Sustainable Energy in Lower-Income Neighborhoods: A Daunting Coverage Challenge This Broker Aced

How Ten Eyck Group’s Greg Barcomb helped a triple-bottom-line climate technology company secure a triple win in New York City.

By: David Agnew | March 7, 2023

Fossil fuels still account for 60% of the U.S.’s energy production, and replacing them with renewable sources may be the foremost environmental project of the century. Much of this transition will play out at the level of power plants — but what about older buildings that run on oil and natural gas? The aging structures most in need of electrification often cluster in the communities that can least afford it.

One of the most efficient ways to convert older buildings to electric HVAC is by installing heat pumps that transmit warmth between indoors and out — not unlike a refrigerator. While lowered energy bills mean that heat pumps can pay for themselves in a matter of months, there’s still the question of who will front the cost of installation.

An Opportunity for the Ages

Donnel Baird founded BlocPower in 2014 with the goal of electrifying buildings in low-income neighborhoods. Because upfront costs can deter property owners, BlocPower also offers financing: Once a building is electrified, heating costs go down, building owners save money, investors are reimbursed, and we all enjoy cleaner air.

Even better, BlocPower represents an opportunity to bring jobs and paid training to lower-income neighborhoods. It was this that drew the attention of the New York City Mayor’s Office of Criminal Justice. In 2021, with a grant from the mayor’s office, BlocPower initiated a massive workforce development program, using its work sites as a milieu for skills training, with the ultimate goal of reducing gun violence. Ten Eyck Group’s Greg Barcomb was on a family vacation when he got the call that BlocPower would require a new endorsement — and fast.

“Just to be clear why Greg was amazing on this, it’s because this was an emergency contract,” said Keith Kinch, BlocPower cofounder and general manager. “It was a June day when they told Donnel and I, ‘We want you to run this program for a year’ … We were working with Greg and Ten Eyck Group already, and we were like, ‘Hey guys, this is very last-minute, but to be able to access this contract, we need an extra $2 million in insurance that covers the LLC, covers our nonprofit, covers the workers, meets the city’s requirements. Can we get this done before July 4th weekend?’ ”

Added to the compressed timeline was the fact that BlocPower was not yet a decade old. “It was a very rapidly growing startup that didn’t necessarily have the policy loss-run history, the procedures, the staffing,” Barcomb said. “They didn’t have all of these foundational risk control elements in place that underwriters are looking for.”

Complicating matters further, New York law and the program’s focus on individuals at risk of gun violence meant trainee background checks were out of the question. “When we look at hiring, [insurers] want to see those controls,” Barcomb explained. “What are you doing, from screening, background checks and checking the National Driver Registry? What risk mitigation techniques are you using to lower your exposure associated with hiring these employees? We didn’t have any of that.”

Finding a Way Forward

Fortunately, BlocPower’s corporate structure offered some assistance. The organization is divided into two legally separate entities: the for-profit side that carries out the business of converting old buildings to electric HVAC, and the nonprofit side that operates workforce training programs like this one.

“Greg put an insurance program together for us based on us being a developer,” said Cullen Kasunic, project finance officer at BlocPower. “How much does our liability shift by having these employees at one entity versus another?”

From there, it was a case of reporting what trainees would be doing in as much detail as possible, giving insurers a clear picture of the risks involved.

“Would people be driving cars?” Kasunic continued. “What type of tools would they be using? Would they be working on our jobsites or other people’s jobsites? City jobsites? Each of these has implications for what we needed to insure.”

“We were able to endorse the current BlocPower policies with a lot of communication with the underwriters to understand what exactly this exposure was,” said Barcomb, his efforts earning him a 2023 Renewable Energy Power Broker® award.

His agency also threw the weight of its own reputation behind the project. “[Insurers] knew the Ten Eyck Group, and [the fact that] we were helping BlocPower go through this process helped in that comfort level with the carriers,” Barcomb said. “They weren’t out there doing this on their own — they had good risk advisement, they had good insurance experience representing them.”

Other backers also lined up to show support: “We had the City of New York send a letter to the insurers explaining the program,” Kinch said. Goldman Sachs Urban Investment Group — a lead BlocPower investor — also thoroughly vetted the project. “If Goldman was able to vouch for us, and the City,” Kinch said, “that also alleviated some concerns for the insurance folks as well.”

Backed by Believers

In fact, the NYC Mayor’s Office has already expanded BlocPower’s grants into the middle of 2024, and Kinch is optimistic they will be extended still further. “We’re in month 18 of the program, and we’ve engaged 3,000 New York City residents around training,” Kinch said. “As of today, we were able to get full-time hires for 450 of those folks.”

Gun violence has also dropped in the neighborhoods where the program operates. “Anyone can claim indirect correlations,” Kinch said, “but you and I both know, if we’re working nine to five, we’re not available to commit a crime or for a crime to be committed against us.” Other cities are also eyeing the program, looking to replicate its success.

“It’s the greatest thing I’ve done in my professional life,” Kinch mused. “More than ever, I’m thankful for people who worked with Donnel and I … when we were still trying to figure it out, or it was hard to buy in. I think about the insurance folks … I would not forget the folks who were with us early on.” &

David Agnew is an associate editor at Risk & Insurance®. He can be reached at [email protected].

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.

By: Risk & Insurance | April 3, 2024

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.