Insurance Journal West 2022-07-04

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July 4, 2022 • Vol. 100 No. 12

Contents

News & Markets

Idea Exchange

Special Report

8

20

NYC, Miami, Tampa, New Orleans Top Regions Among Storm-Surge Exposed Cities

12

Cyber Insurtechs and Insurers ‘In This Together,’ Not in Competition

Ask the Insurance Recruiter: 6 Conversation Starters About Recruiting

24

Is It Covered?: Should You Buy the Rental Car Damage Waiver?

Closer Look: Quantum Computing, Lower Construction Quality, Legal Tech Seen as Emerging Risks: Swiss Re

13

Captives, MGAs, MGUs Contribute to Growing Cyber Insurance Market

28

14

Special Report: 2022 Super Regional P/C Insurers Revealed

Appeals Court First to Rule in Favor of Coverage for COVID Shutdown

Breach Exclusions in E&O Policy Upheld in $1.3M Money Transfer Claim

40 42

Becoming Truly Digital

45

SMBs Are Struggling to Get Cyber Insurance

48

Minding Your Business: Financial Management 101

35

22

38

Spotlight: How Addressing Socioeconomic Inequality Is Key to Building Flood Resilience

Closer Look: Who Needs Earthquake Coverage and Why

22

50

Closing Quote: 3 Lessons From the Microphone

U.S. Supreme Court Sides With Doctors Challenging Opioid Convictions

Departments

6 Opening Note

4 | INSURANCE JOURNAL | JULY 4, 2022

10 Figures

11 Declarations

16 Business Moves

18 People

27 MyNewMarkets

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KNOWING THE SCIENCE BEHIND AN INDUSTRY ALLOWS YOU TO DISCOVER NEW WAYS TO PROTECT IT.

We make it our business to know the business of life sciences. That specialization translates to exceptional service.

With expertise in underwriting, risk engineering and claims, we help develop customized product solutions that mitigate risk for mid- to large-size businesses across many industries. The Buck’s Got Your Back.® TheHartford.com The Hartford® is The Hartford Financial Services Group, Inc. and its property and casualty subsidiaries, including Hartford Fire Insurance Company. Its headquarters is in Hartford, CT. 21-ML-886950 © August 2021 The Hartford

Opening Note Write the Editor: awells@insurancejournal.com

Chairman of the Board Mark Wells | mwells@wellsmedia.com Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION / CIRCULATION

Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com Circulation Manager Elizabeth Duffy | eduffy@wellsmedia.com Staff Accountant Sarah Kersbergen | skersbergen@wellsmedia.com

Bad Business

EDITORIAL

I

t’s no secret. The leading cause of an agency errors and omissions claim continues to be “failure to procure coverage.” But that’s not the end of the story.

While failure to procure coverage remains the biggest area of E&O exposures, it’s not always the agent’s fault, says Colleen M. Murphy, the leader of Goldberg Segalla’s insurance agents and brokers practice within its Management and Professional Liability practice group. Murphy knows a bit about agency E&O. She has spent more than 25 years defending independent agencies against E&O allegations.

Right now, especially in a hard market, some insureds may be tight with the premium dollar, she said. “They may not really understand the value of insurance until they have a claim.” That doesn’t mean the agent didn’t offer the insured sufficient coverage. But once a claim occurs, if the agent didn’t document the file correctly, they are susceptible to an E&O lawsuit. An agent may be doing a good job in offering sufficient coverage, but if they are not documenting that the insured declined a specific amount of coverage then they are at risk, she said.

Failing to identify exposures is another area Murphy sees often in agency E&O litigation.

“It depends on what state you’re in, but in New York, there is no common law duty to advise, guide or direct anybody to obtain any particular type or amount of coverage, absent a specific request,” she said. A request for the “best coverage” or “full coverage” is considered a general request and not a specific request, which would be sufficient to trigger a duty on an agent to obtain a particular type or amount of coverage, she explained.

But in today’s sophisticated insurance market, independent agents are far more than mere order takers, she added.

While there might not be an obligation to physically examine exposures at an insured property, for example, if the agent visits a property and misses a risk, that could lead to an E&O lawsuit or claim.

“So, the idea there is to go out with a checklist, make sure if your agency is professing expertise in certain industry verticals that, that expertise is brought to bear for all of the accounts, just not the larger accounts,” she advised. “Make sure that if you have a newer producer, that the producer is going out to that account with someone else who’s more seasoned and will not miss something.” And the bottom line, document everything, 100% of the time.

But most importantly, avoid bad clients, she said. “Learn how to detect and avoid, and if necessary, get off bad business.” Bad business leads to a disproportionate amount of E&O lawsuits and claims, Murphy added. And how can an agent detect bad business? Simply look at how they operate, she said.

“How do they treat you and your staff? Are they always rushing you? Do they never have time for you? Are they literally yelling and writing nasty grams?” she asked. These are telltale signs that trouble might be on the horizon. Challenging clients often end up being bad business, she added.

‘Learn how to detect and avoid, and if necessary, get off bad business.’

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | JULY 4, 2022

Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com National Editor Chad Hemenway | chemenway@insurancejournal.com Southeast Editor William Rabb | wrabb@insurancejournal.com South Central Editor/Midwest Editor Ezra Amacher | eamacher@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor L.S. Howard | lhoward@insurancejournal.com Columnists & Contributors Contributors: Asaf Lifshitz, Caitlin Smith, Pavel Sternberg, Peter van Aartrijk Columnists: Mary Newgard, Catherine Oak, Barry Rabkin, Bill Wilson

SALES / MARKETING

Chief Marketing Officer Julie Tinney | jtinney@insurancejournal.com West Sales Dena Kaplan | dkaplan@insurancejournal.com Romeo Valdez | rvaldez@insurancejournal.com Kelly DeLaMora | kdelamora@wellsmedia.com South Central Sales Mindy Trammell | mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA, CT) Howard Simkin | hsimkin@insurancejournal.com Midwest Sales Lisa Whalen | (800) 897-9965 x180 East Sales (NY, PA and CT only) Dave Molchan | (800) 897-9965 x145 Advertising Coordinator Erin Burns | eburns@insurancejournal.com Insurance Markets Manager Kristine Honey | khoney@insurancejournal.com Sr. Sales & Marketing Coordinator Laura Roy | lroy@insurancejournal.com Marketing Administrator Alberto Vazquez | avazquez@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com Web Team Lead Josh Whitlow | jwhitlow@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Jason Chipp | jchipp@wellsmedia.com V.P. of New Media Bobbie Dodge | bdodge@insurancejournal.com Videographer/Editor Ashley Waldrop | awaldrop@insurancejournal.com

ACADEMY OF INSURANCE

Director Patrick Wraight | pwraight@ijacademy.com Online Training Coordinator George Jack | gjack@ijacademy.com

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News & Markets NYC, Miami, Tampa, New Orleans Top Regions Among Storm-Surge Exposed Cities

N

ew York, Miami, Tampa and New Orleans are the metro areas with the most single-family homes at risk of heavy damage from storm surge during hurricanes, according to a report released by CoreLogic, a property data analytics firm.

Using housing data and its own reconstruction cost estimates, the report found that these four cities have almost 2.5 million homes vulnerable to the devastating impact of storm surge flooding — at a replacement cost of more than $804 billion. According to CoreLogic risk modeling data, 7.8 million homes with more than $2.3 trillion in combined reconstruction cost value (RCV) are at risk of hurricane-related damages. The report also revealed about 33 million homes with nearly $10.5 trillion in combined RCV are at

8 | INSURANCE JOURNAL | JULY 4, 2022

risk of hurricane-force wind damages.

