2017 Power Broker


Meeting Needs Far Beyond Insurance

Alex Burton
Area Vice President
Arthur J. Gallagher

Several of Alex Burton’s higher ed clients needed more flexibility than what they were getting within their risk retention group.

But transitioning out of a risk retention group can be a complex and exhausting process. The groups house such a diversity of risks, ranging from football programs to art collections, to protection for boards of trustees.

Fortunately, Burton was there to lead the way, building each university a new program to cover its unique coverage, pricing needs and risk appetite.

“Risk is not something that a college wants, ever,” said Brooks Seay, CFO and vice president of finance and operations at Young Harris College in Young Harris, Ga.

Clients also value how Burton enhances their risk management efforts, bringing to the table the right resources and capabilities to manage their exposures.

One college experienced a domestic issue that led to the presence of an armed individual on campus. Thankfully, the situation was neutralized without injury to staff or students, but it was a wake-up call, said Dawn Nash, vice president for administration and CFO at Wesleyan College in Macon, Ga. She was grateful that Burton sped into action immediately and “totally stepped up,” she said.

By the end of that same day, she said, Burton put in place a suite of services and programs that bolstered the college’s level of preparedness and enabled the risk management department to be proactive.

A Champion for Student Health Care

Teresa Koster
Division Chairman
Arthur J. Gallagher

Massachusetts’ adaptation of ACA Medicaid expansion in 2014 profoundly impacted the student health insurance plan (SHIP) marketplace. A wave of students became eligible for state coverage, and SHIP enrollment plunged at public colleges.

Institutions struggled to keep their SHIP programs viable with smaller, more volatile pools of students. Arthur J. Gallagher’s Teresa Koster saw the impact this trend was having on her clients, and saw an opportunity to help not just her own clients, but all public colleges in her state.

Koster reached out to the state’s Medicaid department and health care exchange, proposing a plan that would encourage students to enroll in their school’s SHIP by allowing the use of Medicaid funds to pay premiums. The initiative, which required the approval of regulatory changes, came to fruition in Fall 2016. The SHIP Premium Assistance initiative was launched at all 30 Massachusetts public institutions of higher education.


“It’s an idea that existed but Teresa is the one that brought it to Massachusetts and championed it,” said Ashley Hague, executive director of MIT Medical. “And everybody’s better off for it. … It’s a win-win-win solution.”

“It’s an example that other schools around the country can turn to,” said an executive at a prominent Midwestern university. “She’s helping shape the student insurance industry.”

Since the launch, the per-campus increase in school-based enrollment ranges from 24 percent to 30 percent.

Supporting Educators in Lean Times

Laurie Miller
Miller Services

The Illinois budget crisis hit rural school districts hard. Health care costs were on an upward trajectory, while property values were on the decline, shrinking school tax assessments.

So when a key health carrier lowered the threshold for self-funding groups, Laurie Miller pounced on the opportunity to organize a rural school-based purchasing pool. The Illinois Scholastic Cooperative launched Sept. 1, 2016, with seven districts and 1,000 lives.

“It was a huge cultural shift,” said Scott Bloomquist, superintendent of Winnebago Community Unit School District 323 in Winnebago, Ill. He said it was no small feat getting all the districts on the same page, but that if anyone could have made it happen, it was Miller.

“Everybody trusts her,” he said. “When she makes a recommendation, we almost immediately get buy-in. … She knows her stuff.”

The entire group realized an immediate 5 percent savings overall, and one district avoided an 18 percent stand-alone renewal hit. ISC is now getting the attention of other cash-strapped districts that typically operate with just a superintendent and a bookkeeper handling the programs. All of Miller’s school district clients say they rely heavily on her expertise and her deep commitment to helping rural schools succeed.

“I don’t think there’s ever been a year where she hasn’t done something innovative for us,” said Tom Mahoney, superintendent of Oregon Community School District 220 in Oregon, Ill.

Next-Level Solutions

Scott Wightman, ARM-E
Area Executive Vice President
Arthur J. Gallagher

Ithaca College implemented a strong ERM program in 2009. But by 2016, the organization felt that its program was in a rut.

“It got to a point that we were really at a loss for how to continue managing our data and make our program more robust,” said Kristine Slaght, the college’s risk manager. “We were stalling and no longer had the right tools for where we’d grown to.”

So the ERM committee was intrigued when Scott Wightman approached them about becoming a beta tester for an ERM software solution he was developing.

Wightman, an active proponent of the importance of ERM and compliance in college and university governance, had long since seen the need for ERM and compliance management to move beyond spreadsheets. He sought out a viable software solution and discovered Risk Wizard, an Australian firm with a promising solution for corporations.

Wightman partnered with Ithaca College to help adapt and customize the program for higher education. Using the software, Wightman created about 10 or 12 different templates for the committee to use, said Slaght, including one that would produce a heat map — something that the committee longed for.

“He did miracle work with it actually,” said Slaght. “He’s really moved us in a positive governance direction.”

Slaght said she’s pleased with everything the college has been able to accomplish over the past year. “We’ve really taken it to the next level,” she said.

