Editor: What changes are you seeing in the Commercial D&O market in the UK and Europe, and what’s driving them?
Vanessa Maxwell: The UK and European D&O market has been tightening for around two years. Class actions against foreign filers have been rising since the global financial crisis of 2007-2008, and increased a full 41 percent between 2014 and 2018. The decade since the global financial crisis has seen settlements against foreign companies increase dramatically, often with Europe leading the pack in total dollars and highest average settlement amounts.
In addition to the increase in class actions, since the crisis, regulators in the UK and Europe have been more aggressive in their enforcement, and many markets in London and Europe did not react quickly to the resulting loss trends, which ultimately necessitated dramatic corrective actions and pullback of capacity from some markets.
While a few years ago it was not unusual to see several carriers participating in large layers on complex D&O risks, the size of these layers have been greatly reduced. For example, at peak capacity, London could offer well over $750 million in capacity. Today, that number is more likely around $250 million to $300 million, and this only for a risk with strong fundamentals.
Generally speaking, European companies can expect current market trends to continue through 2021.
Editor: What is the state of the market for financial institutions?
VM: The financial institutions market is becoming increasingly challenged across the board in the UK and Europe, and banks and insurance companies are feeling the greatest impact of hardening rates and lost capacity as carriers cut back and remediate their portfolios. While these trends were sparked by historical losses, they have been accelerated by the uncertainty of the global public health crisis.
Many companies are dramatically cutting lead lines and markets are managing capacity downwards in response to the volatile claims trends for financial institutions. The fact that many Lloyd’s carriers are already at stamp capacity is furthering pressuring capacity.
Coverage is tightening. For example, many carriers are dropping reinstatements, which had become common during soft markets, particularly on Side A coverage.
Editor: What about the Professional Indemnity market in the UK and Europe?
VM: It’s a very similar and challenging scenario in the PI market. While specifics vary by profession, average rate increases of approximately 15 percent are the norm. We have seen UK rates hardening more quickly than the rest of Europe, however European renewals are by no means immune.
Following the Lloyd decile 10 review two years ago, international PI markets have been looking to improve portfolios and this is likely to continue as markets manage new exposures and work to de-risk, especially when it comes to heavily recession-sensitive business. Claims trends are showing losses eroding high excess layers, causing companies to correct limits. Retentions are increasing and any one-claim limits are increasingly moving to aggregates. Coverage terms are tightening, and we are rapidly seeing that many traditional soft market offerings are no longer available.
The combination of rate increases and terms and conditions improving allow us to achieve a better rate adequacy on the financial lines portfolios. Focusing on these changes means will we be able to offer sustainable long term solutions for customers.
Editor: What do you expect for the financial institutions and professional service sectors in 2021?
VM: Financial institutions can expect more of the same, with aggressive capacity management, less coinsurance on programmes and more single layers from carriers, particularly on larger placements. As some carriers continue to remediate their books, and the economy makes performance of the sector uncertain, companies will continue to see rates rising, coverage restricted and more carriers exiting the space. Financial institutions will find fewer true lead markets in the UK and Europe; BHSI will be here as one of them.
When it comes to those professional service sectors where insurers have been dealing with the consequences of rate pressure since the financial crisis, many markets will continue to struggle, especially in the face of recent economic pressure. This will subsequently drive rate increases and restrictions in capacity while narrowing terms.
As is typical of times like these, we will see a flight to quality as customers and brokers are drawn to a carrier’s stability, long-term view and claims proposition, rather than the cheapest price.
Editor: What is your advice for UK- and Europe-exposed companies looking to optimize programmes at renewal?
VM: Information is power. Companies and brokers should start early – four-to-six months prior to renewal–and communicate, communicate, communicate. Share as much information as possible about their situation, their strategies and their challenges. And get as much information as possible from your insurer. Transparency is key. At BHSI, we are committed to it. We make a priority to have frank conversations with our insureds and brokers and clearly understand the company’s particular exposure, what’s driving it, and be very clear about how it can impact terms and conditions at renewal. This way our insureds know exactly what to expect and how we arrived at our assessment of their risk. They can also actively manage the expectations of their key stakeholders.
This transparency is key to forging partnerships and securing sustainable coverage with the claims and litigation management that is the true underpinning of an effective insurance program in the UK, Europe – or anywhere.
Vanessa Maxwell, Head of Executive and Professional Line, BHSI UK
Vanessa Maxwell has been in the insurance industry for over 18 years, with international market experience working in the US and UK. As head of Executive and Professional lines at BHSI UK, Vanessa is responsible for the strategic build out and management of all financial lines products. Vanessa is an enthusiastic and ambitious individual with an impressive background in business leadership, underwriting excellence and business development & distribution across all lines of Professional & Executive insurance.
For more information, please visit: bhspecialty.com/eu/.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.