“Given the uncertainties that come with hurricanes, insurers and their policyholders should understand this risk on a granular, structure-by-structure basis to ensure homeowners are adequately covered,” the report said about the growing risk of damage from storms.

The 2022 Atlantic hurricane season started June 1 and is predicted to be “well above average,” with 20 named storms — 10 hurricanes and 5 major hurricanes of Category 3 strength or more, according to the latest forecast from researchers at Colorado State University.

“Stronger hurricane seasons mean property losses will continue to mount.

The insurance industry will see increased financial implications because wind damages are covered by standard homeowners

insurance policies,” the CoreLogic analysts noted.

Here’s a breakdown of the metro areas with the most to lose from storm surge: • New York: 786,279 single-family homes at risk and $370 billion in reconstruction costs.

• Miami: 740,744 homes at a cost of $184 billion.

• Tampa: 555,474 homes at a cost of $126 billion.

• New Orleans: 405,369 homes at a cost of $124 billion.

For wind damage, New York, Houston, Miami and Philadelphia ranked highest on the list. In all coastal U.S. metro areas, the report found that some 31 million single-family homes are at moderate or greater risk of hurricane wind damage.

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Figures

$25 Million

38

The number of reckless endangerment counts commercial bus driver Jinhuan Chen faces in Connecticut after he blacked out behind the steering wheel while snacking on gummies he says he didn’t know were infused with the cannabis ingredient THC. Chen was driving 38 passengers from the Mohegan Sun Casino when he stopped the bus on the side of Interstate 95 in Stratford.

Police said they found Chen slumped unconscious in the driver’s seat, next to an open package of Smokies Edibles Cannabis Infused Fruit Chews. Chen said he had no idea he had been snacking on anything but regular candy.

10 | INSURANCE JOURNAL | JULY 4, 2022

The settlement amount Lyft Inc. reached to resolve shareholder claims the ride-hailing company concealed safety problems, including sexual assaults by drivers, prior to its 2019 initial public offering.

The preliminary all-cash settlement was filed with the federal court in Oakland, California, and requires approval by U.S. District Judge Haywood Gilliam Jr. Lyft denied wrongdoing. Shareholders had accused San Francisco-based Lyft of trying to appear more socially responsible than rival Uber Technologies Inc. by failing to disclose known problems in its IPO registration statement. In addition to driver sexual misconduct claims, Lyft also was accused of concealing braking issues plaguing its bike-share program.

$300,000 The amount a contact lens company will pay in civil penalties in a deceptive trade practices settlement with the state of Texas. Texas Attorney General Ken Paxton’s office alleges Hubble deceptively marketed its lenses by representing them as “high quality” even though they were manufactured using older technology that many other contact lens companies had moved away from. Hubble allegedly failed to verify consumers’ contact lens prescriptions with prescribers before filling orders, a violation of the Contact Lens Prescription Act, which resulted in many consumers receiving the wrong contact lenses.

$12 Million That’s the size of the settlement the Maricopa County Sheriff’s Office in Arizona reached in a lawsuit involving a jail attack that seriously injured an inmate more than two years ago. The county’s Board of Supervisors approved the settlement for the family of Brian Ortiz, who was 18 at the time and jailed for violating probation by not paying a fine.

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Declarations

Can’t Stop the Blizzards

Gun Owners Liability

Long Recovery

“Dairy Queen introduced no evidence of an actual association between the two products. … If association were to occur, in all likelihood, it would have occurred by now.”

— St. Paul, Minnesota-based U.S. District Judge Susan Richard Nelson, ruling that Dairy Queen cannot stop W.B. Mason Co. from selling “Blizzard” bottled spring water, the same name the unit of Warren Buffett’s Berkshire Hathaway Inc. uses for a popular ice cream product. Nelson found no evidence that consumers were confused by the Blizzards or that W.B. Mason, an office products distributor, intended to confuse anyone. Dairy Queen acknowledged W.B. Mason, which has two trademarks for Blizzard copy paper, was not a competitor, but said consumers might be confused because its U.S. restaurants sell bottled water.

“Guns kill more people than cars. Yet gun owners are not required to carry liability insurance like car owners must.”

— Democratic state Sen. Nancy Skinner stated her support for a bill that would make California the first state to require gun owners to buy liability insurance to cover the negligent or accidental use of their firearms. The state of New York is considering a similar requirement in the wake of numerous recent mass shootings and a rise in gun violence. In January, the Silicon Valley city of San Jose approved what’s believed to be the first such insurance requirement in the United States.

“It’s going to take years before people can get back to their lives. The majority of people are still at a standstill.”

— Cherie Matherne, an official for Louisiana’s Pointe-au-Chien Indian Tribe, on the community’s slow recovery from the wreckage of Hurricane Ida. Only about 12 homes in the lower part of the Pointeau-Chien community survived the storm, while farther west, where many members of the Grand Caillou/Dulac Band of Biloxi-Chitimacha-Choctaw live, about 20% of homes were a total loss. Native Americans have lived in the southeastern Louisiana bayou regions since long before French explorer Rene-Robert Cavelier reached the mouth of the Mississippi River in 1682.

Differences in Treatment

A Right to Know

A Claims Issue

“How is it that we look at the same constitutional violations clearly occurring based on color, and there’s not even a plan on what to do?”

— Missouri NAACP President Nimrod Chapel on a recent report that shows Black drivers are more likely to be pulled over in Missouri compared to white drivers, and the gap between how Missouri police treat Black and white drivers increased again in 2021.

Differences in Black and white motorists’ interaction with police have for the most part increased in the two decades since Missouri began tracking and analyzing vehicle stops. Missouri’s population is close to 11% Black, but about 18% of all police traffic stops in 2021 involved Black drivers.

INSURANCEJOURNAL.COM

“Consumers have a right to know what information of theirs is being collected, have the ability to correct any false data that is collected, and have the right to delete that data if they don’t want it collected.

— Connecticut Gov. Ned Lamont, after signing into law Public Act 22-15, which provides consumers with greater ability to safeguard their personal data that is collected by online companies. The law requires companies to publicly share a privacy policy that tells consumers what data of theirs is being collected and how that data is being used, and gives consumers an option to opt out of selling or sharing that data to others. The law takes effect July 1, 2023. A provision related to a task force is effective immediately.

“The biggest issue is not what’s going on inside the pipes, but what’s going on with the insurance claims industry.”

— David Grindley, a forensic structural engineer who spoke at the Florida Defense Lawyers Association claims conference in June. He explained that while homeowners and contractors have filed an increasing number of claims on cast iron drainpipes, many of those claims are exaggerated and can be defended. Cast iron drainpipes last for decades, aren’t usually the source of a drainage problem, and can be cleaned and lined — instead of having to be replaced, he said.

JULY 4, 2022 INSURANCE JOURNAL | 11

News & Markets Cyber Insurtechs and Insurers ‘In This Together,’ Not in Competition

By Chad Hemenway

I

nsurtechs and insurance companies are “breaking down the wall” that stood between them as competitors in favor of working together to tackle dynamic cyber risk.

“We’re all trying to solve the same problem,” said Lori Bailey, chief insurance officer at Corvus Insurance, during a panel discussion at Carrier Management’s InsurTech Summit. “We’re in this together.”

“I think there’s this long-standing perception that insurtechs and insurers in some ways have been in competition with one another,” she said. “I view it differently. Insurtechs can be a real enabler in providing a lot of important data traditional carriers just don’t have the ability to provide. Not because they don’t want to, but because the systems don’t allow them to capture that data in a real-time format and be able to utilize that data as part of the underwriting process.”

