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

2017 RIMS

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.
By: | April 26, 2017 • 3 min read

As insurers become increasingly concerned about the aggregation of cyber risk exposures in their portfolios, new tools are being developed to help them better assess and manage those exposures.

One of those tools, a comprehensive cyber risk modeling application for the insurance and reinsurance markets, was announced on April 24 by AIR Worldwide.

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Last year at RIMS, AIR announced the release of the industry’s first open source deterministic cyber risk scenario, subsequently releasing a series of scenarios throughout the year, and offering the service to insurers on a consulting basis.

Its latest release, ARC– Analytics of Risk from Cyber — continues that work by offering the modeling platform for license to insurance clients for internal use rather than on a consulting basis. ARC is separate from AIR’s Touchstone platform, allowing for more flexibility in the rapidly changing cyber environment.

ARC allows insurers to get a better picture of their exposures across an entire book of business, with the help of a comprehensive industry exposure database that combines data from multiple public and commercial sources.

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

The recent attacks on Dyn and Amazon Web Services (AWS) provide perfect examples of how the ARC platform can be used to enhance the industry’s resilience, said Scott Stransky, assistant vice president and principal scientist for AIR Worldwide.

Stransky noted that insurers don’t necessarily have visibility into which of their insureds use Dyn, Amazon Web Services, Rackspace, or other common internet services providers.

In the Dyn and AWS events, there was little insured loss because the downtime fell largely just under policy waiting periods.

But,” said Stransky, “it got our clients thinking, well it happened for a few hours – could it happen for longer? And what does that do to us if it does? … This is really where our model can be very helpful.”

The purpose of having this model is to make the world more resilient … that’s really the goal.” Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

AIR has run the Dyn incident through its model, with the parameters of a single day of downtime impacting the Fortune 1000. Then it did the same with the AWS event.

When we run Fortune 1000 for Dyn for one day, we get a half a billion dollars of loss,” said Stransky. “Taking it one step further – we’ve run the same exercise for AWS for one day, through the Fortune 1000 only, and the losses are about $3 billion.”

So once you expand it out to millions of businesses, the losses would be much higher,” he added.

The ARC platform allows insurers to assess cyber exposures including “silent cyber,” across the spectrum of business, be it D&O, E&O, general liability or property. There are 18 scenarios that can be modeled, with the capability to adjust variables broadly for a better handle on events of varying severity and scope.

Looking ahead, AIR is taking a closer look at what Stransky calls “silent silent cyber,” the complex indirect and difficult to assess or insure potential impacts of any given cyber event.

Stransky cites the 2014 hack of the National Weather Service website as an example. For several days after the hack, no satellite weather imagery was available to be fed into weather models.

Imagine there was a hurricane happening during the time there was no weather service imagery,” he said. “[So] the models wouldn’t have been as accurate; people wouldn’t have had as much advance warning; they wouldn’t have evacuated as quickly or boarded up their homes.”

It’s possible that the losses would be significantly higher in such a scenario, but there would be no way to quantify how much of it could be attributed to the cyber attack and how much was strictly the result of the hurricane itself.

It’s very, very indirect,” said Stransky, citing the recent hack of the Dallas tornado sirens as another example. Not only did the situation jam up the 911 system, potentially exacerbating any number of crisis events, but such a false alarm could lead to increased losses in the future.

The next time if there’s a real tornado, people make think, ‘Oh, its just some hack,’ ” he said. “So if there’s a real tornado, who knows what’s going to happen.”

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Modeling for “silent silent cyber” remains elusive. But platforms like ARC are a step in the right direction for ensuring the continued health and strength of the insurance industry in the face of the ever-changing specter of cyber exposure.

Because we have this model, insurers are now able to manage the risks better, to be more resilient against cyber attacks, to really understand their portfolios,” said Stransky. “So when it does happen, they’ll be able to respond, they’ll be able to pay out the claims properly, they’ll be prepared.

The purpose of having this model is to make the world more resilient … that’s really the goal.”

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]