2014 Power Broker

Construction

Building Upon Strengths

Craig Graham, CPCU, ARM, CRIS Senior Vice President Alliant Insurance Services, Los Angeles

Craig Graham, CPCU, ARM, CRIS
Senior Vice President
Alliant Insurance Services, Los Angeles

Craig Graham secured an unheard-of deal for a contractor that was building a tunnel underneath a rail yard for a railroad, while simultaneously constructing several high-rise buildings that rested on a platform over the yard, for a real estate developer. An owner-controlled insurance program covered the building project, but it was not economically feasible for Graham to roll the tunneling project into that program, as the railroad’s coverage demands did not give consideration to the world’s “most difficult” New York construction insurance market.

Graham, senior vice president at Alliant Insurance Services, then convinced the OCIP carriers to also participate in a “relatively affordable” contractor-controlled insurance program for the tunnel, by demonstrating how the contractor could enhance safety on both projects, and how claims management could be coordinated.

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“Craig Graham crafted some really creative solutions to the more problematic markets, such as New York State with its challenging labor laws,” said Bill Buchan, vice president, risk management, at Tutor Perini Corp. “Often the coverages can be very expensive and placing them is a challenge, but he’s been very creative structuring a solution to minimize costs and maximize coverages.”

Graham was able to secure a comprehensive OCIP with “very fair pricing” for the Los Angeles Unified School District, by thoroughly explaining the district’s claims and safety services, said Robert Reider, director of risk finance.

Changing the Game

Paul Healy, CPCU National Practice Leader Aon, Boston

Paul Healy, CPCU
National Practice Leader
Aon, Boston

One of Paul Healy’s clients wanted to bid on construction projects on U.S. military bases in Japan, but the bid specifications referenced the Japan Ministry of Finance approved list of surety companies — which didn’t actually exist, making it impossible for non-Japanese companies to bid on the work. Given the U.S. Army Corps of Engineers was the ultimate owner for these projects and a U.S.-based company with a local office in Japan wanted to bid the work, Healy had to get the agency to change the bid specifications.

To accomplish this, Healy, national practice leader, Construction Services Group at Aon, prompted several U.S. surety companies and their industry trade association to lobby for some political pressure on the Corps’ head office in D.C., to prevail upon the agency’s Japan-based representatives to make the bid requirements reasonable. The agency eventually agreed to change the bid specifications to accept surety bonds from companies on the U.S. Treasury list of approved sureties, in addition to the referenced Japan Ministry of Finance list.

“Paul Healy has been very helpful getting us a bond in Japan,” the client said. “He’s also helped us evaluate various prospective joint-venture partners from a financial perspective.”

“Paul Healy is a strong advocate for us,” said Robert Alger, president and chief executive officer of Lane Construction Corp. “He’s been fabulous to work with and really has the clients’ best interests at heart.”

“Paul was very helpful in placing three new, fairly complex surety agreements for us,” another client said.

Collaborative Excellence

Keith Jurss Senior Vice President Willis, Chicago

Keith Jurss
Senior Vice President
Willis, Chicago

Last year, Keith Jurss was hired to help secure a cutting-edge professional liability policy for a Fortune 100 “diversified international family entertainment and media enterprise” that had started to use the integrated project delivery method on its capital improvement projects.

The IPD method, which requires a multiparty contract between the project owner, designer and contractor, incorporates mutual waivers of liability and financial incentives for the parties to work collaboratively to deliver the project on-time and on-budget.

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However, because of select contractual provisions, the corporate professional liability policies of the design and construction team would not respond appropriately, thus requiring a project-specific alternative.

Jurss, senior vice president at Willis, was able to help underwriters understand the contractual incentives built into the program, and to convince them that the IPD team was truly committed to working collaboratively. Jurss then customized the project solution utilizing a variety of coverages from select carriers. The result was a solution that gave the design and construction team protection for rectifying design and construction errors without having to bring suit against each other. The solution also incorporated best-in-class professional liability coverage to protect against potential third-party claims.

“The challenging element of an IPD is the lack of a mature insurance marketplace,” the client said. “Since my organization has a very active creative and design process on some pretty unique projects, we had a short timeline to have something in place by May.”

