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2017 Power Broker

Energy, Traditional

Improving Coverage and Rates

William Barnett
Managing Director
Marsh, Philadelphia

William Barnett was instrumental in several significant positive developments to one client’s insurance program this year, said its global director of risk management. For starters, he was able to engineer an 8 percent premium decrease on a program that was already reduced by 12 percent the prior year.

“As our program premiums are in the multimillions, this was a considerable savings again this year,” the client said.

Significant policy improvements were also achieved, including the implementation of product recall coverage as well as a newly obtained cyber policy.

“Considering the size of our company and the already broad coverage prior to this renewal year, he still delivered these savings and improvements,” the client said.

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Another client was in the process of evaluating its business model after a spin-out from a larger company. The company had significant legacy pollution liability risks to be managed, particularly as the company looked to convert some non-core assets to cash.

It is often the case in the energy and process industries that undesirable situations, either financial or physical liabilities, are fobbed off onto a spin-out entity.

To protect the balance sheet and satisfy creditors, Barnett and his team developed a surety bond program to encompass all environmental liabilities. During the process of divesting certain assets, the client developed a portfolio environmental program to cover certain environmental risks. That adaptation in turn made divestitures easier.

Making Spin-Outs Smoother

Bobby Bierley
Senior Vice President
Lockton, Houston

During the course of a complex spin-out for one of Bobby Bierley’s clients, “the decision was made that we needed to switch to occurrence cover for each company,” said the company’s manager of risk and insurance.

The budget was set at $1 million.

Bierley suggested splitting the program in two and having two occurrence-based towers. To cover each company’s historical liability, there was a sunrise endorsement covering all occurrences from 1986 until the present, making this first year of coverage very important.

“We liked that because run-off policies have a limited reporting period,” said the client.

Bierley was able to negotiate this for no additional premium.

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In another situation, a client spun off about half of its business and drastically changed the company’s risk profile.

“We faced challenges with our casualty-fronting carrier, which sets the table for the entire excess-liability program,” said the chief risk officer. “Bobby quarterbacked the effort with his London colleagues to broker a brand new market for us.”

He did so while improving the terms, conditions and price. That effort was following up another great effort during the company’s spin-out in 2015 where they converted the GL/XS program to occurrence from claims-made without losing any historical coverage and for minimal price.

A Better Bankruptcy

Michele Cowen
Vice President
Aon, Los Angeles

A client of Michele Cowen’s was going through difficult times, eventually filing Chapter 11. That created significantly higher risk in the D&O and fiduciary coverage lines. Cowen not only renewed the existing program, but put together a “tail policy” for when the company emerges from bankruptcy.

“Even in better times, Michele never ceased to surprise us with excellent results on our executive risk programs,” said the company’s director of insurance and ERM. His wasn’t the only company Cowen helped through tough times.

“We made the difficult decision to file Chapter 11,” said one director of risk management. “Michele was able to pre-negotiate a run-off for the program in place, and get the carriers to commit to an extension even though no one knew at that time the date of the filing.”

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It all worked smoothly, and the feedback the client got from outside coverage counsel was that it was the best coverage they had ever seen. The client added that once the smaller company emerged from bankruptcy with an all-new board, Cowen was able to keep all the major incumbent underwriters in the program.

“Until we switched our business to Michele, our D&O program had been managed by another broker for over a dozen years,” said one CFO. “She was able to deliver significant improvements to our endorsements, which was our primary objective.”

In addition, Cowen took a policy “that was already priced in the top quartile relative to our peers and reduced our cost by more than 25 percent.”

Serious About Finding Savings

Paul Finnett
Managing Director
Aon, Houston

Paul Finnett helped one client achieve a $1 million savings in their 2016 renewal during difficult times in the oil and gas industry.

“The renewal was further complicated by significant reductions in insured values, which underwriters were not happy about,” said the director of risk management. “Nevertheless, Paul was able to help obtain coverage enhancements to our program.”

That kind of a home run seems to have been par for the course for Finnett.

“Paul has been a value-driver for us,” said a CFO. “Paul has helped us reduce our brokerage fees and our insurance premiums, both important as we reduce costs in a down market.”

Specifically, the client was able to eliminate a dual system with an administrative broker in Houston, where it is based, and a market broker in London and consolidate with Finnett.

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Notably, Finnett helped the client revise its cyber coverage, “becoming the first in our industry to achieve some asset coverage where it has historically been excluded,” said the CFO.

For another client, pollution liability was a serious concern. There were issues with wording in a very gray area in the policy, said the risk and insurance manager.

“Paul was able to get new wording, not just a clarification, but a full amendment at the first layer.”

He then got the rest of the tower to accept the same wording as in the primary layer.

“That sounds like common sense but it was something we didn’t have for eight years,” the client said.

Foresight and Fortitude

Jeremy Gayser, OTA
Senior Vice President
Aon, Houston

The struggles of companies in the energy sector have caused some underwriters to reduce their exposure. Jeremy Gayser saw the writing on the wall and advised one of his clients that the lead carrier on its tower was likely to pull back. In the end, it happened sooner than expected. But fortunately the groundwork had already been laid for securing a new lead.

“The replacement of our international lead required good relationships with a lot of markets and extra effort,” said the company’s director of risk management.

A new lead was secured, at terms favorable to the client. Gayser also negotiated policy form provisions that were important to the client into the lead’s forms.

At the other end of the scale, it can be a steep challenge to secure savings or improvements in terms for clients without precipitating departures.

“This year, our property renewal was quite complicated,” said a director of insurance.

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The company went into the renewal with a very aggressive pricing structure. Many of the underwriters pushed back on the pricing originally, but Gayser was able to fight for his client and ended up with premium savings greater than expected.

“His negotiation skills and knowledge of our industry enabled him to produce an excellent outcome for my company,” the director said.

With all the shuffling around, Gayser was also able to land a big new client, with more than $3 billion in project values, by winning a good, old-fashioned request for proposal.

Directing the Pipeline Business

Brian Tanner, CIC
Principal
EPIC, Birmingham, Ala.

Take all the dangers of the oil and gas industry — the hydrocarbons, the extremes of temperature and pressure, the heavy equipment and the constant motion — and put them out in the field many miles from any resources or help, and that is the pipeline business.

“We had a serious, life-threatening injury at a location where we were working,” said the safety manager of one client. “The person eventually had a full recovery, but Brian was instrumental in making sure that a situation that could have been a huge problem for us, even could have cost us a major client, was handled smoothly and without fuss.”

Tanner had experts on site the next day and helped create a comprehensive report. His attention to detail helped establish that it was not, in fact, a workplace injury, the client said.

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Another client suffered a different kind of loss, the sudden death of a senior executive. As family, friends and colleagues grappled with the loss, management relied upon Tanner to support other executives through an urgent succession, including a renewal complicated by underwriters reducing exposures in the energy business.

Those declines also imperiled the very existence of another client.

“Brian and his team helped us significantly by working with the carriers on what seemed like a daily basis, helping us work through the cash flow and other issues,” said the CFO.

“That allowed us to remain in business and continue working our contracts,” he said.

Finalists:

Heidi Bauermeister
Managing Director
Marsh, New York

Logan Couch
Vice President
Aon Risk Solutions, Houston

Cara McGrath
Account Manager
Alliant Insurance Services, Boston

Christina Murphy
Vice President
Marsh, Houston

David Robinson
Managing Director
Aon Risk Solutions, Houston

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.