2017 Power Broker

Energy, Renewable

Helping New Business in a Big Way

Susan Garrard, AIS, AINS
Senior Vice President
Beecher Carlson, Boston

Few brokers can say they were present at the creation of a new business.

“I formed a company about a year ago that acquires pre-construction solar projects and funds the construction and operations,” said the company’s managing partner. Since then, he said, “Susan has essentially served as our in-house insurance expert. She helped us purchase a very cost-effective policy. She led the review process by the independent insurance consultant required by our financing partners, and helped ensure that we didn’t purchase any unnecessary coverage. She’s helped us start thinking about corporate insurance that will be needed to protect our firm and other special requests such as the purchase of decommissioning bonds required for our projects.”

When Garrard is not helping to found whole new entities, she is supporting ongoing concerns in their efforts to launch new lines of business. In one case, that was literally new lines, as in a fiber-optic smart grid for one client.

“We had to battle both federal and state bureaucracies that had a lot of different concerns,” said the risk manager. “We were largely self-insured, and we were going to the market for the new venture.

“It was Susan who was not afraid to step in and tell our story. Her ability to think outside-the-box and communicate in a non-cookie-cutter way won the day for us,” the risk manager said.

Sweetening the Deal

Robert Logan
Vice President
Aon, Dallas

“Rob is new with us, so 2016 was his first full renewal cycle,” said one risk and finance manager. “With the backdrop of several years of material premium increases and some ‘know your customer’ issues with the primary insurer, Rob proactively clarified and resolved the issues and fostered a best-price negotiation for the current renewal.”

In changing the tone and the parameters of a longstanding relationship between carrier and insured, “Rob set the expectations for an improved casualty 2017 renewal price point upon achievement of improved claims performance.”

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Coming back for a second helping, Logan also took in hand errors and omissions coverage for the same client. “He oversaw a study of the differences between the standard electric and gas utility offer from our mutual and the commercial markets. In the final hours of renewal, he secured for us an 11.9 percent reduction when the expectation from other peers was flat to 2 percent reduction.”

The vice president at another renewable energy client confirmed that Logan was instrumental in assisting the company in winning new business for itself. The client operated its own power plants, as well as some owned by other entities. The client already had what they felt was a competitive property program, and Logan suggested they could gain new operating contracts by offering property coverage as part of its proposals. The client was able to secure new business with the help of that sweetener to its bids.

Providing Room to Grow

Charles Long
Area Senior Vice President
Arthur J. Gallagher, Boston

While some energy sectors are struggling, a common challenge in renewables is managing rapid expansion. “We have grown significantly from about 300 employees four years ago to more than 850 today,” said the director of finance at one such company.

“As we expanded beyond our core business into solar it was obvious after the first year that our incumbent broker needed help. We sought an expert in the renewables market. When we found Charlie, he first created a very efficient program for us by consolidating some policies and putting others out to market to get the best pricing. Beyond that, he created a program within which it is easy for us to add new projects. That extends from builder’s risk to property, general liability and umbrella once projects are operational.”

The client credited Long with a diligent gap analysis that led to wider gains. “He reviewed our policy and found several holes in coverage for a solar project. In refining our policy, Charlie was able to get us the coverage we needed at no additional cost. He has also been creative in the use of new policies.” Some recent examples are a potential revenue guarantee on the production of solar power and advanced payment coverage for large projects.

Another client credited Long with “flawless execution” on the insurance that underpins the participation of their tax-credit equity investors. “It is a very complex structure. If we suffer a loss, we could have to pay back our tax credits. He had to tailor-make the policy with clear guarantees.”

Tackling Complexities With an Analytical Eye

Mark Nelson, AFSB, CPCU
Senior Vice President
AssuredPartners NL, Cincinnati

Bonding is a challenge for many small firms. There are always strict qualifications even to apply, along with specific limits and restrictions. The irony is that many programs demand more administrative capability than can be supported by the companies that the programs are supposed to be helping.

“Mark assisted our firm to structure our energy-savings contract so that the performance and payment bond was limited to the initial project and not the ongoing preventive maintenance,” said one company president.

“He also assisted in reviewing our contracts to help make sure our bond and insurance risks were properly mitigated and provided relevant comments. Further, he assisted in mitigating our owners’ indemnification based on our working capital and net worth.” Altogether, that was huge material help to a growing company with many irons in the fire.

“We are an $80 to 90 million company and I am banging up against my bonding limit,” the president of another client company said. “When we stretched, he went to the mat for us. He was very analytical in his approach, which makes him very different from other salespeople.”

The vice president of finance at another firm credited Nelson with being proactive in addressing the complexities of bonding.

“Mark organized a meeting this year with all our lawyers and accountants. They have all the information, but then what?  Mark doesn’t wait for us to call him. If he leaves his agency, I’m going with him wherever he goes.”

Enabling Startups to Succeed

Blake Parrish
Vice President
Marsh, Los Angeles

Startups and venture initiatives are common, but that does not mean that they are openly welcomed by the insurance market. Quite the contrary, investors and underwriters alike demand assurances.

“Insurance for a green development is a challenge,” said a principal of one investment firm. “We backed a small development with seven projects and no track record. Blake went to the market for us, and then went back after every few deals to canvass the market and see if we were getting the best coverage at the best price and terms. I don’t think anyone else would do that, retrace his steps like that.”

The principal also noted that in the middle of one project, the client had to switch general contractors, which is usually highly disruptive to the project and to the insurance program. “Blake took it in stride. We had lots of stress points, but insurance was not one of them.”

A different client had a highly technical scientific development project. More complex still, it was an international collaboration. “Blake demonstrated how Marsh would mitigate the wide range of issues that stem from our distinctive technical objectives and from the project’s global makeup of collaborators,” said the lead contract specialist on the project.