En Route to Top-Notch Service 

Jamie Pincus, CRIS Vice President Wells Fargo, Washington, D.C.

Jamie Pincus, CRIS
Vice President
Wells Fargo, Washington, D.C.

Jamie Pincus, vice president and account executive commercial at Wells Fargo, goes far beyond the call of duty.

For the Metropolitan Washington Airports Authority — which oversees the Dulles International and Ronald Reagan National airports, the Dulles Toll Road, and Dulles Corridor Metrorail Project in the D.C. area — Pincus helped with the transition of the aviation owner-controlled insurance program and the implementation of a rail OCIP.

On the authority’s projects, Pincus scheduled vendor, contractor and subcontractor information sessions to ensure that “clear, open communication occurs internally and externally.” She has also deployed a Wells Fargo Insurance loss control/safety specialist to ensure protocols are being followed at the authority’s numerous worksites. Pincus and her team provided similar attentive services for the OCIP of the Maryland Transit Administration.

“The scope and size of our projects and the amount of administrative detail is staggering, but Jamie does an excellent job,” a client said. “She’s very adept at coverage analytics and has superior technical abilities.”

For Swire Properties’ Brickell CityCentre construction project in Miami, Pincus advocated for the placement of webcams with 24/7 surveillance and a process to badge contractors for secure worksites. “Jamie Pincus is outstanding — she has been able to put in a very unique insurance program for us and she’s saved us a lot of money,” said David Gross, construction accountant for Swire Properties.

BlueBar

LBR_ResponsiblityLeaderBLUE_logo-175A Family Effort

Wells Fargo’s Jamie Pincus is a firm believer that the best insurance policy is the one that you might never need.

“In the construction industry, it’s not just about the insurance placement, it’s about the people working on the construction site, providing a safe environment and seeing something develop that others will benefit from and there must be a business understanding of what our client is looking to accomplish,” Pincus said.

Pincus is a big believer in voice-to-voice communication with clients.

“Email is efficient but a lot gets lost in electronic delivery,” she said.

Pincus serves as a mentor to young professionals, not just handing down instructions but giving them the tools to do their jobs better.

“I lead by example. There is nothing I like better than digging into a policy to learn about what coverage is provided and researching a client’s exposure to have a complete understanding about their risk,” she said.

“I’ll do this as a mentor on a daily basis to demonstrate good service.”

In her community, Pincus involves her family in her efforts to help the less fortunate. Her eldest daughter recently joined her and other Wells Fargo team members to deliver groceries and prepared meals to 77 families in the Washington, D.C. area.

She brought all three of her daughters along for a more recent project, painting and repairing the house of a family in need.

BlueBar

Expertise in Action

Susan Schwartz, CPCU, ARM Director Aon, St. Louis

Susan Schwartz, CPCU, ARM
Director
Aon, St. Louis

One of Susan Schwartz’s clients partnered with two other contractors for a large construction project, but the disparity between the contractors on how to handle insurance for the newly formed limited liability company was holding up finalizing the contract.

To help get the $70 million project started, Schwartz, a director at Aon, discussed the completed operations extension with underwriters, negotiated more favorable coverage and pricing terms, met with the contractors and their brokers to discuss the insurance program, and worked out an equitable broker compensation solution.

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Schwartz met regularly with another client to discuss estimates for coverage and pricing of a contractor-controlled insurance program at various loss ratio levels, and detailed the merits of project-specific coverage for various lines including professional liability, pollution liability, builders risk and contractor default insurance, potentially saving the client more than $500,000.

“With short notice, Sue was able to work with my company and team leaders from other companies and brokerage firms to develop a comprehensive strategy and risk solution for a complex joint venture project,” said Kathy Norris, director of risk management at Fred Weber Inc. “Her clear view and analysis of situations coupled with her can-do attitude, professionalism, and her willingness and ability to listen to the opinions of others and share ideas make her a valuable resource.”

“Sue Schwartz is by far the most knowledgeable when it comes to construction issues and coverage,” said Monica Settle, insurance risk manager at Western Construction Group.

