Risk Management

The Profession

After 20 years on the job, TransUnion's Joon Sung knows that risk management success is based in part on the quality of relationships with brokers, carriers and other risk professionals.
By: | April 7, 2017 • 4 min read


R&I: What was your first job?

I was a clerk at my father’s video store. I got to learn firsthand the power of customer service — we had to do it better to differentiate from the big box stores just to survive. I don’t miss calling customers with outstanding videos or informing them that they owed a rewind fee.

R&I: How did you come to work in risk management?

I took an introductory course in risk management taught by Professor Joan Schmit.

I was fortunate to attend an institution that had such a wonderful and dedicated risk management and insurance discipline. Our professors were passionate about the role of insurance whether it was in a social or commercial setting and challenged us to advance it.

R&I: What was the best location for the RIMS conference and why?

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San Diego, bar none. The location of the convention center with all of the nearby hotels, downtown and scenery make it pretty hard to beat. Oh and the weather is out of this world.

R&I: What emerging commercial risk most concerns you?

Cyber.

R&I: How do you keep yourself educated about emerging risks like cyber? What are your go-to resources?

I try to talk to our CISO [chief information security officer] every chance I get. He has a wealth of knowledge and experience and has line of sight into the kinds of things we’re seeing every single day. Understanding what keeps him up at night helps me think about our perils and how insurance should respond to it.

R&I: What insurance carrier do you have the highest opinion of?

Beazley. You have to have guts to insure a company like ours. You hear buzz words like trust, commitment and partnership bandied about all the time. Beazley breathes it. I’ve effectively had the same underwriter and claims manager for more than 10 years.

We’ve had our ups and downs, like in any relationship, but we got through them. And in so doing, it made our bond even stronger. In many respects, Beazley is similar to our company. We say what we mean, we take ownership in our work, and we follow through on our promises.

R&I: Is the contingent commission controversy overblown?

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Yes it is. I’m not crazy about it, but it’s been around in our industry a long time, and well before Mr. Spitzer made it a big deal. As risk managers, we’ve always tried to be pragmatic about it. If brokers can keep us fully informed of the contingent commission, then we don’t have to second guess whether or not they are looking out for our company’s best interest.

R&I: Who is your mentor and why?

John Bradley, the risk manager of U.S. Bank. Every decision he makes is rooted in the question, “What is best for my company?” He understands insurance and people, and in this business, the latter is critical to success. If he wasn’t so loyal to the Chicago Bears, I’d call him a friend.

R&I: What about this work do you find the most fulfilling or rewarding?

I enjoy the interaction and collaboration among my colleagues, insurance brokers and insurers. We all come from such different backgrounds, yet when we work together to accomplish a single goal, it is incredibly gratifying.

R&I: What do your friends and family think you do?

My parents still think I sell personal lines insurance, which is perfectly fine except when their friends call me about getting a quote for a homeowner’s policy.

My friends think I do what Ben Stiller did in the movie “Along Came Polly” — using the Riskmaster 9000 …

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

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I’d have to say technology. Our industry was so paper intensive in the past. I remember a time when we faxed insurance applications, insurance certificates, insurance policies, etc.

Now most of the insurance policies are PDFs, searchable and largely sent by email. I’m receiving claims notices by text from my insurer as it’s reported in real time. We’ve come a long way. The challenge now is to make sure we’re taking advantage of the efficiency for good.

R&I: What is your favorite book or movie?

“Tommy Boy” starring Chris Farley and David Spade. I’m not ashamed to admit it either. It’s funny, touching and has tremendous replay value.

R&I: What is your favorite drink?

The Korean name for it is Makgeolli. It’s a rice wine that was popular among farmers and the “working class” back in the day. It’s fermented rice and tastes a little sweet, but it pairs nicely with just about any meat.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Alternative Energy

A Shift in the Wind

As warranties run out on wind turbines, underwriters gain insight into their long-term costs.
By: | September 12, 2017 • 6 min read

Wind energy is all grown up. It is no longer an alternative, but in some wholesale markets has set the incremental cost of generation.

As the industry has grown, turbine towers have as well. And as the older ones roll out of their warranty periods, there are more claims.

This is a bit of a pinch in a soft market, but it gives underwriters new insight into performance over time — insight not available while manufacturers were repairing or replacing components.

Charles Long, area SVP, renewable energy, Arthur J. Gallagher

“There is a lot of capacity in the wind market,” said Charles Long, area senior vice president for renewable energy at broker Arthur J. Gallagher.

“The segment is still very soft. What we are not seeing is any major change in forms from the major underwriters. They still have 280-page forms. The specialty underwriters have a 48-page form. The larger carriers need to get away from a standard form with multiple endorsements and move to a form designed for wind, or solar, or storage. It is starting to become apparent to the clients that the firms have not kept up with construction or operations,” at renewable energy facilities, he said.

Third-party liability also remains competitive, Long noted.

