Zurich

Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.

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Services to Support Private Equity

Mergers and acquisitions continue apace, driven by low interest rates. But the risks involved are broad and complex.
By: | May 2, 2016 • 5 min read
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The year 2015 was a record for mergers and acquisitions, driven by an
environment of low interest rates, low organic growth and shareholder pressure for value.

For private equity firms, those conditions presented opportunities for expansion, but also made it more challenging to deliver high returns for investors year after year. A quiet IPO market adds to the pressure, robbing firms of their traditional exit strategy.

“IPOs launched within the past two years have been trading lower than their initial offering price,” said Andy Peterson, head of private equity for Zurich Global Corporate in North America.

“Scale does matter, and it’s been increasingly hard to go it alone. Mergers and acquisitions are ways to help spur growth.”

Activity in the private equity field remains high, and increased fundraising in 2015 means there is cash ready to keep M&A at the forefront of conversations in the deal room in 2016.

The risks involved in bringing two companies together are broad, complex and can diminish the value of any deal without proper mitigation. With far fewer IPOs, private equity firms are holding onto their portfolio companies longer, increasing their exposure.

Zurich_SponsoredContent“The right carrier partner can provide value at every step of the investment cycle — deal generation, due diligence, postacquisition and exit — through a mix of insurance products and enterprise risk solutions.”
— Andy Peterson, Head of Private Equity for Zurich Global Corporate in North America

Insurance not only protects PE firms from liability shouldered by acquired companies, but also acts as an asset to bring to a negotiation.

The right carrier partner can provide value at every step of the investment cycle — deal generation, due diligence, post-acquisition and exit — through a mix of insurance products and enterprise risk solutions.

“Zurich has the best-in-class capabilities to support our customers’ goals at every phase,” Peterson said.

Enterprise Risk Solutions

Enterprise risk solutions help private equity firms conduct due diligence more thoroughly, and can help them decide whether to continue with a deal or pull the plug.

Many of Zurich’s most valuable risk management insights relevant to private equity decision-makers come together in its proprietary Zurich Risk Room, an online aggregation of data that customers can reference as they research target companies, their industries and the risk exposures they may present at home and abroad. The tool can help customers identify the correlation between various risks and test assumptions before making a strategic decision.

“For example, a private equity customer is considering an acquisition in Germany. They can use tools in the Zurich Risk Room to create a flood map and determine flood exposure at the property. That could either bolster their confidence in the acquisition or convince them not to go through with the deal because the risk is too high,” Peterson said.

Zurich Onsite is another innovative tool that is changing the game for risk engineering solutions provided to many customers. The tool increases the transparency of the whole risk assessment process, and enables customers to obtain better insights from site visits than ever before.

These insights enable more informed conversations with the risk engineer during visits, prompting quicker action on risk improvement actions and helping businesses deliver on their loss prevention strategies.

Sophisticated Structures

Once a deal gets the green light, PE firms familiar with the utilization of captive insurers may be positioned to leverage that experience to manage many and perhaps all of their risk portfolios. Building a self-insured structure for an entire portfolio within a captive can deliver a high degree of flexibility while providing coverage for the risks that a firm could inherit from its assets. In effect, a captive helps minimize risk and maximize financial freedom.

“How we structure a program will differ depending on a client’s unique goals and risk appetite, but captives provide a way to pull an array of risks under one roof,” Peterson said.

International Capabilities

Companies looking to expand globally face additional challenges with local regulatory and compliance requirements. While North America still leads the way in terms of investment and deal generation, Europe is not far behind and Asia is gathering steam. Additionally, emerging markets offer more and more opportunities for companies to establish an international footprint.

“Your insurer has to have the capability to write local policies back to a U.S. master policy, and doing that well is a daunting task,” Peterson said.

He noted that Zurich is one of a few carriers with the international capabilities to support expansion and acquisitions abroad.

The information in this publication was compiled from sources believed to be reliable for informational purposes only. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication. We undertake no obligation to publicly update or revise any of this information. This is intended as a general description of certain types of insurance and services available to qualified customers through the companies of Zurich in North America, provided solely for informational purposes. Nothing herein should be construed as a solicitation, offer, advice, recommendation, or any other service with regard to any type of insurance product underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company, 1400 American Lane, Schaumburg, IL 60196. The policy is the contract that specifically and fully describes the coverage, terms and conditions. Coverages and rates are subject to individual insured meeting our underwriting qualifications and product availability in applicable states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Zurich. The editorial staff of Risk & Insurance had no role in its preparation.




Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.
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Zurich’s Loss Sensitive Alternative Delivers a New and Highly Flexible Solution for Global Risk Management

Multinational companies turn to insurers to help them meet global compliance standards.
By: | November 2, 2015 • 5 min read
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With the global economy growing apace, multinational companies face ever-increasing pressure to meet tougher compliance challenges surrounding their international insurance coverages that include a loss sensitive component.

Classic loss sensitive programs, which proved their mettle on the domestic front, may not always meet the challenges posed by the patchwork complexity of compliance and regulatory roadblocks that pop up across country and regional borders.

