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Saudi Arabian Airlines changing for the future
Index
Executive summary
Section 1 Introduction
Section 2 HSBC Group HSBC Insurance Brokers HSBC Aviation Practice The HSBC/SABB service team Service Level Agreement General Terms of Business
Section 3 Outsourcing/in-sourcing the insurance function – SV’s options Adrian Acres – secondment to SV SV risk management – privatisation exercise Fleet valuation SV’s insurance market profile
Section 4 Claims performance – our commitment to SV
Section 5 Non Aviation Program Aviation Program
Section 6 Proposed fees A final word Action/timeline Appendices
Saudi Arabian Airlines changing for the future
The six deliverables below are central to HSBC/SABB’s strategy – when implemented SV will rapidly benefit from the results.
Executive summary 1. Total transparency on commission/fees. Benefits
5. Dedicated HSBC/SABB service team. Benefits
❖ We will identify all commission/brokerage and fully rebate it to Saudi Arabian Airlines (SV)
❖ Integrated insurance/risk management solution with one partner – no gaps in cover
❖ HSBC will not charge hidden fees/commission – all earnings to be declared
❖ Lowest insurance pricing possible
2. Unique insurance solution – secondment of Adrian Acres SV. Benefits ❖ Reorganise the SV Insurance Department to create a working centre of excellence
6. Insurance renewals ❖ Aggressigve ‘fresh’ approach ❖ minimise premiums
HSBC
❖ Electronic Data Recording System (EDRS) = fast access to data, quick analysis, lower insurance premiums and effective claims management ❖ Privatisation advice relative to risk and insurance = reduced balance sheet exposure and protection for SV officers 3. Establish unique SV claims handling formula. ❖ Fast claims payment (10 days) ❖ Improved SV reputation with reinsurers leading to lower premiums 4. Review, analysis and restructuring of non aviation program by HSBC/SABB and build local relationship with SV. Benefits
To ta Reduced costs lt ra ns pa re nc y
Su pe rio rs er vi ce
Benefits
❖ Reduced local broker fees and fast/ responsive service ❖ Qualitative relationship with professional local broker SABB
Value added for SV 4
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Section 1
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HSBC ‘end to end’ service solution.
Introduction This report has been prepared in response to a request for proposal (RFP) from Mr. Ashraf Suleman, Vice President Financial Accounting and Control, Saudi Arabian Airlines. Currently HSBC work in partnership with Arabian Marketing Services (AMS); acting as the international aviation reinsurance broker on SV. Our RFP response proposes the services of HSBC as international reinsurance broker and SABB as local insurance broker. However, we wish to be clear that should SV decide to appoint an alternative local broker to SABB, we would accept this decision and be prepared to work in partnership with your selected local broker. Currently we work with an independent local broker (AMS), and have no objection to continuing with this model or indeed with this broker. HSBC Insurance Brokers (HSBC) offers SV a full range of insurance, risk and specialist advisory services and can deliver innovative, dynamic, customised solutions for your organisation globally. HSBC are not just another London based ‘transactional’ broker – we are part of and supported by one of the world’s foremost banking, insurance and financial services institutions – HSBC plc. In this report HSBC/SABB will identify how we can deliver a definitive domestic, regional and global ‘end to end’ service solution – as well as ‘hard’ tangible financial benefits to SV – all this on the basis of a direct partnership between SV/HSBC/SABB. For the avoidance of doubt, apart from satisfying the legal necessity of a local fronting insurer, the SV/HSBC/SABB partnership would be direct, cohesive and uncompromising. We are clear that a direct SV/HSBC/SABB partnership would result in enhanced service levels, claims performance and immediate/on-going reduced insurance pricing for SV. An integral part of HSBC/SABB’s cohesive “end to end” service solution for SV includes the secondment and embedding of Adrian Acres (our ex British Airways
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Risk & Insurance Manager) into SV for a period of 12 months. During this time he would work closely with SV’s Insurance Department towards re-launching it and establishing its capabilities up to international best practice standards. HSBC/SABB will deliver on the following for SV: ❖ Minimise renewal/on-going broker fees/premiums ❖ Deliver superior claims management/fast claims payment ❖ Provide intelligent guidance on fleet valuation ❖ Guide SV through the insurance and risk implications of privatisation ❖ Design a global non aviation insurance program that integrates with your aviation program ❖ Establish the SV Insurance Department as a valued entity and centre of excellence operating to international best practice standards ❖ Strategically reposition SV within the GCC structure and with reinsurers SV is an existing and long term HSBC client, with relationships and interaction at many different levels and within many different areas of HSBC Group. The Aviation Practice/SABB will react swiftly and positively to service requests from SV.
