2018 Power Broker

Health Care


Giselle Lugones, CPCU, AAI
Executive Vice President
Aon, Miami

A South Florida nonprofit had been with the same broker and an insurance pool for decades when Giselle Lugones suggested it would benefit from a stand-alone insurance arrangement.

With 20 health care facilities — including long-term housing for the elderly, hospices, acute rehab — each with different risks, “we had lots of insurance issues,” said its CFO.

Lugones found a purchasing coalition that saved $1.5 to $2 million “on the low end.” She streamlined policies, which had been “all over the place.” She tied each facility’s policies into the primary policy and facilitated renewals, filing claims and reimbursements.

“You hire a consultant to bring you ideas and thoughts,” the CFO said, “not just sell insurance. Whatever she tells you, you can take it to the bank.”

Another client, Baptist Health System, wanted “the best of the best” health care, handled ethically, said Julia Hyett, director of risk management and insurance, BHS.


Lugones performed a thorough audit, isolating the very different risks for its physicians and hospital programs. She marketed the physicians’ programs and obtained a new partner, saving six figures. She diversified the program with global reinsurers.

And she identified holes in the program specific to regulatory and cyber coverage. Her foresight and strategic thinking informed the process, Hyett said. “She made a proactive assessment, and she put the right tools and resources in place in case we ever do have a bad situation.”

Knows His Stuff

Alex Michon, ARM
Executive Vice President
Lockton, Sacramento, Calif.

A publicly traded pharma company had an “interesting” technology it wanted to spin into a separate company. If a spinout is friendly, it’s easy to insure, said its CEO, but if not, disputes over risk and intellectual property issues can erupt in lawsuits between stakeholders.

The CEO’s first call was to Alex Michon. The spinout got hostile and Michon, mining his deep knowledge of health care and pharmaceuticals, “navigated the treacherous waters” of potential lawsuits, the CEO said.

The spinout succeeded without lawsuits, went public and sold itself, and the company got its technology back. “We came out looking like a bright, shiny penny,” said the CEO.

The California Medical Association, a physicians’ advocacy non-profit, recently undertook a new business venture to help small group and solo practitioners remain independent while transitioning to value-based care.

CFO Lance Lewis knew the organization would have a new set of risk exposures and insurance needs. Michon gave Lewis confidence: “He asked the right questions and put together the right coverage forms,” he said. “Alex didn’t miss a beat.”

Change.org recently went through changes including a brand-new board of directors whose members were concerned about the tail on their D&O policy, said Alexis Stowers, corporate paralegal, Change.org.

Michon, Stowers said, had the tenacity and patience to explain the coverage repeatedly, because the board was unable to meet at the same time.

“They wanted to hear directly from the broker that they were covered even after their terms ended,” she said. “He spent the extra time to put them at ease.”

Packaging Innovation

Lee Newmark
Area Senior Vice President
Gallagher, Rolling Meadows, Ill.

In addition to consolidating its physicians’ groups, streamlining processes, obtaining good discounts and convincing carriers to bring additional physicians groups under its policy, Lee Newmark also averted a significant lawsuit against Radiology Subspecialists of Northern Illinois, said Dr. Joseph Persak, the organization’s co-president.

The prospective plaintiff wanted compensation, not a lawsuit, Persak said, and his organization wanted urgently to avoid a lawsuit.

Lee’s unexpected solution: Approach the carrier to settle out of court before the lawsuit was filed. This move “made everybody happy,” Persak said. “It was super out-of-the-box thinking.”

Facing renewals for its medical malpractice insurance, Ramapo Radiology, a radiology practice collective, had a question: If carriers viewed members as a single entity rather than individual practices, would that reduce premiums, saving money and fueling growth?


“We thought it was a good idea, but we didn’t know if carriers would agree,” said Lee Turner, chief operating officer, Ramapo Radiology. It was a heavy lift, but because of the way Newmark sold it, several carriers bid on the collaborative group.

Next on Newmark’s agenda for Ramapo, pitching “a risk retention situation with different forms of insurance,” Turner said. “We’ll all have skin in the game.” With risk spread, premiums will fall.

