The 2019 M&A Power Brokers

Inna Ashtamenko
Managing Director
Marsh

Inna Ashtamenko, Managing Director, Marsh

Marsh’s Inna Ashtamenko is lauded for being a very nuanced communicator. Whether it’s in a presentation to a board or to a panel of underwriters, she is super sensitive to her audience and the need to help the risk manager put their best foot forward.

“What sets her apart is that she understands what a risk manager needs to be successful and what the broker needs to be for that risk manager to be successful in the eyes of the executives at their company,” said a veteran risk manager with experience in the energy and transportation sectors.

“She is just very good at understanding the right fit for our team and getting people on the account to just hustle,” he added. “She is on top of it and makes all deadlines.”

In the case of an acquisition, Ashtamenko’s client was the target company, and the acquirer used a different broker. Given the opportunity to compete for the business, Ashtamenko prevailed. The benefits to the combined companies were substantial: A premium savings of more than $3.8 million and a savings of an additional $23 million in collateral requirements to the insurer. Ashtamenko’s team effectively combined the programs while eliminating gaps in coverage and improving coverage in key areas.

A client also said Ashtamenko is very good at seeing past the glittering reputations of some brokers and instead finding the broker, even if they are more junior, who is a much better fit for the deal or the program.

“She is hands-down the best,” the risk manager said.

Jessica Harger
Vice President
Aon

Jessica Harger, Vice President, Aon

Clients give Aon’s Jessica Harger credit for being technically adept but clear enough in her communications that she doesn’t confuse things.

“A lot of brokers are guilty of using too much jargon, which often confuses the client, but Jessica cuts through all that and gets to the heart of the matter,” said Thomas Kim, director and global risk manager, KKR Capstone.

One of Harger’s clients was in a real pinch. They were trying to negotiate a purchase agreement, and the seller was unwilling to provide indemnity for two outstanding tax issues spotted by the buyer.

Harger was able to work with the legal and accounting advisors for both the buyer and the seller to craft a tax insurance solution that shielded the buyer from exposure on both tax issues. Harger feels the $600 million in coverage cobbled together with the backing of 13 carriers is one of the largest tax insurance programs ever placed.

Another client, a publicly traded company in the Fortune 500, was pursuing a merger with a unit of a UK-based public company. The newly combined company would be based in the UK, which might raise flags from the IRS on the grounds that it was an abusive inversion transaction.

In just over two weeks, Harger built an insurance program offering protection against any challenge by the IRS on anti-inversion basis.

Rohan Verma
Vice President
Marsh

Rohan Verma, Vice President, Marsh

When two energy companies merged, Marsh’s Rohan Verma was brought in at the very last minute to consolidate their workers’ compensation and auto liability programs. The companies made it very clear they expected to achieve significant synergies.

Making matters complicated, the companies had divergent approaches to risk transfer products. Verma’s team provided a total cost of risk analysis to get at the best structure for the combined company.

The team hit a home run, achieving a 60 percent rate reduction in the workers’ comp program and a 35 percent reduction on the auto liability program — yes, that’s right, the auto liability program. The team was also able to reduce the total outstanding collateral by 14 percent by selling underwriters on the combined company’s excellent financials and backing it up with analytics.

In the case of yet another large international acquisition, Verma was able to quell the fears of a risk manager who was concerned the excess liability limits for the new company might be inadequate. Verma delivered very competitive pricing in a situation where the program increased its limits by 50 percent.

“Rohan assisted with our complex integration of a company that we acquired,” said one risk manager. “In doing so he capably handled the combination of the policies and analysis of alternative structures, helping us find the most efficient way forward and reducing costs in the process,” the risk manager said.

Jonathan Gilbert
Managing Director
Alliant

Jonathan Gilbert, Managing Director, Alliant

As the long-time M&A practice leader at Crystal & Co., Jonathan Gilbert provided risk management advice for more than 2,000 transactions. In April, privately held Crystal announced it was being acquired by Alliant, but Gilbert will remain at Old Slip in Lower Manhattan.

Recently, Gilbert went to bat for an events management company that suffered a series of financial setbacks.

The company was attempting to sell its portfolio company. But there was a concern that related-party debt would be considered equity by the IRS, and therefore, interest, which was deducted from taxable income over an 11-year period, would be reversed for tax purposes. The exposure amounted to $40 million.

The buyer, of course, had no appetite for taking on an enormous tax bill. Numerous insurance brokers told them risk transfer in this case was an impossibility. The buyers then reached out to Gilbert.

After five months of negotiations, he got it done, delivering a risk solution that allowed the seller to get realization on a 10-plus year investment. This turned the deal into a sweet one for the acquirer.

“I think he very clearly understands the philosophical requirements we have from an insurance perspective, and then he is able to approach it pragmatically from a product perspective in the marketplace,” said one CFO.

“He’s got an extensive, wide knowledge, and on the very rare occasion he needs to research, he always does it quickly,” he said.

Lydia Ramcharitar
First Vice President
Alliant

Lydia Ramcharitar, First Vice President, Alliant

In the area of mergers and acquisitions, Alliant’s Lydia Ramcharitar makes her mark as a specialist in employee benefits consulting.

For a client with a poorly constructed benefit plan, she was brought in to complete due diligence on the plan just two weeks before renewal. What she saw was not pretty.

There was a lack of health care coverage for out-of-state employees; the loss ratio was at 125 percent; and there was a pending 20 percent renewal increase. In just two weeks, Ramcharitar was able to revamp the program. She eliminated all exposure, enhanced employee relations and saved the client $150,000 on their health care spend.

In another instance, Ramcharitar helped a client overcome reps and warranties exclusions in its due diligence process. The seller in the deal got an ACA non-compliance letter with an attached penalty of $630,000. Ramcharitar suggested the seller self-report the error, securing removal of the penalty fee prior to the deal closing.

“I could go on and on, I adore her,” said Elizabeth Woodhouse, AVP of human resources and talent, Walden Behavioral Care.

Woodhouse worked with Ramcharitar while at another company and brought the broker with her when she went to Walden. Ramcharitar was able to take a benefits program that was facing double-digit increases and reduce it to single-digit increases.

“She blew it out of the park in terms of knowledge and resourcefulness,” Woodhouse said.

Harry Wallace
Vice President
Marsh

Harry Wallace, Vice President, Marsh

Among his clients, Marsh’s Harry Wallace is known as an innovator in the art of placing insurance to cover tax liabilities and other obstacles that could scotch a deal if left unaddressed.

“Reps and warranty insurance is still a relatively new product, and lawyers and clients are still getting their arms around how it works,” one client said. “

Harry really adds value by rolling up his sleeves and taking the time to walk through hypotheticals and make suggestions. He does a good job of educating his clients on how to get the most value out of the policy.”

Wallace is viewed as an innovator in creating dedicated tax insurance policies that cover an acquirer if the tax liabilities in a merger or acquisition prove to be greater than anticipated.

He is also credited with creating antitrust policies [along with AIG] that cover the dealmakers for their expenses should regulators decide the deal violates federal antitrust laws and force it to be unwound.

Brought in to assist on a large and fast-moving transaction, Wallace and his team were able to craft a multi-policy solution that insured post-transaction liabilities, enabling the deal to close successfully.

In another case, Wallace heard through the grapevine an acquisition in a foreign country was being frustrated over a perceived inability to purchase R&W insurance in that country. Wallace led a conference call with the deal team and transactional liability experts in the target country, which diffused the objections one by one and enabled the deal to proceed.

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

Finalists:

Sarah Allison
Senior Vice President
Marsh

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.

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 M&A Power Brokers