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Cover Story

Forged By Fire

Peter Eastwood and three trusted colleagues set out to build Berkshire Hathaway Specialty Insurance.
By: | December 1, 2013 • 9 min read

To understand the professional bonds and temperaments of the team that leads Berkshire Hathaway Specialty Insurance, go back to 2008.

Peter Eastwood, president of BHSI since its April 29 launch, then worked at Lexington Insurance, AIG’s excess and surplus division. David Bresnahan, David Fields and Sanjay Godhwani, the three other players in the leadership quartet that left AIG for BHSI in April, were also AIG employees at the time. All of them had worked together on major projects and trusted one another. Then came September of 2008 and the earth shook in financial services.

We all know the story. AIG’s liquidity problems brought it to its knees. For many of its employees, the question became, should I stay or should I go?

These four stayed.

David Bresnahan, now an executive vice president, casualty, healthcare professional liability, executive and professional lines with BHSI, recalled that AIG’s property/casualty operation was financially sound at the time but was losing talent.

“Because of the parent company challenges and the possibility that people would start leaving the organization, there was the threat of a vicious spiral where people would leave and then customers would leave and lose confidence in the property/casualty businesses’ ability to move forward. And if the customers had left, that is the beginning of that downward spiral,” Bresnahan said.

David Bresnahan, executive vice president, casualty, healthcare professional liability, executive and professional lines, Berkshire Hathaway Specialty Insurance

“Those years that we spent together — between December of 2008 through 2011 — were when I learned some of the most important life lessons with respect to leadership and teamwork.”
— David Bresnahan, executive vice president, casualty, healthcare, professional liability, executive & professional lines, Berkshire Hathaway Specialty Insurance

Kevin Kelley, who had stood at the helm of Lexington for years, left the company in December of 2008 to take his present job as CEO of Ironshore.

Eastwood was then promoted to president and CEO of Lexington. It was, to that point in his career, the chance of a lifetime.

“It was an enormous opportunity for me and I recognized it for what it was. As a result of that event I have received more opportunity than I ever would have been given,” Eastwood said.

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But he and his colleagues who stayed at Lexington and AIG had to battle to save the company and its reputation. Looking back, Eastwood now sees that as his proudest moment at AIG.

“I think the thing that stands out the most is how my former colleagues and I came together at the height of the financial crisis to move together as a team to move the organization forward. Essentially to run to the fight, to stay with the organization,” Eastwood said.

“I stayed, and I think my colleagues stayed, out of a sense of loyalty to one another and to the organization, as well as based on a commitment we felt we had made to customers and other business partners. Many of us had worked for AIG for many, many years,” he said.

One can’t gauge an individual in just one meeting. But when Risk & Insurance® interviewed Eastwood in New York in early November, he came off as someone with a great deal of self-control, who chooses his words very carefully. One executive who watched Eastwood at work in the stressful days of late 2008 recalled him as one who kept his cool.

“Despite everything going on around him,” said James Drinkwater, president of the brokerage division for the AmWINS Group Inc., “he was always very calm and very thoughtful in his approach.

“He obviously took over at a very difficult time in Lexington’s history. He retained many of the key staff and I think he just demonstrated great leadership at that time,” he said.

Eastwood also marks late 2008 and beyond as a time that strengthened his bonds with Bresnahan, Fields and Godhwani.

The Team

As he looks at the team he is assembling now, that proven success in sticking together to help salvage AIG is in his hip pocket.

“I have said repeatedly to people that they are individuals who are just great professionals and equally good, if not better, human beings,” Eastwood said.

In Eastwood, Bresnahan and Fields said, they have a leader who leads by example, someone who holds himself to high standards and expects the same from teammates.

“He is one of the hardest working individuals you will meet. No matter how high he has climbed in particular organizations, I find that he really sweats the details and really gets into the weeds of the business,” said Bresnahan.

Bresnahan said that he too feels the time the four spent at AIG when it was reeling not only strengthened their bonds with one another but helped them grow as individuals.

R12-13p24-26_01Eastwood12-2.indd

David Fields, executive vice president, underwriting, actuarial, finance and reinsurance at Berkshire Hathaway Specialty Insurance

“I agree with Peter,” Bresnahan said, “Those years that we spent together — between December of 2008 through 2011 — were when I learned some of the most important life lessons with respect to leadership and teamwork.

