Helping the Helpers
From civilian war casualties to masses displaced by natural catastrophes to the survivors of devastating events, nongovernmental organizations (NGOs) have long provided aid to people in crisis. But NGOs still are working on how to better protect their own workers, supplies and assets from the same perils — and others — that aid recipients face.
Indeed, over just the past half-decade, smaller international aid organizations — which make up the bulk of the NGO community — have significantly formalized and beefed up their risk management programs.
Part of that is serendipitous, as the insurance market generally has softened for NGOs, and technological advancements have improved these organizations’ ability to keep their workers safe, experts say. But court cases also have had an impact.
Shifting Legal Landscape
“There were some organizations that just weren’t appropriately sensitive to the exposures [faced by workers],” said Scott R. Konrad, a New York-based senior vice president and the not-for-profit business practice leader for HUB International Northeast Ltd.
Konrad says their “wake-up call” was the lawsuit that aid volunteer Flavia Wagner filed against NGO Samaritan’s Purse following her abduction and 105-day captivity in Sudan in 2010.
Wagner alleged the organization neither adequately trained her nor promptly paid her kidnappers’ ransom demands. Without admitting liability, the NGO settled, although it said it had trained Wagner and she had signed a hold-harmless agreement elucidating the risks she faced.
Two years after Wagner’s ordeal, four Norwegian Refugee Council staff members in Kenya were kidnapped for four days. Another was shot and injured during the abduction. A Norwegian court in 2015 ruled the NRC was grossly negligent in how it handled the incident.
“Key to the ruling was the court’s verdict that they ‘cannot see that there is a basis for applying a more lenient standard of due care for employers within the aid sector than that for other employers,’ ” said Matthew Smith, a London-based associate managing consultant for risk consultant NYA International Ltd.
“Although this was just a Norwegian verdict, this and other incidents have given the international NGO industry impetus to examine their security risk management procedures with a view to ensuring duty of care.”
Those workers’ experiences were not unique. From 2004 through 2014, the last year for which data is available, the number of major attacks against aid operations worldwide and the resulting number of aid worker victims climbed dramatically, according to the Aid Worker Security Database. The AWSD is a project of London-based Humanitarian Outcomes, an independent research and policy advisory organization.
In 2014, there were 329 attacks and 190 victims, compared to 125 attacks and 63 victims in 2004. In 2013, the number of attacks and victims reached record levels: 474 and 264, respectively.
NGOs’ Insurance Portfolio
NGOs and their workers also face numerous additional risks, which the organizations are insuring as well.
Besides being injured or kidnapped while on assignment, workers also can be injured traveling to and from assignments, and they can suffer a work- or non-work-related illness, disease or injury in a foreign land. All of those incidents could necessitate medical attention and evacuation.
If the NGO is large enough, it also might send supplies and assets, such as vehicles, to a country. Indeed, vehicle fleets usually are the second-highest expense after employee compensation for those NGOs, according to Washington, D.C.-based specialty broker Clements Worldwide.
NGOs also face foreign general liability risk and professional liability risk.
“The international aid organization insurance portfolio, in terms of breadth of coverages, is looking a lot more like a commercial portfolio these days,” said Bruce Cohen, a Washington, D.C.-based managing director in the multinational client services unit at Marsh LLC.
“I definitely think [risk management] has evolved” at NGOs, said Meghan Smith, a Philadelphia-based senior account executive in the commercial markets unit at Zurich North America.
NGOs today are better informed about not only “coverages and what they should be looking for,” but also about local insurance requirements overseas regarding admitted coverage and minimum limits, she said.
While there is plenty of insurance market competition for their risks, NGOs need to be circumspect about what they purchase, brokers advise.
For example, coverage often excludes war and terrorism, said Scott Lockman, director of commercial insurance for Clements.
In some cases, war risk is excluded and terrorism is not, but the lines between those two risks “can be blurred,” said Joseph Weiss, a New York-based vice president of underwriting and the segment leader for corporate accident and sickness business at Chubb.
Sometimes, insurers do not extend coverage to certain countries or for endemic diseases, Marsh’s Cohen said.
NGOs can buy back those coverages, however.
