Sponsored: Swiss Re Corporate Solutions

Disaster Recovery and Reconstruction: 4 Challenges to Overcome

Working with an insurer with a reputation for overcoming these claims obstacles with reliability and speed is vital to kickstarting recovery.
By: | November 14, 2017 • 8 min read

When natural disaster strikes, businesses left damaged or destroyed have little time to lament what is lost. A host of decisions need to be made to begin rebuilding and getting business back on track— and fast.

Among the first of those decisions may be evaluating whether it is worthwhile – or even possible – to repair and rebuild at all.

“Areas on the coast might see beach erosion or such deterioration of the landscape that it makes site access difficult and reconstruction near impossible,” said Jay Kubinak, SVP, Head Engineering and Construction North America, Swiss Re Corporate Solutions. “We saw such issues in Florida after Hurricane Andrew, and most recently in Puerto Rico after Hurricane Maria.”

Even when projects get the green light, several obstacles remain in the way of the reconstruction process.

To recover from loss, building owners and the contractors repairing them should be prepared to tackle these four potential challenges:

1. Understanding Policy Coverages and the Claims Process

Jay Kubinak, SVP, Head Engineering and Construction North America

An important step in post-disaster recovery is obtaining the funds to rebuild, and it is often the first struggle owners and contractors must overcome. Understanding how the policy works and working together with the insurance carrier helps expedite the claims process.

In the wake of a natural disaster, there are several factors that may influence the claims process, and the ability to obtain funds. Access to the damaged properties may be delayed due to civil authority, airport and road closures, lack of fuel for automobiles, etc.

Also, identifying and mobilizing qualified claims professionals during a catastrophe can sometimes be a challenge.

“A natural catastrophe means there is a demand for CAT adjusters all at once, and their availability is an ongoing issue,” D.J. Postles, Head East U.S. & Construction Liability, Swiss Re Corporate Solutions. “The problem is amplified when you have several major storms in succession, as we have just seen with Hurricanes Harvey, Irma and Maria.”

A lack of coordinating claims adjustment activities between a policyholder and adjuster can also affect the claims process. Communicating with your claims professional throughout the process is key to facilitating a smooth adjustment. Coordinating inspection times between policyholders, adjusters and experts; reviewing applicable policy terms and conditions; and setting expectations and timelines are just a few things that will allow the parties to strategize the next steps in the adjustment. Due to the large volume of claims following a catastrophic event, this can be more challenging than during the normal course of business.

The biggest impact a carrier can make to expedite the recovery is to advance funds to their policyholder as quickly as possible. A claim need not be finalized before a payment can be made on a covered claim.

Many properties are insured to value, and coverage may not factor in the ultimate cost to repair or replace. Especially with older properties, those costs can stack up quickly if building codes have changed and structures need to be rebuilt to a higher standard. That is why it is imperative for a policyholder to understand their coverages and ensure that their coverages suit their needs.

2. Building Codes

Legislation in the wake of a natural disaster may mandate changes aimed at making buildings more resilient. Even where no mandate is issued, engineers, architects or contractors may recommend certain changes as best practice.

After Superstorm Sandy, for example, buildings near the coast were required to be built at a higher elevation, often requiring new homes to be built on stilts. After Hurricane Andrew in Florida, roofs had to be attached using hurricane straps or clips, instead of simply being nailed down.

These changes were required by law, but other redesigns were suggested to prevent similar losses in the future.

After Sandy, mechanical systems and heating and cooling units typically kept in the basement were housed instead on the third or fourth floor to prevent damage from standing water. In Florida, using concrete to frame the first floor and installing thicker glass windows were recommended to protect homes from wind damage.

Adhering to these changes, however, represents significant cost to project owners.

“Insurance policies are designed to reimburse you for your covered loss, but they may not cover improvements considered as betterments that may fall outside of the policy coverages. So there are decisions to be made as to whether you should make improvements, and by how much. Are those improvements worth it from a cost standpoint?” said Andrew Maichle, Head Construction, Professional Indemnity, North America, Swiss Re Corporate Solutions.

3. Labor Shortage

D.J. Postles, Head East U.S. & Construction Liability

Owners and contractors have to make decisions quickly regarding improvements and upgrades, and move fast to find the best labor and supplies to execute those plans. An ongoing skilled labor shortage plagues the construction industry in general, but lack of labor becomes more acute when an entire region is trying to rebuild at the same time.

“When the normal workforce in your area is overtaxed, it draws in contractors and laborers from other areas. The issue is this transient workforce may have no reputation in the area where they’re rebuilding,” Kubinak said.

