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Aon Risk Solutions

U.S. Technology &


Communications
Industry Report
Powered by Aon GRIPSM, February 2016

Risk. Reinsurance. Human Resources.

Table of Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Top 10 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Risk Preparedness for the Top 10 Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Losses Associated with Top 10 Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Projected 2018 Top Five Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Identifying, Assessing, Measuring and Managing Risks. . . . . . . . 10


Identifying & Assessing Major Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Risk Maturity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Risk Management Department and Function . . . . . . . . . . . . . . . 15


Chief Risk Officer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Risk Management Department. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
External Drivers Strengthening Risk Management. . . . . . . . . . . . . . . . . . . 18
Risk Management Budget. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Risk Financing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Retentions/Deductibles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Limits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Cyber Risk Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Multinational Programs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Captives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Market Insights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Priorities in Choice of Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Desired Market Changes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Carrier/Marketplace Participation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Common Carrier Win Reasons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Common Reasons for Carriers Not Quoting. . . . . . . . . . . . . . . . . . . . . . . . 34
Common Reasons for Rejecting a Carriers Quote. . . . . . . . . . . . . . . . . . . 35
Key Carriers Financials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Financial Insights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Key Contacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Technology and Communications Industry Report

Introduction
In todays global environment, technology and communications companies are facing
increasingly complex challenges: weak and uneven global economic recovery, evolving
regulatory and industry standards, frequent new product introductions, and large-scale
network security breaches, all of which could potentially affect corporate profitability
and, for some, survival. The stakes for the sector are high. With increased scrutiny on
operating efficiencies and a need to constantly innovate to meet mercurial consumer
tastes and demands, it is critical to access accurate and timely information, and
proactively address risk at every level of the organization.
At Aon, our 72,000 colleagues in over 120 countries handle more risk and people issues
on a daily basis than any company in the world. As the leading provider of risk and
human capital solutions, we have an appreciation for the challenges these issues create
and the opportunities that can be unlocked if they are identified and addressed.
We believe in the power of data and analytics to provide insight in this era of greater
complexity and are committed to leveraging our unmatched global network to provide
leading organizations with business intelligence.
Aons 2015 Technology and Communications Industry Report provides comprehensive,
industry specific data on key issues and concerns. These findings allow organizations
to benchmark their risk management and risk financing practices against those of their
peers and help identify practices or approaches that may improve the effectiveness of
their own risk management strategies.
If you have any comments or questions about the survey, or wish to discuss the findings
further, please contact your Aon account executive.
Best regards,

Eric Boyum
National Practice Leader
Technology Practice
Aon Risk Solutions
eric.boyum@aon.com
1.303.639.4120

Executive Summary
In the age of information overload, the technology and
communications industry is facing a barrage of data about
their customers, but many are struggling to make sense of the

Current and projected top risks


Risk readiness and losses

information, and figure out how to capitalize on it. Aon aims to

Techniques utilized to identifying and assessing major risks

bridge this gap. It is Aons belief that information and analytics

Organizational risk maturity

will be the way to complement and supplement the knowledge


base of our clients, enabling them to understand the risks and

Risk management department and function


Risk financing

succeed.
As part of our efforts to help companies stay abreast of emerging
issues and learn what their peers are doing to manage risks and
capture opportunities, we have compiled this report, which
is based on Aons 2015 Global Risk Management Survey and

Cyber risk coverage


Multinational programs
Captives

contains some detailed facts and analyses on the technology and

Market insights

communications sectors. Topics in the report include:

Financial insights

Key Findings

Topic

Key Finding

Top 10 risks

Increasing competition is ranked as the most challenging risk for the technology and communications sectors. Second on
the list is damage to reputation/brand, followed by failure to innovate and meet customer needs. Given the recent highprofile cyber attacks, it is not surprising that computer crime/ hacking /viruses /malicious codes has jumped in ranking,
from number eight in Aons 2013 survey to number five this year.

Risk preparedness for the top 10 risks

In comparison with that of 2013, overall readiness for the top 10 risks has decreased slightly by two percent to 65
percent. Preparedness for two closely inter-related risks - business interruption, and computer crime/hacking/viruses/
malicious codes and technology /system failure have experienced the greatest percentage changes, jumping from 73
percent in 2013 to 92 percent in 2015, and from 72 percent to 92 percent respectively. Economic slowdown has seen
the largest decrease in readiness, from 63 percent to 26 percent.

Losses associated with top 10 risks

On average, reported loss of income from the top 10 risks has decreased from 49 percent in 2013 to 24 percent in
2015. Increasing competition and technology/system failure top the list of income losses related to the most cited risks
in the past 12 months, at 56 percent and 42 percent respectively. The reduction in losses can also be attributed to the
fact that corporate leadership is taking a more proactive role in managing risks.

Projected 2018 top five risks

The ranking for the top five risk concerns in the next three years remains the same as this years - increasing
competition, damage to reputation/brand, failure to innovate/meet customer needs, failure to attract and retain top
talents, and computer crime/hacking/viruses/malicious codes.

Identifying and assessing


major risks

Board and/or management discussion of risk during annual planning, risk assessment or other processes is cited as the
method most often used by surveyed organizations to identify major risks facing their organizations (67 percent), and
senior management judgment and experience the most cited for assessing major risks at 57 percent.

Risk maturity

The Aon Risk Maturity Index (RMI) includes a variety of questions concerning risk management practices, corporate
governance and management decision processes. Overall, an organization can rate at a maturity level ranging from
initial (1) to advanced (5). The technology industry sample set includes over 50 organizations to date, with an
average risk maturity of a 2.5 or basic to defined. This is in line with the current global average that represents
all industries.

Chief Risk Officer

About 17 percent of technology and communications respondents report having a CRO whose duties
include risk management.

Risk management department

Seventy-six percent of technology and communications respondents have indicated that they have a formal risk
management department. Ninety-three percent of organizations over $1 billion have a risk manager. Those with an
in-house risk management department typically maintain a staff of one to five people.

Technology and Communications Industry Report

Key Findings

Topic

Key Finding

External drivers strengthening


risk management

Cyber threat environment (51 percent), pressure from customers (39 percent) and increased focus from regulators
(31 percent) are the most important external drivers strengthening risk management for the technology and
communications industry.

Risk management budget

Forty-one percent of respondents say their risk management spend/resources over the next 12 months remains the
same while 29 percent have indicated a marginal or significant planned increase.

Retentions/deductibles

The majority of organizations have not changed their retentions from the prior policy period. Three lines have registered
the most changes in retention levels: general liability (14 percent), director and officers liabilities (13 percent), and
properties (12 percent).

Limits

Technology and communications respondents say the most commonly purchased umbrella/excess liability limit
stands at USD100 million and the average limit purchased for all surveyed companies totals USD113 million. Similar
to umbrella/excess liability, directors and officers liability limits purchased by publicly traded technology and
communications companies are in direct proportion to a companys revenue size. The highest limit purchased stands at
USD655 million, while the lowest limit purchased was USD1 million.

Cyber risk coverage

About 40 percent of respondents say their companies have purchased cyber insurance coverage, and 17 percent plan
to purchase this coverage. Among companies that have purchased cyber insurance coverage, the majority feel that the
terms and conditions, and the liability limits are sufficient and effective to manage their exposures (at 83 and 67 percent
respectively).

