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2018 Power Broker

At Large

Top Negotiator

Bruce Droz, CPCU, ARM
Senior Vice President
Alliant, Fresno, Calif.

Ruiz Foods saw collateral obligations under its workers’ comp coverage continue to climb and its out-of-pocket costs increase to unsustainable levels.

“Bruce Droz and his team worked to decrease the amount that carriers required us to maintain in standby letters of credit by more than $1 million,” said Bill Wheeler, corporate controller.

“Bruce also helped save us money in fees” for the LOCs, “and increased our credit line capacity. He also had his firm do some earthquake modeling for us to determine what the risks were in our particular geographic area to help us make informed and appropriate coverage decisions.”

“This year Bruce was suspicious that our umbrella carrier might reduce coverage or even bail, so ahead of time he recruited another carrier and gave them a tour of our facilities,” said Bob Brown, president and CEO, CALAMCO.

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“When our carrier did reduce coverage, we switched carriers, and since we were prepared, there was no lapse in coverage.”

“Our company has a high experience modification rate which would normally result in extremely high premiums” for workers’ comp, said the CFO of a company that grows figs. “Since our company has an improved safety program and reduced recent claims, Bruce was able to secure coverage at significantly reduced rates — saving us thousands of dollars.”

The International Expert

David Fraser
Senior Vice President
Aon, New York

A U.S. private equity client, through the European Fund, purchased the European businesses of a large office supplies company. David Fraser engaged M&A colleagues to assist him in identifying any insurance liabilities and negotiating wording in the purchase agreement to ensure they were addressed.

Fraser created a standalone insurance budget, which proved challenging; the seller did not collect local claims details. Data collection, therefore, had to be done in each country in local languages and then converted back into English for the creation of master policies.

He secured warranties insurance coverage — another challenging task, as the U.S. client bought a European business with a Dutch purchase and sale agreement.

After the deal closed, Fraser implemented a multi-million-dollar insurance program with minimal data available on standalone basis, utilizing full global leverage of private equity relationships at each of the key insurance carriers to obtain support on the challenging multifaceted risks.

He also created a new trade credit platform with new insurers, critical for the office supply company to continue to receive products from vendors.

“David Fraser is spectacular,” said Curt Deane, real estate professional, Starrett City Associates.

“He’s immensely responsive and for us, that’s very important because we have a lot of obligations in the area of workers’ compensation.”

Emphasizing Cyber Security

Shannon Groeber
Senior Vice President
JLT Specialty USA, Philadelphia

LabCorp benefited from Shannon Groeber’s holistic risk-based approach to cyber threats.

Prior to her involvement, LabCorp was advised that only a fraction of the overall cyber market would have interest in insuring its risk and only in a way that centered around market appetite — not LabCorp’s actual exposure.

Groeber unified various internal stakeholders to leverage meaningful underwriting information to attract quotes that increased available capacity by a factor of 10.

Then she provided LabCorp with tangible and forward-looking data to allow it to make an informed decision on the most efficient structure that matched its goals and priorities.

“We moved our cyber coverage this year to JLT and a big part of that reason is because of Shannon,” said Christina Reisinger, vice president, risk management.

“She was able to get coverage in many more markets than our previous broker.”

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“Shannon Groeber has done a fantastic job for us,” said Steven Levine, director of risk management, Red Robin Gourmet Burgers and Brews. “She’s always responsive, has strong industry contacts and is an expert in cyber.”

“Shannon has been able to negotiate well for the insured and brings forth a very successful marketing effort during renewals,” said the director of treasury operations and risk management for a portfolio of media and digital businesses. “She continues to impress us with her ability to work under tight deadlines on complex renewals.”

Staying on Top of International Markets

Michael Lombardi, ARM, AINS
Senior Vice President
Lockton, New York

Michael Lombardi created a centralized global program and responsive M&A platform for multiple, roll-in acquisitions over a three-year period for a large manufacturer. It achieved synergies exceeding $2.5 million, resulting in a material reduction in the client’s total cost of risk.

The International Practice leader also developed a global compliance matrix with an exposure-based approach to local policies.

The matrix outlined key decision criteria in issuing local policies, which improves compliance for multinational clients, especially those that have globalized management liability programs.

“Michael is extremely knowledgeable about the idiosyncrasies of foreign insurance markets and the regulatory mandates of each jurisdiction,” said the director, risk management, at a tool manufacturer.

“He partners with us to design compliant programs offering broad coverages that are appropriately priced.”