Powerful Platform

Matthew Walsh Managing Director Aon, Chicago

Matthew Walsh
Managing Director
Aon, Chicago

Matthew Walsh was tasked to respond to a significant uptick in large, complex construction projects undertaken by both private and public sector clients throughout the world.

Walsh, managing director, brokerage practice leader, global/complex clients, Construction Services Group at Aon, built a unique analytics and brokerage platform to address the risks in these complex global projects, including rapidly changing laws impacting construction risk, geographic challenges from catastrophe, and increasingly complex project delivery methods that blur the lines of responsibility between project owners, designers and contractors. It can be used to address various unique legal challenges in some of the world’s most challenging construction liability jurisdictions, or structured for global responsiveness to a single owner undertaking projects simultaneously.

“Matt Walsh goes above and beyond to meet his clients’ needs,” said Ted Wickenhauser, vice president, risk management at McCarthy Building Cos. “He does a phenomenal job at being a client advocate as well as liaison between the markets and his clients. He is never afraid to confront any challenging situation head-on, take ownership of it and move it toward resolution.”

“Matt is very knowledgeable on construction management, as well as the insurance industry,” another client said. “I also think he’s extremely talented from a people skills standpoint, and he’s highly regarded at all levels of the insurance industry.”

BlueBar

LBR_ResponsiblityLeaderBLUE_logo-175A True Team Leader

The global upturn in commercial construction is, on the face of it, good news.

But many of our risk management sources caution that there is great risk in this upturn. Geographic challenges in catastrophe-prone areas and rapid changes in laws governing construction risk are just a few of these factors. Aon’s Matthew Walsh has built a unique analytics and brokerage platform tailored to address the risks of stakeholders in  complex, global undertakings.

Walsh’s base in his 25 years in the business is Chicago, which as a venue ranks as either first or second in construction liability risk from year to year. He feels he’s learned a lot about the business, which is why he is so passionate about passing his knowledge on to a new generation of brokers.

“What has remained constant is that you need a vast team, with vast knowledge and access to vast resources to deliver in these environments,” Walsh said.

“Going it alone was, and never is, an option; it’s all about our team and always will be,” he said.

“At present, I am privileged to have a talented group of young people recruited from our career development program, and young leaders from the construction risk management community, to develop a new generation of construction risk tools delivered through a web portal environment.”

BlackBarFinalists:

Donna Allard-Flett Senior Vice President Aon

Donna Allard-Flett
Senior Vice President
Aon

Gavin Hurd Managing Director Wortham Insurance

Gavin Hurd
Managing Director
Wortham Insurance

Tim McGinnis Senior Vice President Willis

Tim McGinnis
Senior Vice President
Willis

Vincent Zegers Managing Director  Marsh

Vincent Zegers
Managing Director
Marsh

Michael White Senior Managing Director Beecher Carlson

Michael White
Senior Managing Director
Beecher Carlson

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2016 Power Broker

Power Broker Rising Stars

The class of 2016 impresses with its size and quality.
By: and | March 1, 2016 • 3 min read

Judging the talent employed by commercial insurance brokers leads us to one conclusion; optimism is the order of the day.

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As we discovered this year, not only are the ranks of high-achieving younger brokers as strong as ever, they are increasing in number.

We’ve renamed our Power Broker® “Under 40” category to “Rising Stars” to better celebrate this wave of talent and to focus on an important point. Yes, this is a younger group of professionals, all of them under 40, but it’s more on point to think of them as the future leaders of this profession.

As Power Broker® winners and finalists, this set of Rising Stars demonstrated a superior level of creativity in finding solutions for their clients, unflagging customer service and a devotion to learning more about their industry.

Just four years ago, the number of brokers honored by this designation hovered around 40. Last, year, there were 54 Power Broker® winners and finalists recognized in the Under 40 category.

Over the next few pages, you will see the names and affiliations of 77 brokers we recognize as Rising Stars. Since the launch of this category in 2009, more than 250 brokers under 40 received the designation.

The average age of the Rising Stars designees is 36. They represent a powerful wave of talent that is bolstering a profession, which like many other professions will be challenged to replace talent as the baby boomers retire.