Multinational programs

In the survey, half of technology and communications respondents with operations in more than one country have
indicated that their corporate headquarters control procurement of all of their global and local insurance programs
while 38 percent say their corporate headquarters purchase some lines and leave local offices to handle. General
liability, property, and directors and officers liability coverage continue to be the lines of business most frequently
purchased on a multinational basis.

Captives

About 13 percent of technology and communications respondents have reported having an active captive or Protected
Cell Company (PCC), with nine percent also indicating a plan to create a new or additional captive or PCC in the next
three years. Product liability and completed operations, professional indemnity/Errors and Omissions and Property are
the most frequently underwritten lines of coverage within a captive, all at 71 percent.

Priorities in choice of insurer

Ability to execute and deliver risk finance support proximate to global locations is cited by technology and
communications respondents as the top criterion in an organizations choice of insurers, followed by coverage terms
and conditions.

Desired market changes

Respondents are looking for broader coverage/better terms and conditions, along with more flexibility in underwriting,
coverage, pricing; and recognition of investments in internal risk management efforts through lower premiums.

Common carrier win reasons

When it comes down to selecting a carrier, the most common win reason is incumbent relationship.

Common reasons for


carriers not quoting

The most common reasons for a carrier not providing a quote for casualty/liability, automobile liability, workers
compensation, financial lines and property are: terms and conditions, underwriting concerns and pricing.

Common reasons for


rejecting a carriers quote

The reason most often given by clients for rejecting a carriers quote is inferior pricing.

Financial insights

The share prices of information technology have outperformed the Russell 3000 and S&P 500 Indexes since August
2014 while telecommunication had weaker results when compared to both indexes. The technology sector has less
employment issues than the overall industry and communications sector. In terms of annual revenue change, the
Russell 3000 Index has outperformed the technology sector nine of the last ten quarters. If you look at the aggregate
asset size of the 500 largest US technology and communications companies since 2009 you will observe an upward
trend in total assets and an average year on year growth rate of 10.6 percent.

Aon Risk Solutions

Top 10 Risks

Technology and Communications Industry Report

Top 10 Risks

In Aons 2015 Global Risk Management Survey, respondents are

When comparing with the ranking of various risks in the 2013

provided a list of 53 risks and asked to select 10 that they believe

survey, we have noted that computer crime/ hacking/viruses /

to be the top risks facing their own industries and organizations.

malicious codes has jumped from number eight to number

Increasing competition is ranked by the technology and

five. New technologies such as cloud computing, social media,

communications sectors as the most challenging risk. Second

mobile devices and big data analytics have helped companies

on the list is damage to reputation/brand, followed by failure to

achieve profits and reach operational goals. However, these same

innovate and meet customer needs.

businesses face an increasingly diverse and sophisticated array of

Competition, central to the operation of markets, fosters


innovation, productivity and growth. At the same time,
increasing competition can also eat away a companys market

threats to the security of their information management systems.


Each time the industry develops or adds a new feature to a
system, the chance of cyber risks rises.

share and end a business. Increasing competition presents an

Each year, the security industry strives to protect companies

acute risk for the technology and communications companies,

with new potent tools, but a new crop of hackers emerges with

which face tougher anti-monopoly rules, competition from

more damaging cyber attack techniques. At the same time,

foreign suppliers of basic communications services, rapidly

users careless online behavior will continue to create exploitable

changing technology, fast-evolving regulatory and industry

opportunities for hackers or directly result in security breaches.

standards, frequent new product introductions, and price and

As hackers and anti-hackers remain locked into a fierce arms race,

cost reductions. While larger business organizations may be able

survey participants expect the risk to be a top risk concern three

to fend off higher amounts of competition than smaller ones

years from now.

with limited resources, all organizations, regardless of size, see


competition as a priority risk.

The Center for Strategic and International Studies, a well-known

If we break down the technology and communications group

cyber crime and economic espionage to the world economy

further to sub-categories, well see that the communications

runs as high as USD 445 billionor almost one percent of global

sector sees damage to reputation/brand as a number one risk.

income. The average time to resolve a cyber attack is also rising,

This could be attributed to a long list of well-known companies,

climbing to 45 days, up from 32 days in 2013. As cyber crimes are

which saw their reputation affected by unexpected incidents

becoming more rampant, more costly, and more time consuming

customer services snafus, privacy concerns, inappropriate

to resolve, businesses are faced with an increased possibility of

remarks or behavior by company executives and large-scale data

legal exposure, reputation damage, and operational interruption

breaches. In an age of 24-hour news cycles and instant social

that can wreak havoc on their bottom line.

media, crisis could spread globally within hours or minutes.


As a result, reputation, which was categorized by experts as
priceless or an intangible asset, is becoming increasingly

Washington think tank, has estimated that the annual cost of

Similar to the prior survey, our study findings highlight the


interdependency among many of the top risks. For example, a

pricey, exerting a direct impact on the companys bottom line.

cyber attack causes disruption to business and IT operations and

For the technology sector, where the lifetime of products

will dent a businesss competitiveness, making it harder to attract

continues to shrink, the race to market has intensified and

and maintain top talents. Lack of talents stunts a companys

consumer needs are fickle, failure to innovation/meet customer

ability to stay competitive in a tough business environment. The

needs pose as the number one risk.

list goes on. This interdependency between risks illustrates that

a business disruption leads to damage to reputation/brand, which

organizations can no longer evaluate risk in isolation but must


consider their interconnectedness.

Aon Risk Solutions

Top 10 Risks

Technology and Communications Industry 2015 Top 10 Risks


Rank

Technology & Communications Sectors

Technology

Communications

Increasing competition

Failure to innovate/meet customer needs

Damage to reputation/brand

Damage to reputation/brand

Increasing competition

Regulatory/legislative changes

Failure to innovate/meet customer needs

Damage to reputation/brand

Increasing competition

Failure to attract or retain top talent

Economic slowdown/slow recovery

Computer crime/hacking/viruses/malicious codes

Computer crime/hacking/viruses/malicious codes

Failure to attract or retain top talent

Failure to attract or retain top talent

Economic slowdown/slow recovery

Loss of intellectual property/data

Directors & Officers personal liability

Loss of intellectual property/data

Computer crime/hacking/viruses/malicious codes

Merger/acquisition/restructuring

Regulatory/legislative changes

Technology failure/system failure

Economic slowdown/slow recovery

Technology failure/system failure

Regulatory/legislative changes

Failure to innovate/meet customer needs

Distribution or supply chain failure

Distribution or supply chain failure

Business interruption

10

Data Source: Aons 2015 Global Risk Management Survey


Note: Where ranking for a risk was tied, the all respondent ranking was utilized to determine what risk would be ranked higher

Risk Readiness for the Top 10 Risks


Risk readiness refers to the level of a companys risk preparedness

have received from stakeholders, one would expect a dramatic

undertaking a formal review of risks and putting in place a

uptick in the percentage point. The situation may indicate that

comprehensive risk management plan. In comparison with that

insurance markets solutions have not been responsive to key

of 2013, overall readiness for the top 10 risks has decreased

risk sensitivities and that it is important to manage risk from an

slightly by two percent to 65. The results fall below expectation.

enterprise perspective.