Roman Itskovich, co-founder and chief risk officer at Lori Bailey managing general agent At-Bay, said during the panel discussion that he does not like the term “disruptor” for the insurtech space.

“At the end of the day, it’s a partnership,” he said. “But I think change is hard, and some things need to change.”

Right now, the wider cyber insurance market is taking “less of an underwriting approach and more of an exclusionary approach,” Itskovich said.

He said insurtechs have tried to efficiently collect data — information that can be validated through loss trends to understand “how we can write the risk in a consistent manner without creating ambiguity for our insureds.” This is done, he added, with an active risk management

approach to maintain data collection throughout the policy period instead of a traditional once-a-year underwriting process.

“The mindset for insurtechs and carriers should be moving away from a once-a-year underwriting snapshot and a decision, to a more dynamic approach,” Itsovich said.

“If you take an active risk management approach where you consistently collect information and you try to help companies stay safe, not just through the insurance mechanism but through a risk-management mechanism — I think that is something we will all benefit from, both insured and carriers.”

Bailey said insurtechs have played “really important role” with reinsurers in helping get an understanding of data aggregation and systemic risk to free up capacity.

“We think that insurtechs can provide a lot of rich data in this particular space,” she said. “Not only data but tools to help reinsurers better manage the risks.”

Bailey said she expects the rise in partnerships between traditional cyber insurers and insurtechs to continue.

Bill Keogh, COO and operating partner with Eos Venture Partners, said the “days of just offering cyber products on a standalone basis without a tech wrapper is fading given the risk environment.” A tech company partnering with insurance carriers to help provide capacity for a tech-enabled product is “a very powerful tool,” coupled with other tech providers on the response side.

“It’s more of a disruption of old ways of doing things rather than the industry disruption that we all like to put in the news because it sounds great,” Itskovich said. “It sounds aggressive but that’s not the reality of this space in my opinion.

“Insurers have the reputation and the capital, and technology companies have the software and some talent that is harder to get for insurance companies. That just makes sense.”

Captives, MGAs, MGUs Contribute to Growing Cyber Insurance Market

By Chad Hemenway

T

he hard market for cyber insurance, which is expected to continue for “some time,” and a lack of capacity has made captive insurers an “attractive risk management option for corporations,” said AM Best in a recent market report.

As part of its look at the U.S. cyber market, AM Best said captives can customize policies to allow parent organizations to assess damage and react quicker, but “sufficient and reliable cyber data for captive insurers does not exist.” They do not file with the National Association of Insurance Commissioners, with the exception of most risk retention groups (RRGs).

“However, many captive domiciles have shown interest in having captives provide this level of detail, which will improve future transparency,” AM Best said, adding, “Both pure and group captives must understand and appreciate the great complexity that cyber poses and conduct detailed underwriting and risk management on the policies that they would offer. In other words, simply a hard commercial market should not be the main reason to transfer the cyber exposure to the captives.”

The rating agency said some pure captives are writing policies with multi-million dollar INSURANCEJOURNAL.COM

limits and premiums, using third-party technology and forensic cyber consultants.

Based on NAIC data, RRGs wrote about $19 million in cyber premiums in 2021, with limited coverage.

The growth of the cyber market — which overall saw direct premiums written, driven in large part by rate hikes, increase 75% in 2021 — includes the creation of captives or specialty insurers by managing general agents or underwriters (MGAs/MGUs).

“MGAs and MGUs benefit from working closely with their policyholder and insurance brokers. As a result, they are able to recommend measures for policyholders to improve their cyber profiles and practices, while they work with brokers to create customized coverage. At-Bay, Coalition, Corvus, Cowbell, and Resilience are prominent entities in this area,” AM Best noted in the report, U.S. Cyber: The Hardest of the Property/Casualty Markets.

Growth in cyber insurance is far outpacing the rest of the property/casualty industry but claims are also up, AM Best observed. Claims on standalone cyber policies are the majority, as first-party ransomware claims increase. Claims on standalone first-party policies grew an average 38% over the past five years, though the agency said definitions of standalone and packaged policies “appear to be open to interpretation.”

Despite the ongoing growth in cyber claims in 2021, cyber insurers’ underwriting performance still improved, as evidenced by an estimated combined ratio of 91.8 in 2021, although the estimated combined ratio on standalone policies was worse at 98.8, according to AM Best. With cyber attacks becoming more complex, AM Best expects the cyber market to remain hard for some time.

AM Best predicted Berkshire Hathaway’s acquisition of Alleghany will move it into the top 10 cyber underwriters, currently led by Chubb, Fairfax, XL Re, Tokio Marine and AIG. The aggregate combined ratio of the top five insurers is more than 100, led

by AIG’s combined ratio of 154.2 — most among the top 20 cyber insurers. The total combined ratio for the top 20 was 92.6 in 2021.

“Even more concerning, actual underwriting expenses may be even higher than the overall line,” AM Best said.

“Services provided during the underwriting process — evaluating cyber defenses in place, assisting in upgrading cyber defenses, and warning clients when threats are detected — all drive up underwriting expenses.”

Organized by policies-in-force, Hartford by far writes the most cyber insurance policies, eclipsing the next three insurers on the list combined.

JULY 4, 2022 INSURANCE JOURNAL | 13

News & Markets Appeals Court First to Rule in Favor of Coverage for COVID Shutdown

By Jim Sams

T

he attorney who filed the first U.S. lawsuit seeking insurance coverage for a business shut down because of coronavirus won the first policyholder victory in a state or federal appellate court that interpreted the meaning of “direct physical loss or damage.”

The Louisiana 4th Circuit Court of Appeals on June 15 reversed a trial court decision that dismissed a lawsuit filed

by Cajun Conti, the owner of a 500-seat restaurant in the New Orleans French Quarter.

All 77 federal and 44 state court appellate decisions so far have held that the coronavirus did not cause tangible damage to property that was covered under standard-form commercial property policies.

But the Louisiana appeals court ruled in a 3-2 decision that a Lloyd’s of London syndicate owed coverage to Cajun Conti because its policy was ambiguous, so must be interpreted in favor of the policyholder.

Plaintiff’s attorney John W. Houghtaling II said none of the cases decided so far went to trial. He said he won because he was able to present “smoking gun” evidence at trial that the Insurance Service Office was aware that a virus contamination can trigger coverage under “all risk” commercial property policies. The ISO admitted that when its representatives met with the Louisiana insurance commissioner and other insurance regulators around the country in 2006 to seek approval of a standard-form virus exclusion, Houghtaling said.

“I didn’t make that up,” he said. “That was out of the mouths of the insurance industry.”

Mark Friedlander, communications director for the Insurance Information Institute, said the Louisiana decision is an outlier. “We respect the appellate panel’s ruling but disagree with the decision,” Friedlander said in email. “We are confident courts across the country will continue to rule in favor of insurers in business interruption cases because 14 | INSURANCE JOURNAL | JULY 4, 2022

there is ‘no physical loss present.’ Insurers have been prevailing in these cases because the policy language is very clear.

Consequently, insurers cannot be held responsible for coronavirus-related losses.”

The attorney who represented Lloyd’s, Allen C. Miller of Phelps Dunbar in New Orleans, said in an email that the dissenting opinion in the case reflects the opinion of every federal and state appellate court that has ruled on the question of whether insurance coverage is owed for COVID-19 business interruption losses. He noted that the 5th Circuit Court of Appeals, interpreting Louisiana law, had also rejected property insurance coverage in a lawsuit filed by Q Clothier and Louisiana Bone.

“The decisions have been unanimous, without a single dissent,” he said. “We will pursue all options to address what we believe to be an outlier decision.”

