2017 Power Broker

Financial Services

No Jargon, Just Action

Edward Conlon
Senior Vice President
Aon, New York

Edward Conlon became the broker of a registered investment adviser and a related broker-dealer after a spinoff and merger at the holding company level.

Despite a difficult loss history on the broker-dealer side, Conlon saved the combined entity 55 percent on its premium by showing carriers how the client improved its controls, including terminating problematic employees.

He was also able to get a carrier to reverse a claim denial dating back to before Conlon had taken on the account. The carrier ultimately contributed a significant sum of the applicable limit toward settlement.

Advertisement




Ken Rizzuto, vice president, risk management, at iHeartMedia Inc., said that he oversees an “extremely complex” D&O program that services elements of a public and private company with two boards of directors and 23 layers of coverage.

“Each year, Ed has put together a very comprehensive program with all the coverage enhancements that the market has to offer,” Rizzuto said. “Ed’s keen familiarity and good relations with the markets allow him to assemble the best program at the best price for his clients.”

“He’s able to explain complicated issues, bringing it to the level of an average accountant,” said a director of accounting operations at a financial services software firm. “When I’m talking to him, I don’t feel like I’m talking to an insurance agent — no jargon.”

Enthusiastic and Determined

Craig Glendinning
Senior Vice President
Marsh, London

Craig Glendinning developed Marsh’s commodity document fraud (CDF) policy last year in response to client demand following the $1.4 billion Qingdao port fraud in China in 2014, which involved the use of metals for collateral. The new policy addresses the lack of coverage provided by traditional fraud policies, by insuring organizations against financial loss sustained when accepting fraudulent title documents and receipts from clients or third-party vendors.

The CDF policy was developed in close collaboration with a number of Marsh’s U.K. and U.S. commodities industry clients, and is now being purchased by organizations in the banking and trading sector. Clients seeking to expand into emerging markets are particularly interested in the new product.

Advertisement




“Craig helped us develop a bespoke insurance solution that was aligned precisely to the risk that we were trying to mitigate,” said Emily Jenner, head of insurable operational risk at Standard Chartered Bank. “He went over and above to ensure he understood the issue and worked hard to get the best possible solution from the insurance market. As a result of Craig’s enthusiasm and determination, the bank now benefits [from] an insurance policy that helps reduce what we consider to be one of our top five risks.”

“Craig is a tremendous partner,” said Kevin Nye, senior vice president at Royal Bank of Canada. “He is client-oriented, understands the industry and market, and is always focused on value-added solutions and approaches — I can’t say enough about him.”

Superior Service

Craig Goesel
Senior Vice President
Alliant/Mesirow Insurance, Chicago

One of Craig Goesel’s regional bank clients wanted to obtain full-limit coverage for the type of social engineering scams that involve executive impersonation, but carriers were reluctant to provide a substantial limit for the exposure.

Goesel convinced carriers to meet at the bank’s “wire room” to understand its loss prevention measures, enabling carriers to gain a high level of comfort with the bank’s controls. He also helped the bank strategize ways to improve its risk profile, which resulted in an offer of a full-limit program for crime insurance, including full limits for social engineering/executive impersonation theft.

The day after the renewal presentation, the bank announced it was to be acquired by a large international bank. Goesel leveraged his relationships with the carriers to ensure that the favorable renewal terms previously negotiated were not invalidated.

Advertisement




Michael Saturley, director of the treasurer’s office at the National Futures Association, said that Goesel was on hand at NFA’s underwriting renewal meeting, the same day that all of its carriers dropped their coverage after the “Wall Street Journal” published an unfavorable article on it.

“Craig was able to find in a timely manner new coverage for us, and each year since that event, he has worked to rebuild our professional liability program to a sound program,” Saturley said.

“He has been able to aggressively market the program and get competitive bids.”

Comfortable With Complexity

Alex Muralles
Senior Vice President, FINEX
Willis Towers Watson, Chicago

After analyzing the management liability program of Robert W. Baird, a wealth management and private equity firm based in Dana Point, Calif., Alex Muralles identified several program deficiencies including outdated exclusions, a tie-in of limits across all lines, and a narrow regulatory claims investigations trigger.

