2018 Power Broker

Traditional Energy

Negotiating in the Nick of Time

Robert Battenfield
Senior Vice President
JLT Specialty USA, Houston

“We recently switched our broker of record to JLT primarily due to Rob,” said a treasury official at one client.

“He had some great ideas on how to improve our insurance program. One specific item he proposed and we implemented was adding our terrorism coverage back into our property policy and ensuring the CL380 exclusion was removed. That enabled us to increase our coverage while decreasing our exposure to cyber terrorism.”

The company is in a high-profile industry sector, and the client had a separate terrorism and property program. This created a potential gap in coverage for a multi-billion dollar facility because of a complete cyber exclusion on the stand-alone terrorism option.

Battenfield, JLT’s downstream energy leader, went to the commercial market and secured a limit three times as high as the previous one. He also achieved full terrorism coverage for resultant damage from cyber for less than the cost of stand-alone coverage.

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Negotiations for the revised and expanded coverage took place even though the client was still within the timeframe of a two-year contract.

Separately, a large developer was remediating a brownfield site for a specific environmental condition before construction and redevelopment could begin.

Battenfield was able to place a comprehensive pollution program for the project, crucial because once the remediation work began, the contamination was found to be more extensive than originally estimated.

Diving Deep to Find Savings

Andy Bullock
Senior Vice President
Marsh, Boston

Andy Bullock’s specialty is large-scale, high-capital projects in heavy industry. “Andy coordinates our project-specific insurance placements across all of our business lines, including oil, gas, chemicals, industrial, infrastructure and power,” said one client.

“These projects typically range in value from the hundreds of millions to the billions and are very complex, with many involving several joint-venture partners. Andy is able to navigate through a voluminous amount of material on these proposals and provide a more concise picture for the insurance markets.”

“Most recently Andy was able to provide valuable insight on ways to reduce premium costs on a coverage extension for a large project. His attention to detail when accumulating our project information led to a substantial premium savings of roughly a million dollars.”

In another big-ticket effort, the senior vice president of finance at a large client said, “Earlier this year, Andy worked extensively and tirelessly in helping us set up an owner-controlled insurance program for a $1 billion project.

“He provided expert guidance on structuring and implementing this plan and was able to squeeze substantial premium savings from several carriers.”

The SVP added, “We continue to rely heavily on Andy for a broad range of advice and guidance on the various complex insurance issues regarding the development project and also on a number of corporate risk management issues.

“I have been impressed with Andy’s willingness to take the deep dive on complicated issues … and his friendly demeanor.”

Showing Regulatory Savvy

Logan Couch, ARM
Vice President
Aon, Houston

“I am the only insurance and risk manager for a company outside our home country, and I have no local staff,” said one of Logan Couch’s energy clients.

“Logan helped us achieve double-digit rate savings on the energy package program for the third straight year. He placed our program for less than a third of the premium we paid three years ago, and we added more coverage, more limits and more assets.”

The client has on-shore and off-shore operations across North America, so the program includes different national jurisdictions. The company also added some assets as the result of the financial distress of a previous owner, further complicating the placement.

“Logan was also instrumental in helping us provide satisfactory forms of evidence of financial assurance in several instances,” said the client.

“One was an off-shore regulatory requirement. That saved us from placing letters of credit or bonds, which creates substantial savings to our enterprise.

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“The other was instrumental to our providing assurances to trustees and regulators involved in an acquisition of assets from a distressed company. That made the transaction a reality.”

The risk manager also credits Couch with reducing the client company’s bond premiums with one surety, “which will create substantial savings over time.”

The risk manager also gave Couch the nod for providing insight and guidance on “dozens of requests for vendor contract reviews.”

Meticulous Attention to Detail

Lisa Harris, ARM
Senior Vice President
JLT Specialty USA, Houston

“We brought JLT on mid-term, and Lisa was still able to achieve significant rate reductions with existing underwriters by negotiating substantial credits for idle assets,” said the general counsel at one client. Lisa Harris added real value with her dedicated representation of her client’s interests, while maintaining a constructive relationship with underwriters.

The counsel added, “Lisa displayed a meticulous attention to detail and forward thinking and planning along with an impressive work ethic. She was able to reposition our premium structure to better protect the company against an anticipated tightening market while still achieving impressive rate reductions.

“She was able to help our company from both a cost and administrative standpoint. Lisa also showed a detailed knowledge of coverage and policy wording and applied her knowledge of our business to better position the company’s scope of coverage.”

Another client lauded Harris for her tactical skills in helping to close an asymmetrical acquisition for his firm.

“We completed an acquisition of a much smaller firm, and we saw that their pricing and terms were significantly different from ours. There has been a dramatic downturn in the offshore market, but Lisa’s ability to differentiate us in what has become a small industry is very important.

“The sector has become not the most palatable to underwriters, but she has gotten us in front of the markets and gotten them to come out to our facilities.”

Enabling Global Growth

Mary Russell
U.S. Chemical Practice Leader
Marsh, Morristown, N.J.

“Our company made an acquisition that tripled our size and transformed the company from a domestic company to a global one,” said the director of insurance for one of Mary Russell’s clients.

“Mary worked with us to understand the scope of the new company and redesigned each of our insurance programs to be global.

It has been a huge effort in 2016 and 2017. With her help, we have a smoothly running insurance program supporting our growing company.”

The director detailed several specific wins. “We started producing 16 new materials. Mary analyzed the risks associated with those and summarized the programs that we had to mitigate those risks. That information was shared with underwriters.”

With the new loss portfolio, and the financial strength of the new company, Russell supported a decision for substantially higher retentions appropriate for a larger company.

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“We increased our retentions by a factor of five based on financial and actuarial analysis provided,” said the client. “We were also able to increase limits. Given the analysis of risks and financial strength, Mary assisted us in increasing our limits consistent with a substantially larger corporation.”

Russell also implemented foreign coverage for general liability, cargo, D&O and employers’ liability, as well as miscellaneous exposures.

“Mary assisted us in evaluating the regulatory insurance requirements in 25 countries. She helped us set up our internal system to administer the program.”

Persevering in the Face of Catastrophe

Christopher Shorter
Senior Vice President
Aon, Houston

The severe hurricanes late in the 2017 season figured large in several brokers winning their laurels for the year. In this case, Shorter had already been asked by a new client to seek a premium reduction of 15 to 20 percent.

The renewal date was just a few weeks after one of the big storms hit, leaving the region flooded. Both Aon’s and the client’s offices were closed for a protracted period. The client credits Shorter and the firm with persevering despite the loss of mobility and, in some cases, power.

The third leg of the stool was the market, and the client also credits Shorter for his close relations with underwriters to keep them on task for the renewal, meeting with insurers wherever and whenever they were available. That simpatico drew from his prior experience as an underwriter.

Under these circumstances it would have been an accomplishment to close the deal and bind the renewal in time regardless of the costs and terms. But Shorter was able to do those things and still achieve the premium savings that the client sought.

The risk manager at another client testified, “Chris has been working in our account for a few years, and this year in particular, he was able to negotiate a good price and better market alternatives for our program renewal.

“Chris is a great resource, and we utilize him for special projects all the time. Also in 2017, we worked together on a new construction project in Texas, and Chris was instrumental in the placement of the insurance program.”

More from Risk & Insurance

More from Risk & Insurance

Insurtech

Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”

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“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.

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“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?

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“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at riskletters.com.