Given the attention and scrutiny that risk management practices

Technology and Communications Industry Report

Top 10 Risks

Risk Readiness for the Top 10 Risks Technology and Communications Sector
2015 Risk Readiness

2013 Risk Readiness

66%

Increasing
competition

68%
53%

Damage to
reputation/brand

62%
58%

Failure to innovate/
meet customer needs

75%

Failure to attract or
retain top talent

62%
70%
92%

Computer crime/hacking/
viruses/malicious codes

73%
26%

Economic slowdown/
slow recovery

63%
74%

Loss of intellectual
property/data

65%
64%

Regulatory/
legislative changes

60%
92%

Technology failure/
system failure

72%
64%

Distribution or supply
chain failure

58%

0%

20%

40%

60%

80%

100%

Data Source: Aons 2015 Global Risk Management Survey

Despite the slight decline in overall risk readiness, two closely

In a field, where the lifetime of products continues to shrink, and

related risks - computer crime/hacking/viruses/malicious codes

consumer needs are fickle, failure to innovation/meet customer

and technology failure/system failure, have registered the

needs is posing an increasingly significant risk. Only 58 percent

highest percentage of risk readiness, both at 92 percent. The

say their organizations are ready for the risk of failure to innovate

rising preparedness is probably driven by heightened media and

and meet customer needs, a whopping 17 percent decrease

public scrutiny after a series of high-profile computer hacking and

from that in 2013. The percentage of readiness for economic

system failure incidents.

slowdown/slow recovery has slipped from 63 in 2013 to 26 due


to the improvement of overall economic conditions worldwide.

Aon Risk Solutions

Top 10 Risks

Losses Associated with Top 10 Risks


On average, reported loss of income from the top 10 risks has

Once again, topping the list of income losses relating to the most

decreased from 49 percent in 2013 to 21 percent in 2015. All

cited risks in the past 12 months are increasing competition at 56

but one of the top risks for the technology and communications

percent. The second on the list is technology failure/system failure

sectors have registered a decrease in losses in the past 12 months

at 42 percent.

with damage to reputation / brand experiencing the greatest


decrease of 39 percent. The reduction in losses can also be
attributed to the fact that corporate leadership is taking a more
proactive role in managing risks.

Losses Associated with Top 10 Risks Technology and Communications


2015 Loss of Income

56%

Increasing
competition

67%
5%

Damage to
reputation/brand

44%
37%

Failure to innovate/
meet customer needs

50%
24%

Failure to attract or
retain top talent

46%
8%

Computer crime/hacking/
viruses/malicious codes

43%
32%

Economic slowdown/
slow recovery

74%
16%

Loss of intellectual
property/data

39%
18%

Regulatory/
legislative changes

49%
42%
42%

Technology failure/
system failure

5%

Distribution or
supply chain failure

35%

0%
Data Source:: Aons 2015 Global Risk Management Survey

2013 Loss of Income

Technology and Communications Industry Report

20%

40%

60%

80%

100%

Top 10 Risks

Projected 2018 Top Five Risks


When asked to project the top five risk concerns in the next three

Respondents in the communications sector see damage to

years, technology and communications respondents have listed

reputation as the top concern. This could be driven by several

increasing competition, damage to reputation, failure to innovate

high-profile incidents which have happened to well-known

and meet customer needs, failure to attract or retain talent, and

companies over customer service snafus, privacy concerns,

computer crime/hacking/viruses/malicious codes. Their rankings

inappropriate remarks or behavior by company executives and

remain the same as this years.

data breaches. Second on the list is regulatory and legislative

Interestingly, the technology sector breakout shows failure to


innovate/meet customer needs and increasing competition
two closely related risks - are listed as the top two projected risk

changes, to which the industry has been highly exposed.


Regulatory and legislative changes makes a fundamental impact
on corporate profits.

concerns. If one examines the recent list of technology companies


that have failed or suffered losses - Nextel, GT Advanced
Technologies, and OLED Technology and Solutions, one will note
that fierce competition and failure to innovate/meet customer
needs are key elements that have contributed to
their fall.

Projected 2018 Top Five Risks Technology and Communications Sectors


Rank

Technology & Communications

Technology

Communications

Increasing competition

Failure to innovate/meet customer needs

Increasing competition

Damage to reputation/brand

Increasing competition

Regulatory/legislative changes

Failure to innovate/meet customer needs

Economic slowdown/slow recovery

Failure to attract or retain top talent

Failure to attract or retain top talent

Computer crime/hacking/viruses/
malicious codes

Damage to reputation/brand

Computer crime/hacking/viruses/
malicious codes

Failure to attract or retain top talent

Computer crime/hacking/viruses/
malicious codes

Data Source: Aons 2015 Global Risk Management Survey


Note: Where ranking for a risk was tied, the All respondent ranking was utilized to determine what risk would be ranked higher

Aon Risk Solutions

Identifying, Assessing,
Measuring and Managing Risk

10

Technology and Communications Industry Report

Identifying, Assessing, Measuring and Managing Risk

Identifying & Assessing Major Risks


Risk identification and assessment give an organization a clear view

Risk experts have long recommended that organizations tackle

of the potential internal and external obstacles it needs to manage

current and emerging risks with a structured enterprise-wide

and overcome, and the opportunities on which it can capitalize.

risk identification and assessment process. Overall, 45 percent of

A sound assessment enables leaders to define the companys risk

surveyed companies utilize a structured enterprise-wide method

appetite and tolerance, and fashion an effective response to risk. In

to identify risks, while 37 percent use this process to assess their

todays global environment, risks are evolving fast and becoming

risks. In practice, a majority of respondents are using two or more

more volatile and complex. Risk managers can no longer rely on

methods for identifying and assessing.

one method. They have to cultivate a comprehensive process to


identify and assess current and emerging risks.

Board and/or management discussion of risk during annual

When asked to assess and rate their organizations preparedness to

and communications respondents as the method most often used

identify, assess, and manage current and emerging risks, surveyed

to identify (67 percent) and senior management judgment and

technology and communications companies have achieved an

experience for assessing (57 percent) major risks facing

average score of 6.78 out of 10.

their organizations.

planning, risk assessment or other processes is cited by technology

Identification of Major Risks


Technology &
Communications

Technology

Communications

Structured enterprise-wide risk identification process

45%

50%

35%

Board and/or management discussion of risk during annual


planning, risk assessment or other processes

67%

64%

74%

Senior management judgment and experience

55%

55%

57%

Risk information from other function-led processes (e.g.


internal audit, disclosure, compliance, etc.)

