Lawson was brought in to consolidate the company's risk management strategy and gain efficiencies in its search for insurance coverage. Early on, he made the decision to move Key Energy's claims operations and other functions, such as auto identification cards, in-house. "It allowed me to have a better view and control of the dollars being spent," says Lawson. One of the biggest obstacles he and his growing team faced was trying to build analytical models to quantify Key Energy's total cost of risk and loss positions when little centralized data existed. The group was forced to rebuild a data set by first going to each of the business units and collecting the right inputs. It then contacted past and present insurance companies for other history.

Now in place is a new centralized system, with processes that ensure a high degree of data integrity. Insurance information that comes in from the business units is verified for accuracy. Claims reporting standards have been set across business units and monthly meetings are held to discuss claims status with carriers and managers. The data series is also an important source of information for treasury's cash flow forecasting program.

The benefits of the new risk management approach have been considerable after just a year. With a better understanding of its historical profile, the company was able to attract more competition from insurance carriers. Key Energy estimates the total cost of risk to the company (including losses, premiums and administration) was reduced by 7.2%, for a savings of $5 million. It added two cents to the company's earnings per share in 2003. Insurance premiums declined by nearly 30% between 2001 and 2003, and loss estimates fell by 10.3% between late 2002 and late 2003. Lawson says the program is evolving. Within the next year, he plans to begin feeding data back to the company's 12 business divisions, for use in efforts to improve cost and spending analyses.

INSURANCE – Silver

General Electric Co.

For years, General Electric Co. got by with a decentralized approach to insurance that required a heavy dose of manual intervention to collect information from the many insurers and brokers it deals with worldwide. But as the insurance market became increasingly challenging, post-9/11 and post-Enron, GE's treasury decided it was time to bring it all together in a system that could capture the complexity of providing data controls and analytic tools for cost and exposure comparisons across its 150-plus property and casualty insurance policies.

Enter Market Metrics, a custom-built system that is a fully electronic, centralized data storage and analysis platform for GE's global insurance program. "It gives us the ability to understand overall cost of risk and how the programs are performing," says Stacey Regan, deputy treasurer of GE's insurance division. By allowing GE insurance managers to keep track of the various policies' premiums and losses, Regan says Market Metrics helps her group deepen their long-term relations with insurance providers and enables GE to pursue the most competitive policies available. The new system permits GE's business units to drill down into their insurance details to see what is driving costs and how they can do better. At the corporate level, Regan expects it will help her team to deal more effectively with broader issues, such as how tax treatments are impacting the company's overall cost reduction and risk management efforts.

Cost savings include reducing the fees GE pays insurance brokers, since the brokers no longer need to input the data into multiple systems or consolidate data for analysis. The new system is also providing data collection efficiencies in GE's insurance office budget process. It is expected to pay for itself in a little more than two years.

INSURANCE – Bronze

Juniper Networks Inc.

Fueled by myriad lawsuits triggered by the collapse in tech stock prices since 2000, directors and officers insurance premiums have spiraled out of control over the last four years for most technology companies, including Juniper Networks Inc. "We found ourselves in a situation where D&O had become the largest insurance premium we were paying, and it was also the fastest growing," says Treasurer Mark Nordstrom.

Treasury knew something had to be done. That something involved a three-step process it calls the D&O Alternative Risk Finance Solution. First, Juniper dropped the part of traditional D&O coverage that protects or indemnifies the company against claims. To cover its exposure for the lines dropped, Juniper reasoned that with $1 billion in cash and equivalents on its balance sheet, it could pay out claims on its own with no adverse financial impact.

What it retained was a reworked version of traditional D&O coverage that protects the personal assets of the directors and officers. The new risk management solution–from which the real cost savings were derived–contained two elements: An indemnification trust protects the directors and officers in situations where the company is insolvent or the company refuses to pay a legitimate claim, and a modified version of a traditional policy protects directors and officers against claims that the company cannot by law indemnify. The approach sent Juniper's D&O premiums down 80%, for annual savings of more than $1 million. It also maintained a minimum of $15 million protection, and in its latest renewal period, several new insurers were willing to extend coverage under the alternative terms.