“And I share Peter’s view that it was one of the more rewarding times. It really revolved around teamwork, collaboration and being highly communicative to employees, customers and brokers. Those were some of the keys that got us through that very difficult time,” he said.

That experience and the way it strengthened existing bonds, instead of weakening them, is perhaps why this team at BHSI has as much faith as it does.

“It comes from having worked together in a variety of different situations and feeling that we had each other’s backs. We really feel comfortable with each other,” said Fields, now executive vice president, underwriting, actuarial, finance and reinsurance at BHSI.

Chance of a Lifetime

Being able to launch BHSI, backed as it is by the Berkshire Hathaway name and balance sheet, presents unique advantages.

“From my perspective, I smile every morning. I feel like I need to be able to pinch myself about is this all real,” said Fields.

“We are fortunate to be able to have the capital support and name recognition of the Berkshire organization; the freedom within the organization to focus on the things that are important and to be able to accomplish them quickly; and then the ability to work with people that we know and feel comfortable with.

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“We are creating an environment here that is completely different, in my opinion, than other places in the industry … it is a once-in-a-lifetime opportunity,” he said.

Bresnahan said the response from customers so far has been glowing.

“When you meet with customers,
a lot of validation comes out of those meetings. There is genuine joy that people have seeing what we are doing and recognizing that we have a really special opportunity,” Bresnahan said.

“They have approached the marketplace in a very responsible fashion,” said AmWINS’ Drinkwater, “and I think that they have got a terrific team that is going to be incredibly successful in building a new company.”

On the one hand, BHSI has capital strength and a strong brand so it is not viewed as a new entrant, but on the other, it has the unique opportunity to build a team and systems from the ground up that are highly efficient and service-oriented.

R12-13p24-26_01Eastwood12-2.indd“The opportunity in and of itself is exciting. But the ability to build a company with people you respect, trust and have a very strong working relationship with is unique.”
— Sanjay Godhwani, executive vice president, property and programs, Berkshire Hathaway Specialty Insurance

“The opportunity in and of itself is exciting,” said Sanjay Godhwani, executive vice president, property and programs for BHSI. “But the ability to build a company with people you respect, trust and have a very strong working relationship with is unique.”

Since its launch, Eastwood said, BHSI has grown quickly and has been received enthusiastically by brokers and insureds. The possibilities are obviously enormous, but for Eastwood — who left a position as CEO and president of AIG property/casualty in the Americas for this unique opening — so too is the gravity with which it must be treated.

“It comes with a lot of opportunity and a lot of responsibility. The former of which I am thankful for, the latter of which I take very seriously. While the opportunity is significant for me, it is important for me to recognize the team and their contributions and the significance of this opportunity to them as well,” Eastwood said.

The Business So Far

BHSI was launched in April with Eastwood, Bresnahan, Fields and Godhwani. As of early November, the company had 73 employees and five business units, those being a property group, a casualty group, an executive professional lines group, a health care professional liability group and a program business group.

Coming out of the gate, Eastwood described BHSI as “disproportionately focused on the E&S market right now” for a number of reasons, “but evolving quickly.”

The reasons for the initial focus on E&S is that there is a good growth trajectory in E&S. It offers freedom of rate and form, and that makes it attractive for a firm looking to stand up businesses quickly, Eastwood said.

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Getting to work in admitted markets takes a little longer to set up, but Eastwood said BHSI is in the process of doing that. The directors’ and officers’ market, in particular, and the larger professional lines space is more of an admitted market.

“We have just completed a primary D&O policy form and we are now underway getting that policy form filed and the rates filed with it,” Eastwood said.

BHSI is, at this point, also a predominantly U.S.-focused business. The United States is by far the largest market in the world and it is where the Berkshire Hathaway infrastructure is “largely focused and built,” Eastwood said.

But BHSI does have an interest, he said, in moving the business outside of the United States and is exploring opportunities. That said, the company is writing U.S.-domiciled risk with foreign exposures.

In terms of distribution, Eastwood said his team is “interested in seeing as much of the marketplace as we can and as a result we are interested in seeing as much business from as many brokers as we can see it, because it is, again, the only way to see the totality of the market.”

