Alcoa has manufacturing operations in 43 countries and with more than $60 billion in insurable values at risk, the company requires a large amount of commercial property insurance capacity. Its difficulties began to mount last November, when the insurance risk management department struggled to complete its property insurance renewal process at the price targets set months earlier. What lay in between were the massive hurricane-related losses along the Gulf Coast in August and September that drove industry prices higher and limited coverage options. Although Alcoa had not experienced any large losses from the storms, property insurance prices had climbed so high that it was estimated the company would have to pay $1.5 million over its earlier estimates. Among the concerns was that if Alcoa accepted the higher premiums, it would set a costly precedent that would carry on for years to come. Worse yet, Alcoa's insurance broker informed the company that even at the new higher prices, the company's usual insurance companies were seeking to limit coverage for certain layers of the insurance program. Should the company's captive insurance company need to close the coverage gaps, it would expose Alcoa to far more risk than it was willing to assume.

Such a no-win situation drove the insurance team to pursue a non-traditional course. They decided to look beyond the normal insurance and reinsurance providers that had handled the bulk of its property coverage to a set of overseas companies that Alcoa had developed relationships with over the years, mainly for local market coverage. Although none of the four–Mapfre of Spain, Ingosstrakh of Russia, IRB Brazil Re and United Insurance Co. of the Cayman Islands–had the market presence of the largest global companies, Alcoa's insurance group determined they had the capital resources needed and that they met its financial security guidelines. In each case, providing global insurance for a U.S. company was considered unusual, and without their historical relationships with Alcoa, it would have been difficult to convince these companies to provide coverage. It was determined that each of the four was able to fill in the necessary gaps in Alcoa's property insurance renewal at the target price with no significant restrictions in coverage. "What this did for us is to open up our thinking to non-traditional options, things that may have made sense in the past, but where it wasn't clear the carriers were prepared to enter the global insurance market with us," says Brian Woodward, director of Alcoa's insurance risk management department. "There were a lot of new understandings, process, paperwork and logistics required of every carrier, and to the credit of every one of them, they did it."

Alcoa's Insurance Risk Management team determined that on a present value basis for a five year period, the savings it accrued by using the non-traditional insurers totaled more than $6 million. The group also considers the stronger relationships with these insurance groups a benefit that will pay off in the form of future business opportunities.

SILVER AWARD WINNER

General Electric Co.

When you're a company like General Electric Co., making 50 to 100 acquisitions a year, you need to be as good at integrating new businesses as at buying them.

And consolidating insurance programs is a large part of that job, given that GE buys master insurance programs that cover all of its businesses and then relies on the Marsh broker network for local presence.

Once an acquisition is finalized, says Rafael Rivera, GE's manager of insurance programs, "it's the job of the corporate insurance group to integrate the acquired company into GE's global insurance programs." Although GE had an integration technology platform, "it was just a broken process and the acquisition volumes just kept on increasing," says Andrew Lileika, GE's black belt in corporate insurance. "We left policies in place when we should have cancelled them–or even worse, we cancelled policies when we should have kept them."

The project team, led by Lileika and Rivera, sought input from its business units and brokers and designed a new process with well-defined deliverables and cycle times for each role holder, paying special attention to the handoffs. The application was redesigned too, and new features were added: defined tasks, timeline and escalations; user-defined checklist questions for brokers; an integration progress dashboard; and a scorecard recording savings and outcome.

The results have been dramatic: The integration cycle time is down to 30 days, from 81. Savings have been maximized; accountability has been enhanced; archaeology has been simplified; and the process is now visible and under control.

"Three things come out of this. One, I can identify where we are in an acquisition. Two, I can identify how the brokers are performing" by phase and by country, says Rivera. "And three, the financial aspect: What are the synergies we realized."

BRONZE AWARD WINNER

Microsoft Corp.

In a company as big as Microsoft Corp., it can feel like the weight of the world is riding on your shoulders. So, when Microsoft's treasury risk group undertook a proactive assessment of fortuitous and accidental exposures of its businesses–assessing the risks in dollars and identifying mitigating strategies–it was fitting that they chose to call their undertaking the Atlas Project. "We live and breathe risk," says Rich Sadler, senior risk manager at Microsoft.

Enterprise risk management is a priority at Microsoft. But while the risk management group had performed enterprise-level assessment work important for financing, business unit leaders demanded more of a ground-level view into relevant risk information. The

Atlas Project was designed to validate the programs in place and point out the gaps.

Microsoft's risk management group met with and interviewed100-plus individuals at its business units, including its law and corporate affairs division. "It started out as, 'Tell us your basic business and tell us what [is] keeping you awake at night,'" says Sadler.

Based on the interviews, some 130 specific loss scenarios were developed. The group drilled down into the data to model each scenario. A stochastic modeling tool that could run Monte Carlo simulations was selected. Within the modeling process, assumptions were made and each was validated. The effort took 14 months to complete. "It takes some time to build out the models," says Brian Warren, the group manager.

It's too soon to assess Atlas' impact. While business leaders knew what was keeping them up at night, now there's a dollar sign in front of their nightmares. Adds Sadler: "To be effective, [treasury has] to understand the risks within the individual businesses. We use that information to [develop] mitigation strategies. It's a two-pronged effort."