For this group of Rising Stars, a career in commercial insurance brokerage is a compelling challenge that results in rich rewards.

“I really enjoy telling ‘the story’ on behalf of my client to the insurance carrier, to pique their interest in an account,” — Ashley De Paola, assistant vice president, Alliant

We first came to know Lockton’s Christopher Keith when he broke into the Power Broker® ranks as a winner in the Workers’ Compensation category in February 2013.

In those days, Keith worked for the Philadelphia-based Graham Co. Keith, 39, said it’s the “entrepreneurial” nature of the business that he finds so rewarding.

“I like the fact that I am managing my own profit and loss statement,” said Keith, who this year achieved Power Broker® status in the Aviation category.

Ashley De Paola, assistant vice president, Alliant

Ashley De Paola, assistant vice president, Alliant

At Lockton’s annual President’s Dinner, he was recognized as the “prototype” Lockton producer.

“I’m very proud of that,” he said.

Alliant’s Ashley De Paola, 33, a 2016 Power Broker® in the Real Estate category, said it’s the quick-paced, evolving atmosphere of commercial insurance brokerage that excites her.

“I really enjoy telling ‘the story’ on behalf of my client to the insurance carrier, to pique their interest in an account,” De Paola said.

Earlier in her career, a client expressed his concern over her age and experience. Her review of his insurance program changed his mind.

“It was very rewarding when he later asked me to work on his business,” she said.

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Beecher Carlson’s Joe Roberta, a 2016 Power Broker® winner in the Private Equity category, has several reasons he likes working in this industry. Top of the list is that this is a very “social industry.”

“I truly enjoy working with people that I’ve been fortunate enough to build long-term relationships with,” he said.

Justin Wiley, 32, Power Broker® winner in the Public Sector category, works for Arthur J. Gallagher & Co., which prides itself on its mentoring efforts.

The company sent Wiley to Orlando, Fla., to work with veteran Rich Terlecki, himself a multiple Power Broker® winner.

“My goal was to learn and gather from him as much intellectual capital as possible,” Wiley said.

Clearly, Terlecki taught him well.