“Michael Lombardi balances the ability to see the entire picture with the ability to take care of details,” said the vice president, risk management, at a health care services and products company.

“Every person who has met him has been very impressed with his ability to think strategically, to problem solve and to be an advocate for his clients.”

“Michael Lombardi and his team have done a great job of understanding our insurance needs and getting what we need in terms of coverage terms and price,” said the director of insurance at a company that makes fine quality alcohol beverages.

Relaying Best Solutions

Tim Losie
Vice President
USI Insurance Services, Houston

A property & casualty insurance client approached Tim Losie with concerns about its D&O policy and professional liability handled by another broker. Upon review, Losie found holes in the overall management liability coverage, noting it did not address aspects of the client’s complex business.

The client allowed Losie to approach additional insurers. He negotiated a solution tailormade for the client’s needs, while also delivering lower retentions and premium. The client moved the business to USI.

“We had a lot going on with our company last year and Tim Losie helped us a lot,” said Jennifer Crane, CFO, Crossroads Systems.

“We’re a public company, but we went through a pre-packaged bankruptcy and had several questions about our D&O policy. Everything was urgent, but Tim always responded very quickly. He even got on a Board call with us, and a Board member complimented Tim on how well he explained the information to us.”

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“Tim Losie did a superior job in helping our client analyze their risks and coverage and identifying best solutions and best practices,” said Charlie Renie, vice president of account management, KBIC Consulting.

“Tim Losie has been working on a particular D&O and E&O tower for us, and his knowledge of the marketplace has been very impressive,” said the chief administrative officer at a company that provides products and services for owners of alternative assets.

Ensuring Safe Travels

Logan Payne, CPCU, ARM
Vice President
Lockton, Kansas City, Mo.

Logan Payne coordinated a team of Lockton experts for two clients to resolve a similar problem: inconsistencies in coverage between the various products they purchased that protected employees while traveling.

Payne was able to enhance and standardize the level of coverage offered to the clients’ employees worldwide. This reduced the clients’ liability under “duty of care legislation” for the countries they operate in.

It also helped each of his clients develop robust and efficient travel risk management plans, which included improvements in communication with employees while they were traveling.

Payne and his team overhauled and standardized coverage across 20 countries of operation for the one client. He was also able to do the same in 11 countries for the other client.

Additionally, Payne and his team secured several renewal options that provided broader, more inclusive coverage at a savings of up to 40 percent over expiring global premium spend.

“Logan Payne is an incredible service provider. He has in-depth expertise in a wide range of domestic and international risk management issues and is proactive in helping his clients find effective solutions to manage their ever-changing risks,” said one client.

“Logan is very client-focused and has been instrumental in shaping our global insurance program,” said another.

Planning for Loss Control

Manny Pereira
Director
Aon, Philadelphia

The Mosaic Company suffered significant losses due to maintenance issues. Before renewal, Manny Pereira addressed the problem directly by having Mosaic engineering and other senior executives talk to carriers in meetings about what was being done to prevent the issues from reoccurring.

Armed with this information, Pereira was able to leverage data analytics and make an argument for the importance of the facility to negotiate a rate reduction that exceeded benchmarking data.

“Manny understands our business and how we are focused on implementing loss control improvements to reduce the risk of loss,” said Michael R. Bishop, director, risk management.

“He articulates that very well to underwriters, so that he can get the best deal possible for Mosaic.”

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“During a debated claim, Manny was instrumental in us obtaining a very favorable outcome and quick pay by the insurers,” said Benji Holt, corporate risk and insurance manager, Bridgestone.

“His level of knowledge and detail on property policy wording and loss control are unequaled.”

“Manny Pereira did a fantastic job this year,” said another client. “He made some commitments during the RFP process that were very impressive.”

Growing with the Times

Brian Pfund, RPLU
Vice President
Marsh, Portland, Ore.

A client’s business model shifted from being hardware-focused to software-focused, which changed the client’s exposures. As a result, a manuscripted errors and omissions policy became necessary to ensure they were properly insured.

Marsh’s Brian Pfund negotiated full limits to the client’s once-sublimited E&O/cyber coverage, while improving language and reducing premium.

But the “true solution to the challenge” was Pfund’s additional insight into how the market’s appetite for cyber risk shifted throughout the year given the evolving nature of the exposure —  supplemented with analytics, benchmarking, third party assessments, modeling and quantification.

