2017 Power Broker

Environmental

Track Record: On Time and Under Budget

Laura Decker
Broker
Aon, New York

With less than two weeks before a client needed to conclude a major real estate acquisition, Laura Decker got to work. First she reviewed hundreds of environmental Phase I reports on the property.

Of even greater concern was the fact that many of the property’s environmental exposures fell outside of most insurers’ appetites. Subsurface investigations into historic contaminations at the site were infrequent. Worse still, lenders were starting to question if they should proceed with the deal altogether because of the potential exclusions.

Having gone through the reports and drawn up an action plan, Decker negotiated terms that satisfied all parties, walking the client through each property and its exclusions so that they could relay that information to the lender, enabling the transaction to move forward.

“Even with all of these challenges Laura was able to get us the coverage we needed under budget in a tight time frame,” said the client. “She’s good at getting a quick turnaround and has an extensive knowledge of the market and the products available.”

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Another client said, “We had two major challenging acquisitions over the past 18 months, where due to timing, we couldn’t get the necessary information to Laura on time.

“But she was savvy enough to organize and prioritize the data and get the carriers to allocate additional resources to not only get the renewal completed ahead of time under budget, but to get the best terms and conditions for the majority of these properties.”

Adapting to Rapid Growth

Brian Finnegan
Director
Aon, New York

When his client’s insurer decided not to renew its site pollution program after nine years, Brian Finnegan acted quickly.

The client owned more than 400 properties, including bulk petroleum storage terminals, port locations and gas stations. It also transported petroleum products, mostly in Alaska. This was no small task.

Added to which, the client, Saltchuk Resources, wanted to keep identical limits, terms and retention all at the same premium, while ensuring there was no coverage gap between the old and new programs.

Finnegan needed to learn the existing program as well as the business and its operating companies before going to market. To add to his task, he needed to carry out a comprehensive marketing effort during a time in which the client expanded rapidly.

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To meet this growth, he recommended higher limits and found a solution that combined two programs to maintain the retroactive dates of the old program, while keeping the same retentions.

It doubled limits for the highest exposures and reduced premium by 50 percent.

“We were left in a vulnerable position, but thanks to Brian it was an amazing result,” said Lisa McQueen, senior director of risk management at Saltchuk.

“Because of his environmental background he was able to understand our exposures and sit down and work out a solution that gave us the best of both worlds.”

Expertise in Environmental Risk

Allan Jackson, ARM, CPCU
Associate Director
Aon, Atlanta

With more than 600,000 borrowers from across the farming sector on its books, it’s almost impossible for FCC Services to know the full extent of its environmental exposure.

The government-sponsored enterprise provides credit to farmers, ranchers and other rural enterprises. It faces daily risks associated with its members’ large animal operations, power and waste management systems, and on-site air quality concerns.

So it was difficult to find an insurer willing to provide blanket coverage. Allan Jackson stepped in, quickly grasped the organization’s structure and found the best program.

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“We struggled for years to find a broker that could articulate the unique structure of our organization in the commercial insurance marketplace and the uniqueness of our program to our customers and board,” said Debbie Dettmer, FCC’s managing director of risk management and insurance services. “Thank goodness for Allan. He has used his relationships within the industry and his understanding of our exposure and structure to expand our potential markets from one insurer to four. Needless to say, this has resulted in better terms and conditions as well as more favorable pricing.”

Another client said, “Allan has a distinct knowledge of the environmental insurance marketplace and awareness of the specific appetite and competency of each underwriter he works with. He was able to navigate the marketplace to locate the right trading partner for our risk and tailor our policy to fit our specific needs.”

Leveraging Captives to Handle Complexity

Kimberly Mann
Vice President
Marsh, Philadelphia

Tasked with conducting a feasibility study into a global specialty chemical client’s insurance needs, Kimberly Mann first determined if all its stand-alone environmental policies could be integrated into one program.

She then looked into leveraging its captive to create a global program for all its operations. Having engaged the underwriter to review the engineering reports for each of the locations, she added these exposures to the captive, then renegotiated the excess layers of risk transfer with the carriers, structuring the captive as an excess program so as not to disrupt the elements already in place.

This insulated the carrier from the exposure until its policies expired. She was able to improve the terms for each of the facilities, including the addition of first-party trigger, legacy risk exposure, and refined exclusions for known contamination.

She also managed to increase the total limits for several of the sites, while reducing the premium by 77 percent.

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“Kim was instrumental in the leveraging and integration of our programs,” said her client. “She’s detail-oriented, a strong problem-solver and has been very responsive to our needs.”

Another client said, “Kim is a wealth of knowledge that we rely heavily upon in evaluating new construction projects and their specific needs, creating and implementing corporate-wide programs or creating specific programs that fulfill lender requirements.”

Coming Through in a Time Crunch

James Vetter
Managing Director
Marsh, Salt Lake City

Headache doesn’t even begin to explain the scale of the task facing James Vetter. He needed to help his client liquidate the assets of a refinery that was being sold through bankruptcy — all within a six-week window.

The sale of the multi-thousand-acre site involved multiple stakeholders, including the buyer and seller, and six different lawyers representing various aspects of its environmental issues and coverage. But to enable the sale and subsequent operation of the site, $100 million in pollution legal liability insurance first needed to be placed.

Drawing up a schedule for every task and the responsibilities of each stakeholder, Vetter held bi-weekly calls to coordinate the project. The end result suited all parties, and was placed on time and with superior coverage enhancements and policy wording.

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“This was a 50-year-old refinery that had not operated in over four years,” said his client. “I was amazed that Jim was able to not only get the policy in place, but get it done within the time frame we needed.”

Jeanne Cohn-Connor, a partner at Kirkland & Ellis, said, “Jim’s strength is in knowing the players in the environmental insurance space and in directing the work so it can get done, under time pressure, in a way that keeps everyone focused on the goal.”

In another case, Cohn-Connor said, Vetter put together a program with three insurers that showcased his unique talent for negotiating with diverse stakeholders.

Skilled at Satisfying All Parties

Max West
Senior Vice President
Aon, Chicago

When Commercial Liability Partners became involved in the divestment of a former foundry site in Columbus, Ohio, it faced huge environmental challenges.

The 44-acre Columbus Castings site manufactured steel parts for rail cars for more than 100 years. There was a legacy of pollution exposures that needed to be addressed.

Working with the available data, Max West was able to customize and negotiate coverage for the known contamination, as well as insure against bodily injury risk to neighbors and diminution in the value of their properties as a result of past pollution from the site.

The final policy provided $10 million in limits for 10 years, covering all of the site’s legacy environmental problems.

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“Max was successful in obtaining a policy at a better price and coverage with minimal exclusions,” said Ron Froh, CEO of Commercial Liability Partners. “Without the policy, the acquisition wouldn’t have been successful and that’s all down to Max. His ability to grasp the situation, think outside the box and convey our needs to the underwriter to secure the best possible coverage was top-notch.”

West helped another client secure coverage for environmental contamination on its sites as well. “Max is one of the best in the business. He has successfully solved more than a dozen environmental cases for us,” said Mike Baucus, managing partner at real estate investment firm AIC Ventures. “There isn’t another broker in the country we would use.”

Finalists:

Cristin Bullen
Senior Vice President
Marsh
New York

Louis Cipollo
Account Executive
Aon, Philadelphia

Amber Fixter
Vice President
Willis Towers Watson, New York

John Kim
Managing Director
Marsh, San Francisco

Rick Ringenwald
Executive Vice President
Willis Towers Watson
Radnor, Pa.

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]