The 2016 Power Broker® Rising Stars

Morgan Anderson, 38 Arthur J. Gallagher Irvine, Calif. Real Estate

Morgan Anderson, 38
Arthur J. Gallagher
Irvine, Calif.
Real Estate

Peter Ballas, 33 Aon Morristown, N.J. At-large

Peter Ballas, 33
Aon
Morristown, N.J.
At-large

Brooke Barnett, 37 Marsh Los Angeles Entertainment

Brooke Barnett, 37
Marsh
Los Angeles
Entertainment

Herman Brito Jr., 26 Marsh New York Marine

Herman Brito Jr., 26
Marsh
New York
Marine

John Byers, 34 Aon Franklin, Tenn. Employee Benefits

John Byers, 34
Aon
Franklin, Tenn.
Employee Benefits

Sandy Carter, 32 Beecher Carlson Atlanta Automotive

Sandy Carter, 32
Beecher Carlson
Atlanta
Automotive

Brandon Cole, 31 Arthur J. Gallagher Irvine, Calif. Nonprofit

Brandon Cole, 31
Arthur J. Gallagher
Irvine, Calif.
Nonprofit

Edward Conlon, 37 Aon New York Financial Institutions

Edward Conlon, 37
Aon
New York
Financial Institutions

Chris Connelly, 32 Arthur J. Gallagher Orlando, Fla. Public Sector

Chris Connelly, 32
Arthur J. Gallagher
Orlando, Fla.
Public Sector

Anne Corona, 38 Aon San Francisco Technology

Anne Corona, 38
Aon
San Francisco
Technology

Cara Cortes, 35 Aon Pittsburgh At-large

Cara Cortes, 35
Aon
Pittsburgh
At-large

Uri Dallal, 37 Aon New York Financial Institutions

Uri Dallal, 37
Aon
New York
Financial Institutions

Ashley De Paola, 33 Alliant New York Real Estate

Ashley De Paola, 33
Alliant
New York
Real Estate

Brian Dougal, 38 Aon San Francisco Real Estate

Brian Dougal, 38
Aon
San Francisco
Real Estate

Justin Dove, 29 Arthur J. Gallagher San Francisco Real Estate

Justin Dove, 29
Arthur J. Gallagher
San Francisco
Real Estate

Patrick Drake, 27 Aon Southfield, Mich. Utilities, Alternative

Patrick Drake, 27
Aon
Southfield, Mich.
Utilities, Alternative

Dan Edelstein, 37 Willis Towers Watson New York Manufacturing

Dan Edelstein, 37
Willis Towers Watson
New York
Manufacturing

Tim Farward, 36 Marsh Philadelphia Utilities, traditional

Tim Farward, 36
Marsh
Philadelphia
Utilities, traditional

Larissa Gallagher, 28 Aon Southfield, Mich. Manufacturing

Larissa Gallagher, 28
Aon
Southfield, Mich.
Manufacturing

Dominic Gallina, 39 Aon New York Real Estate

Dominic Gallina, 39
Aon
New York
Real Estate

Kevin Garvey, 37 Aon Cleveland Automotive

Kevin Garvey, 37
Aon
Cleveland
Automotive

Matthew Giambagno, 26 Marsh, New York Energy/Downstream

Matthew Giambagno, 26
Marsh, New York
Energy/Downstream

Blake Giannisis, 36 Aon New York Real Estate

Blake Giannisis, 36
Aon
New York
Real Estate

George Gionis, 33 Aon Philadelphia At-large

George Gionis, 33
Aon
Philadelphia
At-large

Debbie Goldstine, 39 Lockton Chicago Manufacturing

Debbie Goldstine, 39
Lockton
Chicago
Manufacturing

Sarah Goodman, 36 Marsh New York Pharma/Life Sciences

Sarah Goodman, 36
Marsh
New York
Pharma/Life Sciences

Jessica Govic, 30 Arthur J. Gallagher Itasca, Ill. Public Sector

Jessica Govic, 30
Arthur J. Gallagher
Itasca, Ill.
Public Sector

Robert Hale, 39 Aon London Utilities, traditional

Robert Hale, 39
Aon
London
Utilities, traditional

Joshua Halpern, 34 Aon New York Private Equity

Joshua Halpern, 34
Aon
New York
Private Equity

Matthew Heinz, 39 Aon New York Private Equity

Matthew Heinz, 39
Aon
New York
Private Equity

Charlie Herr, 25 Arthur J. Gallagher Kansas City, Mo. Education

Charlie Herr, 25
Arthur J. Gallagher
Kansas City, Mo.
Education

Blythe Hogan, 31 Aon New York Fine Arts

Blythe Hogan, 31
Aon
New York
Fine Arts

James Jackson, 35 Willis Towers Watson New York Financial Institutions

