Change Managers

2016 Insurance Executives to Watch

Insurance business leaders in 2016 will be expected to both manage change and drive it.
By: | December 14, 2015 • 20 min read

This is not an easy time to run an insurance business; not that there ever was one.

An extended soft market that shows no signs of letting up is putting pressure on carriers. That pressure from one side is being doubled by pressure from another. Investment returns are much less than what carriers realized a few years back.

Add to that burning risks like cyber and global political instability that create more unknowns on top of what we already know to be painfully true.

These times call for tough decisions.

In this issue, we focus on insurance executives who have their work cut out for them in the coming year. The aforementioned market pressures mean that a number of our choices are executives at the CEO-level. Some big deals, led by the CEOs, are in the works and we expect to see more.

The push for scale is pressuring some carriers to acquire other carriers.


Deals that double or triple revenues look pretty in press releases. But those charged with the task of combining cultures and keeping customers know that the real work begins once the acquisition is finalized.

And what goes on once companies combine can be anything but pretty. Mishandle the merger or fail to marry cultures and what looked like a union made in heaven can give one a painful feeling of buyer’s remorse. Losing customers on top of the failed marriage can double the pain.

Mega-mergers — risky as they are — aren’t the only thing on the minds of insurance leaders. The talent question: how to recruit, retain and best employ talent is another challenge.

It’s a fact that there isn’t enough talent coming into this industry to fill the ranks of those leaving it.

The pressure has become even greater to put retained talent to its best use.

The task of these executives, under these conditions, is not merely to do a good job. That won’t cut it.

The task is to do a superlative job.


Further, Faster

122015_01_CS_EGreenbergEvan Greenberg
Chairman and CEO
ACE Ltd.

ACE Ltd. will complete the acquisition of Chubb in the first quarter of 2016, combining a business with $97 billion in assets with one of $51 billion in assets.

The combination of ACE’s global footprint with Chubb’s strengths in mid-market commercial, surety, specialty and high net worth relationships promises to be a strong one.

“We believe the combined company will have enhanced growth and earning power compared to the two companies on a stand-alone basis,” ACE officials wrote in its third quarter 2015 filing with the Securities and Exchange Commission.

Insurance observers are watching eagerly to see how the ACE leadership team, led by CEO and Chairman Evan Greenberg, will move to push the respected Chubb brand into Europe and beyond.

The Chubb deal might have distracted some of us from the fact that earlier this year, ACE bought the high net worth business of Fireman’s Fund, picking up assets of almost $750 million. As an indication of how market pressures are driving executive decision making, ACE’s strong move into the high net worth realm is an interesting one.

Within the space of a year, ACE has greatly increased its presence in the high net worth arena and has added a highly respected brand to its stable. It might take a couple of years for Greenberg and ACE to incorporate Chubb’s team into their culture. But Greenberg and his team are well-known for being very quick movers.

“Quite frankly, ACE moves as fast as any company I interact with,” Marsh’s Peter Zaffino told us in 2014.

We’ll be watching for more swift action from Greenberg and ACE in 2016.


Talent in Numbers

Madhu TadikondaMadhu Tadikonda
Chief Underwriting Officer, Commercial

Lots of insurance leadership moves were made in 2015 with an eye to the future.

Perhaps none so bold as AIG’s, which moved Madhu Tadikonda, its chief science officer, commercial, into the position of commercial chief underwriting officer.

It’s not an appointment being made in isolation. Under the guidance of John Doyle, the CEO of AIG’s commercial operation, the company has been adding science and engineering talent by the fistful over the last couple of years.

“Madhu is an outstanding leader who has led the development of data-driven tools in insurance and other industries,” Doyle said of the appointment.


Relatively new to insurance — Tadikonda joined AIG in 2013 — and to an underwriting position, Tadikonda said he sees much to admire in this industry.

“Every commercial entity — across geographies, size, etc.  —  is managing its core risks through insurance and that means the industry has an ability to partner with clients on its most crucial issues,” Tadikonda said.

“That is a very compelling and powerful place to be,” he added.