“He is insuring the importation of hundreds of technical components as they cross oceans, and then are driven up remote mountain roads. It takes a particularly savvy broker to learn not only how we will safely transport these components, but to also educate insurance carriers on these same details.”

Helping Green Energy Happen

Tim Pierce, ARM
Senior Vice President
Marsh, San Francisco

In the past few years, large utilities have started to embrace renewable energy. In their newfound enthusiasm to go green, traditional power generators and distributors have had to rely on their brokers to guide them through a very different insurance and risk management environment.

Tim Pierce earned his spurs this year in part working with one major utility and a large government entity on a photovoltaic project. The utility brought him in early as part of the feasibility study for the plan, which would be adjacent to and provide power for the government installation.

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As a greenfield plan in green energy, it was something like three-dimensional chess, with engineering plans being reviewed for safety, security, insurability and risk management.

The director of insurance for the utility confirmed that the end result was a solid understanding of the exposure presented by the government site and the planned solar array. That in turn underpinned the assumed risk and design features and also confirmed that the insurability of the project would not present unacceptable financial risk or premium issues over the lifetime of the solar array.

Another important win for Pierce this year involved a client that had a routine renewal become highly complex unexpectedly. “Underwriters don’t like uncertainly,” the client said. Pierce was able to complete the renewal in a player-to-be-named-later fashion: Coverage was bound with wording to allow for adjustments as necessary by the carriers.

Finalist:

Monica Brecka
Managing Director, Southern Region Manager, Umbrella & Excess Casualty Practice
Aon, Lutherville, Md.

More from Risk & Insurance

More from Risk & Insurance

2017 RIMS

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.
By: | April 26, 2017 • 3 min read

As insurers become increasingly concerned about the aggregation of cyber risk exposures in their portfolios, new tools are being developed to help them better assess and manage those exposures.

One of those tools, a comprehensive cyber risk modeling application for the insurance and reinsurance markets, was announced on April 24 by AIR Worldwide.

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Last year at RIMS, AIR announced the release of the industry’s first open source deterministic cyber risk scenario, subsequently releasing a series of scenarios throughout the year, and offering the service to insurers on a consulting basis.

Its latest release, ARC– Analytics of Risk from Cyber — continues that work by offering the modeling platform for license to insurance clients for internal use rather than on a consulting basis. ARC is separate from AIR’s Touchstone platform, allowing for more flexibility in the rapidly changing cyber environment.

ARC allows insurers to get a better picture of their exposures across an entire book of business, with the help of a comprehensive industry exposure database that combines data from multiple public and commercial sources.

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

The recent attacks on Dyn and Amazon Web Services (AWS) provide perfect examples of how the ARC platform can be used to enhance the industry’s resilience, said Scott Stransky, assistant vice president and principal scientist for AIR Worldwide.

Stransky noted that insurers don’t necessarily have visibility into which of their insureds use Dyn, Amazon Web Services, Rackspace, or other common internet services providers.

In the Dyn and AWS events, there was little insured loss because the downtime fell largely just under policy waiting periods.

But,” said Stransky, “it got our clients thinking, well it happened for a few hours – could it happen for longer? And what does that do to us if it does? … This is really where our model can be very helpful.”

The purpose of having this model is to make the world more resilient … that’s really the goal.” Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

AIR has run the Dyn incident through its model, with the parameters of a single day of downtime impacting the Fortune 1000. Then it did the same with the AWS event.

When we run Fortune 1000 for Dyn for one day, we get a half a billion dollars of loss,” said Stransky. “Taking it one step further – we’ve run the same exercise for AWS for one day, through the Fortune 1000 only, and the losses are about $3 billion.”

So once you expand it out to millions of businesses, the losses would be much higher,” he added.

The ARC platform allows insurers to assess cyber exposures including “silent cyber,” across the spectrum of business, be it D&O, E&O, general liability or property. There are 18 scenarios that can be modeled, with the capability to adjust variables broadly for a better handle on events of varying severity and scope.

Looking ahead, AIR is taking a closer look at what Stransky calls “silent silent cyber,” the complex indirect and difficult to assess or insure potential impacts of any given cyber event.

Stransky cites the 2014 hack of the National Weather Service website as an example. For several days after the hack, no satellite weather imagery was available to be fed into weather models.

Imagine there was a hurricane happening during the time there was no weather service imagery,” he said. “[So] the models wouldn’t have been as accurate; people wouldn’t have had as much advance warning; they wouldn’t have evacuated as quickly or boarded up their homes.”

It’s possible that the losses would be significantly higher in such a scenario, but there would be no way to quantify how much of it could be attributed to the cyber attack and how much was strictly the result of the hurricane itself.

It’s very, very indirect,” said Stransky, citing the recent hack of the Dallas tornado sirens as another example. Not only did the situation jam up the 911 system, potentially exacerbating any number of crisis events, but such a false alarm could lead to increased losses in the future.

The next time if there’s a real tornado, people make think, ‘Oh, its just some hack,’ ” he said. “So if there’s a real tornado, who knows what’s going to happen.”

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Modeling for “silent silent cyber” remains elusive. But platforms like ARC are a step in the right direction for ensuring the continued health and strength of the insurance industry in the face of the ever-changing specter of cyber exposure.

Because we have this model, insurers are now able to manage the risks better, to be more resilient against cyber attacks, to really understand their portfolios,” said Stransky. “So when it does happen, they’ll be able to respond, they’ll be able to pay out the claims properly, they’ll be prepared.

The purpose of having this model is to make the world more resilient … that’s really the goal.”

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]