James Jackson, 35
Willis Towers Watson
New York
Financial Institutions

Sarah Johnson Court, 35 Aon, Miami Fine Arts

Sarah Johnson Court, 35
Aon, Miami
Fine Arts

Christopher Keith, 39 Lockton Blue Bell, Pa. Aviation & Aerospace

Christopher Keith, 39
Lockton
Blue Bell, Pa.
Aviation & Aerospace

Charlie King, 36 Alliant Houston Energy/Upstream

Charlie King, 36
Alliant
Houston
Energy/Upstream

Jonathan Kosin, 37 Aon Southfield, Mich. Construction

Jonathan Kosin, 37
Aon
Southfield, Mich.
Construction

Tyler LaMantia, 29 Arthur J. Gallagher Itasca, Ill. Education

Tyler LaMantia, 29
Arthur J. Gallagher
Itasca, Ill.
Education

Jeanna Madlener, 37 Wells Fargo Portland, Ore. At-large

Jeanna Madlener, 37
Wells Fargo
Portland, Ore.
At-large

 Kimberly Mann, 27 Marsh Philadelphia Environmental


Kimberly Mann, 27
Marsh
Philadelphia
Environmental

Kristina Marcigliano, 27 DeWitt Stern New York Fine Arts

Kristina Marcigliano, 27
DeWitt Stern
New York
Fine Arts

 Matt Medeiros, 34 Arthur J. Gallagher Media, Pa. Retail


Matt Medeiros, 34
Arthur J. Gallagher
Media, Pa.
Retail

Mary Mulhern, 33 Marsh Chicago Health Care

Mary Mulhern, 33
Marsh
Chicago
Health Care

Dennis Nevinski, 31 Aon Chicago Aviation & Aerospace

Dennis Nevinski, 31
Aon
Chicago
Aviation & Aerospace

Lee Newmark, 28 Arthur J. Gallagher Itasca, Ill. Health Care

Lee Newmark, 28
Arthur J. Gallagher
Itasca, Ill.
Health Care

Jake Onken, 26 Aon Houston Health Care

Jake Onken, 26
Aon
Houston
Health Care

Joanna Paredes, 28 Rekerdres & Sons Dallas Marine

Joanna Paredes, 28
Rekerdres & Sons
Dallas
Marine

Stephen Pasdiora, 27 Cottingham & Butler Rosemont, Ill. Employee Benefits

Stephen Pasdiora, 27
Cottingham & Butler
Rosemont, Ill.
Employee Benefits

Stefanie Pearl, 35 Marsh New York Financial Institutions

Stefanie Pearl, 35
Marsh
New York
Financial Institutions

Jason Peery, 37 Aon Newport Beach, Calif. Real Estate

Jason Peery, 37
Aon
Newport Beach, Calif.
Real Estate

Adrian Pellen, 32 Aon Chicago Construction

Adrian Pellen, 32
Aon
Chicago
Construction

Chris Rafferty, 36 Aon Chicago Manufacturing

Chris Rafferty, 36
Aon
Chicago
Manufacturing

Daniel R’bibo, 36 Arthur J. Gallagher Glendale, Calif. Entertainment

Daniel R’bibo, 36
Arthur J. Gallagher
Glendale, Calif.
Entertainment

Brent Rieth, 30 Aon San Francisco Technology

Brent Rieth, 30
Aon
San Francisco
Technology

 Joe Roberta, 35 Beecher Carlson New York Private Equity


Joe Roberta, 35
Beecher Carlson
New York
Private Equity

Robert Rosenzweig, 30 Risk Strategies New York Technology

Robert Rosenzweig, 30
Risk Strategies
New York
Technology

 Patrick Roth, 35 Aon Denver Pharma/Life Sciences


Patrick Roth, 35
Aon
Denver
Pharma/Life Sciences

 Laura Rubin, 33 Beecher Carlson Boston Utilities, Alternative


Laura Rubin, 33
Beecher Carlson
Boston
Utilities, Alternative

 Ian Schwartz,31 Aon Los Angeles Real Estate


Ian Schwartz,31
Aon
Los Angeles
Real Estate

Christopher Shorter, 36 Aon Houston Energy/Downstream

Christopher Shorter, 36
Aon
Houston
Energy/Downstream

Brian Simons, 34 Aon New York Financial Institutions

Brian Simons, 34
Aon
New York
Financial Institutions

Andrew Smith, 28 Marsh New York Marine

Andrew Smith, 28
Marsh
New York
Marine

Timothy Sullivan, 38 Willis Towers Watson Boston Financial Institutions

Timothy Sullivan, 38
Willis Towers Watson
Boston
Financial Institutions

Kurt Thoennessen, 37 Ericson Ins. Advisors Washington Depot, Conn. Private Client

Kurt Thoennessen, 37
Ericson Ins. Advisors
Washington Depot, Conn.
Private Client