The Princeton graduate and Stanford MBA also said he finds the long tenures of many insurance professionals unique.

“From a talent perspective, one of the things that has surprised me is that most senior insurance leaders have been in the industry their entire careers, and there is a lot less import/export of individuals and skill-sets that I’ve seen in other areas,” he said.

“I think that creates an opportunity for the insurance industry, as I believe experts from other industries could have a lot to add to carriers,” he said.

Tadikonda said his chief challenge will be finding the right mix between data insights and underwriter judgment.

“We have uncovered a number of interesting patterns and trends by mining AIG’s historical data,” Tadikonda said.

“That is a great guide for underwriting. But, given the markets that AIG plays in, that is not enough. The input and perspective of the experienced underwriter needs to be woven in.”


Guiding Growth With a Steady Hand 

122015_01_CS_JCelluraJoseph Cellura
President, North American Casualty Division
Allied World Insurance Co.

In 2008, Joe Cellura joined Allied World, eventually growing into the role of president of Allied World’s North American Casualty division with $50 million in annual written premium in excess casualty and a 10-member team. He hit the ground running and hasn’t slowed down since.

Rolling in additional units, launching products and expanding geographies (including Bermuda), that business grew to $800 million in 2014, and is on track to exceed that in 2015. The Allied World North American Casualty team now numbers 120.

Construction, design and engineering make up a sizeable portion of the business that Cellura oversees. With recovery now in full swing, that business will continue to keep underwriters on their toes, he said, with widespread adoption of alternative project delivery methods such as design-build as well as public-private partnerships.

“You start getting into those relationships — there are a lot of long-term complexities to make sure you’re accounting for. It continues to challenge the underwriters to really understand the risks that they’re bearing in the programs they’re putting together.”

Cellura is focused not just on growing the business, but growing it wisely.

“The key is to continue to build the infrastructure to support the business and be good stewards of our commitment to service and promise to pay claims. I’m focused on efficient systems, claims and data management. … It’s a long-term commitment to your customers and to your shareholders so you’ve got to be able to serve that business for a long time.”

Another key to managing growth is not allowing the business to spin off into distractions and excess complexity.

“The strategy is to keep it simple,” said Cellura. “It’s one of the toughest things growth company managers face. How do you maintain what made you great and continue to give people professional growth opportunities without creating a matrix organization with layers of managers managing managers?”


Track Record of Success

122015_01_CS_DCohenDavid Cohen
President and Chief Underwriting Officer
Aspen Insurance

David Cohen is bringing his specialty insurance insights and his track record of success in building business to Aspen, where he will work with Aspen Insurance CEO Mario Vitale to continue the company’s profitable growth.

“Aspen is a true underwriting company,” said Cohen, who formerly was president-USA, Liberty International Underwriters, and chief underwriting officer, LIU Global Casualty. “It was founded by underwriters and it is driven by achieving superior underwriting results.”

As president, CUO and a member of Aspen’s group executive team, Cohen said he is “looking to broaden the product set and expand geographical distribution of key products in the right markets. … Innovating effective approaches to emerging exposures, like cyber, is something we do well and we intend to focus on this even more in the future.”


While not discounting the challenges of “overabundance of competition” and the soft market, he is convinced Aspen can continue its sterling results in the U.S., which is on track to exceed $600 million of net earned premium in 2015 and an expense ratio of less than 16 percent.

“The margin for error is small when there is such pressure on terms and conditions,” he said, noting, however, that Aspen’s product diversification, geography and “underwriting and claims talent” are crucial in any market conditions.

He said there are still “great opportunities for profit,” but it requires exploring new product areas and expanding geographical distribution of key products, while exiting unprofitable lines.

Also important, Cohen said, is “finding the best way to exploit data via analytics [which] is both an enormous challenge and a tremendous opportunity.”

“It’s not easy to continually improve consistency and quality in underwriting and claims handling, but we are doing that and I’m convinced those qualities — much more than a low price — are highly valued by insureds and brokers.”


