The 2019 Environmental Power Brokers

Alexander Brown, AIC, ARM
Assistant Vice President
EPIC, Atlanta

Alexander Brown, Assistant Vice President, EPIC

“Just this year Alex [Brown] obtained for us a higher policy limit and realized premium savings versus expiring coverage and also obtained for us an additional $1 million limit for defense outside policy limits,” said one risk, finance and insurance manager.

Brown worked with regulators to draft the language, ensuring the site-pollution policy met financial responsibility requirements.

After that, Brown was able to “align the definition for responsible insured — the person responsible for reporting and disclosing — with our organizational structure,” said the insurance manager.

“He also expanded our asbestos and lead-based paint coverage to include coverage for inadvertently disturbed materials and obtained blanket language capturing third-party indemnities that were provided in leases and purchase agreements.

“And just for good measure, Alex limited the material change in use exclusion to account for our renovations and development exposure while maintaining meaningful mold coverage despite our insurer’s amended mold appetite.”

For another client, Brown “secured a competitively priced 10-year new and pre-existing conditions environmental policy that facilitated the closing of a shopping center,” said the company vice president.

“Alex secured coverage for the shopping center with known contamination from one historical dry cleaning operation and uncertainty on a second, with no exclusion for dry cleaning solvents. Alex incorporated custom language that allowed the cleanup costs coverage to dovetail with the state remediation program.”

Kimberly Mann
Vice President
Marsh, Philadelphia

Kimberly Mann, Vice President, Marsh

One of Kimberly Mann’s clients, a major academic institution, often receives donations of real estate. She was asked to conduct a risk assessment on the process to manage that property and made several important changes, said the insurance and loss-control manager.

“We were not doing the reports that she felt we ought to and she explained why those were important. She also found some toxic exposure that was an unknown pre-existing condition outside our known excluded.”

And just to show that even the best laid plans can’t cover every possible situation, the client had a minor exposure incident in the middle of a renewal that involved a change of carriers. “Kim was fabulous,” the manager said.

Another client acquired a large energy-processing site with a long history. “Kim got us covered both on a continuing operational basis but also for legacy issues,” said the risk analyst.

“It became almost a script: The project team would ask me, ‘Can we get this or that,’ and I would say, ‘Let me check,’ and Kim would say, ‘Oh sure!’ She was able to present our information in a way that the underwriters liked. It was collaborative. She was an advocate for us but did not try to stick it to the carriers.”

A third client has a separate, stand-alone program for environmental coverage: “We have unique exposures, and Kim was able to manuscript policies for our large, multiple sites,” said the senior risk manager. “That required incredible attention to detail in understanding the complexity of our multiple exposures.”

Kate Mead, ERM, CRM
Senior Vice President
Willis Towers Watson, Chicago

Kate Mead, Senior Vice President, Willis Towers Watson

After losing a major carrier as the primary incumbent, Kate Mead had to replace another $20 million in capacity at the second excess layer due to a treaty restriction of another incumbent player.

In the end, three new carriers were introduced to the program including a new partner on the primary layer. The program remained on a multi-year term, with expiring limits of liability, similar retention structures, matched coverage and only a modest premium increase due to a combination of additional exposures and claims experience.

“During the past year, Kate has done an excellent job in brokering two environmental policy renewals involving strategic government-owned sites operated by us,” said one director of risk management.

“Kate went the extra mile working with the local site personnel to fully understand each site’s unique risk exposures, communicate their individual risk profiles to the underwriters and craft cost-effective coverage.”

With underwriting submissions out to 17 insurers more than 100 days in advance of the renewal, Mead lead the formal marketing efforts with face-to-face client-carrier meetings with most of these insurers.

After months of intense negotiations, Mead and her team were able to secure a pollution legal liability program that met or exceeded all expiring coverage, maintained a multi-year policy term, and matched limit and retention structures. All with a significant premium savings. The policy was highly manuscripted and also satisfied the various regulatory and financial obligations.

Amber Walker
Vice President
Marsh, Atlanta

Amber Walker, Vice President, Marsh

“The environmental coverage placement for my company was difficult to say the least,” noted one director of loss control. “It would be simple if all my company had to do was buy pollution coverage for above-ground fuel tanks, but the coverage Amber has placed for us is much more complicated.

She negotiated with the carrier to provide pollution insurance that covers animal waste, wet and dry, that is transported by third parties off site in addition to the tank coverage.

All of this with a seamless three-year policy renewal term. During two acquisitions this year she negotiated with the carrier to add the acquisitions with no additional premium. All stress free. She is a phenomenal broker.”