With a more holistic view of the client’s risk and mitigation strategies, the client now has several E&O/cyber program structures that can be immediately executed.

“Brian has been a huge help in helping to educate our decision makers about the changing complexity of our insurance policy and how we needed to make decisions about increasing coverage,” the client said.

“Brian has saved us money on our cyber liability policy,” said the director, global risk management, at an outdoor apparel manufacturer.

“Last year he was able to secure broader coverage in a year that we had filed a claim 21 days before the policy renewed. Brian was able to convince the underwriter to maintain the renewal terms they had previously offered.”

A D&O Expert

Chris Rafferty
Managing Director
Aon, Chicago

A new client had a dual board and a complex organizational structure that necessitated a revisit of its management liability insurance.

Chris Rafferty and his team determined specific areas for potential enhancements to the client’s existing D&O policy by providing insight into the probability of a claim, estimates of the largest exposures the client could potentially face, as well as a client peer analysis of programs where a controlling shareholder and a unique program structure were present.

Ultimately, Rafferty and his team were able to build two D&O programs to address the dual-board structure, negotiating the necessary language to ensure coordination across the two towers at a price that was less than the expiring program.

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“Chris Rafferty is a very professional individual who I believe continues to gain in knowledge in the area where he’s an expert,” said the risk manager at a manufacturer of nitrogen products. “That up-to-date knowledge in the marketplace benefits clients.”

“Chris Rafferty is fantastic,” said the risk manager at a company that provides advanced engineering and manufacturing solutions. “On a personal level he has a superb personality, and on a professional level, nobody knows D&O better than he does.”

“Chris Rafferty is very knowledgeable about the programs he manages for us,” said the risk manager at an aviation manufacturer. “He is very action-oriented and responsive and has a balanced relationship with the insurers and his insured.”

Leader in Reducing Rates

Galo Santana
Commercial Insurance Broker
Aon, Morristown, N.J.

Galo Santana had concerns about the frequency and severity of losses within a client’s workers’ compensation program. The client’s auto insurance policy reflected loss activity as well.

The major renewal challenges were the client’s operations and adverse loss history; it was emerging as a loss-leader for carriers. Workers’ comp and auto insurers sought rate increases.

Santana approached nine carriers including the incumbent. Due to an intense marketing effort, he was able to overcome the obstacles presented at renewal and provide the client with a very competitive renewal offering. He was able to negotiate approximately 10 percent savings overall.

For Acosta Inc.’s property insurance renewal, Santana approached 11 carriers, including the incumbent. Most insurers could not be competitive on the target rate due to CAT exposure and COPE (construction, occupancy, protection and exposure) concerns or had difficulties matching the expiring limits.

However, as result of the marketing effort, Santana was successful in reducing the property account rate by over 38 percent and received numerous program enhancements.

“Galo is very diligent,” said Theresa McLaughlin, director risk management.

“We have about 190 properties, some outside the U.S., as we do a lot of acquisitions. Galo keeps us up-to-date on what assets are moving and what assets need to be reduced. He stays on top of his game and works to get the right information to us.”

Sealing the Deal

Dan Schoenberg
Managing Director
Aon, New York

An Aon client’s deal for a competitor was in jeopardy due to a potential $175 million tax exposure: Certain employees of the competitor owned profits interests, and the client was concerned that, after the acquisition tax, authorities would argue the competitor should have withheld employment taxes.

Dan Schoenberg worked with the client’s law firm and accounting firm to draft the tax advice that would be provided to the carriers for underwriting purposes.

He designed the insurance program, obtained five quotes for the client, negotiated the key points in the winning carrier’s policy and spearheaded the extensive due diligence process between the client and the carrier, closing the program under the client’s budget.

The client paid 20 percent less than anticipated with no retention.

The policy covered potential U.S. federal and state income taxes, plus interest, penalties and defense costs. The policy also provided a “gross-up” for the tax owed on any proceeds received by the client under the policy.

The client got a full wrap of the exposure, which allowed its transaction to receive Board approval.

“Dan Schoenberg provides great service and pays attention to detail,” said the vice president, accounting, at a pharmaceutical company.

“We approached him about the coverage we needed, and he was able to deliver a product that fit our needs, which helped us out in a very challenging time when we needed to deliver on a project.”

Keeping Risks on Radar

Christian Wise
Senior Vice President
Aon, Boston

An Aon client signed an agreement to upgrade, maintain and monitor radar installations along the Arctic Circle. The challenge? Broker Christian Wise was to determine the appropriate cost of property insurance.