Only one appellate court so far has ruled in favor of a policyholder seeking coverage for income lost because of a COVID shutdown. The New York Appellate Division, 1st Department found that coverage was owed under pollution legal liability policy purchased by the New York Botanical Garden.

That policy did not include the usual language that requires a “direct physical loss or damage.”

Cajun Conti owns the Oceana Grille, a restaurant in the heart of the touristy French Quarter that seats 500 and employed 200 before Gov. John Bel Edwards issued a March 16, 2020, executive order that forced restaurants throughout the state to close their dining rooms. Oceana reopened at 25% capacity two months later and continued to operate at less than 50% capacity for the next year.

The company had paid $91,000 to purchase a commercial property policy without the usual virus exclusion. The general manager testified that he would not have bought a policy with that

exclusion because the restaurant serves raw oysters.

Cajun Conti filed a lawsuit against Lloyd’s on the same day it shut down, seeking a declaratory judgment that the insurer owed coverage for its losses because of the contamination to the premises. Orleans Parish Judge Paulette R. Irons ruled against a motion to dismiss filed by Lloyds, but after a trial court ruled that no coverage was owed without making any written findings.

The 4th Circuit wrote three opinions; two for the majority and one for the dissent.

Writing for the majority, Chief Judge Terri F. Love, cited testimony from Dr. Lemuel Moye that supported the argument that the coronavirus had physically altered the property.

“The physical presence of COVID-19 substantially diminished the usable space of the property, as tables needed to be pushed farther apart, and resulted in economic losses due to the slowdown of the appellants’ business,” the opinion says. “Stated differently, the physical presence of infectious viral particles decreased the habitable portion of the insured property and caused a slowdown of business activities.”

Judge Joy Cossich Lobrano concurred, but wrote separately to say coverage was owed under a 2011 appellate court decision, Widder v. Louisiana Citizens Property Insurance Corp., that held lead contamination to a home had caused a direct physical loss because it had rendered the property unusable.

The two dissenters, in an opinion written by Judge Roland L. Belsome, said the trial court’s ruling in favor of Lloyds should have been upheld because there was no physical alteration to Cajun Conti’s property.

Rhonda D. Orin, an insurance recovery attorney for the Anderson Kill law firm INSURANCEJOURNAL.COM

‘The decisions have been unanimous, without a single dissent. … We will pursue all options to address what we believe to be an outlier decision.’

in Washington, D.C., said the fact that five appellate court judges wrote three opinions to explain their reasoning demonstrates the ambiguity that Cajun Conti was trying to prove. She said business owners who buy all-risk policies with no virus exclusions expect to be covered in circumstances where they are not allowed to use their property for the intended purpose.

Both Houghtaling and Orin pointed out that most of the decisions so far were decided in federal court at the summary judgment stage, meaning federal judges are interpreting state laws. Houghtaling said he would not have been able to present evidence that ISO considered viral contaminations to be compensable if his case had not gone to trial.

Attorneys for Marc Fisher LLC, a designer shoe distributor, also attempted to submit evidence about ISO’s statements to insurance regulators in a lawsuit that sought more than $100 million in damages.

INSURANCEJOURNAL.COM

A state court judge dismissed the case after finding no coverage was owed because of a virus exclusion.

Nevertheless, Orin said the ISO’s comments to insurance regulators about the need for a virus exclusion in 2006 make for compelling evidence. “Companies don’t go through the process of drafting exclusions and getting them approved by all 50 state insurance departments if they don’t need them,” she said.

Orin said she’s been practicing law long enough to see how tort liability in environmental law developed. Insurers that excluded coverage for pollution won early rounds, but then started losing cases.

She said the tide may be turning for COVID-19 business-interruption claims as well. “I think this thing can turn on a dime and I think insurance companies think it can too and are worried about it,” she said.

James Sullivan, a policyholder attorney with the Calfee law firm in Cleveland, Ohio, said the decision demonstrates that

business interruption coverage is a matter of state law and should be decided by state courts rather than federal courts.

“Although it relies on Louisiana law, which sometimes differs from other states’ laws, this case shares at least two things in common with many other U.S. states,” Sullivan said in an email. “First, it relies largely upon the principle that ambiguous insurance policy language gets construed in the policyholder’s favor as a matter of law, and this same principle exists in most U.S. states. Second, this case shares the same key question as most cases in U.S. state courts, which is how to interpret the phrase ‘direct physical loss or damage.’”

He said it stands to reason that other state high courts may find insurance policy language to be ambiguous.

“Here in Ohio, where ambiguities are construed in favor of policyholders, we continue to wait and see how our Ohio Supreme Court will rule on this topic in a pending case,” he said.

JULY 4, 2022 INSURANCE JOURNAL | 15

Business Moves access QuickInsured’s proprietary digital sales funnel. This technology customizes and provides multiple insurance solutions to customers.

Acrisure said the technology platform will drive further revenue growth by leveraging the significant number of client transactions in its Real Estate Services division, utilizing QuickInsured’s existing digital sales platform to seamlessly offer these customers personal line insurance policies.

Intact, Tokio Marine Highlands

National

JAB, Fairfax, Crum & Forster, PetHealth

JAB Holding Co. and Fairfax Financial Holdings Limited said JAB’s pet insurance business agreed to acquire all of Fairfax’s interests in the Crum & Forster Pet Insurance Group and PetHealth Inc., including all worldwide operations.

Fairfax will receive $1.4 billion in the form of $1.15 billion cash and $250 million in seller notes. JAB said its combined global pet insurance and ecosystem platform will grow to have gross written premiums and pet health services revenues of well over $1.2 billion by 2023, insuring more than 2.1 million pets.

The transaction, subject to conditions and regulatory approvals, is expected to close in the second half of 2022.

C&F Pet insures over 500,000 pets and markets or serves as underwriter for numerous brands, including ASPCA Pet Health Insurance, 24Petprotect, Hartville Pet Insurance, Spot Insurance Services, Pumpkin Insurance Services, and PetCoach LLC (provider of Petco pet insurance plans) in the United States and Pets Plus Us in Canada.

Pethealth provides wellbeing and safety solutions to shelters and pet parents under the 24Pet brand, which includes the 24Petwatch Registry with over 20 million registered pets.

As part of the transaction, Fairfax will also make a $200 million investment in JCP V, JAB’s latest consumer fund.

JAB is a German conglomerate based in Luxembourg.

16 | INSURANCE JOURNAL | JULY 4, 2022

East

Britely Insurance, Empire State Brokerage

Florida-based Britely Insurance has agreed to acquire the assets of Empire State Brokerage Services, a Plainview, New York-based wholesale broker operating in more than 25 states.

The transaction is expected to close in July.

David Schepsman, president at Empire, and his team bring decades of experience in commercial insurance markets including restaurants, contractors healthcare, real estate and nonprofits.

The online Empire Express service allows agents to quickly obtain quotes for businessowners, general liability, workers compensation and professional liability accounts.

Empire also has regional offices in South Carolina and Massachusetts.

Britely is an insurance distribution franchise platform. It offers access to personal lines, commercial lines, small group and individual health insurance markets. Through its subsidiary, Britely Medical Insurance Services, it provides specialized products and services to the medical community.

Midwest

Acrisure, QuickInsured

Acrisure acquired Columbus, Ohiobased QuickInsured, a tech-enabled insurance agency.

Through this acquisition, Acrisure will

Tokio Marine Kiln reached an agreement with Intact Insurance Group USA LLC for the sale of Tokio Marine Highland’s U.S. construction division.

The transaction is subject to customary regulatory approvals and is expected to close in the second half of 2022.