55%

50%

65%

Industry analysis, external reports

39%

41%

35%

4%

5%

4%

Technology &
Communications

Technology

Communications

Structured enterprise-wide risk assessment process supported


by a standard toolkit and methodology

37%

39%

35%

Board and/or management discussion of risk during


annual planning, risk assessment or other processes

49%

50%

48%

Senior management judgment and experience

57%

61%

48%

Risk modeling / risk quantification analysis

33%

30%

39%

Consult with external service provider/advisor

33%

36%

26%

Other

4%

2%

9%

Category

Other

Assessment of Major Risks


Category

Data Source: Aons 2015 Global Risk Management Survey

Aon Risk Solutions

11

Identifying, Assessing, Measuring and Managing Risk

Risk Maturity
The Aon Risk Maturity Index (RMI) includes a variety of questions
concerning risk management practices, corporate governance and
management decision processes. Overall, an organization can rate
at a maturity level ranging from initial (1) to advanced (5).
The technology and communications industry sample set includes
over 50 organizations to date, with an average risk maturity of a
2.5 or basic to defined. This is in line with the current global
average that represents all industries. We typically observe

Developing capabilities to identify, assess and prioritize risks


across the organization
Developing capabilities to analyze risk consistently, but
approach may be primarily qualitative
Developing capabilities for monitoring existing risk exposure
across the organization
Informal and inconsistent consideration of risk and risk

organizations at the defined level to be:

management information in decision making


Developing understanding of Enterprise Risk Management
(ERM) and its application

12

1.5

Technology and Communications Industry Report

3
2.5

3.5

4.5

Identifying, Assessing, Measuring and Managing Risk

Aon Risk Maturity Index

Distribution of Risk Maturity Ratings (October 2015)

25%

21.1%
19.6%

20%

14.5%

14.0%

15%

11.2%
10.6%

10%

5%

4.6%

3.7%

0%

0.6%

1.5

2.5

3.5

4.5

Initial

Initial to
Basic

Basic

Basic to
Defined

Defined

Defined to
Operational

Operational

Operational
to Advanced

Advanced

Identification of Major Risks


All Organizations (900+ Organizations Globally)
Developing capabilities to identify, assess and prioritize risks across the organization
Developing capabilities to analyze risk consistently, but approach may be primarily qualitative
Developing capabilities for monitoring existing risk exposure across the organization
Informal and inconsistent consideration of risk and risk management information in decision making
Developing understanding of Enterprise Risk Management (ERM) and its application

Technology (53 Participants Globally)


Developing capabilities to identify, assess and prioritize risks across the organization
Inconsistency in risk management practices or approaches across the organization (i.e., silos)
Limited capabilities for monitoring existing risk exposure across the organization
Informal and inconsistent consideration of risk and risk management information in decision making
Developing understanding of Enterprise Risk Management (ERM) and its application

Aon Risk Solutions

13

Identifying, Assessing, Measuring and Managing Risk

Technology and communications organizations as a group appear

Specifically, over 60 percent of less mature organizations rarely

to have especially strong practices related to risk management

or never collaborate with their strategic partners to identify

stewardship, and are more mature in their ability to integrate risk

potential emerging risks, while over 86 percent of more mature

insights into human capital processes. In particular, they are likely

organizations collaborate on an ad-hoc basis, if not more

to have the most transparency around their risk communications.

consistently through a defined process. In an increasingly

The technology and communications industry tends to score


lower in areas related to the use of quantification methods to
understand risk. In addition, technology and communications

of collaboration outside of just an internally-focused risk


identification process.

companies seem to have the lowest level of involvement of key

There also appears to be a notable difference between how

stakeholders in risk management strategy setting. In particular,

organizations measure and track risks once identified. Based

they seem less mature with formally collecting and incorporating

on our research, not only do more mature organizations have

risk information into the decision making process.

processes in place to identify risks at an enterprise level, but

One section of the RMI is dedicated to best practices regarding


identification of existing and emerging risks. When it comes to
these practices, there are a few interesting differences between
those organizations at lower levels of risk maturity (2.5-) and
higher levels of risk maturity (3.5+).

14

interconnected world, this difference illustrates the importance

Technology and Communications Industry Report

they are also more than twice as likely to follow through with
implementing, measuring, and tracking risk management
activities to completion.

Risk Management
Department and Function

Aon Risk Solutions

15

Risk Management Department and Function

Chief Risk Officer


Thirty-one percent of technology and communications

include insurance/ hazard risk. About 61 percent of participants

respondents report having a CRO. The responsibilities of a CRO

say they do not have a CRO nor do they plan to create one. They

vary from company to company and industry to industry. Often,

choose instead to leverage existing teams and use risk committees

CROs are given the tasks including managing credit risk, market

for driving change.

risk, regulatory risk and compliance risk, which may or may not

Chief Risk Officer


Technology &
Communications

Technology

Communications

All

Yes, but this role does not include


risk management

14%

16%

9%

11%

Yes, this role includes risk management

17%

16%

17%

17%

No, but we are considering


creating this position

5%

2%

9%

8%

No, and we do not plan to create


such a position

61%

63%

57%

59%

Dont know

5%

2%

9%

5%

Role

Data Source: 2015 Global Risk Management Survey

Risk Management Department


The growing importance and visibility of risk management

Among organizations with a risk management department, 66

have led to the increasing integration of such functions with an

percent say their risk management department reports to the

organizations strategic plan. To succeed in todays competitive

Finance/Treasury/Chief Financial Officer. In the case where no

and heavily regulated business environment, companies have

formal risk management department exists, 32 percent say their

gradually come to the realization that they have to incorporate

CFO handled risk management.

risk management into all aspects of their operations.


Seventy-six percent of technology and communications
respondents have indicated that they have a formal risk
management department, slightly higher than the average
(71 percent) for companies across all industries. If we look
further at this group by organizations over $1 billion we can see
organizational size plays a significant role. Ninety-three percent
of organizations over $1 billion have a risk manager.

16

Technology and Communications Industry Report

Those with an in-house risk management department typically


maintain a staff of one to five people (82 percent).

Risk Management Department and Function

Formal Risk Management/Insurance Department/Function


Yes

No

Yes

No

24%

24%

76%

76%

Data Source: Aons 2015 Global Risk Management Survey

Number of People In Your Risk Management/Insurance Department/Function


1-2

3-5

6-8

9-11 1-2 Over 12


3-5

10%

6-8

9-11

Over 12

10%

4%

4%

4%

4%
41%

41%

41%

41%

Data Source: Aons 2015 Global Risk Management Survey

Aon Risk Solutions

17

Risk Management Department and Function

External Drivers Strengthening Risk Management (past two years)


Cyber threat environment (51 percent), pressure from customers

with that in the recently released Aon-sponsored 2015 Global

(39 percent), and increased focus from regulators (31 percent)

Cyber Impact Report. Compiled by the Ponemon Institute, the

are the top external drivers strengthening risk management

study shows that cyber is one of the fastest growing risks for

for the technology and communications industry. Cyber threat

companies across the globe, and that information technology

environment has displayed the greatest deviation from the

assets are 39 percent more exposed than property assets on a

all industry average for external drivers strengthening risk

relative value to insurance protection basis.

management, being 28 percent higher. The result corresponds

External Drivers Strengthening Risk Management Technology and Communications (past two years)
Technology & Communications

