Risk Scenario

Paying Back the Viking

A quick-thinking business owner seizes the opportunity to best a competitor after a storm.
By: | February 21, 2013 • 6 min read
Risk Scenarios are created by Risk & Insurance editors along with leading industry partners. The hypothetical, yet realistic stories, showcase emerging risks that can result in significant losses if not properly addressed.

Disclaimer: The events depicted in this scenario are fictitious. Any similarity to any corporation or person, living or dead, is merely coincidental.

Part One

The government’s floating, storm tracking robots, riding on the ocean swells off of the North Carolina coast, felt Kenneth before anyone else did.


To them, at first, Kenneth felt just like a shoulder shrug of the ocean. But the storm, a brawny Category Four when it struck land, would carry a rougher touch for the business owners there.

The ship-building industries along the coast got it bad. Johnson Industries, a third-generation naval parts manufacturing business, saw most of its manufacturing floor washed away.

The morning after the storm struck, Heady Johnson, the president of Johnson Industries, and Wiley Ferris, his controller, took a tour of what remained of the factory.

The view was dismal. Three feet of salt water covered the factory floor and there appeared to be substantial damage to the walls and roof of the facility.

“What do you think?” Heady asked Wiley, after a long, grim period of time the two spent looking down on the factory floor from Heady’s office.

Heady could tell Wiley’s brain was working extra hard, so he gave him all the time he needed to answer.

Before he answered, Heady looked out the window, toward the outer wall of Viking Spirit, his Norwegian-owned competitor. At first glance, Viking looked like it had got it just as bad if not worse.

Wiley followed his gaze over at Viking. Then he spoke in his slow, careful poker player’s drawl.

“We have property, business interruption and contingent business interruption coverage in place,” Wiley said.


Scenario Partner

“I can’t see why they wouldn’t be enforceable,” he said.

Then Heady jerked his thumb over towards Viking.

“But so does our competitor over there, I bet.”

Wiley considered. “And then some,” he said. “And then some probably,” referring to Viking’s German-backed limits.

“What are your plans to….?” Wiley started to say but then Heady jumped in with his idea.

“If we move really quickly we might have a chance here,” Heady said and he looked at Wiley to make sure he had his full attention. He had his attention.

“We will be back up and running before Viking over there. I am going to lose out on some contracts, but so are they. The question is who loses out on more.” Heady said.

Heady continued, “I want the adjuster in here first thing in the morning.  If we can agree on what needs to be repaired, we’ll get it done, and we can restart production before Viking has their drawings finished.”

“Hurricane Kenneth was a big event,” Wiley warned. “We’re really gonna’ have to work hard to get the insurers’ attention.”

“That’s why you’re here,” said Heady as Wiley went to call the adjuster.

“Oh, hey Wiley!” Heady called out. “And I want all my lost sales paid while I crank the repairs into high gear.”

“We might have to give a little to get a little,” Wiley said with a grin.

“It will be worth it,” Heady to said to no one in particular.

Part Two

It’s five months past the day that Kenneth struck. Heady Johnson puts down his reading glasses, swivels his chair, snatches up his coffee cup, and looks out on his factory floor. To the right of a massive, plastic industrial tarp, workers are putting the finishing touches on the roof and wall repairs to the northeast corner of the factory.


The gleam of the new aluminum siding is evident, and bright steel rivets catch the light.

To the left of the partition, Johnson Industries workers are on the job. New equipment is on the factory floor and operations and compliance personnel are doing their walk-throughs, making sure everything is set up safely and efficiently so the plant can resume at least partial production.

Heady looks out his window to the Viking operation and gets an idea. He taps the speed-dial on his office phone.

“Hiya,” Heady’s office manager Darlene Harris replies.

“Darlene, I’m going to step out for a bit. No more than 20 minutes or so. I’ve got my mobile on me,” Heady says.

“Sure thing,” Darlene says.

In the bright spring sunlight on the quay, Heady pops on sunglasses, zips up his windbreaker and pulls up his collar against the wind. Almost everybody around here knows him, but he’s trying to mute his appearance as much as possible.

Keeping his head down and his hands in his jacket pockets, Heady strolls down along the quay, walks past the entrance to the Viking Spirit administrative offices and heads away from there and toward the water, in the direction of the Viking Spirit factory bay doors.

This place was once called Marine Supply Inc. and it was founded by one of Heady’s grandfather’s rivals. The Norwegians bought it eight years ago and promised to make a lot of noise with their bigger bankroll.

They weren’t making much noise now other than a few workers finishing the clean-up efforts that started four months ago.

Heady has been watching the factory for weeks now, looking for some sign that rebuild would begin: but nothing.


In his London office, Raif Lennox, the globe-trotting marine broker for Viking Spirit, slams his phone down.

“For the love of all that’s holy!!” Raif practically shouts at his office walls.

His fellow managing director Andrew Narvel, pops his head in, half irritated at the noise, half-curious.

“What is it mate? Did you drop yet another thousand quid on Liverpool?”

“Little early for that isn’t it?” Raif replies, not in the mood for Andrew’s attempt at a friendly jibe.

“It’s a little early for that kind of outburst if you want to know the truth,” Andrew says by way of correction.

“Sorry,” Raif says before putting his face in his hands then looks up to his trusted friend.

