2017 Power Broker

Public Sector

A Hard Negotiator

Karen Bartak, CPCU, ARM, ASLI
President
Bedford Falls Insurance, Napa, Calif.

Blazing a trail for an independent brokerage, Karen Bartak impresses with her connections in the excess casualty markets.

“I rely on her to get me access to the big players in the public entity space,” said Greg Kildare, executive director of risk at the LA Metro Transportation Authority. “I regularly sit down with senior executives to whom I can sell our risk as best in class. I didn’t get this with a lot of the bigger brokers.

“And she negotiates hard,” he added. Indeed, Bartak recently secured LA Metro a flat renewal with a higher limit despite adding two new train lines.

Bartak also helped Contract Cities of Los Angeles retain its existing retention this year despite adverse claims, bad public sentiment toward police and delayed implementation of body cameras, saving hundreds of thousands in additional reserve expenses.

And she was instrumental in helping Sonoma Marin Area Rail Transit (SMART) insure its new rail line through various stages of development, including negotiating policy extensions during testing phases and keeping premiums as-is for its first full year of operations.

With SMART soon taking its first passengers, this is a crucial time. “Karen has done an awesome job, particularly on the rail liability,” said CFO Erin McGrath.

“Karen, in partnership with our team at Alliant, has done a lot of hand-holding as we’ve gone from virtually no insurance program to a very robust $200 million liability policy, from 20 employees to 120, and from almost no assets to 44 miles of property.”

A Benchmarking Power Broker®

Marcus Henthorn, CLCS
Area Vice President
Arthur J. Gallagher, Itasca, Ill.

In late 2015, Marcus Henthorn designed a software tool that transformed the working lives of not only his clients but dozens of Gallagher insurance pools and brokers.

Henthorn’s data collection and questionnaire software aggregates schedules and statement of values, and digitizes applications on large complex accounts. By late 2016, more than 60 Gallagher pools in the U.S. and Canada, (insuring over 2,200 individual pool members) and numerous large clients were launched on the system. The data’s underwriting benchmarking offers a distinct advantage in the marketplace. Meanwhile, the platform is an invaluable administrative time-saver, allowing easy aggregation of forms.

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“The renewal process is now much quicker and efficient. It’s saved literally months of work,” said Bob McDermott, president of the Prairie State Insurance Cooperative.

“Time is our biggest asset — saving time allows us to focus on the things we need to,” added Brad Goldstein, executive board member of the Collective Liability Insurance Cooperative. “We are a large pool and need to benchmark against others, and now we can access information to learn from other pools.”

Henthorn gets the basics right too.

“He has far exceeded my expectations of a broker, and I deeply appreciate how much I’ve learned because of Marcus. I didn’t understand what a risk pool was, but I do now,” said Tina Hubert, executive director of the Six Mile Regional Library District.

Creating the Parametric Trigger

David Marcus, ARM, ARM-P
Area Chairman
Arthur J. Gallagher, Boca Raton, Fla.

Changes in Federal Emergency Management Agency rules meant David Marcus had to get creative last year for hurricane-exposed clients in Florida.

Facing reduced protection, but unable to afford higher premiums or larger deductibles, both Miami-Dade and Broward county public school systems needed fast, creative solutions.

Marcus worked with Swiss Re to restructure Miami-Dade’s program, combining a multiyear structured insurance program (MYSIP) and a new parametric trigger insurance product that allowed the system to cover its “obtain and maintain” obligations at a reasonable cost. “We have to find unique solutions to find adequate insurance without breaking the taxpayer’s back. It’s a tightrope,” said Michael Fox, Miami-Dade’s executive director of risk and benefits. “It would have been very expensive buying first dollar coverage, so this solution was a win-win. David’s knowledge is top of the line.”

Broward was less keen on parametrics, so Marcus instead created a new MYSIP with Lexington to house part of the system’s primary layer, and through negotiations with carriers, lowered Broward’s hurricane deductible by 25 percent for no change in premium.

Marcus also helped the district implement a six-year master rolling builder’s risk program to cover all property risk on major renovations taking place across the system.

“We needed that badly,” said risk management director Aston Henry. “David saves us money every year. He knows the public sector really well — especially the school systems.”