51%

Cyber threat
environment

22%
28%

Demand from investors


for greater disclosure
and accountability

20%
27%

Economic volatility

37%
12%

Exposure from
suppliers/vendors

15%
18%

Globalization

11%
31%

Increased focus
from regulators

38%
13%

Large third party


liability losses/litigation

18%
16%
17%

Natural weather events

12%

Other

8%
9%

Political uncertainty

15%
27%

Pressure from
competitors

21%
39%

Pressure from
customers

26%
0%

Random acts
of violence

2%
18%
18%

Risk events/black
swan events

16%
15%

Workforce issues

0%
Data Source: Aons 2015 Global Risk Management Survey

18

All

Technology and Communications Industry Report

15%

30%

45%

60%

Risk Management Department and Function

Risk Management Budget


Risk management is a process by which business risks are

Change in Risk Management Budget in Next 12 Months

identified, analyzed, engineered, reduced, eliminated


or transferred. In recent years, the tougher regulatory
environment and fast evolving risk landscape are profoundly

No,
decrease

No, stay
the same

Unsure

Yes,
marginally

Yes,
significantly

changing the way an organization manages its risks. The board


of directors and senior executives are under increasing pressure
4% 4%

from various stakeholders to maintain effective oversight of


risk management. At the same time, theres been a rising
interest in risk management as a competitive advantage both
in decision-making (tackling the risk the organization wants or

29%

needs to take, and planning accordingly) and event response

41%

(crisis management and business continuity). Such heightened


attention might have driven an organizations increase in risk
management spend.
In the Aon 2015 Global Risk Management Survey, 33 percent of

22%

technology and communications respondents have indicated


a marginal or significant planned increase in risk management
spend/resources over the next 12 months. We would prefer to

Data Source: Aons 2015 Global Risk Management Survey

see this as a very positive trend following years of declining risk


management budgets. Only four percent of respondents say
they are planning for a decrease in risk management spend.

Aon Risk Solutions

19

Risk Financing

20

Technology and Communications Industry Report

Risk Financing

Retentions/Deductibles
The majority of organizations have not changed their retentions

of directors and officers liability have gone up across the board

from the prior policy period. When a change does occur, its

in recent years, with publicly traded companies especially

normally an increase due to an organizations rising exposure to

affected. This is largely due to the increase in litigations filed by

natural catastrophe risk, an adverse loss experience, or the desire

shareholders, employees, competitors or government agencies

to control premium spend.

against senior leaders as well as the large number of mergers and


acquisitions - nearly all M&A transactions involving publicly traded

General liability, and directors and officers liability have

companies resulted in at least one lawsuit.

experienced the most changes in retention levels, at 14 percent


and 13 percent respectively. Its worth noting that the prices

Changes in Retentions/Deductibles
Lower

Workers
compensation

General liability

Products liability
(if separate)

89%

6%

Auto / motor
vehicle liability
(not physical damage)

3%

85%

Professional indemnity/
errors and omissions

3%

92%

5%

0%

9%

90%

8%

Directors &
officers liability

Property

14%

85%

6%

Higher

6%

80%

7%

Same

3%

13%

6%

83%

20%

40%

12%

60%

80%

100%

Data Source: Aons 2015 Global Risk Management Survey

Aon Risk Solutions

21

Risk Financing

Limits
Umbrella/Excess Liability
When an organization considers what level of risk to transfer via

In the 2015 survey, technology and communications respondents

insurance policies, it has to take into account multiple factors.

say the most commonly purchased limit amounts to USD 100

These include: risk severity, risk mitigation measures already

million and the average limit purchased for all surveyed companies

in place or under consideration, the regulatory landscape, an

totals USD 113 million. The level of limits purchased stands in

organizations historical trend of loss activities, the insurance

direct proportion to a companys revenue size - a larger company

marketplace and its appetite for risk. The choice made by one

with a higher profile could represent a bigger target for legal

individual organization may not work for another. Consideration

actions. As the Chinese saying goes: a tall tree catches most of

must always be given to the impact of that loss retention on an

the wind.

organizations ability to achieve its objectives.

Umbrella/Excess Liability Limits


Revenue

Minimum

1st Quartile

Average

Median

Mode

3rd Quartile

Maximum

All

$4,000,000

$50,000,000

$113,350,877

$100,000,000

$100,000,000

$125,000,000

$700,000,000

$1M-$500M

$4,000,000

$10,500,000

$32,272,727

$25,000,000

$50,000,000

$50,000,000

$100,000,000

$500M-$1B

$10,000,000

$24,000,000

$44,000,000

$25,000,000

$24,000,000

$62,500,000

$100,000,000

$1B-$5B

$25,000,000

$50,000,000

$90,500,000

$100,000,000

$100,000,000

$100,000,000

$200,000,000

$5B-$15B

$75,000,000

$100,000,000

$171,875,000

$125,000,000

$100,000,000

$225,000,000

$350,000,000

Over $15B

$5,000,000

$125,000,000

$237,545,455

$175,000,000

$150,000,000

$262,500,000

$700,000,000

Data Source: Aons 2015 Global Risk Management Survey and other Aon proprietary databases

Directors and Officers Liability


Similar to the umbrella/excess liability, directors and officers

companys revenue size. The highest limit purchased stands at

liability limits purchased by publicly traded technology and

USD 655 million, while the lowest limit purchased USD 1 million.

communications companies are in direct proportion to a

S&P Technology and Communications Sector


Market Cap

Minimum

1st Quartile

Average

Median

3rd Quartile

Maximum

All

$1,000,000

$35,000,000

$102,582,645

$65,000,000

$130,000,000

$655,000,000

$1M-$100M

$1,000,000

$5,000,000

$11,718,750

$12,750,000

$15,500,000

$30,000,000

$20,000,000

$25,000,000

$45,714,286

$35,000,000

$60,000,000

$120,000,000

$500M-$1B

$5,000,000

$50,000,000

$90,153,846

$70,000,000

$130,000,000

$230,000,000

$1B-$5B

$10,000,000

$60,000,000

$86,470,588

$75,000,000

$121,250,000

$200,000,000

Over $5B

$20,000,000

$125,000,000

$212,857,143

$200,000,000

$270,000,000

$655,000,000

$100M-$500M

Data Source: The Aon Financial Services Group

22

Technology and Communications Industry Report

Risk Financing

Cyber Risk Coverage


In the Aon-sponsored 2015 Global Cyber Impact Report (the

While a cyber attack often causes disruption to business and IT

research was conducted by the Ponemon Institute), we have found

operations, catastrophic cyber losses can also result in potential

that cyber is one of the fastest growing risks for companies across

directors and officers liability allegations. In the wake of

the globe as mobile technologies, cloud computing, corporate

numerous publicly reported material incidents in 2015, cyber

bring-your-own-device policies, and big data analytics are

insurance gross written premium is forecast to grow at the

becoming increasingly popular. About 37 percent of companies

same time insurance carriers are limiting capacity, coverage and

surveyed experienced a material or significantly disruptive

raising premiums for certain industry classes, such as large retail,

security exploit or data breach one or more times during the past

healthcare and financial institutions.

two years and the average economic impact of the event was
USD 2.1 million.