“The traditional markets are doing liability very well. There are opportunities for us to market to multiple carriers. There is a lot of generation out there, but the bulk of the writing is by a handful of insurers.”

Broadly the market is “still softish,” said Jatin Sharma, head of business development for specialty underwriter G-Cube.

“There has been an increase in some distressed areas, but there has also been some regional firming. Our focus is very much on the technical underwriting. We are also emphasizing standardization, clean contracts. That extends to business interruption, marine transit, and other covers.”

The Blade Problem

“Gear-box maintenance has been a significant issue for a long time, and now with bigger and bigger blades, leading-edge erosion has become a big topic,” said Sharma. “Others include cracking and lightning and even catastrophic blade loss.”

Long, at Gallagher, noted that operationally, gear boxes have been getting significantly better. “Now it is blades that have become a concern,” he said. “Problems include cracking, fraying, splitting.

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“In response, operators are using more sophisticated inspection techniques, including flying drones. Those reduce the amount of climbing necessary, reducing risk to personnel as well.”

Underwriters certainly like that, and it is a huge cost saver to the owners, however, “we are not yet seeing that credited in the underwriting,” said Long.

He added that insurance is playing an important role in the development of renewable energy beyond the traditional property, casualty, and liability coverages.

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine. Weather risk coverage can be done in multiple ways, or there can be an actual put, up to a fixed portion of capacity, plus or minus 20 percent, like a collar; a straight over/under.”

As useful as those financial instruments are, the first priority is to get power into the grid. And for that, Long anticipates “aggressive forward moves around storage. Spikes into the system are not good. Grid storage is not just a way of providing power when the wind is not blowing; it also acts as a shock absorber for times when the wind blows too hard. There are ebbs and flows in wind and solar so we really need that surge capacity.”

Long noted that there are some companies that are storage only.

“That is really what the utilities are seeking. The storage company becomes, in effect, just another generator. It has its own [power purchase agreement] and its own interconnect.”

“Most projects operate at lower capacity than anticipated. But they can purchase coverage for when the wind won’t blow or the sun won’t shine.”  —Charles Long, area senior vice president for renewable energy, Arthur J. Gallagher

Another trend is co-location, with wind and solar, as well as grid-storage or auxiliary generation, on the same site.

“Investors like it because it boosts internal rates of return on the equity side,” said Sharma. “But while it increases revenue, it also increases exposure. … You may have a $400 million wind farm, plus a $150 million solar array on the same substation.”

In the beginning, wind turbines did not generate much power, explained Rob Battenfield, senior vice president and head of downstream at JLT Specialty USA.

“As turbines developed, they got higher and higher, with bigger blades. They became more economically viable. There are still subsidies, and at present those subsidies drive the investment decisions.”

For example, some non-tax paying utilities are not eligible for the tax credits, so they don’t invest in new wind power. But once smaller companies or private investors have made use of the credits, the big utilities are likely to provide a ready secondary market for the builders to recoup their capital.

That structure also affects insurance. More PPAs mandate grid storage for intermittent generators such as wind and solar. State of the art for such storage is lithium-ion batteries, which have been prone to fires if damaged or if they malfunction.

“Grid storage is getting larger,” said Battenfield. “If you have variable generation you need to balance that. Most underwriters insure generation and storage together. Project leaders may need to have that because of non-recourse debt financing. On the other side, insurers may be syndicating the battery risk, but to the insured it is all together.”

“Grid storage is getting larger. If you have variable generation you need to balance that.” — Rob Battenfield, senior vice president, head of downstream, JLT Specialty USA

There has also been a mechanical and maintenance evolution along the way. “The early-generation short turbines were throwing gears all the time,” said Battenfield.

But now, he said, with fewer manufacturers in play, “the blades, gears, nacelles, and generators are much more mechanically sound and much more standardized. Carriers are more willing to write that risk.”

There is also more operational and maintenance data now as warranties roll off. Battenfield suggested that the door started to open on that data three or four years ago, but it won’t stay open forever.

“When the equipment was under warranty, it would just be repaired or replaced by the manufacturer,” he said.

“Now there’s more equipment out of warranty, there are more claims. However, if the big utilities start to aggregate wind farms, claims are likely to drop again. That is because the utilities have large retentions, often about $5 million. Claims and premiums are likely to go down for wind equipment.”

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Repair costs are also dropping, said Battenfield.

“An out-of-warranty blade set replacement can cost $300,000. But if it is repairable by a third party, it could cost as little as $30,000 to have a specialist in fiberglass do it in a few days.”

As that approach becomes more prevalent, business interruption (BI) coverage comes to the fore. Battenfield stressed that it is important for owners to understand their PPA obligations, as well as BI triggers and waiting periods.

“The BI challenge can be bigger than the property loss,” said Battenfield. “It is important that coverage dovetails into the operator’s contractual obligations.” &

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]