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Infographic: The Risk List

6 Emerging Supply Chain Risks You Should Know

Risks to your supply chain can come from unexpected sources.
By: | May 5, 2014 • 2 min read

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The Risk List is presented by:
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Risk Insider: Joe Boren

The Wolf of RIMS

By: | May 5, 2014 • 2 min read
Joseph L. Boren is Chairman of the Environmental product line at Ironshore Holdings (U.S.) Inc., Executive Vice President of Ironshore Insurance Services, LLC, President of U.S. Field Operations and Director of Strategic Relations. He has experience in every segment of the environmental market; a regulator, practitioner, and insurer. Joe can be reached at joe.boren@ironshore.com.

RIMS just concluded in Denver, and I had a few observations.

It was cold, very cold. Given that the Spencer/Gallagher Golf Tournament is always a part of RIMS, why isn’t the conference held in cities with much better weather? Who could forget Chicago a few years ago, where the golf tournament lasted three holes because of the snow and those who chose Cubs opening day didn’t fare much better. I know we can never really guarantee the weather but we might want to increase the chances of a good climate for a great meeting. Eighteen holes of golf in the sun beats three holes in the cold any day.

And then there was the keynote speaker – Jordan Belfort, the author of “The Wolf of Wall Street.” I actually couldn’t believe RIMS would pick him to speak at our convention. Let’s see, his redeeming values were abusing drugs, denigrating women and maybe worst of all stealing money from at least 1,500 people. Nobody should have money stolen from them, but Belfort concentrated mostly on the weak and vulnerable, retirees or people just getting by. Nice guy, our motivational speaker.

So I was thinking, is this the best our industry could do for a keynote speaker? Was there a lesson RIMS wanted to teach, like “Greed is Bad”?

Of course, people deserve a second chance, so I did a little research after I learned Belfort was the keynote speaker. Nancy Dillon from the Daily News wrote, “according to Federal prosecutors, Belfort failed to live up to the restitution requirement of his 2003 sentencing agreement. The agreement requires him to pay 50 percent of his income towards the 1,500 clients he defrauded.” The Federal government filed a complaint since Belfort had an income of $1,767,203 in 2013 from his book/movie rights and another $24k from speaking engagements like the one at RIMS. Yet, According to Ben Child of the guardian.com he has only paid back $11.6 million of the $110.4 million he was ordered to pay as restitution.

For more details of just how rotten Belfort is, read this NY Times article by Joel M.Cohen who prosecuted the case.

So I was thinking, is this the best our industry could do for a keynote speaker? Was there a lesson RIMS wanted to teach, like “Greed is Bad”? Most of us saw Michael Douglas in Wall Street, some lived it. Couldn’t we as an industry have done better?

In the last year, I saw some great conference speakers such as Garrison Wynn, author of “The Real Truth About Success” as well as Lt. Col. Rob Waldman, a highly decorated fighter pilot, author and businessman and wonderful motivational speaker. And we got a guy who stole money from people and has yet to pay it back. Belfort would be a solid choice if we we motivating crooks, however I like to think a bit more highly of our community

Maybe Albert Einstein said it best when he said “the value of a man should be seen in what he gives and not in what he is able to receive.”

There are plenty of good, decent people who give back to society – why don’t we stick with them as our guest speakers!

Read all of Joe Boren’s Risk Insider contributions.

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Sponsored: Liberty International Underwriters

A Renaissance In U.S. Energy

Resurgence in the U.S. energy industry comes with unexpected risks and calls for a new approach.
By: | October 15, 2014 • 5 min read

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America’s energy resurgence is one of the biggest economic game-changers in modern global history. Current technologies are extracting more oil and gas from shale, oil sands and beneath the ocean floor.

Domestic manufacturers once clamoring for more affordable fuels now have them. Breaking from its past role as a hungry energy importer, the U.S. is moving toward potentially becoming a major energy exporter.

“As the surge in domestic energy production becomes a game-changer, it’s time to change the game when it comes to both midstream and downstream energy risk management and risk transfer,” said Rob Rokicki, a New York-based senior vice president with Liberty International Underwriters (LIU) with 25 years of experience underwriting energy property risks around the globe.

Given the domino effect, whereby critical issues impact each other, today’s businesses and insurers can no longer look at challenges in isolation one issue at a time. A holistic, collaborative and integrated approach to minimizing risk and improving outcomes is called for instead.