In the face of more frequent contractual insurance requirements

Given the proliferation of internet-connected devices, which

forward-thinking companies are taking proactive steps to

are expected to grow from 10 to 50 billion within five years,

explore and transfer cyber risks. Underwriting and purchasing

cyber risk is expected to skyrocket. On average, probable

of cyber insurance process can assist to:

maximum loss of tangible assets amounts to USD 648 million and


probable maximum loss on intangible assets USD 612 million.
But, organizations buy insurance to cover just over half of the
maximum probable loss of property, plant and equipment, and
only 12 percent of the probable maximum loss of information

for cyber liability and potential shareholder derivative actions,

Satisfy customer and partner cyber insurance


contract requirements
Stabilize balance sheet

assets.

Address regulatory (including SEC) guidelines

Organizations need to consider cyber assets and exposures in

Reduce Total Cost of Risk

the context of financial statement impact compared to historical


tangible assets and exposures. According to a sobering new
report from FireEye, on average 96 percent of computer systems
across all industry segments have been breached. Yet, the
Verizon 2015 Data Breach Investigations Report only shows

Enable organization-wide cyber risk management culture


Align cyber insurance solution with Enterprise
Risk Management

confirmed data loss in less than three percent of the almost

Finally, despite the growth of cyber insurance sales,

80,000 incidents reported. As far as financial impact

initial insurance carrier denials of 2015 cyber insurance

is concerned, 80 percent of incidents result in less than

claims re-emphasize the critical importance of negotiated

USD 1 million in total cost and indemnity, 15 percent in losses

customized coverage the devil is in the details.

between USD 1 million and USD 20 million, and five percent


in losses over USD 20 million. Identification, quantification,
mitigation, incident response plans and risk transfer are some
of the key issues in macro-level enterprise risk management.

Aon Risk Solutions

23

Risk Financing

Cyber Risk
No coverage

Property
1st Party Privacy/Network Risks
Physical damage to data only
Virus/hacker damage to data only
Denial of service attach

B.I. loss from security event


Extortion or threat
Employee sabotage of data only
3rd Party Privacy/Network Risks

Theft/disclosure of private info.


Confidential corporate
info. breach
Technology E&O
Media liability
(electronic content)
Privacy breach
expense/notification
Damage to third-partys
data only
Regulatory privacy defense/fines
Virus/malicious code
transmission
* For reference and discussion only.

24

Technology and Communications Industry Report

General
Liability

Crime/Bond

K&R

Limited coverage

Professional
Indemnity

Coverage

Cyber

Risk Financing

In Aons 2015 Global Risk Management Survey, 40 percent of

Purchase of Cyber Insurance

respondents say their companies have purchased cyber insurance


coverage, and 17 percent plan to purchase this coverage. If
we separate the results by sector, 46 percent of technology
companies have not purchased cyber insurance versus 37 percent
for communications. About 21 percent of respondents in the
communications industry plan to purchase cyber insurance.
The following activities by these industries may result
in more risk exposure, and have led to higher take up
rate. This probably explains the difference in purchasing
patterns for technology and communications industries.
Storing and disseminating personal information
A high degree of dependency on electronic processes or
computer networks

Technology &
Communications

Technology

Communications

Insurance
currently
purchased

40%

39%

42%

Not
purchased
and no
plans to
purchase

43%

46%

37%

Plan to
purchase

17%

14%

21%

Category

Data Source: Aons 2015 Global Risk Management Survey

Among companies that have purchased cyber insurance

Engagement with vendors, independent contractors or


additional service providers

coverage, 83 percent of respondents feel the terms and

Regulatory compliance

percent of communications companies say they are effective).

PCI Security Standards/Plastic Card Security compliance

conditions are effective to manage their exposures (100


However, respondents are less satisfied with the liability limits,
with over one third expressing concern over the adequacy of

Contingent bodily injury and property damage that may


result from cyber incidents

their limits carried.

Operation reliant on critical infrastructure (Personally


Identifiable Information risks are less prominent for industries
such as utilities, manufacturing and logistics)

Effectiveness of Current Cyber Insurance

Intentional acts by rogue employees


SEC Cyber Disclosure Guidance of 2011.

Technology &
Communications

Technology

Communications

Yes

83%

73%

100%

No

17%

27%

0%

Category

Data Source: Aons 2015 Global Risk Management Survey

Adequacy of Limits For Cyber Insurance


Technology &
Communications

Technology

Communications

Yes

67%

64%

71%

No

33%

36%

29%

Category

Data Source: Aons 2015 Global Risk Management Survey

Aon Risk Solutions

25

Multinational Programs

26

Technology and Communications Industry Report

Multinational Programs

Globalization continues to be a consistent theme for companies

General liability and property coverage continue to be the lines

pursuing improved operational results. As such, risk managers

of business most frequently purchased on a multinational basis.

need to focus on larger geographic spread while addressing

However, there have been a dramatic increase in the number of

variations in regulatory controls, exposures, available solutions,

respondents purchasing multinational programs for directors

and options for optimal risk finance program design.

& officers liability (86 percent), workers compensation and

Looking at control and placement of multinational risks, half of the


technology and communications respondents with operations
in more than one country have indicated that their corporate
headquarters control procurement of all of their global and local

employers liability (54 percent) and auto/motor vehicle liability.


These upticks may be attributable to the continued need for
certainty of coverage and costs, all of which could drive the
decision to purchase multinational programs.

insurance programs while only 38 percent purchase some lines


and leave local offices to handle other lines.

Multinational Insurance Purchasing Habits

Types of Multinational Insurance Coverages Purchased

Technology &
Communications

All

Corporate headquarters controls


procurement of ALL insurance
programs (global/local)

50%

45%

Corporate headquarters controls


some lines and leaves local office
to purchase other lines

38%

No, each operation buys its own


insurance with no co-ordination
from corporate headquarters

13%

Category

44%

11%

Data represents respondents operating in more than one country


Data Source: 2015 Global Risk Management Survey

Importance to Multinational Program Purchase Decision


Technology &
Communications

All

Certainty of Coverage Knowledge of what coverage


is included in the program

Cost - This approach is


more economical

Statutory Compliance -Access to


local admitted coverage where
non-admitted is prohibited

Fiscal Compliance - Ability


to pay insurance premium
and related taxes

Program Performance - Access to


local claims and/or other services
from local insurer/policy provider

Accounting - Ability to allocate risk


transfer costs to local operations
vs. pay from corporate

Category

Technology &
Communications

All

General Liability/Public Liability

89%

81%

Property (property damage


and business interruption)

79%

79%

Directors & Officers Liability

86%

73%

Marine/Ocean Cargo

46%

49%

Workers Compensation/
Employers Liability

54%

48%

Auto/Motor Vehicle Liability

50%

42%

Crime

61%

42%

Product Recall and Contamination

11%

18%

Trade Credit

25%

17%

Other

11%

11%

Category

Data represents respondents operating in more than one country


Data Source: 2015 Global Risk Management Survey

Data represents respondents operating in more than one country


Data Source: 2015 Global Risk Management Survey

Aon Risk Solutions

27

Captives

28

Technology and Communications Industry Report

Captives

Organizations in all industry groups and geographies continue

Survey results demonstrate that product liability and completed

to use captive insurance companies as an effective way to

operations, professional indemnity/errors and omissions liability,

take financial control and manage risks. About 22 percent of

and property (property damage and business interruptions)

technology and communications respondents have reported

are the most frequently underwritten lines of coverage within a

having an active captive or Protected Cell Company (PCC) with

captive, at 71 percent respectively. For other surveyed industries,

four percent also indicating a plan to create a new or additional

general third-party liability and property are the most frequently

captive or PCC in the next three years.

underwritten lines. Continuing the theme of strategic risk

Even though the insurance market continues to be challenged


with soft rates and low interest rates, an appetite for captive

management, warranty risk is cited with the greatest growth


potential in the next five years within captive entities.

utilization still exists. Aons survey shows that technology and


communications companies use captives predominantly as a
strategic risk management tool (64 percent) that facilitates greater
control over their risk program, particularly around policy terms
and conditions.

