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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

High Net Worth

To the High Net Worth Homeowner: Build a Disaster Resiliency Plan You Can Be Proud Of

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.

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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.”

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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.

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“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]