Aging Infrastructure, Aging Personnel

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Robert Rokicki, Senior Vice President, Liberty International Underwriters

The irony of the domestic energy surge is that just as the industry is poised to capitalize on the bonanza, its infrastructure is in serious need of improvement. Ten years ago, the domestic refining industry was declining, with much of the industry moving overseas. That decline was exacerbated by the Great Recession, meaning even less investment went into the domestic energy infrastructure, which is now facing a sudden upsurge in the volume of gas and oil it’s being called on to handle and process.

“We are in a renaissance for energy’s midstream and downstream business leading us to a critical point that no one predicted,” Rokicki said. “Plants that were once stranded assets have become diamonds based on their location. Plus, there was not a lot of new talent coming into the industry during that fallow period.”

In fact, according to a 2014 Manpower Inc. study, an aging workforce along with a lack of new talent and skills coming in is one of the largest threats facing the energy sector today. Other estimates show that during the next decade, approximately 50 percent of those working in the energy industry will be retiring. “So risk managers can now add concerns about an aging workforce to concerns about the aging infrastructure,” he said.

Increasing Frequency of Severity

SponsoredContent_LIUCurrent financial factors have also contributed to a marked increase in frequency of severity losses in both the midstream and downstream energy sector. The costs associated with upgrades, debottlenecking and replacement of equipment, have increased significantly,” Rokicki said. For example, a small loss 10 years ago in the $1 million to $5 million ranges, is now increasing rapidly and could readily develop into a $20 million to $30 million loss.

Man-made disasters, such as fires and explosions that are linked to aging infrastructure and the decrease in experienced staff due to the aging workforce, play a big part. The location of energy midstream and downstream facilities has added to the underwriting risk.

“When you look at energy plants, they tend to be located around rivers, near ports, or near a harbor. These assets are susceptible to flood and storm surge exposure from a natural catastrophe standpoint. We are seeing greater concentrations of assets located in areas that are highly exposed to natural catastrophe perils,” Rokicki explained.

“A hurricane thirty years ago would affect fewer installations then a storm does today. This increases aggregation and the magnitude for potential loss.”

Buyer Beware

On its own, the domestic energy bonanza presents complex risk management challenges.

However, gradual changes to insurance coverage for both midstream and downstream energy have complicated the situation further. Broadening coverage over the decades by downstream energy carriers has led to greater uncertainty in adjusting claims.

A combination of the downturn in domestic energy production, the recession and soft insurance market cycles meant greatly increased competition from carriers and resulted in the writing of untested policy language.

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In effect, the industry went from an environment of tested policy language and structure to vague and ambiguous policy language.

Keep in mind that no one carrier has the capacity to underwrite a $3 billion oil refinery. Each insurance program has many carriers that subscribe and share the risk, with each carrier potentially participating on differential terms.

“Achieving clarity in the policy language is getting very complicated and potentially detrimental,” Rokicki said.

Back to Basics

SponsoredContent_LIUHas the time come for a reset?

Rokicki proposes getting back to basics with both midstream and downstream energy risk management and risk transfer.

He recommends that the insured, the broker, and the carrier’s underwriter, engineer and claims executive sit down and make sure they are all on the same page about coverage terms and conditions.

It’s something the industry used to do and got away from, but needs to get back to.

“Having a claims person involved with policy wording before a loss is of the utmost importance,” Rokicki said, “because that claims executive can best explain to the insured what they can expect from policy coverage prior to any loss, eliminating the frustration of interpreting today’s policy wording.”

As well, having an engineer and underwriter working on the team with dual accountability and responsibility can be invaluable, often leading to innovative coverage solutions for clients as a result of close collaboration.

According to Rokicki, the best time to have this collaborative discussion is at the mid-point in a policy year. For a property policy that runs from July 1 through June 30, for example, the meeting should happen in December or January. If underwriters try to discuss policy-wording concerns during the renewal period on their own, the process tends to get overshadowed by the negotiations centered around premiums.

After a loss occurs is not the best time to find out everyone was thinking differently about the coverage,” he said.

Changes in both the energy and insurance markets require a new approach to minimizing risk. A more holistic, less siloed approach is called for in today’s climate. Carriers need to conduct more complex analysis across multiple measures and have in-depth conversations with brokers and insureds to create a better understanding and collectively develop the best solutions. LIU’s integrated business approach utilizing underwriters, engineers and claims executives provides a solid platform for realizing success in this new and ever-changing energy environment.

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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.


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