Organizations with a Captive or PCC


Category

Technology & Communications

All

Plan to create a new or additional captive or PCC in the next 3 years

9%

6%

Currently have an active captive or PCC

13%

18%

Have a captive that is dormant / run-off

2%

2%

Plan to close a captive in the next 3 years

2%

1%

Data Source: Aons 2015 Global Risk Management Survey

Aon Risk Solutions

29

Captives

Current and Future Coverage Underwritten


Technology &
Communications

Technology & Communications


Continue/plan to underwrite
same/new risk in next five years

Percentage
change

Auto Liability

14%

13%

-2%

Aviation

0%

0%

0%

Catastrophe

43%

50%

7%

Credit/Trade Credit

0%

25%

25%

Crime/Fidelity

14%

13%

-2%

Cyber Liability/Network Liability

29%

50%

21%

Directors & Officers Liability

29%

25%

-4%

Employee Benefits (Excluding


Health/Medical and Life)

29%

38%

9%

Employers Liability/Workers Compensation

14%

50%

36%

Employment Practices Liability

14%

38%

23%

Environmental/Pollution

0%

13%

13%

Financial Products

14%

25%

11%

General/Third Party Liability

57%

63%

5%

Health/Medical

14%

38%

23%

Life

29%

38%

9%

Marine

14%

25%

11%

Product Liability and Completed Operations

71%

63%

-9%

Professional Indemnity/Errors and


Ommissions Liability

71%

75%

4%

Property (Property Damage and Business


Interruption)

71%

63%

-9%

Terrorism

29%

38%

9%

Third-Party Business

43%

50%

7%

Owner Controlled Insurance Program/


Contractor Controlled Insurance Program

14%

13%

-2%

Sub-contractor default insurance

0%

0%

0%

Warranty

0%

50%

50%

Coverage

Data Source: 2015 Global Risk Management Survey

30

Technology and Communications Industry Report

Market Insights

Aon Risk Solutions

31

Market Insights

Priorities in Choice of Insurer


Technology and communications respondents rate ability to

It is interesting to note that the ranking of value for money/price,

execute and deliver risk finance support proximate to global

and claims services & settlement, two of which topped the list in

locations as the top criterion in an organizations choice of

the 2013 survey, have been dramatically downgraded to number

insurers. This is due to the fact that 77 percent of the surveyed

six and number seven this year. These changes could be attributed

organizations operate in more than one country (64 percent of the

to improved economic conditions worldwide. During a recession,

respondents say they have operations in more than six countries).

if an insurance carrier does not fulfill its promise or there is a long

For companies with multinational operations, it is a priority to

delay in reimbursement, the organizations operations and balance

partner with local firms that understand the specific business and

sheet could be adversely affected. In the worst case scenario,

regulatory conditions, and write policies to meet compulsory

such delay or failure to pay could bankrupt a business. More

insurance requirements.

importantly, the change in ranking has a lot to do with stricter


regulations in foreign countries where the surveyed organizations

An insurance policy is only as broad as the terms and conditions

operate. In an effort to meet local regulatory requirements,

that make it up. When an organization purchases an insurance

an insurers ability to execute and deliver risk finance support

policy, it expects to be compensated in the event of a covered

proximate to global locations trumps claims services & settlement

loss. This explains why respondents cite coverage terms and

and value for money.

conditions as the second priority in an organizations choice


of insurer.

Priorities in Choice of Insurer


Technology &
Communications

Technology

Communications

All

Ability to execute and deliver risk finance support


proximate to global locations

Coverage terms and conditions

Long-term relationship

Flexibility/innovation/creativity

Financial stability/rating

Claims service & settlement

Value for money / price

Capacity

Industry experience

Speed and quality of documentation

10

10

10

10

Category

Data Source: 2015 Global Risk Management Survey

32

Technology and Communications Industry Report

Market Insights

Desired Market Changes


When asked what changes technology and communications

Its a clear indication that organizations are expecting their insurers

organizations would most like to see in the insurance market,

to offer broader terms and more flexible solutions for meeting risk

the majority of respondents desire:

management objectives as they are coping with new risk


and challenges.

Broader coverage/better terms and conditions (67 percent)


More flexibility - underwriting, coverage, pricing (64 percent)
Recognition of investments in internal risk management efforts
through lower premiums (44 percent)

Desired Market Changes


Technology & Communications

All

67%

Broader coverage/better
terms and conditions

64%

Recognition of
investments in internal
risk management efforts
through lower premiums

44%
50%
24%

Increased capacity

22%

More flexibility
(i.e. underwriting,
coverages, pricing)

64%
65%
27%

More sophisticated
claims information
technology (IT) systems

31%
27%

Streamline/innovate
underwriting process

30%

Improved documentation
accuracy and timeliness
(policy issuances and
endorsement processing)

38%
37%
36%
32%

More product innovation


More globally compliant and
consistent coverage across
multinational programs

42%
29%
5%
4%

Other

0%

20%

40%

60%

80%

100%

Source: 2015 Global Risk Management Survey

Aon Risk Solutions

33

Market Insights

Top Carriers by Premium Volume U.S. (Alpha Order)


Top Carriers by Premium Volume U.S. (alpha order) Aon GRIPSM , provides insights into carrier/marketplace participation for casualty/
liability, automobile liability, workers compensation, financial lines and property. These data are based on Aon placements only.
Casualty/Liability

Automobile

Workers Compensation

Financial Lines

Property

Ace

Ace

Ace

AIG

Ace

AIG

AIG

AIG

Beazley

AIG

Alleghany

Liberty Mutual

CV Starr

Chubb

Berkshire Hathaway

Swiss Re

MS & AD

Travelers

XL

FM Global

Travelers

Travelers

Zurich

Zurich

Zurich

* For a Property/Casualty Package AIG, Ace, Chubb and Zurich are the top market
Data Source: Global Risk Insight Platform

Common Carrier Win Reasons


When it comes to selecting a carrier, the most common win reason cited is incumbent relationship, or taking a boxing metaphor, it is
you need to knockout the champ.
Casualty/ Liability

Automobile

Workers Compensation

Financial Lines

Property

Incumbent relationship

Incumbent relationship

Incumbent relationship

Incumbent relationship

Incumbent relationship

Pricing

Pricing

Pricing

Pricing

Pricing

Favorable coverage terms

Favorable coverage terms

Favorable coverage terms

Favorable coverage terms

Coverage/capacity not
available elsewhere

Structured portfolio
solution

Global presence and


network capabilities

Global presence and


network capabilities

Financial strength
of carrier

Favorable coverage terms

Global presence and


network capabilities

Coverage/capacity not
available elsewhere

Coverage/capacity not
available elsewhere

Structured portfolio
solution

Flexibility in response to
client needs

Data Source: Global Risk Insight Platform

Common Reasons for Carriers not Quoting


According to Aon GRIPSM , the most common reasons for a carrier not providing a quote for casualty/liability, automobile liability, workers
compensation, financial lines and property are: terms and conditions, underwriting concerns and pricing.