You would be at the centre of our world – this would not be deliverable by any other insurance broker. HSBC’s Global reach – combined with our regional and domestic Saudi presence – would be deployed to maximum effect for the benefit of SV. This report also encompasses the Royal Saudi Air Force (RSAF), who without SV sponsorship would not be part of the GCC Airline Insurance Program. We look forward to continuing the relationship with the RSAF within the broader GCC aviation insurance structure.
Section 2
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HSBC Group is one of the largest banking, insurance and financial services organisations in the world.
HSBC Group – global reach HSBC Group
HSBC Insurance
Assets: USD 2,547 billion
HSBC Insurance comprises one of the largest insurance companies and insurance broking organisations in the world.
Profit before tax: USD 10,247 million International reach: Around 9,000 offices in 85 countries Employees: Around 335,000 worldwide Customers: Around 100 million worldwide
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Net earned premiums: USD 5,200 million Profit before tax: USD 1,600 million Employees : 9,000 worldwide
HSBC Insurance Brokers
HSBC Insurance Brokers is part of the strongest financial services brand in the world.
Working with SV – we can deliver any type of insurance solution you may require
We see things differently and find solutions that others miss. We have a unique ability to leverage expertise across the world and across a wide range of disciplines, and this diversity of outlook underlies our status as ‘The Intelligent Alternative’.
SV need an Insurance Broker with a global presence – HSBC are positioned to deliver this.
❖ Only major insurance broker that forms part of a global banking group ❖ Founded in 1808, and joined the HSBC Group in 1980 ❖ Founder member of owned network – Assurex Global Global perspectives individual solutions As members of the HSBC Group we share an international network with offices in countries and territories in Europe, the Asia-Pacific Region, the Americas, the Middle East and Africa. This enables us to evaluate insurance in a broader business sense with immediate access to specialist advice and services in areas such as trade finance, cash and investment management, treasury and foreign exchange, as well as processing services and financial controls and disciplines.
