2016 Risk All Star: Carlos Dezayas

Freeing Cargo From Captivity

Kraft and Heinz announced their merger in the spring of 2015, around the time of Heinz’s May 1st renewal. The impending marriage spurred Senior Manager of Corporate Risk Management Carlos Dezayas to rejigger his insurance portfolio ahead of the acquisition’s finalization.

“We were looking for the most efficient structure for the combined program so that everything would be in place on day one of the merger,” Dezayas said.

He found that the Kraft Heinz cargo program was sorely in need of an overhaul.

Carlos Dezayas Senior Manager, Corporate Risk Management, The Kraft Heinz Company

Carlos Dezayas
Senior Manager, Corporate Risk Management, The Kraft Heinz Company

“The cargo program was run through our captive, with a $25,000 retention held at the business unit level and a $225,000 retention at the captive. The problem was that we only had captive licenses in the EU, U.S., Canada, Australia and New Zealand,” he said.

This meant that import/export operations from countries such as China, Japan, Korea, Costa Rica and Brazil were vulnerable. Whenever a claim breached the local deductible but not the captive deductible, it was difficult to get cash into those countries to make claim payments; large cash infusions were subject to a variety of local taxes.

Heinz also could not collect premium from the unlicensed countries.

“Essentially we were overcharging the business units in the licensed countries to make up for the fact that we could not charge any premium from the unlicensed countries,” Dezayas said.

Advertisement




Working with Marsh broker Herman Brito, Dezayas removed the cargo program from the captive structure, retained the local business unit deductibles and established locally admitted policies written by AIG.

The move was atypical — most companies don’t move from a captive to a fully insured plan — but it paid off.

“A year and a half down the road, this seems to be a more stable structure for us,” he said.

“It has allowed the business units to be comfortable knowing we have the coverage in place and that their claims will be paid. It also creates more visibility and transparency across the entire program, which is what senior management expects from their insurance portfolio.”

“[The new program structure] has allowed the business units to be comfortable knowing we have the coverage in place and that their claims will be paid.” — Carlos Dezayas, senior manager, corporate risk management, The Kraft Heinz Co.

In addition to increasing efficiency, the new non-captive structure also means Kraft Heinz can collect premium from every business unit while shifting administrative and claims management expenses away from the captive.

Brito, assistant vice president at Marsh, and a 2016 Power Broker® winner, praised Dezayas for his willingness to tackle a project outside of his area of expertise.

“Carlos came from a strong insurance background, but not particularly in marine. When we were undergoing our renewal strategy, he quickly familiarized himself with marine terminology and set out to learn the latest and greatest in the marine world — not an easy task,” Brito said.

“He took the time to walk through the policy language with me and ask the right questions. He was willing to put his trust in Marsh when we discussed changing the captive structure for cargo and was always extremely responsive.” &

_____________________________________________

AllStars2016v1oRisk All Stars stand out from their peers by overcoming challenges through exceptional problem solving, creativity, perseverance and passion.

See the complete list of 2016 Risk All Stars.

Share this article:

Brokers

Policy Haunts Halloween Attraction

A sunken haunted house attraction resulted in a lawsuit against the insurance broker.
By: | September 14, 2016 • 2 min read
R9-15-16p12_BrokerPg.indd

It was a Halloween trick the theater company didn’t expect.

Between Oct. 31, 2014 and the following morning, the Foundation Theatre Group’s haunted house attraction on a floating stationary barge at Chicago’s Navy Pier sank during a storm.

A more disconcerting surprise came afterward: It discovered its commercial general liability insurer denied coverage.

The ghoul, according to the theater group, is their insurance brokerage, which they accuse of negligently failing to place insurance coverage that would “cover, among other things, storms and sinking,” according to a lawsuit filed on June 15.

Foundation Theatre Group sued New Lisbon, Wisc.-based Donat Insurance Services and Kenneth Donat, its director of special events, in U.S. District Court for the Northern District of Illinois, seeking at least $1.5 million in damages.

The brokerage was instructed to protect the theater company “for possible losses to the barge, including marine and hull risks, protection and indemnity insurance, pollution liability insurance, crew insurance and excess insurance,” according to the lawsuit.

Advertisement




“Donat and Donat Insurance, acting as agents for Foundation, negligently failed to exercise the proper knowledge, skill and professional care of someone engaged in the business of procuring insurance policies … ,” the lawsuit alleged.