34

Technology and Communications Industry Report

Market Insights

Common Reasons for Rejecting a Carriers Quote


The reason most often given by clients for rejecting a carriers quote is inferior pricing.
Casualty/ Liability

Automobile

Workers Compensation

Financial Lines

Property

Inferior pricing

Inferior pricing

Inferior pricing

Inferior pricing

Inferior pricing

Incumbent offer
accepted

Incumbent offer
accepted

Incumbent offer
accepted

Incumbent offer
accepted

Inferior terms &


conditions

Inferior terms &


conditions

Perceived weakness

Perceived weakness

Inferior terms &


conditions

Incumbent offer
accepted

Perceived weakness

Inferior terms &


conditions

Inferior terms &


conditions

Claims paying
reputation

Data Source: Global Risk Insight Platform

Top Technology and Communications Carriers Financial Strength Rating


A number of rating agencies estimate and publish the financial

A.M. Best and Standard & Poors. All of the insurers below

position of insurance companies, including A.M. Best, Standard

currently carry ratings considered to be secure. Ratings can

& Poors, Moodys Investors Service, and Fitch Ratings. For

change at any point in time and should be regularly track to

this review, we have provided an overview of ratings for key

assure they continue to meet industry standards.

technology and communications markets as assigned by

Carrier

A.M. Best Rating

A.M. Size

A.M. Best Outlook

S&P Rating

S&P Outlook

Ace

A++u

XV

Negative

AA

Negative

AIG

XV

Stable

A+

Stable

Alleghany

A+

XIII

Stable

Stable

Beazley

VIII

Stable

NR

NR

Berkshire Hathaway

A++

XV

Stable

AA+

Watch -Negative

Chubb

A++u

XV

Negative

AA

Negative

CV Starr

XIV

Stable

NR

NR

FM Global

A+

XV

Stable

A+

Stable

Liberty Mutual

XV

Stable

Stable

MS & AD

A+

XV

Stable

Stable

Swiss Re

A+

XV

Stable

AA-

Stable

Travelers

A++

XV

Stable

AA

Stable

XL

XV

Stable

A+

Positive

Zurich

A+

XV

Stable

AA-

Stable

Ratings as of 12/23/15
Data Source: A.M. Best Reports through BestLink for all statutory filing data and S&P
Reports for the S&P categories. CV Starr rating is Starr Indemnity & Liability Company.
Alleghany rating is RSUI Indemnity.

Aon Risk Solutions

35

Financial Insights

36

Technology and Communications Industry Report

Financial Insights

Using August 2014 as a starting point, the share prices of

than the overall industry and communications sector. In terms of

information technology have outperformed the Russell 3000

annual revenue change, the Russell 3000 Index has outperformed

and S&P 500 Indexes while communications had weaker results

the technology sector nine of the last ten quarters. If you look

when compared to both indexes. If we compare employment

at the aggregate asset size of the 500 largest US technology

numbers for the technology and communications industry and

and communications companies since 2009 you will observe an

the overall non-farm sectors in the same time period, we can see

upward trend in total assets and an average year on year growth

that of technology sector have had fewer employment issues

rate of 10.6 percent.

Market Performance of Technology Sector

Market Performance of Technology Sector

120

S&P 500S&P Information TechnologyS&P 500 Telecumication Russell 3000

115

110

105

100

95

90

85

80
Aug-14

Sep-14

Oct-14

Nov-14

Source: Bloomberg

Dec-14

Jan-15

S&P 500

Feb-15

Mar-15

S&P 500 Informa.on Technology

Source: Bloomberg

Apr-15

May-15

Jun-15

S&P 500 Telecommunica.on Services

Jul-15

Aug-15

Russell 3000

% Annual Employment Change

% Annual Employment Change

Total Non-Farm EmploymentTechnology EmploymentTelecommunications Employment

4%

2%

0%

-2%

-4%

-6%

Jul-15

May-15

Jan-15

Mar-15

Nov-14

Jul-14

Sep-14

May-14

Jan-14

Mar-14

Nov-13

Jul-13

Sep-13

May-13

Jan-13

Mar-13

Nov-12

Jul-12

Sep-12

May-12

Jan-12

Mar-12

Nov-11

Jul-11

Sep-11

May-11

Jan-11

Mar-11

Nov-10

Jul-10

Sep-10

May-10

Jan-10

Mar-10

Nov-09

Jul-09

Sep-09

May-09

Jan-09

Mar-09

Nov-08

Jul-08

Sep-08

May-08

Jan-08

-10%

Mar-08

-8%

Source: Bloomberg

Source: Bloomberg

Total Non-Farm Employment

Technology Employment

Telecommunications Employment

Aon Risk Solutions

37

Financial Insights

Annual % Revenue Growth

Annual % Revenue Growth


Russell 3000 500 Largest US Tech Companies by Market Cap

12%

10%

8%

6%

4%

2%

Q2'15

Q1'15

Q4'14

Q3'14

Q2'14

Q1'14

Q4'13

Q3'13

Q2'13

Q1'13

0%

-2%
Source: Bloomberg

Russell 3000

500 Largest US Tech Companies by Market Cap

Source: Bloomberg

Total Assets (BN USD) - 500 Largest US Technology & Communications Companies
Total Assets

YoY Growth

14%

3000

12%

2500

8%
1500
6%
1000
4%

500

2009

Source: Bloomberg

38

Technology and Communications Industry Report

2010

2011

2012

2013

2014

YoY% Growth

Total Assets (USD Billions)

10%
2000

Contacts
Technology and
Communications
Eric Boyum
National Practice Leader
Technology Practice
Aon Risk Solutions
eric.boyum@aon.com
1.303.639.4120

Aon Inpoint
George M. Zsolnay IV
Analytics Manager
Aon Client and Business Analytics
george.zsolnay@aon.com
1.312.381.3955

For Media and


Press Inquires
Cybil Rose
Kemper Lesnick
cybil.rose@kemperlesnick.com
1.312.755.3537

Aon Risk Solutions

39

About Aon
Aon plc (NYSE:AON) is a leading global provider
of risk management, insurance brokerage and
reinsurance brokerage, and human resources
solutions and outsourcing services. Through its
more than 72,000 colleagues worldwide, Aon unites
to empower results for clients in over 120 countries
via innovative risk and people solutions. For further
information on our capabilities and to learn how
we empower results for clients, please visit:
http://aon.mediaroom.com.
Aon plc 2016. All rights reserved.
The information contained herein and the statements expressed are of
a general nature and are not intended to address the circumstances of
any particular individual or entity. Although we endeavor to provide
accurate and timely information and use sources we consider reliable,
there can be no guarantee that such information is accurate as of the
date it is received or that it will continue to be accurate in the future.
No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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