EFFECTIVELY MANAGINGEFFECTIVELY MANAGINGINSURANCES IN THEINSURANCES IN THEINSURANCES IN THEINSURANCES IN THE

VOLATILE INDIANVOLATILE INDIANMARKETSMARKETS

Presentation byPresentation by

DINYAR MANEKSHAW JIVAASHADINYAR MANEKSHAW JIVAASHAGroup Global Head & Senior ViceGroup Global Head & Senior Vice--PresidentPresident

Essar GroupEssar Group

““RISKRISK””

•• “You cannot “You cannot discoverdiscover new new oceansoceansunless you have the unless you have the couragecourageunless you have the unless you have the couragecourageto to lose sightlose sight of the of the shoreshore””

•• ““VisionVision is not enough. is not enough. It must be It must be combinedcombined with with ventureventure

•• It is not enough to It is not enough to starestare up the up the stepssteps; we must step up the ; we must step up the stairsstairs.”.”

RISKYRISKY BUSINESSBUSINESS

““MOST PEOPLE CAN DO MOST PEOPLE CAN DO ““MOST PEOPLE CAN DO MOST PEOPLE CAN DO EXTRAORDINARY THINGS, EXTRAORDINARY THINGS,

IF THEY HAVE THE IF THEY HAVE THE CONFIDENCE OR IF THEY CONFIDENCE OR IF THEY

TAKE RISKSTAKE RISKS””

•• The RiseThe Rise &&

ININ THETHE FACEFACE OFOF CRISISCRISIS

•• The RiseThe Rise &&Rise of Business RisksRise of Business Risks

•• And a looming And a looming CrisisCrisis….. ….. in an in an Unbalanced WorldUnbalanced World

DOING BUSINESS TODAYDOING BUSINESS TODAY

•• Capital Intensive BaseCapital Intensive Base --In need of In need of ProtectionProtectionIn need of In need of ProtectionProtection

•• ““CatsCats” on the ” on the riserise•• Need to Protect “Need to Protect “Loss ofLoss of

ProfitsProfits” from “” from “VolatilitiesVolatilities””

•• Political & Terror Political & Terror RisksRisks

GROUP APPROACH TOGROUP APPROACH TORISK MANAGEMENTRISK MANAGEMENTRISK MANAGEMENTRISK MANAGEMENT

•• TheThe GroupGroup CorporateCorporate RiskRisk && InsuranceInsurance ManagementManagement DivisionDivision waswassetset upup byby thethe PromotersPromoters ofof EssarEssar GroupGroup inin 19931993.. TheThe reasonreason forforsettingsetting upup thisthis divisiondivision waswas toto leverageleverage thethe Group’sGroup’s positionposition inin allall

RISK MANAGEMENTRISK MANAGEMENT

settingsetting upup thisthis divisiondivision waswas toto leverageleverage thethe Group’sGroup’s positionposition inin allallInternationalInternational Markets,Markets, havehave aa cross-functional synergy acrossthe Group,, throughthrough uniformuniform policiespolicies acrossacross thethe Group,, andand reapreapthethe benefitsbenefits ofof economieseconomies ofof scalescale

•• ToTo achieveachieve Comprehensive Coverage of the Group’s CorePerceived Risks atat Internationally Benchmarked LowPremium Rates && Deductibles

•• ToTo ContributeContribute substantiallysubstantially toto thethe ““Group’s Bottom-Line”” &&ensureensure protectionprotection ofof ““Groups’ Balance Sheet””

• To contribute to “Product Innovation” in the GlobalInsurance Industry through the Versatility of being the RoleModel for Insurance i.e. “The Essar Model” in the IndianInsurance Industry

To continuously seek strategies that assist usin fully understanding the hazards /

RISK MANAGEMENTRISK MANAGEMENT

in fully understanding the hazards /catastrophic risks to which our businessesare exposed, which in turn provides us with apowerful insight to aggressively negotiate andstructure innovative products for our variedcomplex risks which give us the leadingcompetitive, cutting edge over otherorganizations globally, at InternationallyBenchmarked Premium Rates