TMH’s construction business, Highland, provides primary and excess builders risk insurance in the U.S. The division, led by Rick Girden, president, and Kaileigh Bowe, executive vice president, employs approximately 40 people and is headquartered in Naperville, Illinois.

South Central CCIG

Colorado-based CCIG is expanding its services with the opening of a new location in Austin, Texas.

CCIG specializes in construction and real estate insurance protection. Their insurance program design team and their risk management team help clients secure insurance protection, reduce risk exposures and manage claims.

CCIG calls itself an independent, rapidly growing insurance brokerage, delivering risk management and insurance solutions to their clients.

Skyward Specialty

Houston-based Skyward Specialty Insurance Group Inc. has expanded its miscellaneous professional liability coverage to include errors and omissions (E&O) exposure for employed lawyers.

The coverage protects in-house attorneys from allegations of malpractice INSURANCEJOURNAL.COM

while executing their legal duties. In-house general counsel, legal assistants, notaries public and temporary or independent contractor attorneys are eligible for coverage.

Employed Lawyers coverage is key in limiting rising exposures to in-house attorneys who are not covered by traditional Directors & Officers (D&O) policies, the company said.

Skyward Specialty is a specialty insurance company, delivering commercial property and casualty products and solutions on a non-admitted and admitted basis.

Southeast

King Insurance Acquires Wurzel Agency

King Insurance, a brokerage based in Gainesville, Florida, has acquired The Wurzel Agency in Oveido, Florida.

Wurzel specializes in property/casualty personal lines and small and mid-size commercial coverage.

Robert Wurzel, founder, said the agency has had three generations in the Florida insurance business.

King Insurance is a brokerage firm providing property/casualty and employee benefits programs.

West

Hub, Physicians Risk Associates

Hub International Ltd. acquired the assets of Physicians Risk Associates Insurance Agency LLC in Mission Viejo, California.

Physicians Risk Associates Insurance Agency team will join Hub Los Angeles/ Orange County.

Physicians Risk Associates Insurance Agency is an independent insurance agency providing services to businesses, individuals and families. The firm specializes in insurance for medical and healthcare professionals.

Chicago, Illinois-based Hub is an insur-

ance broker and financial services firm providing risk management, insurance, employee benefits, retirement and wealth management products and services.

PCF, Mike Haffar

PCF Insurance Services acquired Mike Haffar Insurance Services Inc. located in West Covina, California.

Mike Haffar is an insurance and risk advisor for physicians, medical clinics, medical groups, surgery centers and hospitals.

The agency specializes in malpractice, general liability, property, workers’ compensation, management liability, professional liability, employment practices liability, earthquake, and group health benefits.

Lehi, Utah-based PCF Insurance Services is a consultant and insurance brokerage firm offering commercial, life and health, employee benefits, and workers’ compensation.

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JULY 4, 2022 INSURANCE JOURNAL | 17

People National

and has held positions in sales, marketing and as distribution.

III as chief executive officer and president, effective Oct. 1, 2022.

Shallcross will succeed Robert A. DiMuccio, who is retiring after 31 years of distinguished service, including 17 as CEO. DiMuccio will serve as non-executive chair of the board until Dec. 31, 2022.

Shallcross is currently senior vice president and general manager of Amica Life.

Shallcross first joined Rhode Island-based Amica in 2007 as a senior assistant vice president in the accounting department.

Before joining Amica, Shallcross spent 12 years at KPMG’s property/casualty insurance practice.

A direct writer, Amica offers auto, home, life, marine and umbrella insurance, as well as annuities.

Jen Ughetta will become chief people officer of Liberty Mutual Insurance, effective July 2022. Ughetta has been at the company since 2018.

In her new position, she will have responsibility for all talent-focused teams, including talent acquisition, total rewards, employee relations, leadership learning and talent, and the business-embedded talent advisor communities, among other areas of focus.

Previously, Ughetta was executive vice president and chief talent officer of global retail markets.

Prior to joining Liberty Mutual, she spent 20 years at Munich Reinsurance in human resources.

Amica Mutual Insurance Co. named Edmund Shallcross

Liberty Mutual Insurance

named Melanie Foley executive vice president and chief administration officer, effective July 2022.

Foley previously served as executive vice president and chief talent and enterprise services officer.

In this expanded role, she will maintain her current responsibilities in addition to overseeing the company’s corporate administration departments and community and philanthropic investments beginning January 2023.

Foley, who has been part of the insurer’s executive leadership team since 2011, will report to Tim Sweeney, who was appointed CEO of Liberty Mutual beginning in January 2023. Foley has been at Liberty Mutual for 25 years

Lemonade appointed former New York insurance regulator Scott Fischer as its first head of government relations.

He will provide strategic counsel regarding laws and regulations and guide strategy around relationships throughout the insurance regulatory community. Fischer will also serve as co-general counsel alongside Bill Latza, who plans to retire at the end of the year.

Most recently, Fischer was a partner at global law firm DLA Piper, where he represented international, national and local insurers and producers in their regulatory and compliance activities.

He also spent 10 years at the New York State Department of Financial Services, ultimately serving as the executive deputy superintendent for insurance.

East

18 | INSURANCE JOURNAL | JULY 4, 2022

Brethren Mutual Insurance

Co. President and Chief Executive Officer Mike W. Brashears will step down from

his leadership position on Dec. 31, 2022, after a 44-year career with the company.

Robert F. Glass, currently vice president of underwriting and marketing, will succeed Brashears in the role of president/CEO, effective Jan. 1, 2023.

During the first three months of 2023, Brashears will serve in an advisory role to ensure a smooth transition of leadership until his official retirement on April 1, 2023. He will continue his position as a Brethren Mutual board member in retirement.

Glass joined Brethren Mutual in October 2017 as the director of underwriting. He was promoted to managing director of underwriting and marketing in November 2018 and subsequently promoted to this current position in April 2020.

Brethren Mutual is headquartered in Hagerstown, Maryland, and writes personal, commercial and farm business in Maryland, Pennsylvania, Virginia, Delaware and the District of Columbia through independent insurance agents.

Massachusetts-based auto and home insurer, MAPFRE USA, named Dana Whiteley a senior vice president of business development.

Whiteley will oversee MAPFRE’s business development strategy in Massachusetts and the company’s Northeast region.

He succeeds Keith Jensen, who is retiring from MAPFRE, effective June 30, 2022.

Whiteley, a Certified Public Accountant, has served in

several leadership roles since joining the company in 2002.

Midwest

Powers Insurance & Risk Management and sister company Valley Insurance Agency Alliance (VIAA) promoted Tim Tim Davis Davis to chief

operating officer (COO).

Davis previously served as director of operations at both companies for the past five years. As COO, he will supervise the overall business operations strategies and daily operations for both companies.

Responsibilities include creating IT solutions and overseeing hiring and training, as well as developing and administering the company’s policies and procedures.

Prior to joining the companies, Davis worked for a national online retail insurance agency for nearly 10 years.

Powers is one of the largest family owned and operated independent insurance agencies in the bi-state region.

VIAA is a cohesive family of nearly 150 independent insurance agencies in Missouri and Illinois.

Alera Group named John Mollica

as chief information and John Mollica innovation officer (CIIO).

In this role, Mollica will lead the vision, strategy and operations of Alera Group’s technology teams. He will partner with Alera Group’s senior business leaders to INSURANCEJOURNAL.COM

evaluate and implement technology solutions that continue to drive innovation and operational excellence.

Prior to this role, Mollica served as Alera Group’s vice president of business intelligence and transformation.

Before joining Alera Group, Mollica held senior management and product roles in insurtech. He has also previously held senior finance and transformation roles at Citigroup, AXA XL, and Marsh & McLennan.