“Essen Re is trying to give me a twist over this hurricane claim I’ve got in the states!”

“The Viking property?” Narvel says.

“Yes, the Viking Property! The company and the adjuster still can’t agree on the scope for the rebuild, and now Viking is dragging their feet on whether to rebuild there at all. Meanwhile, no one wants to budge on any of the coverage issues that have come up.”

“Viking will get paid,” Andrew says.

“Yes. I’m sure they’ll get paid. But I can’t tell you when, and I’d bet that thousand quid that this claim will go to arbitration before it is settled.”


Back in Carolina, Heady and Wiley are putting their heads together again in Heady’s office.

“I’m hearing from a fella’ in New York that it’s going to be a few more months before Viking gets paid,” Wiley says.

“There is nothing going on over there,” Heady says, jerking his head over to the Viking site.

“It’s no coincidence that we got paid as quickly as we did. That was a smooth move meeting the insurers half way on the building scope and some of the coverage issues they were passionate about,” Wiley said.

“Yeah, and the accountants tell me that we are close to wrapping up the business interruption claim as well,” Heady added.

Heady’s email chirped, and he started clacking at the keyboard.

“Look at that. Department of Defense bids for the new sub propellers are due in a month. I say we skate to where the puck is going to be, to use a Yankee expression, (Wiley smiles), bid aggressively for that propeller work and try to pick up all the money when Viking can’t get to the table.”

“Because they might not get to the table in time,” Wiley said.

“They’re not even going to be at the restaurant,” Heady said.

Part Three

It’s nine months after Kenneth struck and Heady is in his office in the late afternoon, repeatedly punching a key on his computer keyboard.


The way it works with Department of Defense contracts is that the department posts the contract winners on their website at 5 pm daily.

The submarine propeller contract is due to be announced and Heady is making the tip of his index finger numb from tapping “enter” on his keyboard.

And then it comes up.

“Johnson Industries of Weatherington, N.C. is being awarded…..”

Heady doesn’t need to read the rest. He knows what the contract is and how much it is for. This is an eight figure contract and the energy of it rushes through Heady’s veins.

“Yeeeehaahhhhhh!” Heady yells with a Rebel yell that brings up helmeted, safety goggled heads on the factory floor, 20 feet below him.

Heady runs to his office window and throws it open, giving the hand across the neck, “Cut it” motion to one of the crews.

The chief of the crew grins and motions his men to shut it down. Heady’s waving his arms in a “come to me” motion like you see from someone calling out a pilot on an aircraft carrier flight deck.

The men gather and tear off their goggles and helmets. They can see from the excitement in Heady’s face that this is big.

As the production line quiets down, Heady yells the news.

“We got the contract! “Twenty seven million dollars!” Heady yells down to the floor.

Wiley phones his wife.

“We got it! You know what this means. It’s gonna be a late night!”


The claim strategy that Heady chose has now born some delicious fruit. Yes, Viking Spirit got paid, but it was too late.

Not only did Johnson Industries win the Department of Defense contract but they also got around Viking Spirit on a cruise ship supplier contract that Viking had wrested away from them nine years previously.

Repairs are finally underway at the Viking facility across the harbor, but those rivets being put into the building’s new walls just might be owned by Heady Johnson’s company before too long.

Burned by its coastal U.S. hurricane claim experience, the management of Viking Spirit has contacted Heady and some of his other competitors about a possible sale. Viking Spirit has got plenty to do in Asia and Scandinavia these days and could be persuaded to drop the Carolina operation at a nice discount.

Because of his quick thinking, his focus on his business and his creative approach to claims settlement, Heady Johnson might end up being just the man to take them up on their offer.


A quick-thinking business owner grabs an edge by meeting the insurer halfway on a property and business interruption claim and getting back in business before a key competitor even settles their claim.

1. A calamity is an opportunity: Catastrophic events are an opportunity to take a fresh look at your business and the economic landscape. Other businesses, including competitors and key suppliers, will be affected and there could be opportunities afoot. You may also have the ability to reconfigure or rebuild in a better location if your coverage allows for it.

2. Move quickly: Maintaining good relationships is key, but you want to get your adjustor onto the site of a major event as soon as you can. Stay in front of the claim process. Large catastrophes put a burden on insurers’ resources and time, and the squeakiest wheels get the grease.

3. Give a little to get a little: Negotiating successfully with a carrier on a claim in the wake of a major event involves strategic thinking. Think about how compromise in one area can result in gains in another – particularly when it means getting back to business faster.

4. You direct the action, but get help: As the quick-thinking Heady Johnson shows us in this scenario, he wasn’t going to wait for anyone to tell him how to gain a competitive advantage. But, he knew enough to enlist the help of his colleagues and outside experts. Claims don’t happen every day, so having an experienced claims advisor on your team will help drive the claim process.

5. Pay attention: Circumstances are always changing. Don’t assume that the status quo will stay that way. Heady Johnson wasn’t daunted by his competitor’s bigger balance sheet. Even the stoutest competitor can be outfoxed; especially after disaster strikes.

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

High Net Worth

High Net Worth Clients Live in CAT Zones. Here’s What Their Resiliency Plan Should Include

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.


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.”


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.


“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]