Taking on the Toughest Challenges

Elizabeth Marshall, ARM,
Assistant Vice President

One of Elizabeth Marshall’s university clients experienced a troubling — and very public — array of legal woes. As expected, renewal time brought yet more pain, with incumbent markets proposing alarming premium increases and retention levels.

Marshall, an education placement specialist with Marsh, was concerned that the situation could get even thornier, with the potential for hybrid claims creating turmoil between the general liability and educators legal liability carriers. She designed an alternative GL and excess liability proposal. The outcome? Significant cost savings, a lower attachment point for hybrid claims, and a crisis management program independent of a liability occurrence or wrongful act.

“She was a pillar,” said a top risk officer for the university. Marshall was able to secure significant savings on the university’s excess casualty program, allowing it to purchase higher educator’s legal limits without impacting the overall insurance budget for the year.

Another university client needed to roll coverage for an acquired facility into its primary program despite it being a wholly different operation and class of business. It also needed to keep its automotive policy outside the primary program, even though only a limited number of insurers were willing to write automobile liability risk on a stand-alone basis. A tall order all around, but she got the organization exactly what it needed and then some.

“She found solutions and resources that I could not have found,” said the university’s risk manager, a veteran of the brokerage side as well.

Undaunted by the Impossible

Courtney Hensley, CRM, CISR
Account Executive

Almost immediately upon becoming the broker for a large university, Aon’s Courtney Hensley was presented with an unusual challenge: To secure a large federal contract, a division of the university needed coverage for providing prescribed burn services. But “intentional fire” was expressly excluded by the markets.

“These things, when they go bad, can go really, really bad,” said the university’s top risk management professional. Damages can run into the millions. Securing coverage was practically impossible, she said. “It was really nail-biting.”

But Hensley isn’t the type to be bested by a difficult exposure. “We can do better than this,” she told her client. An initial attempt to knit together several partial solutions came to naught because of exorbitant pricing and high retentions. As the clock ticked on the federal contract, Hensley kept working the problem and identified a viable Plan B.


Her team was able to manuscript a program using a wholesaler to place general liability, professional liability and contractors’ pollution liability together, specific to the university’s operations, incurring only minimal deductibles and a cost-effective premium. The burn exposure was contained within a separate tower that would protect the university’s other exposures in the event of an unexpected loss related to activities under the federal contract.

“She created a whole separate insurance tower for that department,” said the risk professional. “I was so amazed.”


Kate Kenny
Vice President

Tyler LaMantia
Area Senior Vice President
Arthur J. Gallagher

Robert DeVilbiss
Vice President
Grand Rapids, Mich.

Shelley Levine
Area Executive Vice President
Arthur J. Gallagher
New York

More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Cyber

Expanding Cyber BI

Cyber business interruption insurance is a thriving market, but growth carries the threat of a mega-loss. 
By: | March 5, 2018 • 7 min read

Lingering hopes that large-scale cyber attack might be a once-in-a-lifetime event were dashed last year. The four-day WannaCry ransomware strike in May across 150 countries targeted more than 300,000 computers running Microsoft Windows. A month later, NotPetya hit multinationals ranging from Danish shipping firm Maersk to pharmaceutical giant Merck.


Maersk’s chairman, Jim Hagemann Snabe, revealed at this year’s Davos summit that NotPetya shut down most of the group’s network. While it was replacing 45,000 PCs and 4,000 servers, freight transactions had to be completed manually. The combined cost of business interruption and rebuilding the system was up to $300 million.

Merck’s CFO Robert Davis told investors that its NotPetya bill included $135 million in lost sales plus $175 million in additional costs. Fellow victims FedEx and French construction group Saint Gobain reported similar financial hits from lost business and clean-up costs.

The fast-expanding world of cryptocurrencies is also increasingly targeted. Echoes of the 2014 hack that triggered the collapse of Bitcoin exchange Mt. Gox emerged this January when Japanese cryptocurrency exchange Coincheck pledged to repay customers $500 million stolen by hackers in a cyber heist.

The size and scope of last summer’s attacks accelerated discussions on both sides of the Atlantic, between risk managers and brokers seeking more comprehensive cyber business interruption insurance products.

It also recently persuaded Pool Re, the UK’s terrorism reinsurance pool set up 25 years ago after bomb attacks in London’s financial quarter, to announce that from April its cover will extend to include material damage and direct BI resulting from acts of terrorism using a cyber trigger.

“The threat from a cyber attack is evident, and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them,” said Pool Re’s chief, Julian Enoizi. “This was a clear gap in our coverage which left businesses potentially exposed.”

Shifting Focus

Development of cyber BI insurance to date reveals something of a transatlantic divide, said Hans Allnutt, head of cyber and data risk at international law firm DAC Beachcroft. The first U.S. mainstream cyber insurance products were a response to California’s data security and breach notification legislation in 2003.

Jimaan Sané, technology underwriter, Beazley

Of more recent vintage, Europe’s first cyber policies’ wordings initially reflected U.S. wordings, with the focus on data breaches. “So underwriters had to innovate and push hard on other areas of cyber cover, particularly BI and cyber crimes such as ransomware demands and distributed denial of service attacks,” said Allnut.

