Creating Innovative Products
Railroad clients needed affordable catastrophe insurance capacity to cover the risks inherent in transporting hazardous materials. But the marketplace did not exist, so Veronica Benzinger created it.
“While a catastrophic event exceeding $1 billion is highly unlikely, even its remote possibility … has prompted many in our industry to purchase as much capacity as the markets will offer,” one client said.
But the industry has been challenged by the limited excess casualty capacity.
Thus, Benzinger developed the manuscripted Cantilever Excess Pollution Liability Insurance product, which utilizes a quota share structure and attaches excess sudden and accidental pollution coverage.
“While we arguably could have sourced other capacity, the cost was prohibitive,” the client said. “Veronica was able to obtain pricing for a fraction of what these other sources were asking us to consider and in line with the remainder of our liability tower.
“In doing so, Veronica called upon untouched markets and brought our company an additional $148.5 million in new capacity.”
Meanwhile, Benzinger remains a staunch advocate for clients facing claims disputes.
One client faced a regulatory agency-issued cleanup order at a closed landfill site for which it had purchased environmental insurance eight years earlier with Benzinger’s aid.
The insurer, however, was balking at covering the claim. Benzinger made peace, saving her client millions.
Doing More Than Necessary
Kimberly Mann doesn’t always do what her clients ask. Often, she does more.
For one new client, Mann unilaterally reviewed the environmental insurance program, although it would not renew for a year.
“Fortunately she did, as there were a number of locations not covered,” the client said.
For no additional premium, the client’s surplus lines insurer provided current-conditions coverage for those locations — even without seeing some critical documentation. The insurer agreed to provide pre-existing conditions coverage after seeing the documentation.
“Without Kim’s immediate attention to this issue, we would not have coverage,” the client said. “Since this is a claims-made policy, we may not find out just how important and how valuable her action was until sometime down the road.”
Later, at renewal, Mann negotiated broader coverage with an admitted insurer at a 14 percent premium reduction, which allowed the client to purchase higher limits.
For a new, multinational client, Mann developed a multi-tiered pollution and liability program on time that offered broader coverage and better protection for the parent company, while protecting a new acquisition with dissimilar risks in a stand-alone program — all at a 16 percent savings.
“It was very important for her to work quickly, because we had to get numerous parties on board with the strategy, and there were varying priorities,” the client said.
Timely and Tactical
When the environmental insurance marketplace is tough, insurance buyers count on Jack Palis to be tougher.
One client observed, “We occasionally experience emergencies with deadlines that might seem unachievable; however, Jack has assisted us by formulating strategies and timelines that ensure goals are met.”
Although it was a “must have,” the client had unsuccessfully attempted many times to consolidate its multiple environmental/professional liability programs for distinctly different operations.
Palis engineered an aggressive marketing strategy that would “place us in front of the right people with the right information and presentations that would overcome underwriter hurdles, while fostering comfort levels they needed in order to insure our risk.”
“This complex program consolidation also provided increased limits and enhanced coverage while achieving a 10 percent premium reduction in spite of the increased exposure values,” the client said.
Another client with a spotless claims history thought it had a simple renewal ahead. But with only a couple weeks’ notice, a longtime incumbent insurer cut its capacity 50 percent for the client.
Palis quickly contacted several markets to solicit quotes to replace the lost $25 million of capacity. Among the offers was one that resulted in a 25 percent premium reduction for the client.
Painting the Picture
Peter Pantalone knows how to tell a story — a talent that greatly benefits clients.
One client was finalizing a property acquisition when an environmental report identified surrounding properties that could pose pollution risks. The client’s incumbent broker heavily marketed the risk but garnered only a few offers from insurers, which proposed excluding the risks the client wanted to insure.
The client retained Pantalone, who, because of the earlier marketing effort, was left with only a few environmental insurers to approach.
After Pantalone reviewed the technical reports, he was able to present insurers with a clear picture of the risk and its various mitigating factors. Within 24 hours, he received a quote without any of the previous exclusions. The coverage allowed the client to close its deal.
Pantalone “understands that unanticipated delays during the course of a transaction can result in significant costs to both buyers and sellers,” the client said.
For economies of scale, another client wanted to bring a large, separately insured unit under its corporate environmental insurance policy.
The stand-alone coverage was placed before the unit’s acquisition by its current owner. But under the previous owner, the unit’s loss ratio was poor, which now was hurting the current owner’s experience, and its record-keeping lacked detail.
Pantalone developed a narrative that convinced the carrier to cover the unit.
A Trusted Adviser
James Vetter is more than “the insurance guy.” He is a trusted client adviser, whose input sometimes influences clients’ transactions.
