Sponsored: Starr Insurance Companies

Rapid Growth in Construction Means Greater Risk — and Demand for Smarter Underwriting

A convergence of new trends and old challenges makes construction riskier than ever. Managing those risks requires an insurer who can adapt to unique needs.
By: | December 3, 2018 • 7 min read

Construction is inherently risky. Large projects, lots of stakeholders, expensive heavy equipment, and dangerous work characterize the industry. More recent trends — like the ongoing labor shortage and the introduction of new technologies amid increased demand in a booming economy — means managing a project’s risks is more complicated than ever.

Total spending in engineering and construction in the U.S. will be up 6 percent by the end of 2018 over 2017, according to construction management consulting firm FMI. The industry as a whole hit 5 percent growth this year. At the same time, though, rising costs of materials drive up the value of property claims, and relentlessly increasing healthcare costs make workers’ compensation coverage more expensive. Managing increased demand amid tightening cost constraints creates opportunities for error.

Several carriers over the past few months have exited construction rather than deal with the complexities. AIG has exited the NY construction market as have a few other domestic carriers. Many are now evaluating their commitment to the construction market.

“The construction industry is moving fast, and the demands on our customers are significant,” said Andrew Robinson, Senior Vice President, Primary and Excess Construction, Starr Insurance Companies. “To serve this sector, you need the technical knowledge to speak with clients on their level, you need to be swift and responsive, but most importantly, you need to listen.”

Andrew Robinson, Senior Vice President, Primary and Excess Construction, Starr Insurance Companies

An emphasis on relationships — in combination with in-house Loss Control and Account Management staff and a suite of both primary and excess products — helps the underwriters at Starr stand out from their competitors. The insurer’s flat management structure and status as a privately-owned company also position it to respond more efficiently to the construction industry’s rapidly changing exposures.

The following three case studies demonstrate how Starr’s collaborative approach helps clients overcome critical challenges at a time when many underwriters are having difficulty managing the complex long-tail exposures inherent to construction risks:

Case Study I: Finally, an insurance company that cares about us

Transparent communication from the beginning sets the stage for an open and trusting relationship. Large carriers tend to have a predefined, institutional approach to insuring a new project that emphasizes the insurer’s expertise and resources over the project owner’s.

“That works for some folks, but it doesn’t work for a lot of our clients,” Robinson said. “So we integrate the insured’s preferences, processes and culture into our solution.”

Many insurance companies may make similar claims, but Starr’s flat structure enables its Construction underwriters to sidestep much of the bureaucracy that stymies legacy institutions and work with clients more nimbly. Robinson described how the company’s approach of listening first won over a recent new client.

“A prospect came to us who was unhappy with their carrier’s claims practices. So we mustered all of our service folks and had a three-city, eight-person conference call — the client, the broker, and our team,” Robinson said. “As you can imagine, everyone on a call like that is there for a reason and has their own vested interest in the outcome. You would expect everyone to want to get their two cents in. But that’s not what happened.”

Robinson knows that in the end, his business is about how the claim is managed. So he made sure that Starr’s head of claims engaged the prospective new client’s risk manager directly. They ended up talking for 45 minutes (while everyone else kept quiet) discussing the client’s claims challenges and what they expected of a carrier, exchanging claims-handling philosophies, establishing mutual expectations around what Starr and the policyholder could deliver, and where third-party services might be needed.

“There was a shared sense of ‘we’re in this together,’” Robinson said. “Ten minutes after the call, the risk manager told us he was all in with us. It was the first time he felt that his insurer was his partner and actually cared about what he had to say.”

Case Study II: What are you going to do to us?

Commitment to lasting partnerships also requires an appreciation of the performance of a company’s risk management program over the long term. When a six-year client of Starr’s came in for their renewal meeting just one month after a severe claim involving a fatality, the company’s CEO expected the worst.

“The CEO came to the table looking ashen and said he could barely sleep because he was convinced we were going to ‘jack up’ his premium. Soon after we walked in, he asked ‘What are you going to do to us?’” Robinson said. “We told him, ‘Yours was a well-run, well-managed company before the claim and that hasn’t changed. We’ve had a good relationship over the past six years. Why would one claim change our approach?’ Sometimes, things happen. But one incident shouldn’t completely shake the foundation of that relationship.”

The conversation pivoted away from the claim and focused instead on what projects the company had in the works for the upcoming year.

“Our relationships mean a lot to us,” Robinson said. “We can’t be reactionary, because we know our clients have a lot of other options out there. There’s a reason they stick with us year over year and that’s why our client retention rate is 90 percent.”

Case Study III: Building the “Starr CIP Enterprise”

The advantages of the Starr platform are best demonstrated when it comes to solving particularly tough market challenges.

In construction, project owners increasingly opt not to package every policy together, but nonetheless want to ensure that their coverages are unified and gap-free. While some carriers offer a GL-only primary product customized for single projects, none could offer companion excess coverage that seamlessly aligned with the primary program.

“We listened to what our brokers and clients were asking for, which was essentially combined primary and excess coverages that they could obtain from a single carrier. A one-stop shop solution,” Robinson said.

Building a new primary product that would click with existing excess coverage was no easy feat. Underwriters and claims professionals had to come together to shape coverage that would fulfill client demands without jeopardizing Starr’s bottom line. But despite differing perspectives, the team got it done.

“We knew we had to get this done for our clients, so we put our heads down and went to work. Because of our leadership position in the excess construction market, and because we have the technical underwriting expertise, we can now offer up to $12 million in concurrent, customized coverage,” Robinson said.

The new controlled insurance program — aptly named Starr CIP Enterprise — is offered exclusively through a distribution channel of 40 wholesalers. Since its launch earlier this year, it has received immediate and immense favorable reviews. Starr, within three months of launching the product, had 120 submissions and had bound four primary and excess deals totaling $4 million.

“We were able to assemble this coverage and bring it to market within a few months in part because of our flatter corporate structure. Larger institutions typically find it harder to push new products through on tight timeframes because there are simply more people and processes involved,” Robinson said.

Collaboration and Consistency Are Cornerstones of Success

All of these characteristics — communication, trust and responsiveness — are products not just of scale and technical expertise, but of Starr’s culture of collaboration.

“Everyone here is willing to roll up their sleeves and work together to get a job done. We’re all governed by the mission of providing what’s best for our clients,” Robinson said. “There’s that sense that, when you pick up the phone and ask for help, the person on the other end will drop what they’re doing and contribute to the process.”

That culture has contributed to Starr’s low turnover rate. The construction division staff hasn’t changed much for the last 10 years. That translates into a consistent customer service experience for clients.

“If you’re a client of ours, you’re talking to the same person any time you have a question,” Robinson said. “In the dangerous world of construction, you want stability, continuity and consistency from the people who are supporting you and your projects.”

To learn more, visit http://www.starrcompanies.com/insurance/constructionoverview



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

Starr Insurance Companies is a global commercial insurance and financial services organization that provides innovative risk management solutions.

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.


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]