This was a particularly challenging renewal, because many markets have little to no appetite in the agricultural/livestock segment.

Adding to the challenge, the expiring policy included products-pollution coverage at third-party sites. Amber Walker approached 26 markets, the majority declined.

But the renewal resulted in products-pollution coverage, broadened coverage for sites with known pollution, broader transportation coverage, improvement in business interruption coverage and a 40 percent premium reduction.

In another case, Walker flipped the script, bringing a new carrier in the segment to an established client.

It was a complex program, one with claims still being sorted, that gave the underwriter pause. By walking both insured and insurer slowly through the process, Walker secured the placement and increased overall capacity in the segment.

Liza Webster
Senior Vice President
Marsh, Boston

Liza Webster, Senior Vice President, Marsh

“We faced a very challenging environmental circumstance in connection with an acquisition,” said one general counsel.

“Liza did a wonderful job of developing a very thorough understanding of the situation and provided our company with some creative potential solutions. She then communicated the circumstances and the desired plan to the insurance market.”

Without Liza Webster’s perspicacity, “I doubt our company would have moved forward with this acquisition.”

Another client concurred. “Liza was an incredibly important resource to us in connection with a recent property investment,” said one COO. “The investment involved a land purchase of more than 100 acres from a user who had contaminated the site over its 50-year ownership.

“The nature of the contamination is complicated, and our investment plans for the site call for remediation and redevelopment for mixed use.

We worked with Liza almost from the beginning of the process … to put in place pollution legal liability insurance coverage.”

Webster made sure the company conducted sufficient testing and had the documentation necessary to generate interest from the insurance markets and bind the coverage needed to satisfy joint venture partners and potential lenders.

“She took the time to educate us on the insurance markets and to educate the carriers on our property. Ultimately, she put us in the best position to obtain the best terms for the coverage we needed,” said the COO.

Max West
Senior Vice President
Aon, Chicago

Max West, Senior Vice President, Aon

The emergent theme in the environmental category this year was brokers devising innovative approaches to provide pollution liability coverage to unlock redevelopment for industrial sites that have long languished because of legacy contamination.

One client of Max West’s had three such projects, all of which involved major industrial companies selling sites with known issues.

“Max helped us place pollution coverage as we assumed all liability, including toxic tort,” said one CEO. “The coverage met the requirements of the developers and the backers. It was very complicated, because our plan was to redevelop the site fully from demolition of the existing plant to subsurface remediation.”

At another site, waste ponds had to be drained and capped on a site of more than 1,400 acres. “Max placed the pollution liability and also excess indemnity,” said the CEO.

Another client gave similar testimony: “We had a very complex transaction in which a piece of industrial property was being sold,” said one attorney.

“That required indemnification and coverage for known conditions. The seller retained some and the buyer accepted some. We, the agents, also needed protection in case the indemnitors did not fulfill their obligation. Max made it all happen.”

In a third deal, the sellers were a financial company not well-versed in environmental law or science. “I did not know the lender, and I did not know the seller,” said a partner at the client. “Max saved us and the seller money and closed the deal.”

The complete list of 2019 Power Brokers® can be found here.

Finalists:

Brian Finnegan
Director
Aon, New York

Jim Vetter
Managing Director
Marsh, Salt Lake City, Utah

How a Carrier Partner Can Help Navigate a Challenging Management and Professional Liability Market

A combination of a choppy economy with increased claims frequency and severity could lead to rate increases in the Management & Professional Liability market.

By: Risk & Insurance | April 3, 2024

Rates in the management & professional liability (M&PL) markets were on the rise from 2020 to early 2023 and are now falling rapidly.

M&PL divisions manage a number of different insurance products including management liability (D&O), professional liability (E&O), employment practices liability (EPL), fiduciary liability policies, cyber, etc. In 2023 and into 2024, a big influence on the marketplace has been the extremely aggressive and softening public company D&O market.

Though these rates have been softening for management liability, that may change over the next few years as companies continue to adjust their business models motivated by economic uncertainty. Layoffs were up nearly 200% last year, Forbes reported, even as other recession indicators, like the inflation rate, improved. A recession could lead to an increased claim activity and force carriers to raise rates.

“Whenever there is a meaningful downturn in the economy, we tend to see claim frequency pop up,” said George Schalick, Jr., senior vice president of the Management and Professional Liability Division at Philadelphia Insurance Companies (PHLY).

With continued fiscal uncertainty, businesses potentially already burdened with pandemic-related claims should seek a carrier with a long history in M&PL products. They will provide much-needed risk management guidance and be better positioned to support their insureds during market fluctuations.