Lockman noted that Clements and Lloyd’s of London syndicates have developed a block of coverages for NGOs that include war and terrorism coverage. Only some of the larger NGOs historically have purchased kidnap and ransom coverage.
But Christopher Arehart, a Chicago-based senior vice president and product manager at Chubb, has “seen an uptick in the K&R product from aid organizations,” including some interest from smaller organizations.
Smaller NGOs are realizing their workers might not be covered by the K&R insurance purchased by an umbrella organization that has contracted for the smaller groups’ services, he said.
“It comes down to a calculated analysis of a risk happening, and sustaining a loss, and what’s non-negotiable, like worker protection.” — Laura Schauble, vice president of risk management, ACDI/VOCA
Budgets, however, continue to affect NGOs’ purchase decisions.
“It comes down to a calculated analysis of a risk happening, and sustaining a loss, and what’s non-negotiable, like worker protection,” said Laura Schauble, the Washington, D.C.-based vice president of risk management at NGO ACDI/VOCA.
For example, ACDI/VOCA, which promotes economic growth in emerging democracies, insures its fleets overseas for the most common losses: collision damage and theft.
But it typically does not buy terrorism coverage, since the NGO does not operate in war zones, Schauble said.
Many brokers and insurers team with risk consultants to help NGOs mitigate risk.
“But not everybody [among NGOs] is aware of that,” said John Warren, a vice president and client executive for Marsh in Washington D.C.
“They think they have to go out to consultants, but it’s already paid for.”
In any case, experts see NGOs paying closer attention to their duty of care.
George Taylor, the Annapolis, Md.-based vice president of global operations at risk management consultant iJet International, finds that NGOs are conducting far more research on the regions they will be operating in.
NGOs also are more engaged in assessing how workers will move about the area they will be working in, where workers will lodge or camp, and other worker vulnerabilities, risk consultants said.
NGOs are taking steps to mitigate the risks to workers by, for example, establishing check-in, in-country travel and lodging protocols, Taylor said. Many NGOs also are embedding a full-time security adviser in their field teams, rather than directing a senior project leader to assume those added duties, he said.
Advances in technology are enabling NGOs to keep better track of their workers, risk management experts said.
For example, volunteers have smartphone and notebook travel apps that provide intelligence, updates and emergency alerts about the areas where they are working.
To ensure workers do not miss critical information, the apps can be set to chime when information arrives. Other apps provide GPS tracking information on workers to their organizations’ security contractors.
And more NGOs are outfitting workers with satellite phones in case a region’s cell phone or Wi-Fi service is interrupted, iJet’s Taylor said.
To reduce the kidnapping risk, some NGOs working in the Eastern Hemisphere are setting up local affiliates that are overseen by Westerners but tap field workers largely from local regions, Chubb’s Arehart said.
Especially significant, before workers head out on assignment, more NGOs now rehearse crisis plans with project managers, group leaders and volunteers, risk advisers said.
“You can never rehearse enough,” Taylor said. “People need to know their part of the plan” for staying safe and responding when safety and health conditions deteriorate.
“It’s all about education,” Clements’ Lockman said.
At ACDI/VOCA, that education process includes detailing the risk management program’s limitations, Schauble said. For example, medical evacuations are run out of commercial airports, not remote locations. Ensuring that workers fully understand how a risk management program is designed is critical to getting their buy-in of the program, Schauble said.
“So what I see now is more of an organizational effort and individual commitment” to risk management, Taylor said. To him, improved NGO risk management comes down to four elements:
• Staying informed.
• Maintaining situational awareness.
• Having a communication plan.
“NGOs can no longer simply accept security risks in the same way they did previously, given the multiplicity of threats to their personnel and a tightening legal landscape,” NYA International’s Smith said.
However, “there’s room for improvement,” Taylor said. &
The New World of Global D&O Insurance – Part 2
Note: This is the second of a two-part Risk Insider look at D&O.
As indicated in my previous Risk Insider post on Aug. 16, it’s been 10 years since the advent of the first local foreign D&O policies. Since then, many carriers have fine-tuned their process for underwriting and issuing local policies in foreign countries.
So, how should companies determine what countries have significant risk for them, and what are the key factors that should be examined in assessing the local exposure to D&O risk – whether from claims or from regulatory or tax concerns?
Not surprisingly, many multinationals have no interest in acquiring foreign local D&O coverage in countries where they believe their D&O exposure is negligible. After all, no exposure should translate into no premium allocation from the carrier, and thus no taxes or other compliance issues.
Therefore, when determining which countries are candidates for a foreign local D&O policy, it is critical to at least consider the following:
- Local exposures based on size, stock ownership, and brand.
- Types of local operations or business activities and status of the local management.
- Local regulations, including whether local non-admitted D&O coverage is permitted and recognized in country, and any potential taxes or penalties.
- Potential indemnification constraints for each country of concern.
- An assessment of local market conditions, purchasing patterns and claims activity.
Ultimately, each multinational client company [in the U.S., for example] should prioritize its international D&O risks from both a claims and compliance perspective. By assessing “regulatory risks,” such as compulsory requirements, admitted paper, indemnification constraints, tax, regulatory, local market viability, enforcement and local D&O claims history, we have built a “Regulatory Score” for each country.
Not surprisingly, many multinationals have no interest in acquiring foreign local D&O coverage in countries where they believe their D&O exposure is negligible.
Against that very substantial analysis, we have also created a simple “Business Trends” score for each country by measuring how often multinationals do business in these countries, and the extent of such business in each country in terms of the size (revenues or assets) and complexity of their operations.
By substituting your own data on country by country exposures, a customized heat map can be drawn that will help you prioritize the countries which require the most attention from a D&O insurance perspective. A sample graphic for some of the more popular countries follows:
Implementing International D&O coverage through the use of locally issued D&O policies is both important and challenging. Brexit does not help. Although “Freedom of Services” (FOS) policies were never very popular, it was helpful in some cases to place a single U.K. policy to obtain coverage for all European Union countries. And while innovative responses to Brexit have already emerged, we continue to favor local policies in each of your countries of interest.
Finally, we recognize that implementing a strong International D&O strategy puts a large administrative burden on the corporate risk manager and corporate offices in general. A large amount of information is required, which may include the collection of application materials from local operations.
However, the trade-offs are worth the trouble in high-risk countries. Sound advice, patience and persistence are critical to a successful process.
See Part I here.
Using Data to Get Through Hail and Back
4,600 hailstorms have rained down on the U.S. as of the end of July according to the National Oceanic and Atmospheric Administration. And these storms have left damage behind, cracking unprotected skylights, damaging exterior siding, dimpling rooftops and destroying HVAC systems.
While storm frequency is almost on par with last year’s 5,400, the rest of the picture isn’t quite the same. For example, the hail zone seems to be shifting south. San Antonio, Texas, a “moderate” hazard hail zone area, typically sees four or five hail storms a year, on average. Year to date, more than 30 storms have been reported. Overall, Texas has suffered nearly 20 percent of all hail storms this year.
Liberty Mutual’s Ralph Tiede discusses the risk hail poses to large commercial property owners.
The resulting damage is different too, with air conditioning (AC) units accounting for more than a third of the insurance industry’s losses, a greater proportion than in previous years. “In some cases, we’ve seen properties that sustained no roof damage but had heavily damaged AC systems. This may be a result of smaller hail stone size coupled with high winds,” noted Ralph Tiede, Vice President of Commercial Insurance and Manager of Property Risk Engineering at Liberty Mutual.
Despite the shifting trends, however, these losses are largely preventable if commercial property owners understand their exposures and take steps to mitigate them. By partnering with the right insurer, a company can gain access to the industry-leading resources and expertise to make it happen.
Understanding the Risk through Data
A property owner might know that his property is located in an area prone to hail, but could underestimate the extent of damage a storm could cause. Exposed skylights, solar panels, satellite dishes and other roof-mounted equipment can translate to serious losses.
Three trends that have emerged this hail season.
This is where Liberty Mutual’s property loss control engineers offer critical guidance for customers with large property exposures.
“Our property loss control engineers go out and inspect locations to develop loss estimates,” said Tiede. “They’re looking at the age and condition of the roof, the material it’s made of, and whether equipment is exposed or if there are adequate safeguards in place.”
Liberty Mutual can combine this detail with the hail data it has collected for more than 14 years and use this extensive library to help customers understand their exposures. The company’s proprietary hail tool looks at customer-specific factors, such as roof type, age, condition and geocodes, to better identify potential losses from hail. The tool provides a more detailed view of hail exposure on a micro level, as opposed to more traditional macro views based on zip codes.
“This way, we’re not just looking at a location’s exposure, we’re looking at an account’s cumulative hail exposure and providing a better understanding of where the risk is concentrated,” Tiede said.
Having a good understanding of a company’s specific exposure helps the broker, buyer, and insurer develop an effective insurance program. “Two customers may be in the same area, but if one’s building has a hail resistant roof, protected skylights, and hail guards for HVAC equipment and the other’s has unprotected sky lights and no hail guards or screens on rooftop equipment, they are going to have different levels of exposure. In both scenarios, we can design an insurance program that fits the customer’s situation and helps control the total cost of property risk,” said Brent Chambers, Underwriting Consultant for National Insurance Property at Liberty Mutual.
A Liberty Mutual property loss control engineer consults with the customer on ways to reduce or mitigate the exposure from hail so that the customer can make an informed decision as to where to deploy capital. “It’s not just about protecting a building’s roof and rooftop equipment. Roof damage can lead to extensive water damage inside a building and in some cases disrupt service, both of which can be costly for a business. By focusing on locations with the most exposure, a risk manager is better able to mitigate future losses,” said Tiede.
Actions commercial property owners can take to mitigate the risk of hail-related damage.
Liberty Mutual property loss control engineers also provide recommendations specific to each location. “We know that hail guards work, so we encourage clients to use those to protect HVAC equipment,” said Ronnie Smith, Senior Account Engineer for National Insurance Property at Liberty Mutual. “Condenser coils in air conditioning systems are fragile and easily damaged, and units don’t necessarily come with built-in protection. It’s important for property owners to take this step proactively to prevent a loss.”
The average cost to fix a condenser coil is $500, but replacing a coil can run at least $500 per ton of cooling, a measurement of air conditioning capacity that refers to the amount of heat needed to melt a ton of ice over a 24-hour period. As one ton of cooling typically covers about 250 square feet of interior space, replacement costs can quickly add up.
Replacing an entire AC unit can run more than $1,000 per ton of cooling. In a 250,000 square foot property, the replacement could easily reach $1 million. Given the increase in hail-related AC damage this year, these are numbers worth knowing.
Other risk mitigation recommendations include regular roof maintenance, such as inspections and repairs to small damages like blisters and installing protective screens over skylights.
“If a roof needs replacing, we also suggest using materials that have been tested and approved by an independent certification laboratory and are durable enough to fit the location’s exposures,” Tiede said. “The last thing a commercial property owner wants is to replace a roof again six months after it’s installed. Experience has shown that ballasted-type roofs are the most resistant to hail damage.”
Using Data to Develop Solutions
When a property owner has an understanding of the size of its exposure and potential losses, it is better able to work with its agent or broker and insurer to develop an insurance program to manage and mitigate potential risks.
“The data and advice we provide help clients focus on the largest risks and better mitigate that exposure,” Smith said. “The more data you have, the more you can understand your risk on a granular level and manage it.”
This data-driven approach to preparedness makes Liberty particularly well-suited to serve large commercial properties with multiple locations in high risk areas.
Prices for roof and air conditioning repairs and replacements have risen over last year, Tiede said, and are likely to grow more expensive as older equipment becomes obsolete. Property owners will be forced to buy newer, pricier replacements than perhaps they had originally planned for.
And if this year’s storm trends are any indication, hail is sometimes an unpredictable foe.
Amidst these shifting trends, the value of an insurer’s expertise in identifying, mitigating and managing hail exposure will be immeasurable to large commercial property owners.
For more information about Liberty Mutual’s commercial property coverage, visit https://business.libertymutualgroup.com/business-insurance.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Liberty Mutual Insurance. The editorial staff of Risk & Insurance had no role in its preparation.