The idea originated with the collective, but “Lee made it his own and sold it to carriers. He knows how to package innovation to his industry.”

Working It Out

Randall Nukk
Area President
Gallagher, Rolling Meadows, Ill.

Where most people ask “why do something,” Randall Nukk asks “why not?” said W. Stephen Minore, MD, president/CEO of an Illinois anesthesiologist group, paraphrasing Einstein.

A fierce advocate for his clients and prone to challenging the status quo, Nukk arranged the abandonment of the waiting period before new practitioners are covered. Now they’re insured the moment their contract is signed — which is an important recruiting tool, since Illinois is the “risk capital of the world for malpractice.”

“Whenever he’s presented with a hard stop, he figures out a workaround,” Minore said.

Kenneth Tuman, MD, president and chairman, University Anesthesiologists, got a taste of the Nukk problem-solving chops when he asked what the group could do for its 43 physicians and three certified registered nurse anesthetists.

Taking advantage of the group’s “great track record” and low loss ratios, Nukk proposed a profit-sharing plan to carriers in which they returned a percentage of premiums paid if claims fell below a specified threshold.

That worked well, and at renewal, Tuman asked the same question again: What more can we do for the group? Nukk negotiated — and got — a tiered system where the group got back a larger percentage of premiums when claims were lower. He negotiated a higher profit sharing rate at the same time.

“He innovated a great program, then tweaked it to make it even better,” Tuman said. “This is original.”

The Spark

Jodi Rittman
Vice President
Marsh, Southfield, Mich.

The Cleveland Clinic is a large health care system in hurricane-prone South Florida. Because of its deductible structure, it held a $19 million windstorm exposure in one hospital.

It was adding buildings, and the carrier tried to combine the sites into one location, further increasing the deductible, said Aaron Bunner, the system’s assistant director of enterprise risk and insurance.

Marsh’s Jodi Rittman organized a site visit with the carrier so that the underwiting team could see the site’s layout and distance from the coast with their own eyes.

It was a “fantastic outcome,” Bunner said. The underwriter agreed to reduce the $19 million deductible exposure to a $7 million cap at no extra charge.

For another large health care system with wind exposures, Rittman suggested a deductible buy-down placement, which would  require certain changes to physical structures.


The system’s director of risk finance said Rittman lit the fire under the project, establishing a work plan and timelines. “She knew what to do based on her insurance knowledge and experience with other placements in this part of the country.”

The same organization recently suffered a malware attack affecting a significant portion of its systems and networks, which, ironically, was covered under its property rather than its cyber policy.

Rittman “ripped apart” the property policy, which had just renewed, to help the organization understand which coverage was available and how it would respond to the loss. “It was extremely helpful,” the director said.

Takes It Personally

Gerald “Yank” Stoll
Vice President – Healthcare Division
HUB International, New York

Priority Healthcare Group specializes in taking over distressed nursing homes, whose history of mismanagement and losses can rattle carriers into sky-high premiums and even loss of coverage.

In one acquisition, the prior owner failed to hand over the policies, forcing the company to struggle through a manual reboot.

In a lemons-to-lemonade move, HUB International’s Gerald Stoll presented the new, responsible owners at renewal as an opportunity rather than a liability.

He compiled financial data such as pro formas and located financials for prior ownership, payroll and historical data, then guided owner and managing partner Akiva Glatzer through implantation of an aggressive risk management program that emphasized training, education, compliance and sharing best practices.

At last analysis, losses were down 80 percent over the prior year. “He’s not just about selling policies,” Glatzer said. “He’s a full business partner. He takes our success personally.”

Steven Friedman, chief administrative officer, Caring Health Systems, considers himself a realist. He feared a major claim against his company fell outside coverage parameters, and he expected a significant increase in renewals or even reluctance on carriers’ part to offer insurance.

But Stoll found policy language that led a carrier to honor the claim, and then the renewal came in with an aggressive quote despite the claims history.

The same diligence pertained when a facility failed to send a claim to a carrier. “Gerald found language that included coverage for the claim anyway. He always comes through.”