Holmes Murphy added Ryan Anderson as property/casualty specialty practice leader in the company’s expanding Minneapolis market.

Anderson joins the Holmes Murphy team with nearly 20 years of industry experience.

His knowledge, expertise and industry relationships will be key assets to Holmes Murphy, not only in Minneapolis but across the enterprise, the company said.

Prior to joining Holmes Murphy, Anderson was a senior vice president at Hays Companies, now Brown & Brown, for nearly 14 years.

Anderson also spent time as a senior executive risk underwriter at Travelers.

Hylant hired veteran Carman Baines as client executive.

Based in Grand Rapids, Michigan, Baines will play a critical role in driving new business wins for the family-owned full-service insurance brokerage and delivering outstanding service to existing client partners.

With more than 20 years of experience in the insurance industry, she will serve within the sales arm of the company INSURANCEJOURNAL.COM

— a key area accelerating new and organic growth for Hylant’s services.

South Central

USG Insurance Services Inc.

named AJ Perez as producer/ broker: commercial lines in the Houston branch office.

Perez joins the USG team with 16 years of insurance industry experience, most recently with CRC Insurance. In his new role at USG, Perez will focus on expanding his book of business and developing USG’s Southern footprint.

This move is the most recent change that USG has implemented in its plan to continue expanding its operations nationally as a leading wholesaler brokerage firm, the company said.

One General Agency, a managing general agency and surplus lines broker based in Oklahoma City, added five people to the underwriting team.

Kraig Rosenow was named underwriting manager. He leads a team of surplus lines and cannabis underwriters over a four-state market.

Rosenow, who has 27 years of experience, began his career in personal lines at American Family Insurance and recently transferred from CapSpecialty, where he was an underwriting leader.

Tammie Darter joins OGA as a commercial lines underwriter. Darter brings 30 years of industry experience to the OGA team.

Rachel McCoy was hired as an OGA commercial lines underwriter. McCoy has worked in the industry for over eight years.

Kelly Marshall brings six

years of industry experience to OGA in her role as an associate underwriter.

Beverly Miner joins OGA with over 13 years of experience in the insurance industry, including extensive experience on retail side.

Southeast

The Florida Association of Insurance Agents installed new

board members at its annual convention in Orlando in June.

The board comprises 14 members, elected on a staggered basis to three-year terms.

Garrett Butler, with Butler, Buckley & Deets, was named chairman. He takes over for outgoing Chairman Garrett Butler Steven Clein, with C&C Insurance.

Karyn Roeling, president of the Seibert Insurance Agency in Tampa, was elected vice chair.

Jeff Schlitt was named national director of the association. He has been with the Schlitt Agency in Vero Beach since 1994 and became co-owner in 2001.

Other new directors include Jason Cloar, with Brown & Brown Insurance in southwest Florida; Patricia Clawson Hamilton, with Clawson & Co. in Miami; and Mary Katherine Lawler, president of Doug Croley Insurance Services in Tallahassee.

Bob Rollins, president of the Beacon Group in Boca Raton, was named chairman-elect, to take over the chair after Butler.

Bob Rollins Rollins has

been active in the FAIA for years, was on the board from 2015 to 2018, and is currently vice chair.

West

IMA Financial Group Inc.

named Lauren Karagozian Colorado market president.

Karagozian succeeds Sandy Harvath, who will remain in a leadership role with the company.

During her 14-year tenure at IMA, Karagozian has served as a contract administrator and account executive contract administrator, vice president of contractual risk and certificates, and most recently, senior vice president and managing director of contractual risk.

IMA Financial Group is an integrated financial services company with more than 1,800 associates.

IIABCal named Jill Epstein CEO. She will be the first female executive of the independent insurance agents and brokers trade association. Epstein succeeds long-time CEO Clark Payan.

Epstein is an experienced attorney and association executive. She comes to IIABCal from the San Diego County Bar Association, where she was executive director.

Epstein previously spent nearly seven years as the executive director of the California Association of Marriage and Family Therapists.

IIABCal represents more than 14,000 independent insurance agents and brokers in California through more than 300 member firms.

IIABCal is based in Pleasanton, California.

JULY 4, 2022 INSURANCE JOURNAL | 19

Spotlight: Flood How Addressing Socioeconomic Inequality Is Key to Building Flood Resilience

F

looding is the most pervasive among natural disasters. According to the Zurich Flood Resilience Alliance, floods affect more people globally than any other type of natural hazard and cause some of the largest economic and human losses.

As highlighted by the Marsh McLennan Flood Risk Index, climate change will exacerbate flood risk in most countries, leaving an increasing number of people and assets exposed.

Disadvantaged groups are the most affected by flooding and the least able to recover.

In this interview, Swenja Surminski, head of adaptation research at the Grantham Research Institute on Climate Change and the Environment (London School of Economics and Political Science), discusses

Swenja Surminski what strategies can be adopted to break the vicious cycle of flood risk and inequality.

Surminski: Growing flood risk

underpins the urgency of climate action. Since 1980, floods have caused over 250,000 casualties and led to economic damage exceeding $1 trillion, accounting for 40%

of total natural catastrophe losses. Tackling climate change is a defining challenge for the next decade and beyond. It will take extensive planning and far-reaching change, but it also presents a new opportunity to create the kind of future we want to see, as we transform our society to achieve the goal of net zero emissions by the middle of this century. However, our efforts to wean the world from fossil fuels is made much harder by the changing climate itself.

Accelerating climate change means it is becoming more difficult to adapt to its worst impacts.

Floods and other natural catastrophes also have a huge carbon footprint associated with recovery and reconstruction. They are detrimental to sustainable development but also to our net-zero ambitions. It is essential that we do all we can to keep risks at a manageable level, while finding solutions for those who are impacted. And you don’t have to get your feet wet to be affected by a flood: local or regional events can have implications across the world through supply chains, infrastructure and transport networks.

Why is flood risk increasing?

Surminski: The human and

economic costs of flooding are growing due to climate change, the increasing concentrations of people and assets in at-risk areas, and the rising vulnerability of affected populations, communities and systems. Climate change

20 | INSURANCE JOURNAL | JULY 4, 2022

is exacerbating flood hazard, but it is not the only factor at play. Our decisions about where and how to build, what and how to produce or grow often leave us more exposed to flooding. Vulnerability is also increasing, driven by lack of resilience strategies, policies, and investments.

The world would experience floods in the absence of climate change — but with a changing climate this is turning into a costly problem for many, and an existential threat for some.

The latest IPCC report on Impacts, Adaptation and Vulnerability warns that climate change is outpacing adaptation efforts, and that inequality heightens vulnerability to climate risks. Why are disadvantaged communities more severely impacted by natural disasters?

Surminski: This is the first IPCC

report that explicitly mentions the link between climate change and inequality. It also discusses how addressing socioeconomic disparities is critical for adaptation. The impacts of climate change are unevenly distributed across systems, regions, and sectors.

Flooding disproportionately affects the most vulnerable, both in high- and low-income countries. It exacerbates inequalities and creates poverty traps. Poorer communities are at a disadvantage in coping with climate shocks, as the ability to recover is often correlated with income levels.

People in these communities are less likely to be protected by insurance, and they are

more likely to lose their livelihood in the wake of a disaster. Early findings from one of our studies in Indonesia, for example, indicate that job losses after a flood event tend to affect mostly low-skilled workers and particularly female employees.

People with a lower income also have fewer options for moving away after a disaster hits. We see this already in many places around the world — and climate change will make this worse. A study I coauthored shows that homes in economically struggling neighborhoods in England and Wales are more likely to be threatened by flooding as climate changes, while their capacity to adapt and to become flood resilient are more limited than in more affluent areas.