Increasing the Cover, Cutting the Rate

Duncan Milne, LLB, ACII
Senior Broker
Aon, New York

By the spring of 2016, the Commonwealth of Virginia, with total insured values exceeding $30 billion, outgrew its single domestic carrier and wanted to take its program global.

Duncan Milne  knew price was a key motivator. Leveraging his experience in the London market, he introduced Virginia to world-leading carriers. He improved terms, conditions and catastrophe limits, including critical wind and flood enhancements, and also updated its cyber policy — all while reducing premiums— in the space of just one month.

“Aon’s Duncan Milne did a terrific job putting together a package with some outstanding companies. It was an excellent deal for us — we saved a lot of money and have a solid program in place,” said risk management director Don LeMond.

“We put a lot of pressure on brokers. We see how far we can push them and ask them questions they don’t necessarily want us to ask, but Duncan and his team have raised our expectations,” said LeMond.

Milne is widely regarded as an expert in his field. When a real estate client added 40 percent to its property portfolio with a single acquisition in March 2016, Milne renegotiated the firm’s rate structure and terms to meet lending requirements, while also securing a 15 percent rate reduction off the back of a 20 percent saving the previous year.

“Duncan has a great temperament,” said the firm’s risk manager. “We are in and out of deals all the time. It’s great to work with someone who is so responsive and level-headed.”

Michigan’s Finest

Joseph Perry, CIC, ARM, LIC, CWCP, CWCA, CRM, CPCU
Vice President
Aon, Southfield, Mich.

“Joe Perry is one of the most knowledgeable people in the State of Michigan as far as public entity risks and insurance is concerned,” according to Detroit Public Community School District risk manager Doug Gniewek.

When the district was instructed by the state to purchase excess workers’ compensation cover, having self-administered for 20 years, the placement proved difficult. Perry secured coverage in less than 30 days.

He also helped veteran risk manager Michael Tilley transform the risk profile of Great Lakes Water Authority (GLWA), which recently spun out of Detroit’s bankruptcy. With no underwriting information and no WC license to self-insure, Perry first secured a temporary multiple lines program that included a workers’ comp deductible program. GLWA later obtained a license to self-insure and Perry converted the workers’ comp coverage to an excess workers’ compensation policy as part of a new permanent multiple lines program.

Detroit’s $100 million self-administered scheme was undisciplined and overpaid on coverage for 20 years. But Perry helped construct GLWA’s first ever commercial insurance program across multiple property and casualty lines, securing $750 million of coverage at a 40 percent premium discount.

“It was phenomenal, and couldn’t have been done without someone like Joe who knows the market and the public sector. I rely on Joe almost as if he is an extension of the department.” said Tilley.

Getting Culver City Out of the Pool

Julie Theirl, CSP
Senior Vice President
Aon, San Francisco

Culver City, Calif.’s 25-year membership in an insurance pool was no longer beneficial. Premiums were spiraling and the city’s concerted risk management efforts were being overlooked. Fortunately, the city found an ally in Aon’s Julie Theirl.

Formerly a local government risk manager and a consultant to pools herself, Theirl was uniquely positioned to help.

Despite an excellent loss history, Culver City’s excess GL premiums had risen 17 percent and 35 percent at its last two renewals, and were slated to rise 29 percent in 2016-2017. With the GL placement the top priority, Theirl went to market with the city’s superior loss experience and found massive savings. After much soul searching, the city entrusted Theirl with withdrawing it from the pool entirely.

Under pressure to place the city’s whole program commercially, Theirl aggressively marketed with outstanding results. The city saved close to $1 million in insurance costs — a near 50 percent reduction — with many lines enjoying broader coverage and higher limits.

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“Costs were becoming astronomical. It seemed our city was subsidizing other cities, because we were considered a good risk,” said Culver City’s HR Director Serena Wright.

“Julie exceeded our expectations of a broker, not just in cost saving but also the exceptional service and level of care she has shown us.

“Under the risk pool everything was taken care of. We entered into a new relationship with trepidation, but I am happy to say Julie and Aon still hold our hands.”

Finalists:

John Chino
Area Senior Vice President
Arthur J. Gallagher, Costa Mesa, Calif.

