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Risk Management

The Profession

Nancy Chambers is bolstered by the inspiration of her mother, now 90, who was born in a log cabin.
By: | September 15, 2014 • 4 min read

R&I: What was your first job?

Administrative assistant to three credit managers for a petroleum company in London, Ontario.

R&I: How did you come to work in risk management?

While working at the University of Guelph, our insurance broker suggested I join my local chapter of RIMS. I went to my first ORIMS meeting and was “hooked!”

Nancy Chambers, Director, Risk Management & Insurance, Bentall Kennedy

Nancy Chambers, Director, Risk Management & Insurance, Bentall Kennedy

R&I: What is the risk management community doing right?

While we each may be working for competitors, risk managers are so willing to share information and help each other, i.e., their ideas, best practices, data, and other information.

R&I: What could the risk management community be doing a better job of?

Mentoring students to enter the field. As the baby boomers look to retire, there will be a shortage of qualified and experienced candidates to fill these roles.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Recognition of the role of the risk manager by insurers and service providers. I had an adjuster say to me once early in my career: “I work for the insurer and I’ll tell you what you need to know, if and when I think you need to know it.” That has definitely changed!

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R&I: What would you do if you weren’t a risk manager?

I love design, architecture and landscaping. It would be wonderful to work with people to bring their visions for their homes to fruition.

R&I: What emerging commercial risk most concerns you?

Technology is advancing at a furious pace and has been for a number of years now. While the benefits are many, do we really understand the corresponding risks and how to manage them?

R&I: What insurance carrier do you have the highest opinion of?

There are a number of quality carriers. However, given Chubb underwrites a significant portion of our portfolio, and has always been willing to explore and find solutions to fit the uniqueness of our company’s operations, they would rank at the top.

“She raised us to believe in ourselves … that we could accomplish anything we set out to do, but always with grace and respect for ourselves and others.”

R&I: How much business do you do direct versus going through a broker?

We don’t do any direct business with an insurer. We currently work with two brokerage firms in Canada.

R&I: Is the contingent commission controversy overblown?

I was RIMS president when this controversy arose and it was a significant issue on our agenda. I was even invited to meet with Greg Serio [former New York State Superintendent for Insurance] to discuss RIMS’ position. Overblown? Perhaps, but it’s a risk manager’s job to examine, question and seek required solutions.

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R&I: Who is your mentor and why?

I have had the benefit of a number of mentors throughout my career. However, my mother has been my greatest influence.

She is 90 years young and from being born in a log cabin, has lived through many “risks” in her lifetime including: losing two homes to fire, experiencing the depression, and at the age of 16 worked in a gun manufacturing factory in Toronto during the war.

She raised us to believe in ourselves … that we could accomplish anything we set out to do, but always with grace and respect for ourselves and others.

R&I: What have you accomplished that you are proudest of?

I am so fortunate to have two amazing daughters who have grown to be women in their own right. I am so very proud of them both.

R&I: How many emails do you get in a day?

I have been dubbed the “Email Queen.” Ranges from 20 to 100+ depending on the day.

R&I: What is your favorite book or movie?

Watching “Despicable Me” (or any movie) with my grandchildren. It is always such a treat to watch their faces and hear their laughter.

R&I: What’s the best restaurant you’ve ever eaten at?

The French restaurant at Sandals Royal Plantation in Ocho Rios, Jamaica.

R&I: What is your favorite drink?

Non-Alcoholic – Starbucks Latte
Alcoholic – Blood Orange Cosmopolitan

R&I: What is the most unusual/interesting place you have ever visited?

While RIMS president, I had the good fortune to travel quite extensively and visit many unusual/interesting places. If I have to choose, it would be Japan first, with Tasmania as a close second.

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R&I: What is the riskiest activity you ever engaged in?

Most recently, climbing a waterfall while on vacation.

R&I: If the world has a modern hero, who is it and why?

Parents have always been heroes and now more than ever. Children are living in an ever-changing, much faster-paced world. While faced with the same challenges as their parents were, children face them now at a much younger age. There is a tough life/work balance for parents to maintain.

R&I: What about this work do you find the most fulfilling or rewarding?

What other professional gets to be involved with every aspect of their company? Every day there is some new question or challenge to keep you engaged, help you keep a fresh perspective on risk, and prompt you to learn and to grow. I love that!

The R&I Editorial Team may be reached at riskletters@lrp.com.
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FATCA Compliance

FATCA Adds to Brokers’ Compliance Burden

Brokers comply with FATCA even as they seek exemption from the law’s foreign insurance requirements.
By: | September 15, 2014 • 4 min read
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Brokers are working to comply with the requirements of the Foreign Account Tax Compliance Act, which took effect July 1. At the same time, however, industry lobbyists are asking Congress and the Internal Revenue Service to exempt non-cash value premiums from the new tax evasion law.

