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

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]