We are a founder member of the Assurex Global network, which ensures that we are represented by leading brokers worldwide. Assurex Global forms the world’s largest independent broking network of commercial insurance, risk management and employee benefits. ❖ Employs over 20,000 insurance professionals on six continents ❖ 110+ independent insurance brokers ❖ Generates annual premiums in excess of US $28 billion
Assurex Global is the world’s #1 independent commercial insurance brokerage group
Broker 1. Marsh
2008 Brokerage
Revenues (000) No. of Offices USD 11,281,000
700
USD 7,096,000
500
USD 3,385,000 USD 3,385,000
558 558
4. Willis
USD 2,463,000
321
5. A.J. Gallagher
USD 1,457,241
150
6. Wells Fargo
USD 1,282,130
171
USD 947,346
75
2. Aon
3. AssurexGlobal Global 3. Assurex
7. Jardine Lloyd Thompson
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HSBC’s Aviation Practice – capabilities and credentials 280 aviation clients
Aviation Practice ❖ A leading global aerospace broker ❖ Over 60 insurance and aviation industry professionals
45 countries
Our history ❖ Since the 1940’s we have served the aerospace industry
Airlines
General Aviation
Specialist Aircraft
Bank and Aircraft Finance
Manufacturers
Airports
ATC
Insurance Management
“We are not part of a one dimensional Insurance Broker – Aviation is part of an integrated banking, insurance and financial services organisation”
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HSBC Aviation Practice – new, aggressive/dynamic In October 2008 the HSBC Aviation Practice appointed Peter Mills to take over as Practice Head. Given Peter’s credentials as an ex Chief Executive of Lloyds Aviation Department (LAD), this fundamental step forward in leadership was a clear indication that HSBC was once again repositioning the Practice for further growth. Recent staff appointments and internal promotions by Peter continue to reinforce this ‘we are in growth mode’ message both internally in HSBC and externally to insurers and indeed our major broking competitors. Significant airline business wins in Europe and the Middle East – like Kuwait National Airways (Wataniya Airlines) – have reinforced our ‘new’ position as the broker who can deliver the most competitive price whilst still delivering exceptional service. Our focus – strategic/considered growth Whilst the HSBC Aviation Practice continues to grow it’s airline account base, we can be clear that it is not our intention to solely focus on market share – we are determined that our client base will fit with our global HSBC brand and that we can always deliver unique pricing and services to our selected client’s.
Our commitments to SV – trust, integrity/ transparency Since the AITC meeting at HSBC in summer 2009 we believe that SV and the HSBC Aviation Practice have developed a relationship based on trust and integrity. The negative influence of AMS in the SV insurance process has been exposed – and HSBC are now able to concentrate on delivering the levels of service that SV deserves. The decision by Peter Mills to personally lead our SV service team demonstrates where SV sit in our organisation – at the top. SV can be assured that if you appoint HSBC/SABB as your broker the current and future service levels on all your insurance arrangements will be guaranteed. A stable team – who understand your business We confidently reassure SV that our service team is stable and has a proven track record of delivering. No transitional risk or costs – the HSBC team is in place Appointing HSBC/SABB ensures SV will have no transitional risks/costs or wasted management time having to test and build new broker relationship/ working systems. This should be considered relative to the imminent AITC meeting (7-9 Oct).
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Our SV service proposition will be co-ordinated jointly out of our London Head Office, our Regional Head Office in Dubai and our local Saudi offices.
The HSBC/SABB service team Clive Bannister Group Managing Director HSBC Insurance
David Hunt Head of HSBC Insurance Middle East Adrian Acres Divisional Director
Steve Bonynge Head of HSBC Insurance Brokers Middle East
Peter Mills Head of HSBC Aviation Practice
Manghat Rajendran Deputy Head of HSBC Insurance Brokers Middle East
Nicholas Mogab Head of SABB Insurance Service Limited
Henkumar Matthew Head of Technical SAAB Insurance Services Limited
Aynis Iftikhar Senior Client Associate
Rohit Kanthra Senior Client Associate Michael Moran Head of Business Development
Graham Hersey Senior Client Executive