Leveraging New Company’s Combined Strength

122015_01_CS_JToccoJoe Tocco
Chief Executive, Americas
XL Catlin

The unification of XL and Catlin created a powerful insurance provider. Joe Tocco, previously the chief executive of XL’s North American property and casualty businesses, assumed the role of CEO of XL Catlin Americas region on May 1, 2015, which entails the oversight of 49 offices and more than 1,800 employees.

“One of the biggest challenges I’ve faced since that day is the integration of the two teams,” Tocco said, “but it’s been a rewarding experience because both groups are comprised of talented and well-respected underwriters.”

A second challenge has been the added responsibility of Latin American business, a new region for Tocco.

“We have done great work in Brazil, and are continuing to invest in Mexico. We’re looking to build up some scale and open insurance operations in several other Latin American countries, hopefully within the next 12 to 24 months,” Tocco said.

He will also nurture a company culture that “breeds innovation” in creating more unique solutions for clients. For example, XL Catlin recently partnered with leading cyber breach response providers to offer a broader solution for clients seeking that coverage.

“We’ve done work in advanced fuel cell technology, and some new product recall products as well,” Tocco said.

Market disruption, largely driven by heavy M&A activity, is a top concern for 2016, but could also open the door for new opportunities.

“We have over 30 lines of business. We’re a leading provider of a number of products. We can issue policies in more than 160 countries,” Tocco said.

“We have the flexibility to pull the lever on businesses that will be more profitable, and slow down those that won’t be.”


A New Way of Doing Business

122015_01_CS_BDuperreaultBrian Duperreault
Hamilton Insurance Group

Brian Duperreault has a long history of taking on big projects that had a major impact on the industry.

His move to acquire Cigna’s commercial property/casualty business when he led ACE is one example. His bold leadership to help Marsh & McLennan recover following the financial crisis is another.

Duperreault, CEO of Hamilton Insurance Group since 2013, helped transform Bermuda into a global insurance center, beginning in 1994 when he took over at ACE. Now, he’s setting his sights on London and the United States.

In London, Lloyd’s Syndicate 3334 was acquired by Hamilton in April 2015. A narrow niche player, Hamilton plans to diversify the portfolio by adding lines like Space, Professional Lines and Treaty Reinsurance, creating a relatively traditional Lloyd’s syndicate.

For the U.S. operation, Duperreault is focusing on “a more technologically advanced approach to accepting business and placing business.”


“The fact is the industry model in the U.S. is highly expensed. Business acquisition and management run to 30 percent — a percentage that few industries would accept.”

Duperreault wants to effectively apply the “wonderful world of data science” to the business.

That means using data to assist potential insureds in applying for insurance as well as using “algorithmic science to make [underwriting] decisions.”

“We are not inventing new products, we’re improving the way we provide them,” he said, noting that his U.S. operation in Princeton, N.J., targets the insurance needs of small and midsize enterprises.

While he may “someday” take Hamilton public, his current plan is to grow organically, and find U.S. partners “who share our vision.”

“We have found a number of producers who want to change,” he said. “They recognize that the way we do business has to change and they want to be a part of it, not a victim of it.”


Uncommon Perspective

122015_01_CS_NGoodwinHiscoxNicole Goodwin
Chief Underwriting Officer
Hiscox USA

This past summer, Nicole Goodwin was appointed chief underwriting officer of rapidly growing Hiscox USA, which primarily specializes in serving small and middle-market businesses with less than $1 billion in annual revenue. Hiscox’s core professional liability and small commercial products are driving year-on-year growth, both in the broker channel and in its direct-to-consumer business.

Goodwin will help lead the company’s push towards scale with deeper market penetration in key areas. She noted that there are a myriad of opportunities for the company to expand its footprint.

“Despite our fast, profitable growth, we still see ourselves as only a blip on the screen relative to the opportunity,” she said.

“Cyber is an area in particular where that rings true. Hiscox was one of the first markets to underwrite cyber and hacker business interruption and has been doing so consistently for nearly 20 years. With the exponential growth we are seeing in that marketplace, we believe our heritage and expertise in that area will allow us to compete well against the flood of new, first-time market entrants into that space.”