 John Tomlinson, 37 Lockton Encino, Calif. Entertainment


John Tomlinson, 37
Lockton
Encino, Calif.
Entertainment

 Kaitlin Upchurch, 30 Wortham Houston At-large


Kaitlin Upchurch, 30
Wortham
Houston
At-large

 Liz Van Dervort, 30 Gillis, Ellis & Baker New Orleans Nonprofit


Liz Van Dervort, 30
Gillis, Ellis & Baker
New Orleans
Nonprofit

 Rene Van Winden, 36 Aon Houston Energy/Downstream


Rene Van Winden, 36
Aon
Houston
Energy/Downstream

Ben Von Obstfelder, 30 Aon Wauconda, Ill. Retail

Ben Von Obstfelder, 30
Aon
Wauconda, Ill.
Retail

Michael Walsh, 35 Marsh Boston Real Estate

Michael Walsh, 35
Marsh
Boston
Real Estate

Emily Weiss, 29 DeWitt Stern New York Fine Arts

Emily Weiss, 29
DeWitt Stern
New York
Fine Arts

Jeremiah White, 38 Aon Frederick, Md. Transportation

Jeremiah White, 38
Aon
Frederick, Md.
Transportation

 Joshua White, 28 Gulfshore Insurance Naples, Fla. Private Client


Joshua White, 28
Gulfshore Insurance
Naples, Fla.
Private Client

Casey Wigglesworth, 37 Aon Washington, DC Fine Arts

Casey Wigglesworth, 37
Aon
Washington, DC
Fine Arts

 Justin Wiley, 33 Arthur J. Gallagher Orlando, Fla. Public Sector


Justin Wiley, 33
Arthur J. Gallagher
Orlando, Fla.
Public Sector

Wendy Wu, 38 Aon Shanghai Automotive

Wendy Wu, 38
Aon
Shanghai
Automotive

Susan Young, 30 Marsh Seattle Retail

Susan Young, 30
Marsh
Seattle
Retail

Dan Reynolds is editor-in-chief of Risk & Insurance®. He can be reached at [email protected] Tom Starner, a freelance journalist, can be reached at [email protected]
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Sponsored: Liberty International Underwriters

Cyber: The Overlooked Environmental Threat

Environmental businesses often don't see themselves as a target, but their operations are just as vulnerable to the threat of an industrial cyber attack.
By: | August 3, 2016 • 6 min read
LIU_SponsoredContent

“Cyber breach” conjures fears of lost or ransomed data, denial of service, leaked corporate secrets and phishing scams.

But in a world where so many physical operations are automated and controlled by digital technologies, the consequences of cyber attacks extend far beyond the digital realm to include property damage, bodily injury, and even environmental pollution.

Industrial companies that deal with hazardous materials — like power plants, refineries, factories, water treatment facilities or pipelines — are heavily dependent on automated technology to maximize their efficiency. Other sectors use technology to control HVAC systems, power and utilities, placing their properties at risk as well.

Cyber risks like theft of personally identifiable data have been highly publicized in recent years, but physical risks like pollution sparked by a cyber breach may not be as obvious.

“It’s significant to lose 100,000 customers’ Social Security numbers,” said William Bell, Senior Vice President, Environmental, Liberty International Underwriters, “but can you imagine if a waste treatment facility’s operations get hacked, gates open, and thousands of tons of raw sewage go flowing down a local river?”

In many industrial complexes, a network of sensors gathers and monitors data around machinery efficiency and the flow of the materials being processed. They send that information to computer terminals that interpret the data into commands for the hardware elements like motors, pumps and valves.

This automation technology can control, for example, the flow of pipelines, the level of water or waste held in a reservoir, or the gates that hold in and control the release of vast quantities of sewage and other process materials. Hackers who want to cause catastrophe could hijack that system and unleash damaging pollutants.

And it’s already happened.

In 2000, a hacker caused 800,000 liters of untreated sewage to flood the waterways of Maroochy Shire, Australia. In 2009, an IT contractor, disgruntled because he was not hired full-time, disabled leak detection alarm systems on three off-shore oil rigs near Long Beach, Calif.

Just last year, cyber attackers infiltrated the network of a German steel mill through a phishing scam, eventually hacking into the production control system and manipulating a blast furnace so it could not be shut down. The incident led to significant property damage.

According to a leading industrial security expert and executive director of the International Society of Automation, “Today’s operational technologies—such as sensors, SCADA systems, software and other controls that drive modern industrial processes—are vulnerable to cyber attack. The risk of serious damage or compromise to power and chemical plants, oil and gas facilities, chemical and water installations and other vital critical infrastructure assets is real.”

“The hacks could come from anywhere: a teenager looking for entertainment, a disgruntled worker, or more sophisticated criminals or terrorists,” Bell said. “There are certainly groups out there with political and ideological motivations to wreak that kind of havoc.”