Khalid Al Hussami Business Development Associate
Simon Bredin Senior Claims Executive
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Jason Humphreys Divisional Director
Omar Haddad Senior Client Associate
BC HSBC Middle East Regional Head Office PO Box 24912 Dubai United Arab Emirates SABB Insurance Services Limited (SISL) P.O. Box 9084 Riyadh 11413 Kingdom of Saudi Arabia SABB is headquartered in Riyadh with branches in Jeddah and Khobar. The credentials of your key team members are listed as follows:
London: Clive Bannister HSBC Group Managing Director for Insurance Role – Ultimate Responsibility for all Insurance Business within HSBC Group + 44 (0) 20 7992 5800 clive.bannister@hsbcgroup.com Peter Mills Head of Aviation Practice + 44 (0) 20 7661 2919 peter.n.r.mills@hsbc.com Role – overall responsible for HSBC Airline Practice and SV account within HSBC Aviation
BC
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HSBC Aviation Practice 29 - 33 Artillery Lane London E1 7LP United Kingdom
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Experience – prior to joining HSBC in 2005 he was Chief Executive of Lloyd’s Aviation Department (LAD) and managed the successful privatisation of LAD. He has also worked for Sedgwick (now Marsh) as a Director responsible for successfully breaking Sedgwick in to Far East aviation business. He is recognised as a senior executive within the global aviation insurance arena. Flag carrier experience includes Cathay Pacific, Asiana, Thai Airways, United Airlines, GCC Program and Wataniya Airways. Michael Moran Head of Business Development + 44 (0) 20 7661 2824 michaelj.moran@hsbc.com Role – responsible for leading and co-ordinating special projects and strategic consulting/analysis for SV on behalf of HSBC. Experience – prior to joining HSBC in 2008 he worked for Willis where he was an aviation board member and Head of the Africa/Middle East Business Unit. He holds a Diploma (Dip. CII) in Insurance from the Chartered Insurance Institute (London). Flag carrier experience includes South African Airways Group, MAGREB Program (Air Algerie, Royal Air Maroc, Tunis Air, Libyan Arab Airlines), Cyprus Airways, Egypt Air and various GCC Program airlines including Emirates, Gulf Air, Kuwait Airways. Jason Humphreys Divisional Director + 44 (0) 20 7661 2857 jasonhumphreys@hsbc.com
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Role – responsible for leading and co-ordinating all aspects of the broking and marketing on the SV account (in conjunction with Peter Mills) on behalf of HSBC. Experience – prior to joining HSBC in 2006 he worked for Jardine Lloyd Thomson and Heath Lambert where he was an aviation Director. He has over ten years of Middle Eastern airline experience. Flag carrier experience includes Cintra Group of Mexican airlines, Air France, Olympic Airways, Qantas, Aeroflot and Cubana. Graham Hersey
Experience – prior to joining HSBC in 2005 he worked for Marsh where he was a claims Director. Flag carrier experience includes Virgin Atlantic, EVA Air, Asiana, United, Air Canada, Saudi Arabian Airlines, US Air, TAM, Avianca as well as Boeing, Airbus, BAE Systems and Rolls Royce.
Dubai:
Senior Client Executive
David Hunt
+ 44 (0) 20 7661 2823 graham.hersey@hsbc.com
Head of HSBC Insurance Middle East Managing Director of SABB Takaful Director of SABB Insurance Services Limited (SISL)
Role – responsible for leading and co-ordinating all technical aspect of the SV account service on behalf of HSBC.
+ 966 (0) 1 2764827 davidhunt@hsbc.com
Experience – prior to joining HSBC in 2001 he worked for AON and Miller Insurance where he was a Director responsible for airline servicing and management. Flag carrier experience includes GCC Program (specifically Saudi Arabian Airlines and Yemen Airways) and Wataniya Airways. Adrian Acres Divisional Director + 44 (0) 20 7661 2833 adrianacres@hsbc.com Role – responsible for leading and co-ordinating all aspects of the SV risk management and insurance consultancy services on behalf of HSBC. Experience – prior to joining HSBC in 2004 he worked as a Risk and Insurance Manager at British Airways. He has worked with multiple flag carriers world wide over a 30 year aviation career – including one world partner airlines. See Appendix A for full career resume and professional accreditations. Simon Bredin Senior Claims Executive + 44 (0) 20 7661 2891 Simon.bredin@hsbc.com
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Role – responsible for leading and co-ordinating all aspects of the claims management for SV on behalf of HSBC.