Why Insureds Might See an Uptick in M&PL Claims

George Schalick, Jr., Senior Vice President of the Management and Professional Liability Division, Philadelphia Insurance Companies

The current soft market might come as a bit of a surprise as it does not track with previous underwriting cycles and economic conditions. Afterall, many privately held and non-profit organizations struggled during the early days of the pandemic with shutdowns and rapidly declining revenues. But the Government assistance programs, like the Paycheck Protection Program loans, helped keep many afloat during the tough times.

“During COVID many organizations stopped doing business until they were able to sort out all of the health and safety challenges,” Schalick said. “They were forced to lock down, but then all the government assistance programs allowed them to keep people employed. The increased volume of claims we anticipated we would see coming from the lockdowns and restrictions that were imposed upon businesses in the U.S. didn’t manifest at first.”

“Just because there wasn’t an onslaught of reported claims at the beginning of the pandemic, doesn’t mean the circumstances that would give rise to a claim being reported didn’t occur. Courts and the judicial system were closed or slowed and now that they are back open, we’re starting to see the circumstances that occurred during the COVID lockdowns becoming claims today,” Schalick said. “Litigation is progressing.”

Added to the delayed pandemic litigation is a concern over newer claims that might be filed as the country inches toward an economic downturn. Though a recession was avoided in 2023, experts think a soft dip could occur in 2024, with 76% of economists saying there’s a 50% or less chance of an economic downturn this year — that almost always results in more management liability claims.

“During the Great Recession in 2008, we saw an almost immediate spike in claims because of the economic conditions and the pressure it placed on organizations. They were making personnel changes with significant belt tightening almost immediately.” Schalick said.

What’s in Store for M&PL Policy Rates in 2024?

Despite an uptick in claims and increased economic uncertainty, management liability rates haven’t increased, resulting in market-wide pricing levels that may not meet the increased pressure of rising settlements and jury verdicts.

“Rates are going the other direction and settlement values are not falling,” Schalick said.

The mismatch between rates, claim frequency and severity is, in part, because carriers experiencing the dramatic soft market in the public D&O market are seeking premium gain in the private and non-profit market.

“In the public company market, the rates have been decreasing significantly. The rates were increasing in the private, not-for-profit market, and rightfully so, but there’s a desire to supplement overall mid-size D&O for carriers who also write private not-for-profit, and they see that as an opportunity to aggregate premium,” Schalick said. “So the always competitive landscape in the private, not-for-profit market has dramatically increased in the last 18 to 24 months.”

Still, companies of all sizes and types should be concerned about management liability rates in the future. Legal system abuse is resulting in increases in both the amount of litigation and the size of verdicts plaintiffs are receiving.

Certain areas of the country are particularly vulnerable to this type of legal system abuse. As a result, insureds in these localities are likely to be vulnerable to rate increases.

“The environment is so positive for the plaintiff that forces premium increases so carriers are able to stay in that market long term,” Schalick said.

Why a Tenured Carrier Partner Can Help Insureds Navigate An Uncertain Market

It’s clear that insureds are facing an uncertain M&PL market over the next few years. Fortunately, carriers with a long history in the M&PL space will be there to offer stability.

Philadelphia Insurance Companies has been supporting this market for 35 years. PHLY is committed to offering long-term rate stability, even as economic and claims trends start to push premiums upwards. They have an appetite for all sorts of companies, large and small, for-profit and nonprofit alike.

“We’ve been at this game for a long time and are one of the most tenured underwriters in this space,” Schalick said. “We like to stay very consistent.”

PHLY has worked with both for-profit and non-profit on management liability policies. With dedicated M&PL teams throughout the company’s 13 regions, PHLY provides the support agents and brokers are looking for on behalf of their clients. The teams know their regions well and can respond to local trends. They’re also dedicated to making the renewal process as easy as possible for their partners and policyholders.

“We have real confidence in our results, so we focus a lot on making the renewal experience as painless as possible for all agents and insureds,” Schalick said.

The company is also investing in tools to help insureds avoid losses. Earlier this year, they launched a new online risk management platform, PHLYGateway, which offers resources for insureds on how to create an employee handbook and trainings on issues such as recognizing workplace sexual harassment and discrimination.

If insureds have questions, they can consult a Best Practices Help Line, provided via the platform. That way, they can get on the spot risk management guidance to help them prevent claims.

To learn more, visit: https://www.phly.com/mplDivision/managementLiability/default.aspx.

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

The 2019 Environmental Power Brokers