Goodwin has blazed an uncommon trail to the CUO’s seat. Until 2004, she practiced law in San Francisco, focusing on emerging technology, privacy and IP-related risk analysis and counseling.

She joined Hiscox as divisional counsel to the company’s Technology Media & Telecoms division. Most recently, she served as the head of U.S. Claims.

“I don’t come from a traditional underwriting background so I probably feel I have more to prove than the average CUO,” said Goodwin.

“But [I have] a natural curiosity about how we, the marketplace, our customers and partners behave and think about the world and risk often provides sources of new ways of innovating to solve problems internally and externally.”

Feeding the talent pipeline in the face of rapid growth is one of the most immediate challenges Goodwin has been facing in the early months of her tenure as CUO, but she readily admits, “It’s a pretty first-class problem to have.”


Looking East

122015_01_CS_KKelleyKevin Kelley

Ironshore first appeared on the specialty insurance landscape in 2006 and, with the addition of Lexington’s veteran leader Kevin Kelley as CEO in 2008, quickly became a company to keep an eye on.

Now the company’s made another move that’s attracted attention. Fosun International, a China-based company with insurance subsidiaries in Portugal, Israel and China, completed the acquisition of Bermuda-based Ironshore in November.

In addition to the capital support of the much larger Fosun, Kelley points to Asia’s present and future importance to the global economy as being an important driver of the deal.

“We think Asian capital is important because we do believe that Asia will have a big influence over tomorrow’s world and we want to be part of that,” Kelley said.

“We think that having Fosun as a partner is going to be a great way for us to get a glimpse of what the future might look like.”


The Fosun move to acquire Ironshore took place in an environment where rates are soft, investment returns are light, and mergers and acquisitions are prevalent.

Scale is relevant, but so is selectivity and focus, Kelley said.

“In my opinion, picking the right businesses and building the right businesses are probably just as important as scale,” Kelley said.

“So the key for us has been and will continue to be our product focus, to do things that we know and to do things that we believe carry margin over the long haul and to continue to build in particular areas,” he added.

An advantage of the Fosun deal, Kelley said, is that Ironshore will be a wholly-owned subsidiary and won’t undergo any restructuring as it moves forward.

“We don’t have to fracture the company in any way,” Kelley said.

“We don’t have to create synergies that would reduce our potential,” he said.

“What we see here is a great owner who will allow us to continue to build upon what we started to build. We are very excited about it and feel that this is going to be a great home for us.”


The Experience Is What Matters

122015_01_CS_DMichelDebbie Michel
Executive VP of National Insurance Casualty, Liberty Mutual
President, Helmsman Claims Management Services

Under Debbie Michel’s leadership, Helmsman Management Services — Liberty Mutual’s wholly-owned third-party administrator — has grown to become the fifth largest multiline TPA based on total gross revenue. Michel will now bring her experience and leadership to bear on new frontiers as the executive vice president and general manager of Liberty Mutual’s National Insurance Casualty unit, while also retaining her position at the head of Helmsman.

The shift seems a natural one for Michel, and she is eager to offer clients the benefits of her dual role.

“The structure allows us to go to market with the capability for meeting prospects’ needs however they elect to purchase their services,” said Michel, whether that means bundled or unbundled services.

“We’re able to bring these capabilities holistically to the marketplace which I think is a differentiator for us.”

As economic challenges continue to suppress the growth of risk management departments, said Michel, carriers, brokers and TPAs need to step up their game and provide clients with the support, expertise and analytics they need to manage their programs, especially as risk managers struggle more than ever to keep up with the pace of change.

With a view toward growing both the casualty business as well as Helmsman’s operations, Michel has a clear vision of what will drive that growth.

“It’s all about the customer experience” she said.

“To grow a business, you have to retain your business. … If you’re not retaining your customers and creating a great customer experience, it’s darn near impossible to grow. It’s about the dedication to the customer, and really making certain that in all aspects of our business, we’re doing what’s in the best interests of the customer and making sure that experience is solid. [That’s what] positions us well for growth in the future.”