“The compliance burden of this law is significant and there are some reports saying it could cost in the tens of millions of dollars,” said Joel Kopperud, director of governmental relations for the Council of Insurance Agents & Brokers (CIAB).

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As of July, brokers that collect premiums from their clients on behalf of foreign carriers must obtain certain IRS-generated forms from the carriers that they are FATCA-compliant or FATCA-exempt. In addition, the brokers must report each carrier’s status under that law to the IRS.

If an agency determines a carrier is not compliant or exempt, then a percentage of the premiums paid to them by their U.S. clients that have coverage with the foreign carrier will be withheld as taxes.

If an agency determines a carrier is not compliant or exempt, then a percentage of the premiums paid to them by their U.S. clients that have coverage with the foreign carrier will be withheld as taxes.

(This part of the law was deferred and will apply to premiums paid on insurance and reinsurance policies with effective or renewal dates of Jan. 1, 2015 or later.)

Forcing brokers to withhold a percentage of an insurance premium “would cause major business disruptions to insurance customers including the potential for lapses in coverage,” said Steve Chapman, partner with PwC’s financial services tax practice in New York City.

Fiduciary Responsibilities

J. Scott Tofil, senior vice president and chief financial officer of Beecher Carlson Holdings, Inc. in Atlanta, said his firm will collect the required forms from all of the foreign carriers that it works with, and they will be kept in an internal database shared with its parent company, Brown & Brown.

“If [the foreign carriers] cannot provide these forms, we cannot do business with them,” Tofil said.

“When the government added these requirements into the law, I really don’t think they paid attention to how brokers acting in a fiduciary capacity would be impacted.” — J. Scott Tofil, senior vice president and chief financial officer, Beecher Carlson Holdings

“As a fiduciary, the money we collect from our clients and put in trusts to pay premiums to carriers is never technically our money. So if we were forced to withhold 30 percent as this new law requires, we would not be able to submit full payment, and the carrier might cancel their insurance, which is why we will not place insurance with a carrier that cannot provide the correct paperwork.”

While that likely won’t happen for most of the foreign insurers, this new law places all brokers and agents in “an uncomfortable position,” he said.

“When the government added these requirements into the law, I really don’t think they paid attention to how brokers acting in a fiduciary capacity would be impacted,” Tofil said.

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Many states require brokers and agents to put the money for premiums into a trust and hold in a fiduciary capacity, he said. “Now you have the federal government telling you to take 30 percent from money and hold it, when the money isn’t yours to begin with.”

To aid broker compliance with FATCA, the CIAB provided an online portal that offers the forms required by the IRS for each foreign insurer, Kopperud said.

“This way, brokers don’t have to reach out individually for the certifications from all of the foreign insurers they work with — we will have done that for them,” he said. “This will be a one-stop shop for these certificates.”

The withholding requirements will likely not affect most brokers, as most will simply not conduct business with a foreign insurer that is not FATCA-compliant, said Vladimir Gololobov, CIAB’s director, international.

“But the reporting piece has a cost consideration that really comes into play, which will divert more brokers’ resources,” Gololobov said.

Tax Evasion Schemes

The reason insurance brokers were included in FATCA was that some foreign insurance products have an investment component, such as an annuity, that “unscrupulous” U.S. taxpayers could use to funnel money and evade taxes, said Dean Paik, a director at Rogers Joseph O’Donnell law offices in San Francisco.

FATCA was intended to stamp out tax evasion schemes, Paik said. In the past, U.S. taxpayers who wanted to avoid paying taxes would set up investment accounts at foreign institutions. The IRS wants to ensure that U.S. taxpayers can’t use insurance products with investment components to evade taxes, he said.

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When the law was passed in 2010, the brokers’ group believed that non-cash value insurance was not intended to be part of the law, but the IRS included non-cash value premiums when they released final regulations implementing FATCA, Kopperud said.

CIAB is working with the IRS and Congress to clarify the situation, he said.

Non-cash value insurance is “simply irrelevant to FATCA’s goal of combating tax evasion, as property casualty insurance and reinsurance simply cannot be used as a vehicle to evade taxes,” Kopperud said.

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at riskletters@lrp.com.
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Sponsored Content by Riskonnect

A Dreaming Team

Chris Thorn of Southwest Airlines got creative with his risk management program. Now, the sky's the limit.
By: | September 15, 2014 • 4 min read
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Chris Thorn is known as one of the most creative risk managers in the business. After all, his risk management program hit the cover of Risk & Insurance® in March, 2012.

Now the senior manager, payments and risk, for Southwest Airlines is working with Riskonnect, a technology partner that he thinks can take his program to new heights.

