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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

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]