In your research, you say rising flood risk and socioeconomic trends will have implications on affordability of insurance, public and private spending on adaptation, and urban planning. Is there a risk of reaching dangerous tipping points?

Surminski: Yes. My team at the

LSE worked with the Bank of England on the 2021 Biennial Exploratory Scenario on financial risks from climate change.

We analyzed the possibility of a significant increase in mortgage defaults and foreclosures triggered by large-scale flood events, alongside emerging hotspots of uninsurability.

Initial results indicate that without significant action to address cause and effects of INSURANCEJOURNAL.COM

climate change, flooding will create particular challenges for those households and businesses that are already vulnerable. Banks and insurers may pass on rising costs to customers, making access to finance impossible for some.

Globally, coastal areas are particularly exposed, with sea level rise already putting many people at risk of displacement.

Loss of land to rising waters does not only impose severe economic costs on communities, but also impacts their social fabric and cultural heritage. About 230 million people now occupy land less than 1 meter above current high tide lines. Communities, businesses and individuals can become more resilient, but not everything can be saved. It is increasingly urgent to design and fund managed retreat and relocation plans, both in high- and low-income countries, in a fair and equitable way. This poses challenges for policymakers who see little incentives in taking early action. We can also expect more frequent out-migration following flood events.

What are the critical steps to protect the most vulnerable?

Surminski: We need to promote

a culture of resilience. There is a huge imbalance in global funding committed to natural catastrophes, with 85% of the money flowing into disaster response and reconstruction, and only 15% invested in adaptation and prevention. We need to dedicate more efforts to building resilience. Adapting to rising flood risk requires a

INSURANCEJOURNAL.COM

holistic approach. A flood wall or an innovative insurance product alone is rarely going to make a significant difference unless it’s part of broader financial, physical, natural and social interventions.

I am currently working with the InsuResilience Global Partnership on identifying how best to link risk transfer and wider resilience efforts.

It is clear that nature-based solutions and new risk financing tools will play an increasingly important role in building resilience. One example is the Restoration Insurance Service Company (RISCO) in the Philippines, a social enterprise engaging in mangrove conservation and restoration in partnership with local communities. RISCO aims to generate revenue by quantifying the benefits of flood risk reduction efforts, and by monetizing the value of climate mitigation effects of mangroves through carbon credits. Insurance companies are ready to pay an annual fee

for these services.

Access to data, analytical tools, and modeling capabilities play a critical role in strengthening flood resilience.

This renders public-private partnerships essential. While the private sector has much to offer in terms of finance, physical assets, and innovation, governments can enhance the integration of data and analytical capabilities as well as promote resilience initiatives from the private sector.

How can participatory methods incentivize flood risk reduction, and how can communities benefit from such initiatives?

Surminski: Decisions that affect

flood risk and resilience are often made at the national level, yet the impacts of flooding are felt most immediately by communities. Public policies, regulations, and corporate strategies often consider resilience as one-dimensional — a set of either financial or physical responses. In times

of dynamic and more complex risks, however, it is important to develop a multi-faceted approach to resilience, also based on the understanding of how the benefits of risk reduction interventions can be realized even in the absence of a disaster.

This is the mindset behind the Triple Resilience Dividend, a new analytical framework I developed with the World Bank and the ODI to enhance the economic case for investing in disaster risk management.

Investments in adaptation and resilience do not only limit human and economic losses caused by natural catastrophes.

They can also have short- and long-term positive effects by stimulating economic activity in a lower-risk environment and by generating additional social, economic, and environmental co-benefits.

This article first appeared in BRINK. BRINK is supported by Marsh McLennan Advantage and managed by Long Dash. Website: Brinknews.com

JULY 4, 2022 INSURANCE JOURNAL | 21

News & Markets Breach Exclusions in E&O Policy Upheld in $1.3M Money Transfer Claim

A

company that transferred $1.3 million from a client’s payment fund in response to emailed requests from a hacker has lost its bid for insurance to cover the loss.

Pennsylvania-based Construction Financial Administration Services (CFAS) argued that the money error should be covered under its errors and omissions policy even though the policy contained breach exclusions. CFAS maintained that the breach of the client’s systems was not the cause of the loss, but even if it were, its own negligence also was a cause so the loss should be covered.

The federal district court for western Pennsylvania found that Federal Insurance Co. was right to deny the $1.3 million claim under the breach exclusions. The language of both exclusions “clearly contemplates losses” precipitated by social engineering fraud schemes such as hacking, the court found.

The policy excluded any claims “based upon, arising from or in consequence” of any unauthorized access to or use of any computer program.

Even if the exclusion did not apply, Federal was right to deny the claim because the insured failed to notify the insurer as required before admitting its liability and taking action, the court further noted.

CFAS administered a fund for construction projects, receiving funds and making payments to suppliers and contractors on behalf of clients including SWF Construction, a firm working on a border fence in Calexico, California, in 2017. To trigger a payment, the client would provide the one person at CFAS authorized to make disbursements with a voucher for each payment request

and identify what line item to charge.

The two wire transfers at issue — one for $600,000 and another for $700,000 — were made by the CFAS employee in response to email requests from what he thought was the client. However, the employee transferred the funds without first obtaining vouchers or line item information from the client.

As became known later, the requests were frauds made by someone who had gained unauthorized access to SWF’s systems.

CFAS argued that the loss was not “based upon, arising from or in consequence of” an unauthorized access or use of a computer system. Instead, CFAS argued that its failure to obtain proper paperwork was a proximate cause of the fraudulent transfer, in addition to the

U.S. Supreme Court Sides With Doctors Challenging Opioid Convictions

By Nate Raymond

T

he U.S. Supreme Court on June 27 made it harder for prosecutors to win convictions of doctors accused of running “pill mills” and excessively prescribing opioids and other addictive drugs, by requiring the government to prove that defendants knew their prescriptions had no legitimate medical purpose.

The 9-0 ruling, authored by liberal Justice Stephen Breyer, sided with Xiulu Ruan and Shakeel Kahn, who argued that their trials were unfair because jurors were not required to consider whether the two convicted doctors had “good faith” reasons to believe the numerous opioid prescriptions were medically valid.

While both doctors were registered under the a U.S. law called the Controlled Substances Act to prescribe such drugs to their patients, prosecutors at their trials 22 | INSURANCE JOURNAL | JULY 4, 2022

argued that the prescriptions fell outside the usual course of professional practice.

Breyer, who is retiring at the end of the court’s current term in the coming days, wrote that once the doctors produced evidence that they were authorized to dispense drugs like opioids, prosecutors needed to prove they knowingly or intentionally acted in an unauthorized manner.

Breyer said a decision by a doctor registered with the Drug Enforcement Administration to intentionally prescribe addictive drugs in an unauthorized way would be illegal, not the prescriptions themselves.

“We normally would not view such dispensations as inherently illegitimate; we expect, and indeed usually want, doctors to prescribe the medications that their patients need,” Breyer wrote.

The justices, though, declined to decide whether jurors were sufficiently instructed

in Ruan’s and Kahn’s cases or, if not, whether the mistakes were harmless. The Supreme Court sent the cases back to two federal appeals courts that had upheld the convictions for further proceedings based on the ruling.

Justice Samuel Alito, writing on behalf of himself and fellow conservative Justices Clarence Thomas and Amy Coney Barrett, said he agreed with the decision’s bottom-line result but said its reasoning could result in “confusion.”

Beau Brindley, Kahn’s lawyer, said the ruling “totally changes the landscape of these prosecutions” by requiring proof that doctors knew they were committing a crime when they write prescriptions.

Ruan’s attorney did not respond to a request for comment. The U.S. Justice Department declined to comment.