Eastwood said the network will be both retail and wholesale-focused.

“I value the wholesale broker channel as a very effective distribution channel for us, reaching brokers that we couldn’t get to on our own or getting to geographic territories that we wouldn’t get to on our own,” he said.

As this venture unfolds, the excitement on the part of the BHSI executives is palpable and the possibilities before them look to be historic in their uniqueness.

Eastwood described this chance to build a business within Berkshire Hathaway as an opportunity to work within a company that has “industry leading characteristics.”

One, he said, Berkshire Hathaway is a company that knows and values the insurance industry. Its personal lines business Geico and its reinsurance arm Gen Re being just two examples.

Two, it has great financial strength.

“In a business where companies are transferring risk and we are assuming risk — it’s a competitive advantage,” Eastwood said.

The third is the brand of Berkshire Hathaway, standing as it does in Eastwood’s words, for “integrity and doing things the right way.”

And the fourth is group empowerment.

Eastwood said he has the right team to act with that freedom and deliver.

It’s fair to say that the rest of the industry is watching closely.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

High Net Worth

To the High Net Worth Homeowner: Build a Disaster Resiliency Plan You Can Be Proud Of

Having a resiliency plan and practicing it can make all the difference in a disaster.
By: | September 14, 2018 • 7 min read

Packed with state-of-the-art electronics, priceless collections and high-end furnishings, and situated in scenic, often remote locations, the dwellings of high net worth individuals and families pose particular challenges when it comes to disaster resiliency. But help is on the way.

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Armed with loss data, innovative new programs, technological advances, and a growing army of niche service-providers aimed at addressing an astonishingly diverse set of risks, insurers are increasingly determined to not just insure against their high net worth clients’ losses, but to prevent them.

Insurers have long been proactive in risk mitigation, but increasingly, after the recent surge in wildfire and storm losses, insureds are now, too.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy,” said Laura Sherman, founding partner at Baldwin Krystyn Sherman Partners.

And especially in the high net worth space, preventing that loss is vastly preferable to a payout, for insurers and insureds alike.

“If insurers can preserve even one house that’s 10 or 20 or 40 million dollars … whatever they have spent in a year is money well spent. Plus they’ve saved this important asset for the client,” said Bruce Gendelman, chairman and founder Bruce Gendelman Insurance Services.

High Net Worth Vulnerabilities

Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

As the number and size of luxury homes built in vulnerable areas has increased, so has the frequency and magnitude of extreme weather events, including hurricanes, harsh cold and winter storms, and wildfires.

“There is a growing desire to inhabit this riskier terrain,” said Jason Metzger, SVP Risk Management, PURE group of insurance companies. “In the western states alone, a little over a million homes are highly vulnerable to wildfires because of their proximity to forests that are fuller of fuel than they have been in years past.”

Such homes are often filled with expensive artwork and collections, from fine wine to rare books to couture to automobiles, each presenting unique challenges. The homes themselves present other vulnerabilities.

“Larger, more sophisticated homes are bristling with more technology than ever,” said Stephen Poux, SVP and head of Risk Management Services and Loss Prevention for AIG’s Private Client Group.

“A lightning strike can trash every electronic in the home.”

Niche Service Providers

A variety of niche service providers are stepping forward to help.

Secure facilities provide hurricane-proof, wildfire-proof off-site storage for artwork, antiques, and all manner of collectibles for seasonal or rotating storage, as well as ahead of impending disasters.

Other companies help manage such collections — a substantial challenge anytime, but especially during a crisis.

“Knowing where it is, is a huge part of mitigating the risk,” said Eric Kahan, founder of Collector Systems, a cloud-based collection management company that allows collectors to monitor their collections during loans to museums, transit between homes, or evacuation to secure storage.

“Before, insurance was considered the only step in risk management. Now, our client families realize it is one of the many imperative steps in an effective risk management strategy.” — Laura Sherman, founding partner, Baldwin Krystyn Sherman Partners

Insurers also employ specialists in-house. AIG employs four art curators who advise clients on how to protect and preserve their art collections.

Perhaps the best known and most striking example of this kind of direct insurer involvement are the fire teams insurers retain or employ to monitor fires and even spray retardant or water on threatened properties.