The installations were in remote locations and lacked adequate fire protection — one had burned to the ground, resulting in a $20 million loss. The initial cost to incorporate this exposure into the global property program was roughly $1.8 million dollars, eradicating any anticipated profit.

A loss control engineer traveled to the remote locations — complete with protective gear and a shotgun to ward off polar bears — assessing their value, which was nearly half of what was provided.

Wise and his team drafted a coverage form meeting the requirements of the contract, including broad coverage.

The team took advantage of the Aon Client Treaty in London that provides additional capacity of 20 percent to a line slip. They met with key London markets and placed a separate policy for additional savings. The original premium cost was ultimately reduced by $1.3 million.

“Chris Wise and his team have been responsive to our growing needs and challenges — combined with their client focus and industry relationships, they are truly assets and help make my job easier,” said the director of risk management at a company that provides wireless communications infrastructure.

The complete list of 2018 Power Broker® winners can be found here.

Finalists:

Robert Foote
President
Frank H. Furman Inc., Pompano Beach, Fla.

Marcus Henthorn, CLCS
Area Vice President
Gallagher, Rolling Meadows, Ill.

Christopher Mee
Assistant Vice President
Aon, Chicago

Thomas Sewell
Brokering Executive
Wells Fargo, Atlanta

James Shih, ARM
Managing Director
Krauter & Company, San Francisco

More from Risk & Insurance

More from Risk & Insurance

Cyber Resilience

No, Seriously. You Need a Comprehensive Cyber Incident Response Plan Before It’s Too Late.

Awareness of cyber risk is increasing, but some companies may be neglecting to prepare adequate response plans that could save them millions. 
By: | June 1, 2018 • 7 min read

To minimize the financial and reputational damage from a cyber attack, it is absolutely critical that businesses have a cyber incident response plan.

“Sadly, not all yet do,” said David Legassick, head of life sciences, tech and cyber, CNA Hardy.

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In the event of a breach, a company must be able to quickly identify and contain the problem, assess the level of impact, communicate internally and externally, recover where possible any lost data or functionality needed to resume business operations and act quickly to manage potential reputational risk.

This can only be achieved with help from the right external experts and the design and practice of a well-honed internal response.

The first step a company must take, said Legassick, is to understand its cyber exposures through asset identification, classification, risk assessment and protection measures, both technological and human.

According to Raf Sanchez, international breach response manager, Beazley, cyber-response plans should be flexible and applicable to a wide range of incidents, “not just a list of consecutive steps.”

They also should bring together key stakeholders and specify end goals.

Jason J. Hogg, CEO, Aon Cyber Solutions

With bad actors becoming increasingly sophisticated and often acting in groups, attack vectors can hit companies from multiple angles simultaneously, meaning a holistic approach is essential, agreed Jason J. Hogg, CEO, Aon Cyber Solutions.

“Collaboration is key — you have to take silos down and work in a cross-functional manner.”

This means assembling a response team including individuals from IT, legal, operations, risk management, HR, finance and the board — each of whom must be well drilled in their responsibilities in the event of a breach.

“You can’t pick your players on the day of the game,” said Hogg. “Response times are critical, so speed and timing are of the essence. You should also have a very clear communication plan to keep the CEO and board of directors informed of recommended courses of action and timing expectations.”

People on the incident response team must have sufficient technical skills and access to critical third parties to be able to make decisions and move to contain incidents fast. Knowledge of the company’s data and network topology is also key, said Legassick.

“Perhaps most important of all,” he added, “is to capture in detail how, when, where and why an incident occurred so there is a feedback loop that ensures each threat makes the cyber defense stronger.”

Cyber insurance can play a key role by providing a range of experts such as forensic analysts to help manage a cyber breach quickly and effectively (as well as PR and legal help). However, the learning process should begin before a breach occurs.

Practice Makes Perfect

“Any incident response plan is only as strong as the practice that goes into it,” explained Mike Peters, vice president, IT, RIMS — who also conducts stress testing through his firm Sentinel Cyber Defense Advisors.

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Unless companies have an ethical hacker or certified information security officer on board who can conduct sophisticated simulated attacks, Peters recommended they hire third-party experts to test their networks for weaknesses, remediate these issues and retest again for vulnerabilities that haven’t been patched or have newly appeared.

“You need to plan for every type of threat that’s out there,” he added.