Vetter assumed that role for a client that was purchasing one of the largest and oldest former steelmaking sites in the country.
Several other buyers previously backed out of deals for the Brownfield site because of environmental concerns, but Vetter addressed that issue for his client, said the client’s attorney, Michael K. Ohm, a partner at Bryan Cave LLP.
“Closing, including the placement of a complex, multi-layer PLL [pollution legal liability] program with limits of $100 million, was successfully completed [in 2014] after nearly 12 months of due diligence and negotiation among the contracting parties as well as state and federal regulators,” Ohm said.
“The complexity … did require a high state of readiness and responsiveness from not only Jim and his team at Marsh but the adroitness of Jim to anticipate the needs of the purchaser’s deal team, the underwriters and other important parties such as the seller and the regulators,” he said.
Another client, wholly owned by an employee stock ownership plan, retained Vetter to quickly review and — if necessary — modify its environmental risk coverage for a group of properties.
“We believe the projected cost savings our company was able to realize is in excess of $10 million, without question,” the client said.
Delivering on Deadline
The pollution perils that companies face often don’t develop quickly. But their need for insurance protection does, and Max West delivers it.
One client was facing a potentially costly uninsured pollution liability risk after it sold a property to, and carried the mortgage for, another company that subsequently leased the site to a third organization.
The tenant polluted the premises and then filed bankruptcy. The client was concerned about getting back a contaminated property and possibly being named in pollution liability claims.
West secured two strong pollution legal liability quotes “in record time,” the client said. The client opted for a five-year $5 million policy — above a $100,000 self-insured retention — covering government-ordered cleanups of pre-existing conditions.
“Pretty tough coverage to get, and the price was very fair,” the client said. “We really count on Max.”
Attorney Nancy J. Rich, a partner at Katten Muchin Rosenman LLP, said West came through for two of her clients — also in short order.
One client had just days to produce proof of PLL coverage to meet a government agency’s strict terms when bidding on a property.
The other client was involved in redeveloping a Brownfield site into a residential subdivision.
Although governmental agencies had not issued “No Further Action” letters regarding the environmental cleanup work at the site, the client wanted PLL coverage so it could quickly begin construction. West delivered when not many other brokers could have, she said.
Lifting Client Burdens, in Any Way Possible
When Houston-based Levey Group sought permanent financing for one of its industrial parks, it hit a snag.
One of the park’s tenants was self-insured, prompting questions from the company’s lender, according to Helen Dreyfus, Levey Group’s operations director.
Dreyfus handed off the questions to Paige Cokinos, who promptly straightened things out.
It’s not the first time Cokinos has spared her the time and effort that insurance matters used to soak up in the past. In another case, he reassured a buyer for a Levey property that the company’s existing insurance would cover future environmental issues.
“I mean it when I say he changed my life in this office,” Dreyfus said.
Cokinos has been changing lives for all of his Houston-area clients. In 2014, he redesigned insurance policies to account for reduced capacity in the region for wind and flood coverage. The revamped policies minimized high deductibles and kept premiums reasonable.
Cokinos lends a hand regardless of whether a commission is on the line, according to Michael Grivon, managing partner at Lovon Properties, which owns commercial properties in Colorado and Texas.
After building a second home in Colorado, Grivon had trouble finding homeowner’s insurance. Cokinos connected Grivon with a local agent who was able to find coverage, Grivon said.
“He made life easier for his customer and, ultimately, his customer got taken care of,” Grivon added. “When I talk to friends and tell them about Paige or recommend that they use him, I always use that as an example.”
The One You Can Turn to
A real estate firm had rolled up a large portfolio of single-family rental properties, and was planning to securitize it; they just needed an insurance plan that would satisfy the conservative requirements of credit ratings agencies.
Within four months, Alexandra Glickman, Gallagher’s real estate and hospitality practice leader, came back with a favorably priced package that included coverage for property, casualty, D&O, environmental liability, lender liability and cyber liability, as well as employment practices and employed lawyers, according to an executive at the firm.
“I have worked with many insurance brokers, but Alexandra Glickman has far surpassed all the others in knowledge, expertise and service,” said the executive.
Joseph E. Miller, CFO of California-based Griffin Capital Corp., calls Glickman for advice, maybe more often than he calls her for insurance, knowing she will follow through.
During a recent merger transaction, for example, Miller needed tail coverage for D&O exposure. Glickman provided guidance, though she was not writing the coverage. “Alex and her team provide very sound advice on how to proceed with all insurance programs and coverage limits,” Miller said.