“You want contractors with a strong reputation and local knowledge. But depending on what you are able and willing to pay, you may not get that contractor.”

Contractors unfamiliar with the disaster area may not be up to speed on local building codes and legislative requirements. A contractor based in the South may not realize the importance of building for snow loads in the Northeast, and a Northern contractor working in Texas may not factor humidity into his plans.

“Local workers know what materials to use. If you’re tapping into that transient workforce, you might not be getting the best supplies. The local expertise is lost,” Maichle said.

Lack of local knowledge combined with overworked laborers also raises the risk of construction defect.

“People may be working double shifts, and supervision may be stretched out over a few sites, so the quality of work is not necessarily continually at its peak,” Postles said. “When you have a tight timeframe, aggressive rebuilding schedules, and lack of qualifications, it creates a risky scenario.”

Non-compliant structures increase liability for the building owner and pose a reputational threat to contractors.

“Contractors live and die by their reputation,” Kubinak said. “The constraints of rebuilding in a disaster zone certainly threaten the quality of their work.”

4. Materials Shortfalls

Andrew Maichle, Head Construction, Professional Indemnity, North America

Just as there may be shortages of CAT adjusters or construction workers, building materials also become scarce during post-disaster reconstruction.

“Some materials can be tougher to get in post-disaster reconstruction because they simply were not around in high volume prior to the event,” Kubinak said.

That can lead to inferior products flooding the market as manufacturers jump to meet the demand as quickly as they can.

After Katrina ravaged New Orleans, for example, there were shortages of half-inch (1/2″) drywall used in residential construction, since most U.S. drywall manufacturers shifted their production to five-eighth inch (5/8″) drywall used in commercial construction. The shortage of 1/2″ drywall caused suppliers to turn to inferior products made by Chinese manufacturers, later found to be contaminated with byproducts, which reportedly caused a chemical reaction capable of corroding copper pipes, emitting a sulfur smell, and even causing illness.

“People have to find different resources, and companies are going to produce what they can make the most profit with,” Maichle said. “Securing the best materials comes back to relationships with your suppliers and being quick to secure items that typically become scarce after a disaster. Starting recovery as soon as possible betters your chance of getting the best labor and supplies.”

Meeting Challenges with Reliability and Speed

Working with an insurer with a reputation for claims excellence is vital to kickstarting recovery.

“The claims experience is the tangible aspect of an insurance product,” Postles said. “Our clients need quick assessments and prompt payments, and we execute that with urgency and responsiveness.”

Within days of Harvey’s rampage through Houston, Swiss Re’s emergency response claims team had set up a “command central.”

“The whole team was in a room together, as opposed to communicating through telephone calls and emails. We also were able to reallocate resources to the storm-hit areas that needed them most,” Maichle said.

In some cases, Swiss Re Corporate Solutions is able to issue advance payments to clients so recovery and reconstruction can get underway as soon as possible. It is also one of few insurers who offer parametric coverages for precisely these situations when almost immediate payment is needed.

“Parametric policies complement traditional property coverages, and their primary benefit is expedited claims payment. If the event meets the qualifying triggers of the policy, a payment is made. It cuts out the typically lengthy claims process and results in quick liquidity and lots of time saved,” Maichle said.

Swiss Re’s financial stability also assuages any doubts or concerns clients may have over receiving their payments while so many others are making claims as well.
“There may be concern about insurer solvency after NAT CAT events. Swiss Re has been around for more than 150 years, and the strength of its balance sheet can handle these large events,” Postles said.

“We have been in the construction business for decades, and we are committed to expanding in this industry,” he added. “It is an area we believe in and are dedicating more resources within the North American market.”

To learn more, visit https://corporatesolutions.swissre.com/.

Insurance products underwritten by Westport Insurance Corporation, Overland Park, Kansas, a member of Swiss Re Corporate Solutions. This article is intended to be used for general informational purposes only and is not to be relied upon or used for any particular purpose.  Swiss Re shall not be held responsible in any way for, and specifically disclaims any liability arising out of or in any way connected to, reliance on or use of any of the information contained or referenced in this article.  The information contained or referenced in this article is not intended to constitute and should not be considered legal, accounting or professional advice, nor shall it serve as a substitute for the recipient obtaining such advice.



This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Swiss Re Corporate Solutions. The editorial staff of Risk & Insurance had no role in its preparation.

Swiss Re Corporate Solutions offers innovative, high-quality insurance capacity to mid-sized and large multinational corporations and public entities across the globe.

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now an where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]