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Has worked for HSBC Group for 21 years with 15 years spent in the Middle East and the last 10 years in Saudi Arabia. Has intimate understanding of the Middle East financial services market and excellent connections with, local regulators and within the wider commercial sector. Ultimate responsibility for HSBC Groups Middle East insurance operations. He holds a Bachelor’s degree in Banking and Finance – First Class Honours from Loughborough University of Technology in the United Kingdom. He is also an Associate of the Chartered Institute of Bankers (ACIB), holds a Diploma in Financial Studies (FS Dip) and a Certificate for Financial Advisors (CeFA). Steve Bonynge Head of HSBC Insurance Brokers Middle East + 971 04 310 9241 stevebonynge@hsbc.com He has over 25 years international insurance broking experience in London and international markets handling multinational accounts. He has held technical and management positions with AON Risk Services and Marsh prior to joining HSBC in 1998. Specific experience in property and casualty classes placing primary liability, media and professional indemnity cover for major companies.
Where SABB is responsible for the placement of insurance, they will ensure that all insurance policies are in compliance with local regulations/laws, especially SAMA’s Implementing legislation.
Manghat Rajendran Deputy Head of HSBC Insurance Brokers Middle East + 966 (0) 1 2764827 rajendran.m@hsbc.com
He has over 23 years of insurance experience. Prior to joining HSBC he was Chief Operating Officer at Falcon insurance in Thailand. He has held various senior positions at St Paul Re and F&G Re in Hong Kong, France, England, India and Singapore
He has over 22 years of insurance experience in various positions in India and the Middle East, handling multinational and large local accounts. Has wide experience in underwriting, claims, risk management and technical broking. Before joining HSBC Insurance Brokers he was as General Manager of Dubai National Insurance & Reinsurance Company.
He is an Industrial Engineer, holds a Master of Commerce and a Diploma in Insurance. He is an Associate CPA, and Senior Associate to the Australia and New Zealand Institute of Insurance and Finance
He is Chartered Insurer, an Associate of Chartered Insurance Institute (London) and an Associate of the Institute of Risk Management (London). He has worked on the insurance program for national and multinational clients in Saudi Arabia, Oman and the UAE.
+9661 276 3697 henkumarmathew@hsbc.com
Saudi Arabia:
Henkumar Mathew Head of Technical SAAB Insurance Services Limited
He has over 20 years of insurance experience. Has held senior positions in commercial insurance underwriting, claims management, risk engineering at companies including AIG, Allianz and Chubb. He is B.Tech in electrical engineering with an MBA Degree in Finance and Fellow Degree holder of Insurance Institute of India. Has handled major Telecom sector clients such as Etisalat, Tata Telecom, Idea Cellullar and chemical, power and oil refining risks in his past roles with the various insurance companies shown above.
Nicholas Mogab Chief Executive Officer SAAB Insurance Services Limited +9661 276 3925 nicholas.mogab@sabb.com
HSBC/SABB Insurance Brokers – Middle Eastern presence
United Arab Emirates – offices in Dubai and Abu Dabi Qatar Oman
Saudi Arabia Riyadh Jeddah Khobar
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HSBC – General Terms of Business for Clients Our terms of business is set out in Appendix D If you have any question on this please contact Peter Mills, Head of HSBC Aviation Practice.
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Section 3
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Section 4
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If SV wished to avoid these known slower payers, then the only solution would be to either convince the AITC/GCC brokers to only use London based reinsurers who are part of the London Bureaux ‘clearing system’. Whilst this is possible, it would likely increase the achievable GCC program rates and therefore SV’s premium.
A direct partnership with SV will allow HSBC to maximise our market relationships and deliver exceptional claims performance to SV. How will we deliver this?