It noted that the brokerage “promotes themselves as ‘one of the best in the special events insurance industry,’ as someone a customer ‘can truly trust that knows the industry from the inside out,’ and as someone that can provide ‘the most comprehensive coverage available.’ ”

The sinking of the barge resulted in several different lawsuits, including one from Capitol Specialty Insurance Corp., which issued the CGL policy, seeking a court declaration that it does not need to provide a defense or indemnity to the theater group.

Donat’s attorney, Mitchell A. Orpett of Tribler Orpett & Meyer, said in an email that the brokerage denies any liability.

The litigation is “only one version of a complicated situation,” he said, and the theater group is “the target of several other companies who have attempted to blame Foundation and thereby escape their own responsibility and legal liability for the damages they caused at Navy Pier.”

He said the theater group’s lawsuit, “I am confident, [was] only reluctantly filed as a defense to the unwarranted claims of the others. I am confident as well that Foundation’s lawsuit will be resolved without any finding of liability against Mr. Donat or Donat Insurance Services.” &

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]
Share this article:

Sponsored Content: XL Catlin

Mind the Gap in Global Logistics

Shippers need more than just a sophisticated system to manage their growing operations.
By: | December 1, 2016 • 6 min read
XLCatlin_SponsoredContent

Manufacturers and shippers are going global.

As inventories grow, shippers need sophisticated systems to manage it all, and many companies choose to outsource significant chunks of their supply chain management to contracted providers. A recent survey by market research firm Transport Intelligence reveals that outsourcing outnumbers nearshoring in the logistics industry by 2:1. In addition, only 16.7 percent of respondents stated they are outsourcing fewer logistics processes today than they were three years ago.

Those providers in turn take more responsibilities through each step of the bailment process, from processing, packaging and labeling to transportation and storage. Spending in the U.S. logistics and transportation industry totaled $1.45 trillion in 2014 and represented 8.3 percent of annual gross domestic product, according to the International Trade Administration.

“Traditionally these outside parties provided one phase of the supply chain process, perhaps transportation, or just warehousing. Today many of these companies are extending their services and product offerings to many phases of supply chain management,” said Mike Perrotti, Senior Vice President, Inland Marine, XL Catlin.

Such companies are known as third-party logistics (3PL) providers, or even fourth-party logistics (4PL) providers. They could provide transportation, storage, pick-n-pack, processing or consolidation/deconsolidation.

As the provider’s logistics responsibilities widen, their insurance needs grow.

“In the past, the underwriters would piecemeal together different coverages for these logistics providers. For instance, they might take a motor truck cargo policy, and attach a warehouse form, a bailee’s form, other inland marine products, and an ocean cargo form. You would have most of the exposures covered, but when you start taking different products and bolting them together, you end up with gaps,” said Alexander McGinley, Vice President, US Marine, XL Catlin.

A comprehensive logistics form can close those gaps, and demand for such a product has been on the rise over the past decade as logistics providers search for a better way to manage their range of exposures.

XLCatlin_SponsoredContent_Perotti“Traditionally these outside parties provided one phase of the supply chain process, perhaps transportation, or just warehousing. Today many of these companies are extending their services and product offerings to many phases of supply chain management.”
–Mike Perrotti, Senior Vice President, Inland Marine, XL Catlin

A Complementary Package

XL Catlin’s Logistics Services Coverage Solutions takes a holistic approach to the legal liability that 3PL providers face while a manufacturer’s stock is in their care, custody and control.

“A 3PL’s legal liability for loss or damage from a covered cause of loss to the covered property during storage, packaging, consolidation, shipping and related services would be insured under this comprehensive policy,” McGinley said. “It provides piece of mind to both the owner of the goods and the logistics provider that they are protected if something goes wrong.”

In addition to coverage for physical damage, the logistics solution also provides protection from cyber risks, employee theft and contract penalties, and from emerging exposures created by the FDA Food Modernization Act.

This coverage form, however, only protects 3PL companies’ operations within the U.S., its territories and possessions, and Canada. Many large shippers also have an international arm that needs the same protection.

XL Catlin’s Ocean Cargo Coverage Solutions product rounds out the logistics solution with international coverage.

While Ocean Cargo coverage typically serves the owner of a shipment or their customers, it can also be provided to the internationally exposed logistics provider to cover the cargo of others while in their care, custody, and control.

“This covers a client’s shipment that they’re buying from or selling to another party while it’s in transit, by any type of conveyance, anywhere in the world,” said Andrew D’Alessio, National Ocean Cargo Product Leader, XL Catlin. “When provided to the logistics company, they in turn insure the shipment on behalf of the owner of the cargo.”

