—lb"""°°"' Snthe News Mzssh Nev+s If you need more guidance in learning how to use your MweM�eiinnis�.=saarthe mp,N4 a 11C P,oV°salz Marsh.com web site,you should ask your Client Executive to :=� .Pa.,a a"a° '=�a*<ma i=° = ll=• °*°_^=r FNds>n—b—i.� register you for our one-to-one training program.This program nnertmem 9 ^,I ^�w�°9 c°^gym —"'°g�g P,°,°me^ wkb amid'" 1a"a°ada s ri i Ma^ , c a� k. ,asks lets you choose between an in-person office visit from a Marsh ","°... .fAa""°"e$.s representative or an online demonstration with time reserved for your questions.We want to work with you to determine of=w F your appropriate training solution. _ wra���m Keep on Top of Your Risk Issues With Marsh.com PTL.CP.001.3(09-02 ©2002 Marsh Inc. All Rights Reserved. Marsh. The World's#1 Risk Specialist. Marsh&McLennan Companies � � ? MARSH ��\ Crisis Consulting y -------------- Crisis events and management are the defining tests of corporate leadership. Our research shows that an organization will face a crisis every 4-5 years. A Chief Executive Officer can expect to manage at least one crisis in his or her tenure. What is a crisis? A crisis is any event, or series of events,that threatens a severe negative impact to an organization's financial results,brand,or reputation,or relations with employees,customers, or suppliers. Today, crises may strike from more directions and do more damage, more quickly than ever before.The events of September 11 brought home to many organizations the scale and unpredictability of the threats they confront. Crisis trigger events include: Accounting irregularities Product recall Political violence/terrorism Mergers or acquisitions Employee misbehavior workplace violence Management misbehavior Natural disasters Wherever it originates, a crisis will consume significant senior management time, and demand rapid and coordinated responses. Crisis management preparedness can minimize the distraction and opportunity cost. Ask yourself: How good is my Crisis Readiness'n' The goal of crisis planning is to give your company the capability to manage well any crisis it faces. Since no one can know precisely what will trigger the next crisis, good crisis planning establishes a self-sustaining foundation for knowing what to do and how to do it, a strategy that will stand you in good stead, even in unpracticed situations. Successfully managing a crisis Sustainable crisis The difference between effective and poor crisis Readiness requires the management can have a major impact on enterprise alignment of organizational value.Ineffective crisis management can destroy VALUES—leadership irreplaceable assets such as corporate reputation, and culture—with its brands, and public trust that took years to build. OPERATIONS—plans, processes and systems A study by Templeton College at Oxford University examined the share price performance of companies that handled crises well,versus those that did not. A year after the event,the share price of the effective crisis managers was 22% higher than that of the Ambassador L.Paul Bremer III,Chairman and CEO ineffective crisis managers. (See chart: Effective vs. of Marsh Crisis Consulting,believes the CEO must Ineffective Crisis Responses.) drive the planning process."The CEO must ensure that his or her organization has an executive crisis The impact of a crisis event can seriously damage a management team that knows exactly what to do;'he company's image and stock price.A well-planned crisis says."This doesn't happen overnight. It takes analysis, management capability can mitigate the impact of a imagination,resourcefulness and testing to instill crisis,if it occurs. confidence in the team throughout the company." Partial solutions aren't enough. Partial solutions offer How Marsh Crisis Consulting can help superficial and often unreliable assurance. Business We can help you develop an integrated plan for a recovery plans and ad hoc emergency plans typically comprehensive crisis response—one that addresses address only operational issues. Crisis communications all of your company's critical functions and plans are necessary,but not sufficient. constituencies. In a large organization, such plans may overlap During planning,Marsh Crisis Consulting helps clients: confusingly and leave critical needs unaddressed. ❑Assess current crisis related plans and capabilities; • ' • ❑ Define the future roles and responsibilities of their crisis management teams; ❑ Develop a concept of operations for the crisis 20 , --- management team (creating an overarching 15 methodology for crisis management team activation 10 and response); and 5 -}.7% ❑Validate their plans with simulations and other r exercises. 4a Market assesses company response c o -15% 0 _ This methodology will help your organization E successfully manage any crisis,even if its nature is Reflex market response 20 entirely unforeseen. ca C 20 40 60 60 100 12C140 160 180 200 220 240 Trading days after the event Soo ce'."TII2­n�8q of CatBSlNyes O-Sh4lY6d4Pt VPL R,,F.K11,hL&DaWao,J P.111 TTIldfoOR 61I1ey2.Jdvasi(y 11 Ulf- crisis plan, really? Our partners Crisis management is a multi-disciplinary activity.Marsh Crisis Consulting can extend and deepen its services to clients by drawing upon the expertise of other firms and divisions within Marsh & McLennan Companies: ❑ Marsh's Risk Consulting practice possesses extensive experience in identifying, quantifying and managing financial and hazard risk exposures. ❑ Mercer Delta helps the CEOs of leading companies develop the work practices, culture,processes, and staffing needed to accomplish large- scale organizational change and align its values with its processes. ❑ Mercer Management Consulting provides supply chain management, brand management, and other expertise relevant to crisis planning and response. In addition to these resources,we have carefully selected a number of alliance partners to provide our clients with the depth of technical services they need to make the right decisions on crisis planning and execution. Marsh Crisis Consulting helps organizations develop the robust operating capability to prevent, prepare for, respond to, and recover from crises. ComponentsIssential . . . ility Risk and Vulnerability Analysis Crisis Strategy Development Financial,Operational,Human Capital, Crisis Management Plan Brand Business Continuity Planning Impact Analysis Emergency Response Plans Business Im P ly Crisis Communications Plan Security/Terrorism Defense Strategy Humanitarian Services Physical, Executive, & Personal Security Capability Assessment Computer Security Planning Risk TYansferAnalysis Chemical and Biological Security organizational Culture Assessment Exercises,Drills and Simulations rg Validation of Crisis Capabilities & Preparedness s Business Recovery CEO and Management Execution Plans Business Continuity Team Support Crisis'Management Recovery,Vendor Identification Incident Management Post-Crisis Change Management Crisis Communications Business Strategy Revisions Business Continuity Financial Recovery Humanitarian Assistance Claims Advisory Coordination of Frequently Siloed Corporate Insurance Recoveries Operation Units (Claims Accounting&Preparation) Industry Specific Experts Human Capital Recovery Event Specific Experts Crisis Counseling (i.e.,Workplace Violence) Having a sound and tested crisis management plan in place is both an operational and a corporate governance best practice. Benefits of crisis planning Those organizations that have such plans in place avoid long term damage to their reputation,brands, and public trust.And, as the Oxford study demonstrates,there is a significant return on investment in crisis management. How our clients benefit: ❑ Comprehensive,integrated approach to crisis management that is realistic,institutionalized,and self-sustaining; ❑ Highly customized plan that supports the critical internal and external relationships that sustain a company's business; ❑ Means of handling crises that facilitates responsive leadership and protects enterprise value; and ❑ Best practices approach that conforms to the highest standards of corporate governance. Marsh clients also benefit from the peace of mind that comes from knowing that they are prepared. Crisis Planning Model hents can mart their crisis readiness program at any point in the process ,�. . Facilitated :New or improved Crisis ~. ------ Planning i Management Plan =-- Event Management Capabilities Plan -CrisisCommunications t?' Review&Audit Update .Business/iT Continuity t •Security . Satisfactory ^.Humanitarian Assistance x Plan _._.. PLAN TESTING AND DEVELOPMENT Tabletop Executive Long-Term Drill Full Scale Exercise Team =Plan i Exercise Training