Muralles worked with a new carrier to manuscript a policy that incorporated the existing policy language of Baird’s incumbent carrier, with the addition of proposed enhancements and the broader terms of both carrier policies.

The customized policy removed tie-in limits, increased the aggregate from $10 million to $40 million, broadened notice provisions, and expanded regulatory investigations coverage.

Advertisement




Muralles saved Baird 20 percent in premiums and negotiated a two-year policy paid in annual installments with a refreshed aggregate — not typically offered for errors and omissions policies.

“We have very complex businesses and he’s been able to help us through the complexities of transferring risk and protecting the firm,” said Angela Johnson, Baird’s insurance risk manager.

“Alex provides unmatched, outstanding service on a regular basis,” said Heather Myerscough, corporate insurance director at Huntington Bank.

“We’re not just an account to him, he really cares about how the bank works and what the bank needs.”

Providing Fantastic Results

Phil Norton
Vice Chairman, Midwest Region
Arthur J. Gallagher, Chicago

One of Phil Norton’s clients, a global insurance company recovering from the fallout of the financial crisis, is striving to be leaner, smarter and more efficient.

Norton and his team were tasked with reducing the client’s premiums at the same time the company fully collected on significant outstanding claims.

The brokers demonstrated to the program’s carriers the operational improvements and reductions in risk achieved by the client. They then convinced the carriers to buy into multiple years of large premium decreases as part of a new level setting of the overall risk metric.

Norton was personally involved in working with one carrier that had not fully reserved a significant claim and was questioning the amount. Norton took the issue all the way up to the carrier’s chief executive, who then fast-tracked the claim payment.

Advertisement




“One of the values Phil brings is extensive benchmark analysis,” said the client. “He will factor in not only what peers are maintaining in limits and retentions, but he’ll also factor in our claims experience, as well as industry claims experience. Because of his Ph.D. and actuarial experience, he gives us a much more robust analysis than the average broker.”

“Phil went above and beyond for us when we had a disagreement over the value of a claim with an insurance carrier,” said a risk manager of an insurance company in the Midwest. “He was able to bring a creative approach that gave us a fantastic result and made our CEO happy.”

Fighting for His Clients

Eric Seyfried
Senior Vice President
Aon, New York

Last year, Eric Seyfried was presented with the most challenging renewal of his career as a professional liability broker. His client agreed to a nine-figure settlement with the California Public Employee Retirement System over allegedly inflated ratings on residential-mortgage bond deals.

By presenting detailed analyses of profitability, and pulling in other lines of coverage sold to the client by the carriers, Seyfried and his team convinced the markets to accept a longer “payback” horizon and crafted a complex multiyear deal that involved various “out” triggers for both parties. The client was able to obtain full continuity with all its incumbent carriers with no increase in premium.

Advertisement




“I’ve always had a very good team at Aon who have managed my risks very well,” said the risk manager for the client. “With the addition of Eric to the team, I now have the benefit of a new perspective — someone who has added value with his ability to think outside of the box to develop solutions to unique problems that arise.”

“Eric has incredible attention to detail and is very responsive,” said Maria Diaz, risk manager at Xerox. “He’s also extremely strategic. He’s my right-hand person when it comes to this line of coverage, which is currently a challenging line for us.”

“Eric provides good guidance and he puts our concerns in front of the carrier, and fights for us to get better coverage and lower premiums,” said Le Andra Holly, senior manager, risk management, at Staples.

Finalists:

Vincent Flood
Eastern Region Property Practice Leader
Aon, New York

Nick Kalist
Managing Director
Aon, St. Louis

Eileen Yuen
Managing Director, National Practice Leader, Financial Institutions
Arthur J. Gallagher, Whippany, N.J.

Matt Kupiec
Vice President, FINEX
Willis Towers Watson, New York

Philip Dunn
Vice President
Aon
Philadelphia

 

More from Risk & Insurance

More from Risk & Insurance

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

Advertisement




“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

Advertisement




Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]