Leanne Gallagher
Senior Vice President
Marsh, Philadelphia

James O’Dell
Executive Vice President
Willis Towers Watson, Nashville, Tenn.

Mary Pulley
Managing Director
Aon, Indianapolis, Ind.

Ryan Roberts
Principal, Vice President
Parker, Smith & Feek
Bellevue, Wash.

Cameron Spearman
Client Executive/Risk Management Consultant
NFP Property & Casualty Services, Santa Ana, Calif.










More from Risk & Insurance

More from Risk & Insurance

Risk Focus: Cyber

Expanding Cyber BI

Cyber business interruption insurance is a thriving market, but growth carries the threat of a mega-loss. 
By: | March 5, 2018 • 7 min read

Lingering hopes that large-scale cyber attack might be a once-in-a-lifetime event were dashed last year. The four-day WannaCry ransomware strike in May across 150 countries targeted more than 300,000 computers running Microsoft Windows. A month later, NotPetya hit multinationals ranging from Danish shipping firm Maersk to pharmaceutical giant Merck.


Maersk’s chairman, Jim Hagemann Snabe, revealed at this year’s Davos summit that NotPetya shut down most of the group’s network. While it was replacing 45,000 PCs and 4,000 servers, freight transactions had to be completed manually. The combined cost of business interruption and rebuilding the system was up to $300 million.

Merck’s CFO Robert Davis told investors that its NotPetya bill included $135 million in lost sales plus $175 million in additional costs. Fellow victims FedEx and French construction group Saint Gobain reported similar financial hits from lost business and clean-up costs.

The fast-expanding world of cryptocurrencies is also increasingly targeted. Echoes of the 2014 hack that triggered the collapse of Bitcoin exchange Mt. Gox emerged this January when Japanese cryptocurrency exchange Coincheck pledged to repay customers $500 million stolen by hackers in a cyber heist.

The size and scope of last summer’s attacks accelerated discussions on both sides of the Atlantic, between risk managers and brokers seeking more comprehensive cyber business interruption insurance products.

It also recently persuaded Pool Re, the UK’s terrorism reinsurance pool set up 25 years ago after bomb attacks in London’s financial quarter, to announce that from April its cover will extend to include material damage and direct BI resulting from acts of terrorism using a cyber trigger.

“The threat from a cyber attack is evident, and businesses have become increasingly concerned about the extensive repercussions these types of attacks could have on them,” said Pool Re’s chief, Julian Enoizi. “This was a clear gap in our coverage which left businesses potentially exposed.”

Shifting Focus

Development of cyber BI insurance to date reveals something of a transatlantic divide, said Hans Allnutt, head of cyber and data risk at international law firm DAC Beachcroft. The first U.S. mainstream cyber insurance products were a response to California’s data security and breach notification legislation in 2003.

Jimaan Sané, technology underwriter, Beazley

Of more recent vintage, Europe’s first cyber policies’ wordings initially reflected U.S. wordings, with the focus on data breaches. “So underwriters had to innovate and push hard on other areas of cyber cover, particularly BI and cyber crimes such as ransomware demands and distributed denial of service attacks,” said Allnut.

“Europe now has regulation coming up this May in the form of the General Data Protection Regulation across the EU, so the focus has essentially come full circle.”

Cyber insurance policies also provide a degree of cover for BI resulting from one of three main triggers, said Jimaan Sané, technology underwriter for specialist insurer Beazley. “First is the malicious-type trigger, where the system goes down or an outage results directly from a hack.

“Second is any incident involving negligence — the so-called ‘fat finger’ — where human or operational error causes a loss or there has been failure to upgrade or maintain the system. Third is any broader unplanned outage that hits either the company or anyone on which it relies, such as a service provider.”

The importance of cyber BI covering negligent acts in addition to phishing and social engineering attacks was underlined by last May’s IT meltdown suffered by airline BA.

This was triggered by a technician who switched off and then reconnected the power supply to BA’s data center, physically damaging servers and distribution panels.

Compensating delayed passengers cost the company around $80 million, although the bill fell short of the $461 million operational error loss suffered by Knight Capital in 2012, which pushed it close to bankruptcy and decimated its share price.