PERSPECTIVES ONPERSPECTIVES ONCURRENT INSURANCECURRENT INSURANCECURRENT INSURANCECURRENT INSURANCE

PROGRAMS AND FUTUREPROGRAMS AND FUTURENEEDS…NEEDS…

ESSAR GROUP INSURANCEESSAR GROUP INSURANCE

•• FramedFramed thethe firstfirst insuranceinsurance policypolicy onon InternationalInternational LinesLines inin thethe midmid19901990’s,’s, ii..ee.. thethe IndustrialIndustrial AllAll RisksRisks (IAR)(IAR) policypolicy –– forfor EssarEssar PowerPower

•• FirstFirst AdvanceAdvance LossLoss ofof ProfitsProfits policypolicy inin 19981998 -- forfor EssarEssar OilOil LtdLtd•• FirstFirst AdvanceAdvance LossLoss ofof ProfitsProfits policypolicy inin 19981998 -- forfor EssarEssar OilOil LtdLtd

•• FirstFirst FixedFixed ProtectionProtection && IndemnityIndemnity (P&I)(P&I) policypolicy -- forfor EssarEssarShippingShipping

•• FirstFirst seamlessseamless telecomtelecom policypolicy inin IndiaIndia forfor Essar’sEssar’s CellCell PhonePhoneOperationsOperations -- forfor EssarEssar TelecomTelecom

•• FirstFirst tailortailor--mademade UnnamedUnnamed GroupGroup PersonalPersonal AccidentAccident PolicyPolicygivengiven toto anyany corporatecorporate inin IndiaIndia -- aa Comprehensive,Comprehensive, TailorTailor--mademadeHealthHealth andand BenefitsBenefits covercover forfor EssarEssar employeesemployees andand theirtheir dependentsdependentswhichwhich isis aa benchmarkbenchmark inin corporatecorporate IndiaIndia

•• FirstFirst MegaMega RiskRisk SeamlessSeamless ComprehensiveComprehensive UmbrellaUmbrella OperationsOperationsSingleSingle EntityEntity covercover forfor thethe entireentire steelsteel businessbusiness inin IndiaIndia inin 20052005 --forfor EssarEssar SteelSteel

•• FirstFirst toto introduceintroduce thethe conceptconcept ofof ““FirstFirst LossLoss CoverCover”” forfor projectsprojects,, ininIndiaIndia

LANDMARKS SET…LANDMARKS SET…

•• GlobalGlobal InsuranceInsurance ProgramProgram forfor AegisAegis –– BPOBPO BusinessBusiness

•• ComprehensiveComprehensive LiabilityLiability CoversCovers && RunRun OffOff CoversCovers forfor•• ComprehensiveComprehensive LiabilityLiability CoversCovers && RunRun OffOff CoversCovers forforAcquisitionsAcquisitions

•• ComprehensiveComprehensive MiningMining InsuranceInsurance ProgramProgram –– TrinityTrinityCoalCoal

•• SeamlessSeamless CoversCovers forfor OffshoreOffshore ProjectsProjects•• Complex,Complex, ComprehensiveComprehensive MegaMega InsuranceInsurance CoversCovers forfor

StanlowStanlow RefineryRefinery && KenyaKenya RefineryRefinery•• ComprehensiveComprehensive ProjectProject && LiabilityLiability InsuranceInsurance CoversCovers

forfor EssarEssar SteelSteel MinnesotaMinnesota•• CreditCredit InsuranceInsurance CoversCovers

FUTURE NEEDSFUTURE NEEDS

•• Sourcing, Devising & Negotiating “Sourcing, Devising & Negotiating “Global Global Property Insurance ProgramProperty Insurance Program” for Steel & ” for Steel & Property Insurance ProgramProperty Insurance Program” for Steel & ” for Steel & Energy BusinessEnergy Business