High-Level Service for High Net Worth

All high net worth carriers have programs that leverage expertise, loss data, and relationships with vendors to help clients avoid and recover from losses, employing the highest levels of customer service to accomplish this as unobtrusively as possible.

“What allows you to do your job best is when you develop that relationship with a client, where it’s the same people that are interacting with them on every front for their risk management,” said Steve Bitterman, chief risk services officer for Vault Insurance.

Site visits are an essential first step, allowing insurers to assess risks, make recommendations to reduce them, and establish plans in the event of a disaster.

“When you’re in a catastrophic situation, it’s high stress, time is of the essence, and people forget things,” said Sherman. “Having a written plan in place is paramount to success.”

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Another important component is knowing who will execute that plan in homes that are often unoccupied.

Domestic staff may lack the knowledge or authority to protect the homeowner’s assets, and during a disaster may be distracted dealing with threats to their own homes and families. Adequate planning includes ensuring that whoever is responsible has the training and authority to execute the plan.

Evaluating New Technology

Insurers use technologies like GPS and satellite imagery to determine which homes are directly threatened by storms or wildfires. They also assess and vet technologies that can be implemented by homeowners, from impact glass to alarm and monitoring systems, to more obscure but potentially more important options.

AIG’s Poux recommends two types of vents that mitigate important, and unexpected risks.

“There’s a fantastic technology called Smart Vent, which allows water to flow in and out of the foundation,” Poux said. “… The weight of water outside a foundation can push a foundation wall in. If you equalize that water inside and out at the same level, you negate that.”

Another wildfire risk — embers getting sucked into the attic — is, according to Poux, “typically the greatest cause of the destruction of homes.” But, he said, “Special ember-resisting venting, like Brandguard Vents, can remove that exposure altogether.”

Building Smart

Many disaster resiliency technologies can be applied at any time, but often the cost is fractional if implemented during initial construction. AIG’s Smart Build is a free program for new or remodeled homes that evolved out of AIG’s construction insurance programs.

Previously available only to homes valued at $5 million and up, Smart Build recently expanded to include homes of $1 million and up. Roughly 100 homes are enrolled, with an average value of $13 million.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work.” — Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“We know what goes wrong in high net worth homes,” said Poux, citing AIG’s decades of loss data.

“We’re incenting our client and by proxy their builder, their architects and their broker, to give us a seat at the design table. … That enables us to help tweak the architectural plans in ways that are very easy to do with a pencil, as opposed to after a home is built.”

Poux cites a remote ranch property in Texas.

Curt Goetsch, head of underwriting, Private Client Group, Ironshore

“The client was rebuilding a home but also installing new roads and grading and driveways. … The property was very far from the fire department and there wasn’t any available water on the property.”

Poux’s team was able to recommend underground water storage tanks, something that would have been prohibitively expensive after construction.

“But if the ground is open and you’ve got heavy equipment, it’s a relatively minor additional expense.”

Homes that graduate from the Smart Build program may be eligible for preferred pricing due to their added resilience, Poux said.

Recovery from Loss

A major component of disaster resiliency is still recovery from loss, and preparation is key to the prompt service expected by homeowners paying six- or seven-figure premiums.

Before Irma, PURE sent contact information for pre-assigned claim adjusters to insureds in the storm’s direct path.

“In the high net worth space, sometimes it takes longer potentially to recover, simply because there are limited contractors available to do specialty work,” said Curt Goetsch, head of underwriting for Ironshore’s Private Client Group.

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“If you’ve got custom construction or imported materials in your house, you’re not going to go down the street and just find somebody that can do that kind of work, or has those materials in stock.”

In the wake of disaster, even basic services can be scarce.

“Our claims and risk management departments have to work together in advance of the storm,” said Bitterman, “to have contractors and restoration companies and tarp and board services that are going to respond to our company’s clients, that will commit resources to us.”

And while local agents’ connections can be invaluable, Goetsch sees insurers taking more of that responsibility from the agent, to at least get the claim started.

“When there is a disaster, the agency’s staff may have to deal with personal losses,” Goetsch said. &

Jon McGoran is a novelist and magazine editor based outside of Philadelphia. He can be reached at [email protected]