Maintaining Underwriting Discipline

122015_01_CS_MParkerMatt Parker
Markel Specialty

When Matt Parker became president of Markel Specialty on April 1, he began his first foray into managing multiple lines of business, having formerly served as managing executive of FirstComp, a single-product company.

“I had to learn the nuances of the various businesses that comprise Markel Specialty,” Parker said.

“We have great people running each of those businesses, so a key thing for me was to understand where I could help them without being overbearing.”

Markel Specialty has been consistently profitable for the past 25 years. According to the company’s third quarter financial report, Markel produced a lower combined ratio, at 88 percent, in all underwriting segments compared to the third quarter of 2014. Quarterly operating revenue rose 3.3 percent year over year, to $1.34 billion. Analysts credit disciplined underwriting for the solid results.


“We have to be very prudent about the type of risk we’re writing, and if we’re not getting the price that we think is adequate, we just don’t write it,” Parker said.

“That’s Markel’s style. We have to price things appropriately for the long term.”

In 2016, Parker plans to improve performance and reduce expenses by ensuring that people with the right skill-sets are handling the right responsibilities. Over the last several months, that has meant moving some key staffers around.

“We’ve shuffled things around to make sure we’re putting our best foot forward, and I think we’ll have a more consistent and unified view of underwriting across some of our specialty commercial products,” he said.

“Looking forward to 2016, I’m excited that, despite the soft market and pressure in pricing, we’re projecting growth across every single Markel Specialty unit.”


Investing in Talent for Improved Distribution

122015_01_CS_BGriffithBrian Griffith
Executive Vice President, Field Management & Distribution
QBE North America

Brian Griffith’s move to QBE North America in late August 2015 was part of what he describes as a “migration of talent” to an organization going through a substantial reorganization.

In his new role as executive vice president, field management and distribution, Griffith will be responsible for growing relationships and improving collaboration with the 1,400 agents and brokers that the insurer currently does business with. In 2014, QBE NA reported gross written premiums of $5.3 billion.

“QBE today plays in small business, in the middle market, and in risk management. We have a huge program business at over $1 billion, a huge crop business, 11 specialty businesses and a personal lines business,” Griffith said.

“We’ll be taking a hard look at agent/broker segmentation, understanding deeply the businesses they play in, and where it overlaps with our businesses.”

Strengthening regional hubs in Connecticut, New York City, Chicago, San Francisco, Dallas and Atlanta will pave the way for improved communication with and greater access to distribution partners. Each hub will have “a critical mass of talent,” including standard underwriters, some specialty underwriters, and sales executives.

“We’re looking to hire 40-plus field staff in the next six months to really improve connections with our trading partners in those regions,” Griffith said.

Investing in talent is a key growth strategy for Griffith and QBE as a whole. Building up regional hubs and local centers of excellence will enable QBE to better align its assets with changing needs in the market, which also serves as a defense against softening prices.

“We’ll combat the softening market by getting closer to existing customers,” Griffith said. “It’s about getting the right distribution partner, in the right geography, with the right products.”


Big Shoes

122015_01_CS_ASchnitzerAlan D. Schnitzer

There may be no harder shoes to fill in the insurance business than those of Jay Fishman, who stepped down as the CEO of Travelers Dec. 1.

The company’s financial performance has never been better. It reported net written premiums of $6.19 billion in the third quarter of 2015 — a record — and is receiving praise from analysts for its approach to revitalizing its personal lines business.

“Travelers has a unique and impressive franchise in the United States,” analyst Cliff Gallant of Nomura Securities wrote of the company earlier this year.

But step down Fishman must, as he addresses a well-publicized health issue.


Into those shoes now steps Alan Schnitzer, formerly CEO of the company’s Business and International Insurance segment.

Fishman stays on as executive chairman.

The timing of our publication deadline for December couldn’t have been worse for Schnitzer to provide comment — he officially took over on Dec. 1, as this issue went to print and was readying himself to take over the reins of a company with $27.1 billion in revenues as of the end of 2014.