Elizabeth Cunningham seemingly had it all. The daughter of two well-established professionals — her father was a personal injury attorney, her mother, also an attorney, had her own estate planning practice — she grew up in a house in Maryland horse country with lots of love and the financial security that can iron out at least some of life’s problems.
Tall, good-looking and talented, Elizabeth was moving through her junior year at the University of Pennsylvania in seemingly good order; check that, very good order, by all appearances.
Her pre-med grades were outstanding. Despite the heavy load of her course work, she’d even managed to place in the Penn Relays in the mile, in the spring of her sophomore season, in May of 2019.
But the winter of 2019/2020 brought challenges, challenges that festered below the surface, known only to her and a couple of close friends.
First came betrayal at the hands of her boyfriend, Tom, right around Thanksgiving. She saw a message pop up on his phone from Rebecca, a young woman she thought was their friend. As it turned out, Rebecca and Tom had been intimate together, and both seemed game to do it again.
Reeling, her holiday mood shattered and her relationship with Tom fractured, Elizabeth was beset by deep feelings of anxiety. As the winter gray became more dense and forbidding, the anxiety grew.
Fed up, she broke up with Tom just after Christmas. What looked like a promising start to 2020 now didn’t feel as joyous.
Right around the end of the year, she plucked a copy of her father’s New York Times from the table in his study. A budding physician, her eyes were drawn to a piece about an outbreak of a highly contagious virus in Wuhan, China.
“Sounds dreadful,” she said to herself.
Within three months, anxiety gnawed at Elizabeth daily as she sat cloistered in her family’s house in Bel Air, Maryland.
It didn’t help matters that her brother, Billy, a high school senior and a constant thorn in her side, was cloistered with her.
She felt like she was suffocating.
One night in early May, feeling shutdown and unable to bring herself to tell her parents about her true condition, Elizabeth reached out to her family physician for help.
Dr. Johnson had been Elizabeth’s doctor for a number of years and, being from a small town, Elizabeth had grown up and gone to school with Dr. Johnson’s son Evan. In fact, back in high school, Evan had asked Elizabeth out once. Not interested, Elizabeth had declined Evan’s advances and did not give this a second thought.
Dr. Johnson’s practice had recently been acquired by a Virginia-based hospital system, Medwell, so when Elizabeth called the office, she was first patched through to Medwell’s receptionist/scheduling service. Within 30 minutes, an online Telehealth consult had been arranged for her to speak directly with Dr. Johnson.
Due to the pandemic, Dr. Johnson called from the office in her home. The doctor was kind. She was practiced.
“So can you tell me what’s going on?” she said.
Elizabeth took a deep breath. She tried to fight what was happening. But she could not. Tears started streaming down her face.
“It’s just… It’s just…” she managed to stammer.
The doctor waited patiently. “It’s okay,” she said. “Just take your time.”
Elizabeth took a deep breath. “It’s like I can’t manage my own mind anymore. It’s nonstop. It won’t turn off…”
More tears streamed down her face.
Patiently, with compassion, the doctor walked Elizabeth through what she might be experiencing. The doctor recommended a follow-up with Medwell’s psychology department.
“Okay,” Elizabeth said, some semblance of relief passing through her.
Unbeknownst to Dr. Johnson, her office door had not been completely closed. During the telehealth call, Evan stopped by his mother’s office to ask her a question. Before knocking he overheard Elizabeth talking and decided to listen in.
As Elizabeth was finding the courage to open up to Dr. Johnson about her psychological condition, Evan was recording her with his smartphone through a crack in the doorway.
Spurred by who knows what — his attraction to her, his irritation at being rejected, the idleness of the COVID quarantine — it really didn’t matter. Evan posted his recording of Elizabeth to his Instagram feed.
#CantManageMyMind, #CrazyGirl, #HelpMeDoctorImBeautiful is just some of what followed.
Elizabeth and Evan were both well-liked and very well connected on social media. The posts, shares and reactions that followed Evan’s digital betrayal numbered in the hundreds. Each one of them a knife into the already troubled soul of Elizabeth Cunningham.
By noon of the following day, her well-connected father unleashed the dogs of war.
Rand Davis, the risk manager for the Medwell Health System, a 15-hospital health care company based in Alexandria, Virginia was just finishing lunch when he got a call from the company’s general counsel, Emily Vittorio.
“Yes?” Rand said. He and Emily were accustomed to being quick and blunt with each other. They didn’t have time for much else.
“I just picked up a notice of intent to sue from a personal injury attorney in Bel Air, Maryland. It seems his daughter was in a teleconference with one of our docs. She was experiencing anxiety, the daughter that is. The doctor’s son recorded the call and posted it to social media.”
“Great. Thanks, kid,” Rand said.
“His attorneys want to initiate a discovery dialogue on Monday,” Emily said.
It was Thursday. Rand’s dreams of slipping onto his fishing boat over the weekend evaporated, just like that. He closed his eyes and tilted his face up to the heavens.
