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Solving the Complicated Risks of Mid-Sized Financial Institutions

Mid-sized companies need partners to give them an advantage when it comes to protecting against risks.
By: | March 1, 2019 • 8 min read

No matter their size, financial institutions are characterized by complex risk portfolios.  Real estate funds will have a litany of property exposures. A venture capital firm investing in startups may have unique technology risks. Banks are subject to intense regulatory scrutiny and are frequent targets of cyber attacks. All of these institutions are highly exposed to professional liability risks.

And yet, many mid-sized financial institutions lack the risk management resources necessary to manage these exposures.

“Institutions in the middle market space often face risks just as complex as the large financial organizations, but they don’t always have robust risk management departments,” said John Burkhart, SVP, Head of Professional Lines and Industry Verticals, QBE North America. “As a result, they get less specialized attention from the insurance market than they deserve, even though they could benefit the most.

“That’s why we are looking to serve this tier with an integrated model that will address every aspect of their risk management needs.”

The term “integrated” has become an insurance industry buzzword, although it means different things to different companies.

Some carriers use “integrated” to dress up what is simply cross-selling. “Some think of integration as finding opportunities for separate business units to sell their products together to the same client,” Burkhart said. “But that doesn’t allow for synergy of services. To QBE, to be “integrated” means to have a dedicated business unit that can manage risk more effectively and deliver an end-to-end solution.”

Meaningful risk management integration applies through the entire insurer-insured relationship from underwriting to loss control to claims management. These four attributes demonstrate this approach to integration and how it can help mid-sized financial institutions solve risk management challenges:

1. Underwriting and claims coordination ensures policies respond as they should.

John Burkhart, SVP, Head of Professional Lines and Industry Verticals, QBE North America

When underwriters and claims professionals share the same interpretation of policy wording, it delivers a smoother client experience when a claim does happen.

“Integrated specialization at QBE means one leader, one team and a single accountability around solving customer problems, backed up by expert claims professionals. Our approach eliminates silos and the inherent disconnect from the customer that those silos create,” said Stacey Meade, SVP, Head of Financial Institutions, QBE North America.

Claims professionals are in the room when underwriters are crafting new solutions, ensuring that there is no gap between the underwriter’s vision and the claim manager’s understanding of what’s covered. Because the value of an insurance policy is delivered in the claims experience, the input of claims professionals during the underwriting process helps to proactively shape that experience.

“Our claims professionals can explain how a claim would move through a client’s organization under different policy constructs. The ease of the claims process is not just about breadth of coverage, but how well that coverage is applied to an organization,” Meade said.

That insight is crucial for financial institutions who lack internal insurance expertise and who may benefit from additional education around the way coverage can be applied in different scenarios.

2. A single point of contact simplifies every communication.

Stacey Meade, SVP, Head of Financial Institutions, QBE North America

Seamless cooperation between underwriting and claims also enables clients to have a single point of contact. Questions get answered faster, and the answers are consistent.

On the underwriting side, there are no silos pigeonholing experts into buckets of professional liability, property, cyber, etc. When a customer wants to know how one exposure overlaps with another, and how their policies interact, they do not have to call multiple people to solve the puzzle.

“They don’t need to have four different conversations regarding four different exposures relative to a claim,” Burkhart said. When a claim does inevitably happen, a single claims contact also helps to keep everything on track and minimize the stress that can be inherent in the process.

“Whether it’s a property, auto or D&O claim, they are all shepherded through the organization through one person,” Burkhart said. “Companies in the middle market space unfortunately don’t always get that level of concierge service from their insurer.”

“What QBE is doing is very different than a traditional industry silo approach. They continue to be one of our top partners by offering financial institution products with a deep level of expertise into complex FI businesses and the risks these institutions face.”
— Betsy Spalla, JD, Senior Vice President, Hays Companies

3. Comprehensive loss control services are integral.

When insurers are truly integrated, the loss control services that normally come as a value-add are instead considered a more integral part of the risk management approach. Rather than a separate piece of business, loss control is part of the continuum of the carrier-client relationship.

“The better we get to know a client’s business, the better we are as a partner in terms of identifying and addressing potential problems they could encounter,” Meade said.

“Our claims staff is very experienced, so they’ve seen complex losses before. They understand where tough claims come from, and they want to look for solutions that solve a problem before it manifests,” Burkhart said. Those problems can originate from a number of corners: unsafe driving behaviors; a mismanaged workers’ comp program; a portfolio of properties with unaccounted flood exposure. The list goes on.

“Providing risk assessment tools, educational services and a full suite of loss control resources is another step in the problem-solving process,” Meade said.

“Our goal is to not just be an insurance provider, but an extension of the risk management department.”

4. Bespoke solutions demonstrate integration at the client level.

Acting as an extension of a client’s team means taking the initiative to solve a problem on their behalf, without waiting to be asked to do so. Leveraging industry-specific expertise to build custom solutions is an example of superior client-level integration.

When one real estate investment company was looking for property coverage, for example, it was turned down by nearly every carrier that its broker reached out to. This was likely due to the underwriters looking at the submissions were more junior — as is often the case with smaller accounts — who felt the exposures that were involved were too complex for them to handle.

“Our underwriter understood the complexity of the risk and knew he could write it, but he understood that there were issues that needed to be addressed first. He called the broker and requested a meeting to review those issues and figure out how to make a policy work for that client,” Meade said. “The result was that the underwriter was able not just to take on the risk, but to craft a proposal that was tailored specifically to that insured.”

“They have a high level of authority. They have a high level of expertise. And they are very comfortable tailoring bespoke solutions as required by the complexities of the market that we’re serving,” Burkhart said of QBE’s financial institutions team of underwriters, whose average tenure is 18 years.

Clients Recognize that Specialized Expertise Makes the Difference

A truly integrated model gives financial institutions access to a complete, end-to-end solution, and it’s predicated on a dedication to specialization. QBE’s Integrated Advantage for Financial Institutions — a new vertical dedicated to this sector — is possible only because of the strength of the bench of both the underwriters and claims professionals.

Rather than specializing in EPL, D&O, property or workers’ comp lines of insurance, they instead have an intimate understanding of the financial institutions sector as a whole, and how all of these pieces fit together. That is what it means to be an integrated specialist insurer, and clients have already recognized the unique advantages of this approach:

“What QBE is doing is very different than a traditional industry silo approach.” said Betsy Spalla, JD, Senior Vice President, Hays Companies. “They continue to be one of our top partners by offering financial institution products with a deep level of expertise into complex FI businesses and the risks these institutions face. Additionally, by giving us access to one team, this will create an all-encompassing solution that we have confidence in because it is led by a dedicated experienced FI leader. We look forward to this vertical creating a seamless experience with underwriting, claims, risk solutions and product and are excited to continue to partner with them to serve our customers.”

To learn more about the QBE Integrated Advantage for Financial Institutions, visit https://www.qbe.com/us/specialty/financialinstitutions.



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

QBE North America is a division of QBE Insurance Group Limited, one of the world's 20 largest insurance and reinsurance companies. We offer the unique integration of financial strength, a broad product set and sophisticated capabilities to deliver value for our partners and policyholders.

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 and 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]