•• EnergyEnergy

•• Sourcing, Devising & Negotiating “Sourcing, Devising & Negotiating “Global Global Liability Insurance ProgramsLiability Insurance Programs” for ” for Essar’s Ultimate Parent Company Essar’s Ultimate Parent Company –– Essar Essar Global LimitedGlobal Limited

•• Structuring Structuring Comprehensive Insurance Comprehensive Insurance Covers for PersonnelCovers for Personnel, especially Expats & , especially Expats & TCNsTCNs

CHALLENGES IN INDIANCHALLENGES IN INDIANINSURANCE MARKETSINSURANCE MARKETSINSURANCE MARKETSINSURANCE MARKETS

INDIAN INSURANCEINDIAN INSURANCEMARKETMARKET

•• Reinsurance MonopolyReinsurance Monopoly•• Restricted Market for Complex Risks Restricted Market for Complex Risks –– A A •• Restricted Market for Complex Risks Restricted Market for Complex Risks –– A A

space for Lloyd’sspace for Lloyd’s•• Lack of Consulting Expertise of Lack of Consulting Expertise of

InsurersInsurers•• Limited tieLimited tie--ins for Global Insurance ins for Global Insurance

Placements & ProgramsPlacements & Programs•• Local Admittance Requirements Local Admittance Requirements –– Bane Bane

for Free Market Economyfor Free Market Economy

INDIAN RISKSINDIAN RISKSABROAD….ABROAD….

•• Risk & Capacity RestrictionsRisk & Capacity Restrictions•• No Existence of Support for No Existence of Support for •• No Existence of Support for No Existence of Support for

North American Risk Placements North American Risk Placements •• Variations in Underwriting Variations in Underwriting

Philosophy of various markets when Philosophy of various markets when underwriting Indian Risks. Case underwriting Indian Risks. Case ––Essar Oil & Stanlow RefineryEssar Oil & Stanlow Refinery

INDUSTRYINDUSTRYCHALLENGES…CHALLENGES…

•• Fascination for Top Line Growth, ONLYFascination for Top Line Growth, ONLY•• Accumulated Losses exceeding US $ 6.7 Accumulated Losses exceeding US $ 6.7 •• Accumulated Losses exceeding US $ 6.7 Accumulated Losses exceeding US $ 6.7

BillionBillion

•• Challenged Economics of Distribution Challenged Economics of Distribution ChannelsChannels

•• Disproportionate Claim & Disproportionate Claim & OpexOpex CostsCosts•• Absence of True Risk Based PricingAbsence of True Risk Based Pricing•• Ownership & Investment NormsOwnership & Investment Norms•• Absence of Debt / Bond / Derivative Absence of Debt / Bond / Derivative

MarketMarket

OUR NEED TODAY…OUR NEED TODAY…

CUSTOMISEDCUSTOMISEDRISK MANAGEMENTRISK MANAGEMENT

The The needneed of the of the hourhour is for is for companiescompanies to to equipequip themselves with themselves with companiescompanies to to equipequip themselves with themselves with strong “strong “Risk Management SystemsRisk Management Systems” ” and and InsurersInsurers can play a can play a majormajor rolerolein “in “Customizing Risk ManagementCustomizing Risk Management” ” for the unique Indian Market, and, for the unique Indian Market, and, help it to protect it’s “help it to protect it’s “bottombottom--lineline”, ”, and, grow and, grow biggerbigger && fasterfaster..

“CHANGECHANGE”

If you are not If you are not ridingriding, , If you are not If you are not ridingriding, , the the waveswaves of of changechange,,You will You will findfind yourself yourself

beneathbeneath it.it.

CONCLUSIONCONCLUSION

““LET NOT ANY MANLET NOT ANY MAN““LET NOT ANY MANLET NOT ANY MANYOU TRANSACT WITH,YOU TRANSACT WITH,

LOSE,LOSE,SO YOU SHALL NOTSO YOU SHALL NOT””

-- ChanakyaChanakyaThe Great Indian Strategist & Economist The Great Indian Strategist & Economist