“Meeting these compliance needs can help companies reduce unexpected local or country issues relative to their operations,” explained Brian Winters, Head of Casualty Practice & SRS at Zurich Global Corporate in North America. Zurich, in a search for better ways to meet those specific multinational needs, began to survey the competitive landscape and came away with a number of options. After taking a deep dive, it realized that the “global corporate” market – companies with revenues in excess of $750 million – were hungry for a product that would help them meet those growing global compliance hurdles.

According to Winters, one of the better ways to get there is by using a sponsored captive insurance company which houses protected cells, a variation of a traditional captive that allows an insured to have an individual “cell.” Ultimately, the sponsored captive can be comprised of many cells that can be utilized by any number of companies. Typically, a sponsor company (Zurich) sets up and owns the core company, but allows for insureds to use their own “cells” for risk retention business in a compliant, cost-effective and flexible way.

Brian-Winters_230“Meeting these compliance needs can help companies reduce unexpected local or country issues relative to their operations.”
— Brian Winters, head of Casualty Practice & SRS, Zurich Global Corporate in North America

In Zurich’s case, the company will offer its new sponsored captive facility, to provide clients with the flexibility and efficiency of a captive cell model.

“We worked through all the different factors involved in starting up a sponsored cell captive,” Winters said. “Since the beginning of this year we picked up a lot of steam on the product, which offers our customers a product that lets them take advantage of their own experience.”

According to Steve Bauman, Head of Captive Services at Zurich Global Corporate in North America, as Zurich pressed its market research and talked to customers and brokers in North America, the company found strong demand for Zurich to be able to offer a product along these lines.

Bauman said the main genesis of the product is to offer a loss-sensitive solution. While many Zurich customers already own captives, for various reasons, they may not choose to use their own captives to help meet international compliance challenges. Plus, for customers who don’t already have captives, the cell facility also delivers that “loss sensitive” solution.

“The essence of our loss sensitive product offering is to provide customers with a broader product portfolio that can help them navigate those international compliance waters,” Bauman said. “Many of our customers, particularly in the larger market, appreciate a broad range of loss sensitive products, and Zurich aims to provide these solutions.”

Bauman added that the cell facility offering may start off initially in international casualty, but could also be highly effective in other areas within Zurich. In terms of domicile, Zurich chose Vermont, which has long been the top U.S. domicile.

Apart from global loss sensitivity features, Bauman said Zurich’s captive cell also delivers cost effectiveness because it operates under a shared-expense value proposition and it is highly efficient around collateral.

“Our program will administratively be very efficient,” Bauman said. “It’s not at all burdensome in terms of customers being able to step in and utilize the product.”

The Zurich product is secured through a trust, to help meet repayment obligations associated with loss sensitive programs. And while the typical group captive model does offer benefits, Bauman said these protected cells stand on their own for the exclusive risk profile of the individual insured.

With Zurich’s cell facility offering, all funds are segregated, giving the customers protection from the other insureds that may be using the facility. A captive cell provides many of the benefits of a stand-alone captive insurance company and the customers can benefit from Zurich’s expertise.

“We have done the groundwork and due diligence required to form the captive facility ahead of time, and efficiently manage the costs. We’ve already made the tough decisions required for such programs,” Bauman said.

Matching Zurich’s expertise is its technology prowess. For example, the company offers an award-winning proprietary tool for multinational insurance customers that tracks insurance compliance regulations worldwide. It is updated and upgraded constantly to provide our customers with the latest tax and insurance regulation updates on what’s going on around the world.

“It’s easy to imagine multinational corporations trying to do business in so many countries worrying about changes in the way countries pursue taxes and insurance regulation,” Winters said, adding that at the highest levels in an organization, there is no tolerance for compliance risk in terms of the global insurance program.

“The expectation is that the global risk manager is going to work this out, so our customers can really benefit from our technology on that front,” he said.

Finally, there is the pure geography. The Zurich loss sensitive option further strengthens our customer’s ability to do business with Zurich’s assistance in over 200 countries and territories, an extremely broad scope covering practically anywhere customers have business operations.

“We’ve been in the insurance business for over 100 years,” Winters said. “With this product we emphasize our commitment to the insurance industry.”

For more information about Zurich solutions and risk insights, visit zurichna.com.

This is intended as a general description of certain types of insurance and services available to qualified customers through the companies of Zurich in North America, provided solely for informational purposes. Nothing herein should be construed as a solicitation, offer, advice, recommendation, or any other service with regard to any type of insurance product underwritten by individual member companies of Zurich in North America. Coverages and rates are subject to individual insured meeting our underwriting qualifications and product availability in applicable states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers. Any and all information contained herein is not intended to constitute advice (particularly not legal, regulatory or accounting advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. Zurich does not guarantee a particular outcome, reduction in costs, or improvement in administration and further assumes no liability in connection with the providing of these products.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Zurich. The editorial staff of Risk & Insurance had no role in its preparation.




Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.
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Special Challenges for U.S. Oil and Gas Business

Mega-mergers happening in the marketplace right now could impact international oil and gas economic growth.
By: | September 14, 2015 • 5 min read
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The summer of 2014 was an exciting time in the North American oil and gas business.

In June of that year, the price of oil was cruising along at $107 a barrel and the North American oil rig count hovered at almost 2,200. Things were going so well, in fact, employers had challenges finding qualified workers.

Fast-forward to the here and now and a much different picture emerges.

As of August, oil was at slightly under $44 dollars a barrel. The North American rig count had dropped to just under 1,200. Since the price of oil began its downward spiral, approximately 150,000 jobs have been lost out of an estimated 600,000 total jobs created in the past two years in the oil and gas sector.

The oil and gas sector is often cyclical, said Jeanne Jankowski, head of Energy & Marine, Zurich Global Corporate in North America.

One factor influencing the sector now is a global oversupply of oil. Global refinery throughput is operating at the highest recorded levels, at 95 percent and upwards.

But demand by China, a critical buyer, has slowed as it deals with economic turbulence, while at the same time, OPEC continues to steadily produce oil and many experts expect Iran to soon add its product to the global supply of oil.

In addition, the shale revolution in the U.S. and Canada has responded to the downturn by improving drilling technologies and increasing efficiencies to keep its oil production cost-effective. On the upside, demand for oil is healthy right now and the price should return to sustainable levels over time.

Zurich_SponsoredContent“It’s anticipated that the downward trend in the price of oil due to the oversupply will continue into 2016.”
— Jeanne Jankowski, head of Energy and Marine at Zurich Global Corporate in North America

“It’s anticipated that the downward trend in the price of oil due to the oversupply will continue into 2016,” Jankowski said. “We’ve seen a lot of reductions in force, particularly within the oil field service companies, where we have seen a dip in both revenues and capital expenditures among our customers.”

With the market contracting in North America, U.S.-based oil and gas entities are looking to reduce costs where they can.

Conrad Maier, head of Exploration and Production, Zurich Global Corporate in North America, said the company is seeing a trend among international drilling contractors to prioritize their international operations to help counter the turnkey style approach often experienced in the USA. These international regions include Middle East, Asia or Africa … wherever their services can be used profitably.

“They’re prioritizing their business based on where the profitable business is, where they can keep the rigs on a longer term contract ensuring the rigs’ day rate,” he said.

In terms of the workforce, U.S.-based payroll dollars have been decreasing since the fourth quarter of 2014, according to Jankowski.

Larger companies are more often using local nationals for the overseas operations, she said. Yet, while there are cost advantages to hiring locally, there also are challenges, such as ensuring best practices in safety because of geo-political differences, regulatory issues and local practices.

“Hiring local is not a panacea,” Jankowski said.

She added that Zurich expects those trends to continue for the short term, as companies that serve the international oil and gas industry are charged to grow their international footprint.

One trend that could impact international oil and gas economic growth is M&A activity, as there are mega-mergers and potential mergers happening in the marketplace right now.

“The challenge in supporting international trade and foreign investment is the world still remains extremely complex for everyone,” she said. “And that is true especially with taxing and compliance, which often can be a deterrent to global business development.”

“Risk managers have to be more judicious about how they look at their multinational programs,” she said, noting that there are 240-plus country jurisdictions, some of which have multiple provinces per country.

“We do find as underwriters we’re getting many more questions when we’re putting these programs together, about why we do things a certain way from a compliance standpoint.

“Every country’s licensing requirements and taxing requirements need to be factored in, and potential taxability of claims payments can all be different, with varying definitions of coverage,” Jankowski said. “What we call a particular coverage in the U.S. may mean something completely different in a foreign country. Or a certain type of coverage might not even exist.”

Along those lines, Zurich is sponsoring an initiative that involves educating its customers about the need for international reform for multinational insurance. The goal is to achieve greater standardization and alignment in local country insurance regulations, which will simplify programs and add predictability to the management of international insurance needs.

“We are passionate about it at Zurich,” Jankowski said. “It’s a very important initiative and at the heart of what Zurich represents. We are very serious about reaching out and embracing the need for simplification of cross-border type programs.

“The oil and gas industry is a perfect example of how much it’s needed, with the trend towards more globalization.

“We have capabilities to write business on a global basis,” Jankowski said. “Not only do we offer a comprehensive network, we also have over 900 experienced risk engineers and 8,000 claims professionals dedicated to service our international customers.”

The information in this publication was compiled from sources believed to be reliable for informational purposes only. Any and all information contained herein is not intended to constitute advice (particularly not legal advice). Accordingly, persons requiring advice should consult independent advisors when developing programs and policies. We do not guarantee the accuracy of this information or any results and further assume no liability in connection with this publication, including any information contained herein. We undertake no obligation to publicly update or revise any of this information, whether to reflect new information, future developments, events or circumstances or otherwise. Insurance coverages are underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company. Risk engineering services are provided by The Zurich Services Corporation.

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This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Zurich. The editorial staff of Risk & Insurance had no role in its preparation.




Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.
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