Jean Cofield
Broker/Account Executive
Aon, Washington, DC

George Gionis
Director
Aon, Philadelphia

Michael McHugh
Area Senior Executive Vice President
Arthur J. Gallagher, Itasca, IL

More from Risk & Insurance

More from Risk & Insurance

Insurance Executive

A Leader for Turbulent Times

Lloyd’s CEO Inga Beale is tasked with guiding the venerable insurance market through Brexit and the demands of the fiercely competitive global specialty business.
By: | July 6, 2017 • 12 min read

Underwriters at Lloyd’s are accustomed to taking on complex, even daunting, risks. The company’s leader looks at the world today and sees plenty of opportunity, but also much to be concerned about.

“Political instability is something that troubles me more than anything else because I think there is now more uncertainty across the world than there has ever been,” said Inga Beale, CEO of Lloyd’s of London.

“It feels that all of the norms that I grew up with are being challenged — openness, globalization, acceptance, inclusion — on a global scale.”

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Appropriately, we’re sitting around a table in Beale’s modern glass-fronted office at the top of the Lloyd’s Building — itself a vision from the future — to talk about Brexit and Lloyd’s newly announced Brussels subsidiary.

Add to the mix Donald Trump and the threat of nuclear attack from North Korea, the bombing of Syria and a spate of terrorist attacks across Europe, and it’s clear we are living in the most dangerous period certainly since the Cold War, or possibly ever, believes Beale.

That belief received even more chilling reinforcement when terrorists detonated a bomb at an Ariana Grande performance in Manchester, England on May 22.  Twenty two people, some of them children, were killed and more than 50 wounded in that attack.

Three years ago, it was Beale herself making world headlines with her appointment as the first female CEO in Lloyd’s 329-year history. But now Brexit and other seismic disruptions to world order have taken center stage.

Lloyd’s announced at the end of March that it would establish a new European subsidiary in Brussels in time for January 1, 2019 renewals so it can continue writing risks for all 27 European Union (EU) and three European Economic Area states after the UK exits the EU.

Currently, it uses its passporting rights to serve EU customers from London, but the expected loss of those rights after Brexit necessitated the establishment of a new subsidiary.

For now though, it’s business as usual, said Beale, with the UK remaining a full EU member for at least two more years. She added, with a reassuring smile, that there will be no immediate impact on existing policies, renewals or new policies written during that time.

“We were campaigning very much to remain in the EU before the referendum because we knew what the likely impact [of leaving the EU] would be on Lloyd’s,” said Beale, whose impressive resume includes stints with GE Insurance Solutions, Zurich and Canopius.

“We rely very much on our licensing network, and being part of the EU means that from London we can write insurance and reinsurance for all of the EU countries with our passporting authority.

“But with the UK exiting the EU, it now means that we lose those licensing powers to offer insurance with immediate effect. To counteract this, we have determined to set up a subsidiary within the EU, meaning that about five percent of our global revenues will have to go through this subsidiary because it is insurance business offered to our EU-based clients.”

Beale and her team also negotiated that most of Lloyd’s underwriting business will remain in London, as will the majority of the transactions and decision-making powers. Meanwhile, the manpower needed to run the new Brussels operation will be in the “tens rather than hundreds,” she is quick to point out.

“It’s not a huge raft of people having to move over,” she said.

“Lloyd’s will continue to do 95 percent of its business as it has always done — it’s only the other five percent that will have to go through a separate legal entity, and we’re not anticipating any further changes to our business model as a result.”

Beale, whose dual role is both supervisor and advocate for the market’s 100-something member underwriting syndicates, says that the franchise board chose Brussels over other locations including Luxembourg, Dublin and Malta because of its “robust and quality” regulatory regime.

“At the time, I didn’t even know that reinsurance existed, but once I discovered it I absolutely loved it.” — Inga Beale, CEO, Lloyd’s of London

It also provides access to a multilingual talent pool, is near to London, and, most importantly she stresses, is located in a member state with a “very high certainty of staying in the EU.”

“We want people who reflect our customers,” she said.

“The London insurance market is littered with people from all over the world because London is such a global insurance hub, so we need experts here who speak the language and understand the different cultures.”