“Europe now has regulation coming up this May in the form of the General Data Protection Regulation across the EU, so the focus has essentially come full circle.”

Cyber insurance policies also provide a degree of cover for BI resulting from one of three main triggers, said Jimaan Sané, technology underwriter for specialist insurer Beazley. “First is the malicious-type trigger, where the system goes down or an outage results directly from a hack.

“Second is any incident involving negligence — the so-called ‘fat finger’ — where human or operational error causes a loss or there has been failure to upgrade or maintain the system. Third is any broader unplanned outage that hits either the company or anyone on which it relies, such as a service provider.”

The importance of cyber BI covering negligent acts in addition to phishing and social engineering attacks was underlined by last May’s IT meltdown suffered by airline BA.

This was triggered by a technician who switched off and then reconnected the power supply to BA’s data center, physically damaging servers and distribution panels.

Compensating delayed passengers cost the company around $80 million, although the bill fell short of the $461 million operational error loss suffered by Knight Capital in 2012, which pushed it close to bankruptcy and decimated its share price.

Mistaken Assumption

Awareness of potentially huge BI losses resulting from cyber attack was heightened by well-publicized hacks suffered by retailers such as Target and Home Depot in late 2013 and 2014, said Matt Kletzli, SVP and head of management liability at Victor O. Schinnerer & Company.


However, the incidents didn’t initially alarm smaller, less high-profile businesses, which assumed they wouldn’t be similarly targeted.

“But perpetrators employing bots and ransomware set out to expose any firms with weaknesses in their system,” he added.

“Suddenly, smaller firms found that even when they weren’t themselves targeted, many of those around them had fallen victim to attacks. Awareness started to lift, as the focus moved from large, headline-grabbing attacks to more everyday incidents.”

Publications such as the Director’s Handbook of Cyber-Risk Oversight, issued by the National Association of Corporate Directors and the Internet Security Alliance fixed the issue firmly on boardroom agendas.

“What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.” — Jimaan Sané, technology underwriter, Beazley

Reformed ex-hackers were recruited to offer board members their insights into the most vulnerable points across the company’s systems — in much the same way as forger-turned-security-expert Frank Abagnale Jr., subject of the Spielberg biopic “Catch Me If You Can.”

There also has been an increasing focus on systemic risk related to cyber attacks. Allnutt cites “Business Blackout,” a July 2015 study by Lloyd’s of London and the Cambridge University’s Centre for Risk Studies.

This detailed analysis of what could result from a major cyber attack on America’s power grid predicted a cost to the U.S. economy of hundreds of billions and claims to the insurance industry totalling upwards of $21.4 billion.

Lloyd’s described the scenario as both “technologically possible” and “improbable.” Three years on, however, it appears less fanciful.

In January, the head of the UK’s National Cyber Security Centre, Ciaran Martin, said the UK had been fortunate in so far averting a ‘category one’ attack. A C1 would shut down the financial services sector on which the country relies heavily and other vital infrastructure. It was a case of “when, not if” such an assault would be launched, he warned.

AI: Friend or Foe?

Despite daunting potential financial losses, pioneers of cyber BI insurance such as Beazley, Zurich, AIG and Chubb now see new competitors in the market. Capacity is growing steadily, said Allnutt.

“Not only is cyber insurance a new product, it also offers a new source of premium revenue so there is considerable appetite for taking it on,” he added. “However, whilst most insurers are comfortable with the liability aspects of cyber risk; not all insurers are covering loss of income.”

Matt Kletzli, SVP and head of management liability, Victor O. Schinnerer & Company

Kletzli added that available products include several well-written, broad cyber coverages that take into account all types of potential cyber attack and don’t attempt to limit cover by applying a narrow definition of BI loss.

“It’s a rapidly-evolving coverage — and needs to be — in order to keep up with changing circumstances,” he said.

The good news, according to a Fitch report, is that the cyber loss ratio has been reduced to 45 percent as more companies buy cover and the market continues to expand, bringing down the size of the average loss.

“The bad news is that at cyber events, talk is regularly turning to ‘what will be the Hurricane Katrina-type event’ for the cyber market?” said Kletzli.

“What’s worse is that with hurricane losses, underwriters know which regions are most at risk, whereas cyber is a global risk and insurers potentially face huge aggregation.”


Nor is the advent of robotics and artificial intelligence (AI) necessarily cause for optimism. As Allnutt noted, while AI can potentially be used to decode malware, by the same token sophisticated criminals can employ it to develop new malware and escalate the ‘computer versus computer’ battle.

“The trend towards greater automation of business means that we can expect more incidents involving loss of income,” said Sané. “What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.

“We’re likely to see a growing number of attacks where the aim is to cause disruption, rather than demand a ransom.

“The paradox of cyber BI is that the more sophisticated your organization and the more it embraces automation, the bigger the potential impact when an outage does occur. Those old-fashioned businesses still reliant on traditional processes generally aren’t affected as much and incur smaller losses.” &

Graham Buck is editor of gtnews.com. He can be reached at riskletters.com.