2018 Power Broker

Pharmaceuticals

Tackling Tough Risks

Grant Bell
Senior Vice President
Marsh, Atlanta

A client of Marsh’s Grant Bell, a relatively new privately held biotech company, has multiple subsidiaries and is acquiring assets but hasn’t yet introduced any products. With such rapid expansion, risk management issues can crop up unexpectedly.

For example, a state recently sought evidence of workers’ compensation coverage at a new subsidiary located outside the client’s state of domicile. Bell “quickly and effectively guided our human resources team in the process,” the client said.

Bell also helped the client implement a system to ensure that it could “remain proactive in procuring specific workers’ compensation solutions or placements” as the company grows and enters new jurisdictions.

The client’s portfolio of coverages includes both public and private company D&O liability programs.

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“Grant and his team delivered significant savings with our most recent D&O public company renewal, achieving more than $200,000 in savings while maintaining both the retention and the total purchased limit,” the client said.

Another client praised Bell for his assistance in defending against a D&O claim.

“We faced a frivolous lawsuit that threatened many aspects of our business,” the client noted. “Grant was quick to organize the team, even connecting us with his firm’s experts on handling D&O carriers in this type of situation.”

The client added: “We have the best broker who can help us navigate any threat to our business from a risk management view.”

Armed with Knowledge

Matthew Grove, CIC, ARM, AIS
Business Insurance Consultant
BB&T Insurance Service, Frederick, Md.

No matter which direction their risks are heading, clients count on Matthew Grove to help manage them.

When Aziyo Biologics was purchasing the assets of CorMatrix last year, its greatest risk management concern was “the generation of certificates of insurance for more than 50 hospitals,” noted Jeff Hamet, VP, finance. Without the COIs, Aziyo’s new salespeople could not have entered the facilities, he explained.

Hamet said that Aziyo’s expectations were exceeded with the “simultaneous close of the deal, binding of coverage and generation of the necessary COI documents.”

Grove’s efforts “ensured a seamless transition with no loss of sales to Aziyo — which would have occurred had we been shut out from the hospitals even for a short period.”

Ed Cordell, former CFO of KeraLink International, praised Grove’s efforts when he came on board as the company was beginning to downsize in 2015.

“Matt inherited our line from a retiring broker at BB&T. He impressed me at our first meeting by being fully briefed on our business and coverages. However, he wanted to learn more” about KeraLink’s industry, competitors and business environment.

A year later, Grove used that knowledge to successfully market the renewal of the downsized KeraLink “as an opportunity in the corneal transplant market and sold the carrier on creating a package that could be marketed to the approximately 50-plus eye banks around the country,” Cordell said.

Leveraging Renewal Opportunities

Natalie Marquess, ARM, CIC, CRM
Senior Broker
Aon, San Francisco

After joining VIVUS Inc. as CFO in 2015, Mark Oki soon realized that the company’s renewals had been treated as a last-minute “perfunctory event.”

That changed after Oki turned to Aon’s Natalie Marquess for the 2016 and 2017 renewals. The renewal process, which began at least three months ahead of the renewal date both years, yielded many coverage enhancements while cutting premiums 41 percent in 2016 and 10 percent more in 2017, Oki said.

Marquess converted the company’s $10 million product liability deductible to a $5 million self-insured retention, giving VIVUS much more control of claims handling with no program cost increase.

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She also secured punitive damages coverage and negotiated a $25,000 deductible within the product liability program for clinical trial exposures — a fraction of the $5 million SIR that losses from clinical trials previously were subject to.

Oki also noted that Marquess understands VIVUS’s potential growth and planned for it by recommending adding a carrier to the company’s tower of insurers.

“It sets us up to have an existing relationship with the new insurer to absorb future growth” of risk.

An official for another client also praised Marquess for her efforts during that organization’s 2016 and 2017 renewals.