“For us, it’s a platform that gives you so many different tools that if you can dream it, you can build it,” said Thorn.

Claims administration

Thorn ditched his legacy risk management information system in 2012 and started working with Riskonnect, initially using the platform solely for liability claims management.

But the system’s “do-it-yourself” accessibility almost immediately caught the eye of Thorn’s colleagues managing safety risk and workers’ compensation.

“They were seeking a software solution at the time and said, ‘Hey, we want to join the party,” Thorn recalls of his friends in safety and workers’ compensation.

SponsoredContent_Riskonnect“For us, it’s a platform that gives you so many different tools that if you can dream it, you can build it.”

–Chris Thorn, senior manager, payments and risk, Southwest Airlines

What was making Thorn’s colleagues so jealous was the system’s “smart question” process which allows any supervisor in the company to enter a claim, while at the same time freeing those supervisors from being claims adjusters.

The Riskonnect platform asks questions that direct the claim to the appropriate category without the supervisor having to take on the burden of performing that triage.

“They love it because all of the redundant questions are gone,” Thorn said.

The added beauty of the system, Thorn said, is that allows carriers and TPAs to work right alongside the Southwest team in claims files while maintaining rock-solid cyber security.

“This has sped up the process,” Thorn said.

“Any time you can speed up the process, the more success you’re going to have when you make offers to settle claims,” he said.

Policy management

Since that initial splash in claims management, the Riskonnect platform has gone on to become a rock star at Southwest in a number of other areas. And as Thorn suggests, the possibilities of the system are limited only by the user’s imagination.

SponsoredContent_RiskonnectWith a little creativity and help from Riskonnect as needed, a risk manager can add on system capabilities without having to go on bended knee to his own information technology department.

In the area of insurance policy management, for example, the Riskonnect platform as built by Thorn now holds data on all property values and exposures that can in turn be downloaded for use by underwriters.

Every time Southwest buys a new airplane, the enterprise platform sends out a notice to the airlines insurance broker, who in turn notifies the 16 or 17 carriers that are on the hull program.

Again, in that “anything’s possible” vein, the system has the capability of notifying the carriers, directly, a tool Thorn said he’s flirting with.

“It is capable of doing that,” he said.

“We’re testing out this functionality before we turn on it loose directly to the insurance companies.”

Carrier ratings

In alignment with the platform’s muscle in documenting, storing and reporting liability and property exposures, the system monitors and reports on insurance carrier financial strength.

If a rating agency downgrades a Southwest program carrier’s financial strength, for example, the system “pings” Thorn and his colleagues.

“Not only will we know about it, but we will also know all programs, present and past that they participated on, what the open reserves are for those policy years and policies,” Thorn said.

“That gives us even more comfort that we have good, solid financial backing of the insurance policies that are protecting us,” Thorn said.

Accounting interface

Like many of us, Chris Thorn didn’t set out to work in risk management and insurance. Thorn is a Certified Public Accountant, and it’s that background that allows him to take creative advantage of the Riskonnect platform’s malleability in yet another way.

With the help of the Riskonnect customer service team, Thorn added a function to the platform that allows him to calculate the cost of insurance policies on a monthly basis, enter them into a general ledger and send them over to his colleagues in accounting.

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“It’s very robust on handling financial information, date information, or anything with that much granularity,” Thorn said.

The sky is the limit

Thorn and Southwest are only two years into their relationship with Riskonnect and there are a number of places Thorn thinks the platform can take him that have yet to be explored, but certainly will be.

“It’s basically a repository of anything that’s risk-related, it continues to grow,” Thorn said.

SponsoredContent_Riskonnect“This has sped up the process. Any time you can speed up the process, the more success you’re going to have when you make offers to settle claims.”
–Chris Thorn, senior manager, payments and risk, Southwest Airlines

Not only have Southwest’s safety and workers’ compensation managers joined Thorn in his work with Riskonnect, business continuity has come knocking as well.

Thorn met in July with members of Southwest Airline’s business continuity team, which has a whole host of concerns, ranging from pandemics to cyber-attacks that it needs help in documenting the exposures and resiliency options for.

That Enterprise Risk Management approach will in the future also involve the system’s capability to provide risk alerts, telling Thorn and his team for example, that a hurricane or fast moving wildfire is threatening one of the company’s facilities.

Supply chain resiliency and managing certificates of insurance for foreign vendors are other areas where Thorn and his team plan to put the Riskonnect platform to good use.

“That’s all stuff that’s being worked on by us,” Thorn said.

“They’ve given us the tools, but we’re trying to develop how we’re going to use it,” he said.

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

Riskonnect is the provider of a premier, enterprise-class technology platform for the risk management industry.
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