Insurance Executive

Four Questions for Aspen’s Pat Hickey

Accumulation risk due to the increased size of marine vessels is something marine underwriters are keeping a keen eye on.
By: | July 6, 2017 • 4 min read
Topics: Claims | Marine | Underwriting

In April of 2017, the International Union of Marine Insurance underwriters, or IUMI, released a report pointing to increased energy losses and accumulation risks for marine underwriters. Pat Hickey, Executive Vice President, Marine, at Aspen Insurance shared with Risk & Insurance some of this thoughts on IUMI’s findings.

R&I: Grounding losses in particular are increasing sharply, according to IUMI. What’s at play here? What factors are leading to this?

PH: This is a very interesting, and disturbing, trend where human error is most likely the root cause. The question is what is driving it? I believe it is multi-faceted; however, there is evidence that we have become overly dependent on electronic navigation and enhanced technology to make decisions for us. Accordingly, we are losing critical human interaction and judgment to avoid these incidents.

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In addition, we must also consider general distraction due to mobile phones, tablets and other technologies unrelated to vessel navigation.  In January of 2016, an incident occurred on the Mississippi River near New Orleans involving tank barges and towing vessels that caused $60 million in damages to the vessels and docks. The U.S. National Transportation Safety Board (NTSB) determined that the captain of one of the towing vessels was on a personal call on his mobile phone just prior to the collision.

R&I: Given the losses we’re seeing, what changes might risk managers and insureds see going forward in aspects of the marine transit losses underwriters are willing to cover?

PH: Marine underwriters need to be flexible and creative, to cover global maritime risks, and very few risks are exactly the same. It’s incumbent on marine underwriters to know their customers’ exposures so they can build manuscript coverages around those unique risks.   As losses increase, skilled marine underwriters will look to partner with their customers to minimize, or eliminate, those risks. When we partner with a dedicated customer willing to work with our risk engineers, there are few challenges we cannot solve together. When we do not see the expected level of engagement or willingness to address losses, we may consider utilizing exclusions and higher retentions. We prefer to provide broad coverage to partners who focus on risk management since that can drive down both losses and premiums.

It would be naive for us to suggest that ports operating 24/7 with increased accumulation exposure are not at risk.

R&I: Accumulation risk in ports, notably those in China, is a concern, according to IUMI’s report. The explosion in Tianjin was such a serious incident on many levels. How likely is it that we could see another event on the scale of a Tianjin and why?

PH: Tianjin was perhaps the perfect storm; however, we need to consider the underlying exposures and regulations that could contribute to a future event. The vast increase in the size of cargo vessels quickly translates to greater exposure per vessel, and significantly greater exposure at major port facilities.  While steamship lines and ports do an exceptional job of quickly and safely moving freight, a relatively simple error of misdeclared cargo (e.g. hazardous materials) could end up causing a catastrophic loss. It would be naive for us to suggest that ports operating 24/7 with increased accumulation exposure are not at risk.

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R&I: Discussions are under way in our nation’s capital on increasing the coastal areas that would be open to oil drilling. After a relatively calm period of drilling exploration, what are the risks and opportunities for energy insureds and their marine underwriting carriers should drilling markedly increase again?

PH: These are very exciting discussions for the marine and energy industries in general. The expansion would require the deployment of fleets for drilling with accompanying support vessels. Further, it is possible that some dormant equipment in the Gulf of Mexico could be redeployed to the coasts. This would also create additional employment opportunities for displaced Gulf oil and gas professionals, and ultimately boost revenue for the sector. As a direct result, marine underwriters would see immediate additional opportunities on these risks that could help grow premiums. There are additional risks associated with possible expansion and these include incidents that cause pollution, loss of life, habitat damage, or impacts to areas not prepared to quickly respond to disasters. Overall, I believe the opportunities outweigh the risks.  I am confident that marine underwriters and risk engineers could help clients mitigate these risks.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]