LIU_SponsoredContent“We are working to bring the cyber component of environmental risk to the forefront. Cyber security is not just an IT issue. Industry executives need to be aware of the real-world risks and danger associated with an industrial cyber attack as well as the critical differences between cyber security and operational technology security.”

— William Bell, Senior Vice President, Environmental, Liberty International Underwriters

The cleanup cost of an environmental disaster can climb into the hundreds of millions, and even if a cyber breach triggered the event, a cyber policy alone will not cover the physical and environmental damage it caused.

The risk is even more pointed now, as resource conservation becomes increasingly important. Weather related catastrophe modeling is changing as both flooding and drought become more severe and frequent in different regions of the U.S. Pollution of major waterways and watersheds could have severe consequences if it affects drinking water sources, agriculture and other industrial applications that depend on this resource.

Managing the Risk

LIU_SponsoredContentUnfortunately, major industrial corporations sometimes address their environmental exposure with some hubris. They trust in their engineers to remove the risk by designing airtight systems, to make a disaster next to impossible. The prospect of buying environmental insurance, then, would be superfluous, an expression of doubt in their science-backed systems.

Despite the strongest risk management efforts, though, no disaster is 100 percent avoidable.

“We are working to bring the cyber component of environmental risk to the forefront,” Bell said. “Cyber security is not just an IT issue. Industry executives need to be aware of the real-world risks and danger associated with an industrial cyber attack as well as the critical differences between cyber security and operational technology security.”

The focus on network security and data protection has distracted industry leaders from strengthening operational technology security. Energy, manufacturing and other industrial sectors lack best practice standards when it comes to securing their automated processes.

After the Homeland Security Act of 2002, the Department of Homeland Security began comprehensive assessments of critical infrastructure’s cyber vulnerability, working with owners and operators to develop solutions. It also offers informational guides for private companies to do the same. The National Institute of Standards and Technology also continues work on its cyber security framework for critical infrastructure. Although this helps to establish some best practices, it does not completely mitigate the risk.

Many businesses don’t see themselves as a target, but they need to look beyond their own operations and property lines. They could be an attractive target due to their proximity to densely populated areas or resources such as waterways and highways, or nationally or historically significant areas. The goal of a cyber terrorist is not always to harm the target itself, but the collateral damage.

The Role of Insurance

LIU_SponsoredContent“Environmental liability is still by and large viewed as a discretionary purchase,” Bell said, “but the threat of a cyber attack that can manipulate those systems and ultimately lead to a pollution incident is added incentive to buy environmental coverage.”

Liberty International Underwriters’ environmental coverage could respond to many pollution conditions set off by a cyber breach event.

“Property damage, bodily injury and cleanup of any pollution at or emanating from a covered property would likely be taken care of,” Bell said. “The risk is not so much the cyber exposure but the consequence of the attack. The resulting claims and degradation to the environment could be severe, especially if the insured was a target chosen because of their unique position to have a large effect on the local population and environment.”

LIU also offers dedicated Cyber Liability insurance solutions designed to manage and mitigate the cost of responding to a cyber attack and any resultant loss of data and associated liability. Coverage includes proactive data breach response services designed to help organizations comply with regulatory requirements and prevent data breaches.

LIU’s loss control managers are also on hand to conduct assessments of insureds’ properties and facilities to examine potential environmental impacts. They can educate brokers on the importance of enhancing cyber security to prevent an environmental accident in the first place.

“People are relying more and more on their systems, automaton is increasing, and the risk is growing,” Bell said. “We’re all focused on protecting data, but the consequences of a cyber breach can be much farther reaching than data alone.”

To learn more about Liberty International Underwriters’ environmental coverages and services, visit www.LIU-USA.com.

Liberty International Underwriters is the marketing name for the broker-distributed specialty lines business operations of Liberty Mutual Insurance. Certain coverage may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds and insureds are therefore not protected by such funds. This literature is a summary only and does not include all terms, conditions, or exclusions of the coverage described. Please refer to the actual policy issued for complete details of coverage and exclusions.

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

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LIU is part of the Global Specialty Division of Liberty Mutual Insurance.
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