“Those of you who have met Alan know that he is a leader of extraordinary talent, judgment, versatility and heart. He brings deep knowledge of our company and our business to his new role,” Fishman wrote in a letter to Travelers employees in August, in announcing that he is battling a variant of Amyotrophic Lateral Sclerosis, or ALS.


Cutting Through the Talk

122015_01_CS_PHorganPaul Horgan
Zurich Global Corporate in North America

Ignore the “noise,” said Paul Horgan, newly appointed CEO of Zurich Global Corporate in North America.

“We are a strong organization, a global corporation that still has intentions to renew a very high percentage of our portfolio,” he said.

“Our biggest challenge is working through the noise in the market. When you cut through all of the talk, when you talk to people, brokers and customers, Zurich is still AA-rated, and the company will deploy $3 billion excess capital by the end of 2016. I inherited a terrific franchise in Global Corporate,” Horgan said.

The “noise” is talk about Zurich restructuring after seeing profits and income decline. It is of the company’s losses from the Tianjin explosion and potential losses related to the Volkswagen scandal.

But Horgan argues that Zurich has unmatched global capacity, thousands of risk engineers, thought leaders, captive solutions and risk insights to help new and current customers.

“We are a true strategic partner, somebody who is adding value to the customer,” he said. “We really haven’t made any major changes.”

The restructuring has not affected Zurich Global Corporate operations, he said.

In North America, the only changes have been to stop writing equipment breakdown as a stand-alone policy, and to stop writing workers’ compensation and primary casualty for the trucking business in the U.S.

Zurich Global Corporate is focused on its core casualty business, Horgan said, which is writing workers’ comp, general liability and auto products as well as continuing to grow its property book and international business.

“We are in 216 countries,” Horgan said. “It’s a differentiator for us. No one else can match our capabilities in that space.

“The goal is to continue to build on the franchise I inherited, to focus on being the best account writer for large and complex risks,” he said.

The R&I Editorial Team may be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Black Swan: Cloud Attack

Breaking Clouds

A combination of physical and cyber attacks on multiple data centers for cloud service providers causes economic havoc. Even the most well-prepared companies are thrown into paralyzing coverage confusion.
By: | July 27, 2017 • 10 min read


By month 16 of the new presidential administration, the Sunshine Brigade is more than ready to act.

Stoked by their anger over rampant economic inequality, the mostly college-educated group of what might best be called upper-middle-class anarchists — many of them from California, Oregon and Washington State — put in motion the gears of a plan more than two years in the making.

Their logic, to them at least, is unimpeachable. Continued consolidation of economic power into the hands of fewer and fewer corporations is creating a world where the rich increasingly exploit and shut out the poor.


The rise of the techno giants is accelerating this trend, according to the Sunshine Brigade’s de facto leader Emily Brookes, an All-American rugby player and a graduate of Reed College in Oregon.

With a new presidential administration seemingly bent on increasing the economic advantages of the rich with no end in sight, nothing to do then but break things up; and in so doing break the hold of this technology oligarchy.

As Emily Brookes so forcefully put in her instant messages to the other members of the brigade: Break the Cloud.

With more than 500 members, many of them with ample financial and technical resources, the Sunshine Brigade is very capable of delivering on its plan for a two-pronged attack.

It is also radicalized enough to justify the loss of some human life, even its own countrymen, to “save” — in its collective logic — the tens of millions of global citizens that are living as virtual slaves in this callous, exploitative global economy.

With websites and digitally connected services large and small down for days, irritation turns to fear.

The first wave in the attack is an attempt to infect and shut down the data centers for the top three cloud service providers. It takes months to set up this offensive.

Rather than rely on a phishing scam from outside the firewalls of the service providers, The Sunshine Brigade uses its social and business connections to place three members on each of the cloud provider’s payrolls. An infected link from someone you know, someone in the cubicle right next to you, seems like an unstoppable play.

It only partially works. Only one of the cloud service providers is harmed when an unsuspecting employee clicks on a link from their traitorous co-worker. The released malware manages to cripple a major cloud service provider for 12 hours.

With millions of users affected, the act creates substantial disruption and garners global headlines. Insured losses are around $1.5 billion. But this is just the beginning.