North American Footprint

Despite its large European market, it’s the other side of the pond where Lloyd’s really thrives. Approximately 46 percent of its business comes from the U.S., mainly California earthquake and East Coast hurricane risks, she said.

Lloyd’s also remains the No.1 excess and surplus lines insurer in the U.S. and the largest non-U.S. domiciled insurer, she added.

“We have done really well in terms of growing our E&S market share over there,” she said.

“That’s our sweet spot; those non-standard risks that are hard to place.”

By contrast, Beale said that reinsurance has become a much more competitive market with new entrants offering alternative types of reinsurance putting a squeeze on prices. As a consequence, Lloyd’s has focused more on insurance, she said.

“We have also done well in Canada and with our delegated authority through our Managing General Underwriters and Managing General Agents,” she said.

“It’s this very local and specialist distribution channel that has been our success story across North America.”

In January, Beale was made a Dame Commander of the Order of the British Empire — the female equivalent of being knighted — and is also the Association of Professional Insurance Women’s Insurance Woman of the Year for 2017.

“What concerns us most is not individual risks such as earthquakes and hurricanes, but rather assessing the aggregation of our exposures to financial and liability-type risks with no geographical boundaries.” — Inga Beale, CEO, Lloyd’s of London

As the person directing Lloyd’s, she is also acutely aware of the shift in power towards emerging economies, with McKinsey recently reporting that 67 percent of commercial insurance growth will come from those markets by 2020.

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In response, Lloyd’s has focused its efforts on Asia and Latin America, transferring more than half of its managing agents to its Shanghai and Beijing platforms; and it was recently granted final approval to open a reinsurance office in Mumbai, she said.

“That’s where the future’s going to be,” she said.

“We know that a lot of the business is no longer coming to London in the traditional way, hence we have set up a Singapore platform and platforms in China, and opened up an office in Dubai as well as in India to be closer to our clients and brokers there.”

Lloyd’s profits last year were flat at $2.7 billion, while GWP was up $3.9 billion.

The market made a profit despite taking a $2.7 billion hit for major claims — the fifth highest such total since the turn of the century — primarily due to Hurricane Matthew and the Fort McMurray Wildfire in Canada.

Although natural disasters are Lloyd’s bread and butter, its real strength is in insuring complex risks, from cargo ships and satellites to political and terrorism risks.

Lloyd’s Role in Cyber

It’s the aggregation of those harder-to-quantify risks such as cyber security that concerns Beale most. Expected to grow to $7.5 billion in global premiums business by 2020, cyber is a big focus for Lloyd’s. It has a 25 percent market share and aggregate limits of approximately $650 million per risk, she said.

“What concerns us most is not individual risks such as earthquakes and hurricanes, but rather assessing the aggregation of our exposures to financial and liability-type risks with no geographical boundaries,” she said.

“We saw that with the financial crisis and the collapse of Fanny and Freddie, and its impact on Greece, but now it’s cyber.

“We have interviewed numerous risk managers and they are telling us that they are only insured against less than 10 percent of the risks that their businesses face on a daily basis. Our challenge is to make sure that we are continuing to adapt as fast as their businesses do and that we are delivering the relevant products that they need.”

Another area where Lloyd’s has seen an uptick is political and terrorism risk, said Beale.

The U.S. standoff with North Korea, Brexit and a swath of ISIS terrorist attacks across Europe have only exacerbated the problem, heightening fears among those countries’ citizens and tearing whole communities apart.

“We would love to get to a stage where a client can track something being quoted or a claim being paid, just like you do with a package being delivered [to your home].” — Inga Beale, CEO, Lloyd’s of London

Just witness the anguish of the victims and families in the Manchester concert bombing.

“We have seen a dramatic increase in demand for these types of products because of the political instability everywhere at the moment, particularly for companies that are trading cross border with countries where governments can suddenly intervene at a moment’s notice,” she said.

“Similarly, businesses are looking to protect themselves against the ever-growing threat of terrorism, which is where Lloyd’s can step in to give them the confidence to keep on trading.”

Reforming Lloyd’s

Within Lloyd’s itself, Beale has been at the forefront of trying to modernize the aging institution. Despite its modern metallic and glass exterior, inside Lloyd’s there’s still very much what some might term a stuffy “old boys’ club” culture.