Another client relied on Glickman’s client-centric approach to resolve a large property claim in 2014. Glickman delivered a 100 percent recovery. “She’s not shy about looking out for our interests and doing it in a professional, pleasant manner,” said the client, an executive overseeing risk for a firm in the Northeast.
No Challenge Too Tough
Limited data did not limit David A. Johnson when real estate giant CBRE challenged him to find coverage for its affiliates around the world, according to Mark Magi, manager of global risk management for the company.
The coverage was required for affiliates delivering services under the CBRE name in countries where the company does not have its own offices.
CBRE could provide revenue estimates, but not much more, Magi said. “We were essentially asking them to go out on a wing and a prayer, and said it had to be inexpensive.”
Johnson came back with exactly the coverage CBRE needed, Magi said, noting that Johnson is now tackling other complex projects for the company. “He’s done phenomenal things for us, things that I didn’t think a broker could do,” Magi said.
Johnson made a similar impression on the risk manager at a construction company in the Northeast. “He came in and really brought in coverages that I wasn’t even aware existed,” said the risk manager. “I felt that he had a history of understanding our needs, and that obviously made him more valuable.”
One of the company’s more pressing needs was better general liability coverage for its exposure to contractors working for the company overseas, said the risk manager.
Ultimately, Johnson brought the company’s international coverage closer to its U.S. coverage, the risk manager said. “That let us better price our projects in terms of how we covered certain contractors in areas where contractors didn’t buy insurance as much as we had hoped.”
The risk manager for a commercial real estate company needed a juggler, not an insurance broker.
As the company was preparing to go public in late 2013 and early 2014, it undertook a series of property swaps — and had to ensure that insurance coverage was consistently in place at the right price.
Brendan Monahan stepped into the ring and kept an eye on all the moving pieces, the risk manager said. The process involved months of weekly meetings and conference calls, the risk manager added.
“He really took ownership of it. He wasn’t just sort of a liaison. He definitely owned it. He would get the information and bring it back to me himself. He knew everything that was going on.”
Most importantly, Monahan made the risk manager look good in front of senior managers, who didn’t want to hear about any challenges involving insurance coverage. “We never had to go to them and say, ‘We’re at a roadblock; we have a problem. We need your help,’ ” the risk manager said. “I feel like Brendan helped me be the problem-solver.”
Clients attribute Monahan’s success in delivering results to his calm, even-handed manner, as well as his up-front approach to client requests.
“He doesn’t always say ‘yes’ to me, which I appreciate,” said the risk manager for real estate at a Fortune 500 company. “That sounds weird, but he tells me like it is in a way that we both understand why he’s saying what he said, and he explains it clearly.”
Strategic and Tactical
Hudson Advisors LLC had insurance policies scattered all over, and the inconsistencies were maddening.
For example, Hudson was paying two different rates for the same coverage under general liability policies for its hotels, said Stephen Bernstein, Hudson’s senior vice president for global insurance management.
“It drove our people crazy,” Bernstein said.
To simplify matters, the Dallas-based private equity firm decided to consolidate policies through a single broker. After an RFP in early 2014, the firm picked Robin Reyes and her team at Marsh. Things are a lot saner now.
For Hudson’s hotels, Reyes worked with the insurer to secure the better rate for every property. “That was a real coup for us,” said Bernstein. “She’s far superior to anybody else we’ve ever had. She’s both strategic and granular. It’s a rare combination.”
She helped another client, a Texas-based private equity firm, after it ran into a trouble on a recent deal. A buyer for one of its properties couldn’t find insurance at a reasonable rate, delaying the transaction.
Word of the impasse reached Reyes, according to an executive in charge of insurance for the firm, which deals mostly in real estate. Reyes could have simply offered suggestions, the executive said. “Instead, she took ownership of it, and got a resolution.”
Although Reyes helped the buyer find insurance, she didn’t benefit from the transaction, the executive added. “She just helped us by helping him. To me, that is above and beyond.”
Creating Order Out of Chaos
It wasn’t too much celebrating that caused a hangover in early 2014 for the legal and compliance administrator at a New England real estate company.
It was a long list of insurance challenges that had gone unaddressed in previous years. “The whole thing was in disarray,” the administrator said.
The headache began to subside by May, however, when Jennifer Wilson began poring over the issues.
“She got them all resolved in a very short period of time,” said the administrator. “And it wasn’t one or two issues. It was a whole list of issues that had been outstanding for quite a while.”
Among them was a potential lack of protection under construction contracts, the company’s largest risk, the administrator said. Wilson reviewed all contracts and made sure the language adequately shielded the company from any claims arising from the work of subcontractors.
Wilson even came up with a schedule for requiring insurance limits for subcontractors, based on the size and type of the project, and the size of the contract.