The morning after, the Sunshine Brigade unleashes a far more devastating and far more ruthless Round Two.

Using self-driving trucks, the Sunshine Brigade smashes into five data centers; three on the West Coast, and two in the Midwest. Fourteen employees of those cloud servers are killed and another 23 injured; some of them critically.

This time the Brigade gets what it wanted. The physical damage to the data centers is substantial enough that it significantly affects three of the top four cloud service providers for five days.

With websites and digitally connected services large and small down for days, irritation turns to fear.

Small and mid-sized banks, which host their applications on clouds, are shut down. Small business owners and consumer banking customers immediately feel the brunt. Retailers that depend on clouds to host their inventory and transaction information are also hit hard.

But really, the blow falls everywhere.

In the U.S., transportation, financial, health, government and other crucial services grind to a halt in many cases.

Not everyone is disrupted. Some of the larger corporations are sophisticated enough in their risk management, those that used back-up clouds and had steadfast business resiliency plans suffer minimal disruption.

Many small to mid-size companies, though, cannot operate. Their employees can’t get to work and when they can, they sit idly in front of blank computer screens connected to useless servers.

For the man on the street, this is hell.


Long lines blossom at the likes of gas stations, banks and grocery stores. A population already on edge from a steady diet of social media provocation becomes even more inflamed.

By nightfall of Day Five, the three major cloud service providers are recovered, and digital “normalcy” begins to creep back. But for many small and medium-sized businesses, the recovery comes way too late.

Economic losses promise to register in the tens of billions. It’s not being too imaginative to think that losses could hit the $100 billion mark.

Two multinational insurers based in the U.S., three Lloyd’s syndicates and a Bermuda insurer signal to regulators that their aggregate cyber-related losses are so great that they will most likely become insolvent.

Emily Brookes and her cohorts were willing to kill more than a dozen people to promote their worldview. In their youthful naiveté, they could not know just how much suffering they would cause.


For some commercial insurance carriers, the aggregated losses from a prolonged disruption of cloud computing services could be catastrophic, or close to it.

“It’s on a par with any earthquake or hurricane or tornado,” said Scott Stransky, an associate vice president and principal scientist with the modeling firm AIR Worldwide.

AIR modeled the insured losses for the Fortune 1,000 were Amazon’s cloud service to go down for one day. They came up with a figure of $3 billion.

Now consider that most businesses in this country are small businesses, with not nearly the risk management sophistication of the Fortune 1000. Then consider a cloud interruption of five days or more.

Mark Greisiger, president, NetDiligence

“Almost any company you talk about today would rely to some extent on the cloud, either to host their website, to do invoicing, inventory, you name it — the cloud is being used across the board,” Stransky said.

“It’s a significant issue for insurers and one we think about a lot,” said Nick Economidis, an underwriter with specialty carrier Beazley.

“Should a cloud service provider go down, everybody who is working with that cloud service provider is impacted by that,” he said.

“Now, pretty much every software maker is on the cloud,” said Mark Greisiger, president of NetDiligence.

“In the old days, someone would come in and install software on your servers and come in annually for maintenance. That’s all gone bye-bye. Everybody who makes software is forcing you onto their private cloud,” Greisiger said.

The aggregation risk for carriers is complicated by the degree of transparency they have into which insured’s applications are hosted on which cloud provider.

Now here’s the even trickier part. Clouds outsource to other clouds.

“It’s almost becoming a spider’s web of interdependencies on who has access to what in terms of upstream and downstream providers,” Greisiger said.

Determining which of their insureds is hosted on which cloud, and in turn, where that cloud is outsourcing to other clouds can be very difficult for carriers to determine.

Even if a company is careful to diversify the risks they’re taking, they might not realize that a high percentage of insureds are even with the same cloud provider. They could be hit with devastating losses across their entire portfolio of business, said an executive with BDO consulting.

AIR’s Stransky said his company launched a product in April, ARC, which stands for Analytics of Risk from Cyber, which is designed to help carriers gain that much needed transparency.