Claims performance – our commitment to SV Our Aviation Claims team will establish a new, dynamic and pro active claims ‘dealing’ system for SV. With Adrian Acres embedded at SV and establishing an Electronic Data Recording System (EDRS) he will ensure the local end of this process works. EDRS ❖ Fast information ❖ Faster review ❖ Status monitoring of results ❖ Payment receipt recordings = Puts SV in control If we have the authority to engage directly with SV Insurance/Technical Departments, you will no longer have to suffer the obstructed process which has in the past resulted in pedestrian claims payments. A direct partnership with HSBC will equal fast action and fast payment. ❖ Quarterly claims reviews and half yearly claims meeting in London /Jeddah ❖ Claims Handling Procedures Manual ❖ No separate/additional cost for this service The claims management process can be summarised as follows: ❖ SV gives claim advice to HSBC ❖ Reinsurers advised and adjustors/lawyers engaged – immediately/same day ❖ Reports (interim) prepared – within 5 working days/sooner ❖ Claims payment process commences (based on current GCC market)
London proportion (65.6%) paid to SV within 10 days of a signed release Non-London proportion (34.4%) paid to SV immediately on receipt (see below) The Non-London (international) reinsurers referred to above are problematic for all London brokers. Their payments often take longer to be transferred due to them being handled on an individual basis by all brokers – as opposed to via the London Bureaux ‘clearing system’. This frustration exists for brokers and clients – there is no existing solution other than having a vigilant broker who relentlessly presses these international companies to pay now. We guarantee to maintain group level pressure on known ‘slow payers’, to ensure fast payment which is as close to London speeds as possible.
To demonstrate our claims performance capability we recently (on receipt of a signed release/discharge) sent payment to ILFC (as ultimate aircraft owner) for a total loss value of USD 34M having collected it from the GCC insurance market and paid it in 14 days. To achieve a smooth aviation claims management/ payment process (on all your covers) it is imperative that the relevant departments in SV (Insurance/ Technical and maybe others) understand the claims process and the terms and conditions of the SV policies. How can this be achieved? We will come to
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Loss Adjusters/ Surveyors
Police
Lessor
Regulators
HSBC Claims Repairers
Reinsurers
Local Insurers
Lawyers Manufacturers
Jeddah and run (with Adrian Acres who will already be embedded) training courses to ensure appropriate SV employees understand claims management and the operative policy terms and conditions. We would also bring your loss adjustors (currently GAB Robins) with us so they can establish their requirements directly with your people – under guidance from HSBC. Decisive action to implement the above training will result in faster claims payment. We can work to an immediate agenda here, but would recommend this is done before the end of October.
Legacy claims – the Marsh years When HSBC were appointed by SV in 2004, we agreed to take over/close off over 400 outstanding claims which Marsh Aviation had allowed to accumulate. We are proud to say that this has ostensibly been achieved – resulting in significant payments to SV. Current claims – September 2009
If HSBC are appointed the current claims will continue to be quickly managed to conclusion – at no separate or additional cost
Personal accident – an opportunity Presently this program is managed using a claims fund which is administered and held in trust by Barlow Lyde & Gilbert on behalf of reinsurers. We recommend a fundamental change in approach here – to speed up claims payment and reduce wasted time. How can this be done? By activating a provision in the policy which allows SV to ‘take control’ and make full (independent) use of their settlement authority a situation that AMS prevented from happening. This is something that Adrian Acres could quickly implement for SV if he were embedded in SV.
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A new broker may well choose/ require a specific ‘takeover’ fee for these pre-existing claims.
Section 5
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Section 6
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Action/time line
ept – ort 26 S p Mon /SABB re – on C Sept HSB d 30 a decision e W t e n k e a to SV SV m appointm r drian broke Oct – date for A in SV e d e e r b ag em o t s e iation Acr on av Oct – rovide n ation p SV to ce inform an ce insur -9 – ) suran Oct 7 viation in s (London a g in C tions t C e G ates enda – l me a m t c w m e O o ertific ren rt/rec iation ded/C lu c n Repo n non av l co d – o Nov n renewa ver issue to SV d o io place aviat ence of C ogram sued c– r id e p v D E n & n is viatio ith SV non a cumentatio – ing w ct o t c d e e e d D n a up’ m e dire B ‘wrap come sinc SBC/SAB t H u f o o t on n e intm appo
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