Hogg agreed that bringing third parties in to conduct tests brings “fresh thinking, best practice and cross-pollination of learnings from testing plans across a multitude of industries and enterprises.”

“Collaboration is key — you have to take silos down and work in a cross-functional manner.” — Jason J. Hogg, CEO, Aon Cyber Solutions

Legassick added that companies should test their plans at least annually, updating procedures whenever there is a significant change in business activity, technology or location.

“As companies expand, cyber security is not always front of mind, but new operations and territories all expose a company to new risks.”

For smaller companies that might not have the resources or the expertise to develop an internal cyber response plan from whole cloth, some carriers offer their own cyber risk resources online.

Evan Fenaroli, an underwriting product manager with the Philadelphia Insurance Companies (PHLY), said his company hosts an eRiskHub, which gives PHLY clients a place to start looking for cyber event response answers.

That includes access to a pool of attorneys who can guide company executives in creating a plan.

“It’s something at the highest level that needs to be a priority,” Fenaroli said. For those just getting started, Fenaroli provided a checklist for consideration:

  • Purchase cyber insurance, read the policy and understand its notice requirements.
  • Work with an attorney to develop a cyber event response plan that you can customize to your business.
  • Identify stakeholders within the company who will own the plan and its execution.
  • Find outside forensics experts that the company can call in an emergency.
  • Identify a public relations expert who can be called in the case of an event that could be leaked to the press or otherwise become newsworthy.

“When all of these things fall into place, the outcome is far better in that there isn’t a panic,” said Fenaroli, who, like others, recommends the plan be tested at least annually.

Cyber’s Physical Threat

With the digital and physical worlds converging due to the rise of the Internet of Things, Hogg reminded companies: “You can’t just test in the virtual world — testing physical end-point security is critical too.”

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How that testing is communicated to underwriters should also be a key focus, said Rich DePiero, head of cyber, North America, Swiss Re Corporate Solutions.

Don’t just report on what went well; it’s far more believable for an underwriter to hear what didn’t go well, he said.

“If I hear a client say it is perfect and then I look at some of the results of the responses to breaches last year, there is a disconnect. Help us understand what you learned and what you worked out. You want things to fail during these incident response tests, because that is how we learn,” he explained.

“Bringing in these outside firms, detailing what they learned and defining roles and responsibilities in the event of an incident is really the best practice, and we are seeing more and more companies do that.”

Support from the Board

Good cyber protection is built around a combination of process, technology, learning and people. While not every cyber incident needs to be reported to the boardroom, senior management has a key role in creating a culture of planning and risk awareness.

David Legassick, head of life sciences, tech and cyber, CNA Hardy

“Cyber is a boardroom risk. If it is not taken seriously at boardroom level, you are more than likely to suffer a network breach,” Legassick said.

However, getting board buy-in or buy-in from the C-suite is not always easy.

“C-suite executives often put off testing crisis plans as they get in the way of the day job. The irony here is obvious given how disruptive an incident can be,” said Sanchez.

“The C-suite must demonstrate its support for incident response planning and that it expects staff at all levels of the organization to play their part in recovering from serious incidents.”

“What these people need from the board is support,” said Jill Salmon, New York-based vice president, head of cyber/tech/MPL, Berkshire Hathaway Specialty Insurance.

“I don’t know that the information security folks are looking for direction from the board as much as they are looking for support from a resources standpoint and a visibility standpoint.

“They’ve got to be aware of what they need and they need to have the money to be able to build it up to that level,” she said.

Without that support, according to Legassick, failure to empower and encourage the IT team to manage cyber threats holistically through integration with the rest of the organization, particularly risk managers, becomes a common mistake.

He also warned that “blame culture” can prevent staff from escalating problems to management in a timely manner.

Collaboration and Communication

Given that cyber incident response truly is a team effort, it is therefore essential that a culture of collaboration, preparation and practice is embedded from the top down.

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One of the biggest tripping points for companies — and an area that has done the most damage from a reputational perspective — is in how quickly and effectively the company communicates to the public in the aftermath of a cyber event.

Salmon said of all the cyber incident response plans she has seen, the companies that have impressed her most are those that have written mock press releases and rehearsed how they are going to respond to the media in the aftermath of an event.

“We have seen so many companies trip up in that regard,” she said. “There have been examples of companies taking too long and then not explaining why it took them so long. It’s like any other crisis — the way that you are communicating it to the public is really important.” &

Antony Ireland is a London-based financial journalist. He can be reached at [email protected] Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]