Mistaken Assumption

Awareness of potentially huge BI losses resulting from cyber attack was heightened by well-publicized hacks suffered by retailers such as Target and Home Depot in late 2013 and 2014, said Matt Kletzli, SVP and head of management liability at Victor O. Schinnerer & Company.


However, the incidents didn’t initially alarm smaller, less high-profile businesses, which assumed they wouldn’t be similarly targeted.

“But perpetrators employing bots and ransomware set out to expose any firms with weaknesses in their system,” he added.

“Suddenly, smaller firms found that even when they weren’t themselves targeted, many of those around them had fallen victim to attacks. Awareness started to lift, as the focus moved from large, headline-grabbing attacks to more everyday incidents.”

Publications such as the Director’s Handbook of Cyber-Risk Oversight, issued by the National Association of Corporate Directors and the Internet Security Alliance fixed the issue firmly on boardroom agendas.

“What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.” — Jimaan Sané, technology underwriter, Beazley

Reformed ex-hackers were recruited to offer board members their insights into the most vulnerable points across the company’s systems — in much the same way as forger-turned-security-expert Frank Abagnale Jr., subject of the Spielberg biopic “Catch Me If You Can.”

There also has been an increasing focus on systemic risk related to cyber attacks. Allnutt cites “Business Blackout,” a July 2015 study by Lloyd’s of London and the Cambridge University’s Centre for Risk Studies.

This detailed analysis of what could result from a major cyber attack on America’s power grid predicted a cost to the U.S. economy of hundreds of billions and claims to the insurance industry totalling upwards of $21.4 billion.

Lloyd’s described the scenario as both “technologically possible” and “improbable.” Three years on, however, it appears less fanciful.

In January, the head of the UK’s National Cyber Security Centre, Ciaran Martin, said the UK had been fortunate in so far averting a ‘category one’ attack. A C1 would shut down the financial services sector on which the country relies heavily and other vital infrastructure. It was a case of “when, not if” such an assault would be launched, he warned.

AI: Friend or Foe?

Despite daunting potential financial losses, pioneers of cyber BI insurance such as Beazley, Zurich, AIG and Chubb now see new competitors in the market. Capacity is growing steadily, said Allnutt.

“Not only is cyber insurance a new product, it also offers a new source of premium revenue so there is considerable appetite for taking it on,” he added. “However, whilst most insurers are comfortable with the liability aspects of cyber risk; not all insurers are covering loss of income.”

Matt Kletzli, SVP and head of management liability, Victor O. Schinnerer & Company

Kletzli added that available products include several well-written, broad cyber coverages that take into account all types of potential cyber attack and don’t attempt to limit cover by applying a narrow definition of BI loss.

“It’s a rapidly-evolving coverage — and needs to be — in order to keep up with changing circumstances,” he said.

The good news, according to a Fitch report, is that the cyber loss ratio has been reduced to 45 percent as more companies buy cover and the market continues to expand, bringing down the size of the average loss.

“The bad news is that at cyber events, talk is regularly turning to ‘what will be the Hurricane Katrina-type event’ for the cyber market?” said Kletzli.

“What’s worse is that with hurricane losses, underwriters know which regions are most at risk, whereas cyber is a global risk and insurers potentially face huge aggregation.”


Nor is the advent of robotics and artificial intelligence (AI) necessarily cause for optimism. As Allnutt noted, while AI can potentially be used to decode malware, by the same token sophisticated criminals can employ it to develop new malware and escalate the ‘computer versus computer’ battle.

“The trend towards greater automation of business means that we can expect more incidents involving loss of income,” said Sané. “What’s possibly of greater concern is the sheer number of different businesses that can be affected by a single cyber attack and the cost of getting them up and running again quickly.

“We’re likely to see a growing number of attacks where the aim is to cause disruption, rather than demand a ransom.

“The paradox of cyber BI is that the more sophisticated your organization and the more it embraces automation, the bigger the potential impact when an outage does occur. Those old-fashioned businesses still reliant on traditional processes generally aren’t affected as much and incur smaller losses.” &

Graham Buck is editor of gtnews.com. He can be reached at riskletters.com.