Men are required to wear a tie and women weren’t allowed into the underwriting room until 1972. Brokers still walk around with leather slipcases crammed full of paper.

The Lloyd’s headquarters on Lime Street.

Beale’s predecessor, Richard Ward, tried to modernize Lloyd’s but left plenty for Beale to address in that respect.

Beale committed $700 million over the next five years to upgrade Lloyd’s aging computer and IT systems, with the end goal of achieving one-touch data capture to speed up the premiums and claims process.

“It’s about following that data all the way through the process from the client to the intermediary and the underwriter, and the processing of the premiums and claims,” she said.

“We would love to get to a stage where a client can track something being quoted or a claim being paid, just like you do with a package being delivered [to your home].”

Another area Beale is keen to shake up is diversity within Lloyd’s itself. Currently the market is two-thirds male, while only 11 percent of the whole London insurance market are non-UK nationals — a damning statistic that Beale is all too aware of.

“The Lloyd’s market doesn’t reflect the demographics of the whole of London and we are very conscious that we’re not tapping into all of the available talent that’s out there,” she said.

“We need to cut out the old ideas, try to challenge the unconscious bias and create an environment that is welcoming for people who are a bit different.”

Beale has also been pushing the [email protected] initiative, currently in its third year, and in September Lloyd’s will host the third annual Dive In festival to promote diversity and inclusion in the insurance industry.

In addition, 95 percent of the Lloyd’s market has already signed up to its Diversity & Inclusion charter to improve diversity, she said.

“To attract the best talent we need to modernize and look at how we can change our working practices and hiring decisions for the better,” she said.

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“There’s a vast amount of work that we are actively doing to encourage people to be more open and seek more diverse talent.”

On a personal level, Beale readily admits that she was late to the leadership game, and it was only her mentor, Annette Sadolin at GE, who convinced her to take her first promotion.

That lack of confidence is something that, as a leader, Beale has witnessed in her own team and she is keen to help overcome.

“Annette became very much a mentor for me throughout my career, so whenever I have had to make key decisions I would always ask her view,” she said.

“The key lesson that I have learnt from her is that things move so quickly and you need to take opportunities when they come along that give you exposure to something new, even if they don’t seem like a natural career path at the time.

“For me, being a leader is all about inclusion and being passionate about the people you work with because you need to inspire and motivate them. But there is also nothing more rewarding than watching people progress their careers.”

A Truly Global Journey

Beale, who initially harbored ambitions of being an architect, admits that she “fell into reinsurance,” starting as a trainee international treaty reinsurance underwriter at Prudential Assurance Company in London in 1982. But once she had a taste there was no turning back.

“At the time, I didn’t even know that reinsurance existed, but once I discovered it I absolutely loved it,” she said.

“I fell in love with the global nature of the risks that came to London; one day you could be looking at a piece of business from Chile, the next from Australia.”

But, back then, working in a male-dominated industry where she was the only woman among 35 men, Beale struggled to fit in. So she quit and went travelling for 10 months.

It was during her time as a receptionist at the BBC in Sydney, Australia that Beale worked under her first female boss, a formidable woman, she said.

Inspired by her boss’s strong work ethic, Beale decided to return to the insurance business.

She soon landed a job with GE Insurance Solutions in Kansas City, where she held various underwriting management roles, before being appointed president of GE Frankona and head of continental Europe, Middle East and Africa for GE Insurance Solutions in Germany.

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After 14 years at GE, Beale moved to Switzerland with Converium as group CEO in 2006.

Two years later, she joined Zurich Insurance Group as a member of the group management board in Zurich before being appointed global chief underwriting officer, prior to her appointment as group CEO at Canopius in 2012.

The breadth and depth of her experience makes Beale a natural fit for the demands of the Lloyd’s top job.

There’s no doubt she’ll be drawing upon every ounce of that expertise and experience to keep Lloyd’s at the cutting edge of this harrowing new world we live in.

Alex Wright is a U.K.-based business journalist, who previously was deputy business editor at The Royal Gazette in Bermuda. You can reach him at [email protected]