The international component provided by ocean cargo coverage can also eliminate clients’ fears over non-compliance if admitted insurance coverage is purchased. Through its global network, XL Catlin is uniquely positioned as a multi-national insurer to offer locally admitted coverages in over 200 countries.

XLCatlin_SponsoredContent_McGinley“In the past, the underwriters would piecemeal together different coverages for these logistics providers. For instance, they might take a motor truck cargo policy, and attach a warehouse form, a bailee’s form, other inland marine products, and an ocean cargo form. You would have most of the exposures covered, but when you start taking different products and bolting them together, you end up with gaps.”
–Alexander McGinley, Vice President, US Marine, XL Catlin

A Developing Need

The approaching holiday season demonstrates the need for an insurance product that manages both domestic and international logistics exposures.

In the final months of the year, lots of goods will be shipped to the U.S. from major manufacturing nations in Asia. Transportation providers responsible for importing these goods may require two policies: ocean cargo coverage to address risks to shipments outside North America, and a logistics solution to cover risks once goods arrive in the United States or Canada.

“These transportation providers are expanding globally while also shipping throughout the U.S. That’s how the need for both domestic and international logistics coverage evolved. Until now there have been few solutions to holistically manage their exposures,” D’Alessio said.

In another example, D’Alessio described one major paper provider that expanded its business from manufacturing to include logistics management. In this case, the paper company needed coverage as a primary owner of a product and as the bailee managing the goods their clients own in transit.

“That manufacturer has a significant market share of the world’s paper, producing everything from copy paper to Bible paper, wrapping paper, magazine paper, anything you can think of. Because they were so dominant, their customers started asking them to arrange freight for their products as well,” he said.

XLCatlin_SponsoredContent_Dalessio“These transportation providers are expanding globally while also shipping throughout the U.S. That’s how the need for both domestic and international logistics coverage evolved. Until now there have been few solutions to holistically manage their exposures.”

–Andrew D’Alessio, National Ocean Cargo Product Leader, XL Catlin

The global, multi-national paper company essentially launched a second business, serving as a transportation and logistics provider for their own customers. As the paper shipments changed ownership through the bailment process, the company required two totally different types of insurance coverage: an ocean cargo policy to cover their interests as the owner and producer of the product, and logistics coverage to address their exposures as a transportation provider while they move the products of others.

“As a bailee, they no longer own the products, but they have the care, custody, and control for another party. They need to make sure that they have the appropriate insurance coverage to address those specific risks,” McGinley said.

Unique Offering

“From a coverage standpoint, this is slowly but surely becoming the new standard.  A logistics form on the inland marine side, combined with an international component, is becoming something that a sophisticated client as well as a sophisticated broker should really be asking for,” McGinley said.

The old status quo method of bolting on coverage forms or additional coverages as needed won’t suffice as global shipping needs become more complex.

With one underwriting solution, the marine team at XL Catlin can insure 3PL clients’ risks from both a domestic and international standpoint.

“The two products, Ocean Cargo Coverage Solutions and Logistics Service Coverage Solutions, can be provided to the same customer to really round out all of their bailment, shipping, transportation, and storage needs domestically and around the globe,” D’Alessio said.

Learn more about XL Catlin’s Logistics Services Coverage Solutions and Ocean Cargo Coverage.

The information contained herein is intended for informational purposes only. Insurance coverage in any particular case will depend upon the type of policy in effect, the terms, conditions and exclusions in any such policy, and the facts of each unique situation. No representation is made that any specific insurance coverage would apply in the circumstances outlined herein. Please refer to the individual policy forms for specific coverage details. XL Catlin, the XL Catlin logo and Make Your World Go are trademarks of XL Group Ltd companies. XL Catlin is the global brand used by XL Group Ltd’s (re)insurance subsidiaries. In the US, the insurance companies of XL Group Ltd are: Catlin Indemnity Company, Catlin Insurance Company, Inc., Catlin Specialty Insurance Company, Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., and XL Specialty Insurance Company. Not all of the insurers do business in all jurisdictions nor is coverage available in all jurisdictions. Information accurate as of December 2016.

SponsoredContent

BrandStudioLogo

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




XL Catlin. From insurance to reinsurance, a changing world needs new answers. We’re here to find them. With an incredible blend of people, products, services and technology, we have the power to find innovative, creative solutions to your risks — from the most familiar to the most complex.
Share this article: