Ebola Sends Employers Wake-Up Call
Finally, it happened. The United State is experiencing its first cases of Ebola. A Liberian national living in Dallas died after being diagnosed with the virus, and now two of his treating nurses have now come down with the disease.
While the nation’s Ebola threat remains relatively minor right now, that’s hardly the case, of course, in the West African countries of Liberia, Nigeria, Guinea and Sierra Leone.
With the media reports as a backdrop, experts stress that recent Ebola media coverage on domestic shores is the perfect lynchpin for employers to review their emergency contingency plans already in place and update them, if necessary.
“The Ebola virus in Africa and the chikungunya virus in the Caribbean both demonstrate the need for employers and their employees to think about personal safety while traveling outside the United States,” said Dominick Zenzola, vice president and employee benefits manager for Chubb Accident & Health in Chicago.
“Employers have a duty of care to their employees who travel. Some prudent companies even have relocated business meetings and events to alternative destinations.” — Dominick Zenzola, vice president and employee benefits manager for Chubb Accident & Health
“Employers have a duty of care to their employees who travel. Some prudent companies even have relocated business meetings and events to alternative destinations,” he said.
Chicago-based Ed Hannibal, global leader of Mercer’s Mobility Practice, said that as more and more companies push deeper into global markets, safety and emergency planning for mobile employees has become an even more serious issue — from the executive on a single business trip to someone who locates to a country on a permanent basis.
Hannibal said employers should ensure their people systems are “linked up,” so they know where their employees are at all times, and where they have been or may be going.
Robert Quigley, U.S. medical director and senior vice president of medical assistance for International SOS, a Trevose, Pa.-based global medical and travel security risk services company, said employers have a “duty of care” to all their employees, but especially those who may need to work in high-risk countries or regions.
“The recent unfortunate Ebola outbreak should serve as a wake-up call for employers, to ensure they are doing the right thing,” Quigley said.
“Companies are reaching out to us, wondering if they are doing enough, or what is the benchmark in their industry segment. We have more than 10,000 clients, and many have a footprint in West Africa.”
Quigley also said it may be surprising that the companies with business in West Africa represent a wide spectrum of industry segments.
“Many of them want to know what everyone is doing in their segment, or what is [a] best practice for their industry,” he said. “One of our jobs is to help educate them, but depending on the sector, they will have a different risk tolerance.”
For example, a nongovernmental organization would have higher risk tolerance because their work typically takes them into some of the world’s most dangerous places.
Different clients have decisions to make, but the one thing they can’t do is make them on the fly, Quigley said.
Many plans, he added, are still based on the last pandemic with influenza, so it makes sense for employers to take a look at their current plan. For others who may not have any solution, they need to have something in place even if it’s somewhat generic and can be customized to meet special situations like Ebola.
“It’s not a decision to be made on the run and it must involve many levels of decision makers, from the C-suite down,” he said. “It requires systemic ownership and involvement.” — Robert Quigley, U.S. medical director and senior vice president of medical assistance, International SOS
“It’s not a decision to be made on the run and it must involve many levels of decision makers, from the C-suite down,” he said. “It requires systemic ownership and involvement.
“Having a pandemic plan on the shelf is not good [enough],” Quigley said, adding that employers should create a specific task force responsible for making sure such protocols and procedures are constantly updated.
Quigley compares the situation to company fire drills, which most employers conduct two or three times a year.
“You don’t want to [have to] invent protocol when there actually is a fire,” he said. “Call it whatever you want, but it needs to be planned and rehearsed. Having an updated plan is also a good morale builder, because it lets those employees know they mean something to the company because it is being proactive and taking measures to protect them.”
Mercer’s Hannibal emphasizes the importance of communications. He said plans must be very clear when sending employees out around the globe, noting that different locations will mean different levels of communication.
“For example, they should know that Ebola is not an easy virus to contract; they need to make sure they have briefed employees about the specifics for any potential risk,” he said.
At a basic level, Chubb’s Zenzola said, employers need to remind global travelers to check the list of travel alerts and warnings from the U.S. Department of State — which now includes Russia, Ukraine, Israel, Thailand, Egypt and Mexico — and from the Centers for Disease Control and Prevention before they book their trips and pack their bags.
“Right now, Ebola is the flavor of the month, but before it there was Mad Cow, SARS (severe acute respiratory syndrome), bird flu, West Nile. There will always be something,” said SOS’ Quigley.
“The Ebola outbreak must remind employers to ensure they have updated, effective emergency procedures and protocols in place.”
University Risk Managers Share Concerns
Higher education risk managers converged on Louisville, Ky., last week for the annual conference of the University Risk Management and Insurance Association, where several themes emerged as key areas of focus.
“ERM seemed to be the biggest theme, but there was a enough variety in the sessions to cover all the basics,” said Mark Logel, director, administrative services & risk management at the University of Evansville and a first-time conference attendee.
More than six in 10 (61 percent) survey respondents said they have not conducted an enterprise risk management process at their institution in the past two years, or don’t know if such work was done, according to data shown during one session, “Managing Risk Intelligently: A New Normal.”
And yet, nearly three-fourths (73 percent) said they are more focused on institutional risk now than five years ago, and 63 percent reported having more full board discussions about institutional risk.
Paradoxically, only 39 percent of respondents said they were getting enough information about their exposures, down from 43 percent in 2008.
However, according to Gary Langsdale, university risk officer at Pennsylvania State University (PSU) and a session speaker, these statistics are not as negative as they appear. Such conflicting opinions may demonstrate that institutions are growing more aware of the complex web of risks they face and therefore asking for more information, not necessarily receiving less.
“There’s an impetus for thinking more holistically about risk,” said Andre LeDuc, executive director, enterprise risk services at the University of Oregon. “It’s a continual struggle to promote a risk-aware culture.”
Such a culture needs to be built from the top down, with buy-in from board members and more communication between academic and student affairs offices. The publicity surrounding the Sandusky scandal at PSU revealed a need for greater board involvement, Langsdale said.
But, he noted, there is a limit.
“Board members should have their noses in but fingers out,” he said, meaning the board’s role is to be informed but not overly involved in risk management.
Langsdale identified ways risk managers can help set the culture for a true ERM effort:
• Look for leadership opportunities.
• Break down organizational silos.
• Understand the analytical tools and methodologies available.
• Elicit views from across the organization.
“Establishing ERM is an evolution,” LeDuc said. “Check back in two or three years to see what works and what doesn’t. Every institution is unique. … We have to take lessons learned back to our home institutions and help the thematic thread spread.”
Changing demographics and enrollment challenges, lack of funding and regulatory compliance are three major strategic risks faced by universities.
According to Christine Eick, executive director, risk management and safety at Auburn University, some schools saw hundreds of millions of dollars’ worth of cuts in government funding during the recession.
That is compounded, Langsdale said, by a lack of funding on students’ end as well. As costs rise, fewer students and their families are able to contribute much from their own pockets.
“We have to make choices about which programs to support,” he said.
Many attendees acknowledged that funding for sports programs, while ultimately accounting for a very small percentage of a school’s overall budget, should be the first to take cuts because of their high visibility.
Enrollment has also fallen as demographics shift. There are simply fewer 18-year-olds in the prospective student pool now than there were a decade or more ago, which increases competition among schools vying to keep classrooms full.
“One help has been recruiting returning military members,” Eick said, “who often come with the support of government funding” and have incentives to obtain a degree as they re-enter the mainstream workforce.
Compliance has also risen as a priority, especially with adherence to Title IX and the handling of sexual assault cases coming under tighter scrutiny.
Along with the increased risk, however, comes the benefit of putting “risk managers at the right tables,” said LeDuc, as universities need to discuss such risks among different offices and with board members.
Like any other organization that collects personally identifiable information, higher education institutions are more concerned with cyber threats.
“Data, data, data. Are we fully aware of our exposures?” LeDuc asked, picking out cyber security as a risk to watch related to students’ personal and financial records, as well as the potential for theft of intellectual property, especially at research institutions.
“Cyber is an increasing threat,” Eick agreed. “There has to be a shift in culture that mandates security training for all faculty to be completed by a certain date. Schools should be employing more privacy officers and CIOs to handle those challenges.”
Universities may have a higher exposure for data breach, Langsdale said, because networks are “designed to be open” to allow access for prospective and current students, alumni, faculty, and researchers from other facilities.
“You need to be on top of your cloud providers and know where your servers are located,” he said. “There should be no deemed export of information.”
Along with the increase in study abroad programs comes the increased need for colleges and universities to do more to ensure the safety of students in such programs, including keeping track of their whereabouts and the conditions of the countries they visit.
Until recently, schools have had limited ways to track and communicate with students abroad, and have kept limited records of incidents. Both nonprofit organizations and businesses offer resources to help risk managers expand their efforts.
One way to conduct due diligence is through site visits, which “are not terribly expensive,” according to Eick, but which usually are only done by larger, better-funded schools.
In addition to scoping out the conditions of hosting school and the surrounding communities, site visits allow risk managers an opportunity to analyze local coverage and ensure that the right policies are in place. Language barriers can result in improper coverage.
A Renaissance In U.S. Energy
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
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
Current 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.”
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.
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
Has 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.
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.