The Right Solutions at the Right Time

Lars Sorensen
Director EMEA Life Science & Pharma
Aon, Chicago

When product liability crises arise, Lars Sorensen has the resources to help his clients avert disaster.

Sorensen assisted one multinational client facing a material coverage reduction due to an exchange rate issue. For years, the client had €700 million of limits — or $1 billion of indemnity in the United States — where it generates significant revenue.

But in 2017, greater parity between the Euro and the dollar cut the client’s U.S. coverage by about $250 million.

Stressing that the organization could not shoulder a €200 million uninsured loss, the client noted that finding more than €100 million of additional coverage was a real challenge.

“Lars came with an Aon treaty, allowing us to benefit from an additional €200 million capacity immediately and following the conditions of our lead insurers in product liability without negotiations on wording and pricing,” the client said.

“This allows our company to continue to meet our future financial forecasts.”

For another client facing a claim, Sorenson collected documentation and developed arguments to rebut the plaintiffs’ allegations, ultimately compelling the plaintiffs to drop their claim.

Then Sorensen proactively developed “strategic risk management initiatives to improve internal controls and documentation, especially regarding quality controls,” which will allow the company to more efficiently confront future claims, the client said.

Coming Through in the Clutch

Nick Tait, AU
Principal
Marsh & McLennan Agency, San Diego

A client of Nick Tait’s invested considerable time and resources in a state-of-the-art facility.

Unfortunately, a sprinkler-head malfunctioned shortly before the operation was set to open in mid-2016. The malfunction occurred in the facility’s clean room but flooded the entire plant, causing substantial damage and a significant delay in opening the facility.

The client had business interruption insurance but faced significant complications with its claim.

First, “because the facility had not opened yet, there was not a historical revenue/income number to base the claim on,” the client said, adding that Tait and his team at Barney & Barney, a Marsh & McLennan Agency company, “were invaluable working with me to properly show the forecasts and impact on our income as a result of the flood.”

Recovering the loss of approximately $860,000 was an urgent matter. “Importantly, as a company, we were struggling with cash flow, and the BI claim payment was extremely important to bridge us from point A to point B while we recovered,” the client said.

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“Without a quick and good outcome for us, the company would likely be in trouble.”

Another client praised Tait for shepherding the company through a difficult renewal of its D&O liability insurance coverage while defending itself against a class-action claim.

Tait was able to renew the coverage with an increase in limits “without a meaningful increase in premium,” the client said. “The CEO and board were pleased with the revised D&O program that met our needs and fell within budget.”

Achieving Goals with Tailored Solutions

Darlene Villoresi
Managing Director
Marsh, Morristown, N.J.

When clients need their risk-financing plans fixed, Darlene Villoresi tops their call list.

Teva Pharmaceutical Industries Ltd. began self-insuring its U.S. product liability exposure in 2014 for economic reasons, explained vice president Limor Sagiv, head of global insurance. But after a few years, company officials “were not confident this was the right path,” he said.

Teva wanted insurers, however, to address its top three concerns: wording, deductibles and premium.

Villoresi “suggested a novel concept, and we drafted together a manuscript policy, based on the Bermuda form, which was shared with some key insurers — who are our partners on other lines — for their input,” Sagiv explained.

“After a very long process — over a year — we were able to bind a policy which answered the triple target,” including cutting Teva’s previous commercial program’s deductible by more than two-thirds, Sagiv noted. The program also includes a hedging tool to protect Teva’s balance sheet from a catastrophic event.

Sagiv ascribes Villoresi’s success to her determination, ability to simplify complex matters, skill in managing her team, great relations with markets, and her aptitude for “making things look achievable and possible by creating good process.”

Another client, whose acquisitions over the years required it to maintain multiple product liability programs, turned to Villoresi for an economical risk-financing approach.

Finalist: 

Brett Pizer
Vice President
Marsh, Philadelphia

 

More from Risk & Insurance

More from Risk & Insurance

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.

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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.

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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?

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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.

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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.

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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]