“She can identify what the problem is, and she’s tenacious,” the administrator added. “She goes after it until it’s done.”
Wilson takes the same dogged approach to claims, according to an executive at another client. Her guidance helped the client, a temporary staffing agency, stave off a recent E&O claim.
“She was valuable because she had the perspective of how an insurance company views potential claims, and what you should or shouldn’t be doing to help work through it,” the executive said.
What Is Insurance Innovation?
Truly innovative insurance solutions are delivered in real time, as the needs of businesses change and the nature of risk evolves.
Lexington Insurance exemplifies this approach to innovation. Creative products driven by speed to market are at the core of the insurer’s culture, reputation and strategic direction, according to Matthew Power, executive vice president and head of strategic development at Lexington, an AIG Company and the leading U.S.-based surplus lines insurer.
“The excess and surplus lines sector is in a growth mode due, in no small part, to the speed at which our insureds’ underlying business models are changing,” Power said. “Tomorrow’s winning companies are those being built upon true breakthrough innovation, with a strong focus on agility and speed to market.”
To boost its innovation potential, for example, Lexington has launched a new crowdsourcing strategy. The company’s “Innovation Boot Camps” bring people together from the U.S., Canada, Bermuda and London in a series of engagements focused on identifying potential waves of change and market needs on the coverage horizon.
“Employees work in teams to determine how insurance can play a vital role in increasing the success odds of new markets and customers,” Power said. “That means anticipating needs and quickly delivering programs to meet them.”
An example: Working in tandem with the AIG Science team – another collaboration focused on innovation – Lexington is looking to offer an advanced high-tech seating system in the truck cabs of some of its long-haul trucking customers. The goal is to reduce driver injury and fatigue-based accidents.
“Our professionals serving the healthcare market average more than twenty years of industry experience. That includes attorneys and clinicians combining in a defense-oriented claims approach and collaborating with insureds in this fast-moving market segment. At Lexington, our relentless focus on innovation enables us to take on the risk so our clients can take on the opportunities.”
— Matthew Power, Executive Vice President and Head of Regional Development, Lexington Insurance Company
Power explained that exciting growth areas such as robotics, nanotechnology and driverless cars, among others, require highly customized commercial insurance solutions that often can be delivered only by excess and surplus lines underwriters.
“Being non-admitted, our freedom of rate and form allows us to be nimble, and that’s very important to our clients,” he said. “We have an established track record of reacting quickly to trends and market needs.”
Lexington is a leading provider of personal lines coverage for the excess and surplus lines industry and, as Power explains, the company’s suite of product offerings has continued to evolve in the wake of changing customer needs. “Our personal lines team has developed a robust product offering that considers issues like sustainable building, energy efficiency, and cyber liability.”
Most recently the company launched Evacuation Response, a specialty coverage designed to reimburse Lexington personal lines customers for costs associated with government mandated evacuations. “These evacuation scenarios have becoming increasingly commonplace in the wake of recent extreme weather events, and this coverage protects insured families against the associated costs of transportation and temporary housing.
The company also has followed the emerging cap and trade legislation in California, which has created an active carbon trading market throughout the state. “Our new Carbon ODS product provides real property protection for sequestered ozone depleting substances, while our CarbonCover Design Confirm product insures those engineering firms actively verifying and valuing active trades.” Lexington has also begun to insure new Carbon Registries as they are established in markets across the country.
Lexington has also developed a number of new product offerings within the Healthcare space. The Affordable Care Act has brought an increased focus on the continuum of care and clinical patient safety. In response, Lexington has created special programs for a wide range of entities, as the fast-changing healthcare industry includes a range of specialized services, including home healthcare, imaging centers (X-ray, MRI, PET–CT scans), EMT/ambulances, medical laboratories, outpatient primary care/urgent care centers, ambulatory surgery centers and Medical rehabilitation facilities.
“The excess and surplus lines sector is in growth mode due, in no small part, to the speed at which our insureds’ underlying business models are changing,” Power said.
Apart from its coverage flexibility, Lexington offers this segment monthly webcasts, bi-monthly conference calls and newsletters on key risk issues and educational topics. It also provides on-site risk consultation (for qualifying accounts), access to RiskTool, Lexington’s web-based healthcare risk management and patient safety resource, and a technical staff consisting of more than 60 members dedicated solely to healthcare-related claims.
“Our professionals serving the healthcare market average more than twenty years of industry experience,” Power said. “That includes attorneys and clinicians combining in a defense-oriented claims approach and collaborating with insureds in this fast-moving market segment.”
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Lexington Insurance. The editorial staff of Risk & Insurance had no role in its preparation.