Wasn’t it enough that he and the other members of the C-suite fought tooth and nail to keep thousands of people safe and treat them during the COVID-crisis?
He’d watched the explosion in the use of telemedicine with a mixture of awe and alarm. On the one hand, they were saving lives. On the other hand, they were opening themselves to exposures under the Health Insurance Portability and Accountability Act. He just knew it.
He and his colleagues tried to do the right thing. But what they were doing, overwhelmed as they were, was simply not enough.
Within the space of two weeks, the torture suffered by Elizabeth Cunningham grew into a class action against Medwell.
In addition to the violation of her privacy, the investigation by Mr. Cunningham’s attorneys revealed the following:
Medwell’s telemedicine component, as needed and well-intended as it was, lacked a viable informed consent protocol.
The consultation with Elizabeth, and as it turned out, hundreds of additional patients in Maryland, Pennsylvania and West Virginia, violated telemedicine regulations in all three states.
Numerous practitioners in the system took part in teleconferences with patients in states in which they were not credentialed to provide that service.
Even if Evan hadn’t cracked open Dr. Johnson’s door and surreptitiously recorded her conversation with Elizabeth, the Medwell telehealth system was found to be insecure — yet another violation of HIPAA.
The amount sought in the class action was $100 million. In an era of social inflation, with jury awards that were once unthinkable becoming commonplace, Medwell was standing squarely in the crosshairs of a liability jury decision that was going to devour entire towers of its insurance program.
Adding another layer of certain pain to the equation was that the case would be heard in Baltimore, a jurisdiction where plaintiffs’ attorneys tended to dance out of courtrooms with millions in their pockets.
That fall, Rand sat with his broker on a call with a specialty insurer, talking about renewals of the group’s general liability, cyber and professional liability programs.
“Yeah, we were kind of hoping to keep the increases on all three at less than 25%,” the broker said breezily.
There was a long silence from the underwriters at the other end of the phone.
“To be honest, we’re borderline about being able to offer you any cover at all,” one of the lead underwriters said.
Rand just sat silently and waited for another shoe to drop.
“Well, what can you do?” the broker said, with hope draining from his voice.
The conversation that followed would propel Rand and his broker on the difficult, next to impossible path of trying to find coverage, with general liability underwriters in full retreat, professional liability underwriters looking for double digit increases and cyber underwriters asking very pointed questions about the health system’s risk management.
Elizabeth, a strong young woman with a good support network, would eventually recover from the damage done to her.
Medwell’s relationships with the insurance markets looked like it almost never would. &
Risk & Insurance® partnered with Allied World to produce this scenario. Below are Allied World’s recommendations on how to prevent the losses presented in the scenario. This perspective is not an editorial opinion of Risk & Insurance.®.
The use of telehealth has exponentially accelerated with the advent of COVID-19. Few health care providers were prepared for this shift. Health care organizations should confirm that Telehealth coverage is included in their Medical Professional, General Liability and Cyber policies, and to what extent. Concerns around Telehealth focus on HIPAA compliance and the internal policies in place to meet the federal and state standards and best practices for privacy and quality care. As states open businesses and the crisis abates, will pre-COVID-19 telehealth policies and regulations once again be enforced?
Risk Management Considerations:
The same ethical and standard of care issues around caring for patients face-to-face in an office apply in telehealth settings:
Telehealth can create challenges around “informed consent.” It is critical to inform patients of the potential benefits and risks of telehealth (including privacy and security), ensure the use of HIPAA compliant platforms and make sure there is a good level of understanding of the scope of telehealth. Providers must be aware of the regulatory and licensure requirements in the state where the patient is located, as well as those of the state in which they are licensed.
A professional and private environment should be maintained for patient privacy and confidentiality. Best practices must be in place and followed. Medical professionals who engage in telehealth should be fully trained in operating the technology. Patients must also be instructed in its use and provided instructions on what to do if there are technical difficulties.
This case study is for illustrative purposes only and is not intended to be a summary of, and does not in any way vary, the actual coverage available to a policyholder under any insurance policy. Actual coverage for specific claims will be determined by the actual policy language and will be based on the specific facts and circumstances of the claim. Consult your insurance advisors or legal counsel for guidance on your organization’s policies and coverage matters and other issues specific to your organization.
This information is provided as a general overview for agents and brokers. Coverage will be underwritten by an insurance subsidiary of Allied World Assurance Company Holdings, Ltd, a Fairfax company (“Allied World”). Such subsidiaries currently carry an A.M. Best rating of “A” (Excellent), a Moody’s rating of “A3” (Good) and a Standard & Poor’s rating of “A-” (Strong), as applicable. Coverage is offered only through licensed agents and brokers. Actual coverage may vary and is subject to policy language as issued. Coverage may not be available in all jurisdictions. Risk management services are provided or arranged through AWAC Services Company, a member company of Allied World. © 2020 Allied World Assurance Company Holdings, Ltd. All rights reserved.