Among insureds, surviving an event of this magnitude will depend not only on the sophistication of their risk management department, but on the company’s overall ability to negotiate contracts with vendors and suppliers that will indemnify the company in the case of a cloud outage of this duration.

It will also depend on organization’s understanding that there is no off-the-shelf solution that will prevent an event like this or make a company whole after it.

Shiraz Saeed, national practice leader, cyber, Starr Companies

Experts say contracts with cloud service providers, customers and suppliers must be structured so that a company is defended should it lose cloud access for as much as five days or more.

Best practices also include modeling just what your losses would look like in this area, and vetting your full portfolio of insurance policies to understand how each would respond.

One broker said buyers can’t be blamed if the complexities of the coverage issues at stake here are initially hard to grasp.

“It’s becoming a spider’s web of interdependencies on who has access to what.” —Mark Greisiger, president, NetDiligence

“I think it’s the broker’s job to inform the client of this exposure,” said Doug Friel, a vice president with JKJ Commercial Insurance, based in Newtown, Pa.

“You may have business interruption coverage for direct physical damage to your building. But have you ever thought about your business income if your IT structure goes down?” Friel said.

He said many buyers might not realize there is a difference.


Large businesses should have the resources to demand from their cloud service providers that they be indemnified for the entirety of a cloud failure event. There will be a fee for that, but it will be well worth paying, Friel said.

“You have to push,” Friel said. “They are going to say, ‘Here is our standard contract, sign it.’ ”

Don’t settle for that, he said, although many do in ignorance, he added.

“Where possible, we would look for clients to negotiate their contracts. These business relationships should be mutually beneficial, even if one of these events occur,” said Shiraz Saeed, national practice leader, cyber, for the Starr Companies.

It’s a partnership, he said.

“It shouldn’t be a zero sum game on either side. I think there should be an understanding of what the potential loss might be and then designing a contract around that,” he said.

While cloud service providers are known for having high grade security systems, most average organizations don’t have the means for that. But no matter what a company’s resources, the first step is modeling where your digital assets are, and what you and your customers stand to lose if you lose access to them.

“Most insureds don’t seem to understand the amount of individual loss that you could be subject to,” said Jim Evans, leader of insurance advisory services at BDO Consulting. “Usually this stuff is measured in hours,” he said. “But what if a cloud provider is out for three or four days?” he said.

“Trying to quantify what you did lose in an event is hard enough. Trying to do a modeling exercise about what you could lose? It’s something that just doesn’t get done enough,” he said.

Once you have an understanding of what you own and what you stand to lose, the next step is prioritizing the protection of the assets you have. That means drilling into your contract with your cloud service providers to get the maximum indemnification.

It also means spreading your risk so that if at all possible, not all of your assets or your customers’ assets are housed by one cloud service provider. Cloud platforms can be public, private, or a hybrid of the two.

Understanding where your assets are in that architecture is crucial. Spending the money to insure that they are protected behind a diverse menu of firewalls is highly advisable.

Navigating the different iterations of business interruption coverage in property, cyber and kidnap and ransom policies is also important.

Make sure your broker can provide clarity on the different types of coverages and tailor them to your needs, experts said.

The concept of design thinking is really what’s in play here. Organizations have to work with vendors in every aspect of their operations to design a risk management system that can sustain this kind of hit.

“Build a better mousetrap to protect yourself,” said JKJ’s Friel.

“Depending on your service, you need to have the best and the brightest designing this stuff. Spread the risk.”

“Don’t be afraid to ask for more,” he said.


In engineering an attack on the cloud, Emily Brookes and her cohorts accomplished the opposite of what they set out to do.


Only the largest corporations with the most sophisticated risk management programs were able to survive the attempt to break the cloud with manageable losses.

Small businesses, the true backbone of the U.S. economy, suffered terribly. Entrepreneurs who put their life’s work into their business lost it in many cases.

Those on the lowest part of the economic scale, the working poor, lost their jobs and their ability to cover their rent and grocery bills. They joined the ranks of those subsidized by the government by the millions.  The attempt to break the cloud resulted in an even more polarized society. &

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]