The United States for more than two decades has struggled with an opioid INSURANCEJOURNAL.COM

hacker’s access to SWF’s computer system.

Since CFAS’s failure to obtain the necessary paperwork contributed to the company’s actions, CFAS concluded the exclusion does not apply.

According to CFAS, a loss may have more than one cause. Even if the breach exclusion applies, a policyholder is not excluded from coverage where there is more than one cause of an injury and only one of the causes is excluded, the firm contended.

The insurer argued that the facts clearly fall under the exceptions since the fraudulent user logged into the client’s email accounts and posed as one of its employees.

The court sided with Federal that “even under the narrowest construction” the policy’s language excludes CFAS’s claim.

The court rejected the notion that the wire transfers were the result of the paperwork failure. There was just one cause — the unauthorized emails — and the losses caused by social engineering events such as hacking are not covered by the

policy, the court ruled.

“CFAS’s lack of receipt of proper documentation could not have caused the injury in question (here, the fraudulently-induced money transfers) without the emails precipitated by the hacker’s unauthorized access to SWF’s network.

CFAS would not have sent the funds to the bank account included by the fraudster without first receiving the unauthorized emails. The existence of the loss did not depend on the existence (or lack thereof) of the documentation, but rather upon the unauthorized emails. Even more literally, CFAS would not have been able to transfer the funds to HK without the unauthorized emails because the emails contained the account information,” the opinion states.

The court added that the policy has broader language than necessary in this case. Instead of confining the breach exclusions to injuries “arising out of” unauthorized access, it further excludes injuries “based upon, arising from or in consequence of any unauthorized or exceeded authorized access to” any

computer program or network. The fact that this language casts a wider net cannot be ignored, the court added.

In addition to the breach exclusions, the policy included a notification requirement that CFAS could not settle any claim or admit any liability with respect to any claim without Federal’s prior written consent. Following the fraudulent disbursements, in response to a demand from SWF, CFAS borrowed $1 million and placed those funds into the SWF disbursement account in order to avoid default of payment to the client’s actual subcontractors and suppliers. It did not first notify Federal.

The insurer argued that CFAS violated the notification clause by responding to SWF’s demand letter with a unilateral payment of $1 million. This robbed Federal of the ability to investigate any comparative fault on behalf of SWF or evaluate the events land its options surrounding the fraudulent transfers.

The court concluded the insurer has likely shown CFAS’s failure to notify was a sufficient basis to deny coverage.

epidemic that, according to federal health officials, has claimed the lives of more than a half million Americans.

States have sued drug companies and pharmacies to hold them liable, but another key element in the public health crisis has been the role of doctors in prescribing massive volumes of the highly addictive pain medication.

Some doctors have been accused of turning their medical practices into “pill mills” — routinely prescribing controlled substances without a medical necessity and outside the bounds of a normal professional practice.

Ruan, who practiced in Alabama, and Kahn, who practiced

in Arizona and then Wyoming, were sentenced to 21 and 25 years in prison, respectively, in separate criminal cases.

Prosecutors said Ruan, with a business partner, ran a clinic in Mobile that issued nearly 300,000 controlled-substance

prescriptions from 2011 to 2015 and was one of the top U.S. prescribers of certain fentanyl-based pain medications.

Prosecutors said he accepted kickbacks from drugmaker Insys Therapeutics Inc. to prescribe a fentanyl spray to patients.

Insys’ founder, John Kapoor, was later convicted of conspiring to bribe doctors, including Ruan, to prescribe the drug and defraud insurers into paying for it. The Supreme Court on June 13 rejected Kapoor’s bid to overturn his conviction.

Prosecutors said Kahn regularly sold prescriptions for cash and unlawfully prescribed large amounts of opioid pills, resulting in at least one patient dying of an overdose.

INSURANCEJOURNAL.COM

Copyright 2022 Reuters.

JULY 4, 2022 INSURANCE JOURNAL | 23

Closer Look: Emerging Risks Quantum Computing, Lower Construction Quality, Legal Tech Seen as Emerging Risks: Swiss Re

By L.S. Howard

T

he global community continues to deal with known challenges such as the pandemic, the war in Ukraine, economic turmoil and failing trust in established social institutions. But a report from Swiss Re reminds re/insurers there are new emerging risks on the horizon that could materialize.

“This year’s emerging risks arise from climate change and the transition to a low-carbon economy, real and hyped technological disruptions, and increased global uncertainty and risk awareness,” said a commentary accompanying Swiss Re’s SONAR report “New emerging risk insights.”

Swiss Re identified by lines

of business the top emerging risk themes that could affect re/insurers:

• Thawing permafrost — accelerating climate, infrastructure and health hazards.

This risk poses environmental, property and health risks, and may translate into property and liability claims. (See below for more detailed explanations of these risks).

• Legal tech — is AI rendering justice? Lawyers may utilize

“legal tech,” or advances in artificial intelligence (AI) and machine learning (ML) to select cases with highest chances of success. This risk has implications for casualty exposures.

• Quantum computing — a threat before an opportunity.

With rapid development of quantum computing (QC)

24 | INSURANCE JOURNAL | JULY 4, 2022

capacity, re/insurers face new threats to data security, which could affect property, specialty and casualty lines as well as operations and assets and financial markets.

• Challenges in construction — raw material shortages and price increases. There is con-

cern that inflationary pressures and raw material scarcity could affect quality and durability of buildings, posing risks to property, specialty and casualty lines.

• Eroding trust — new worries for public health.

Swiss Re said life and health re/insurers could be affected by growing mistrust in public health officials and medical professionals, which “fosters harmful behavior and increases the risk of higher morbidity

and mortality, particularly in future health crises.”

Thawing Permafrost

Diving into each of these topics in turn, Swiss Re said permafrost has been thawing at an increased speed over the past decades in high latitudes and mountainous regions.

“This poses environmental, property and health risks, and may translate into property and liability claims, and also higher costs in L&H business,” the report said.

“Damage to property or infrastructure due to thawing permafrost can increase claims in property and engineering.

This is also relevant with respect to the liability of engineers and architects involved in the planning, and public sector INSURANCEJOURNAL.COM

entities supporting or building infrastructure in permafrost zones or in areas exposed to risks associated with thawing of permafrost (e.g., rockfalls),” the report added.

Swiss Re said there could be an increase in liability claims against projects that accelerate thawing of permafrost. Also, health claims could affect L&H insurers as a result of illness caused by pathogens and pollutants released by thawing permafrost.

“Thawing permafrost also poses risk to health, of both humans and animals. It can release pathogens previously trapped in frozen ground, such as anthrax. Thawing also causes limestone deposits to release toxic substances, such as mercury and radon. Mercury poisoning of water sources has been reported in permafrost regions,” the report stated.

Legal Tech

Legal tech, which employs AI and ML, could have a big direct

impact on insurers if lawyers use legal tech systems “to zero in on those lawsuits/cases with most chance of success,” said the report, noting that this could also lead to a significant rise in claims loads.

The other potential impacts of legal tech include: • A potential rise in liability cases in situations where AI software produces incorrect outcomes. This includes big law firms that may be held liable for the services they offer while using these types of technologies (e.g., in accounting, taxes, licensing, etc.).

• Lawyers may decide to focus on class action cases with higher chance of winning larger awards, which could lead to prioritization of economic success over justice, and also an overall increase in the claims load for insurers.

• Increased claims load could come from low-value claims as efficiency gains from legal tech may lower legal costs for individual cases. “Potential

lines of business impact could be, for instance, motor liability (car accidents), employer’s liability/worker’s compensation (workplace accidents),” said Swiss Re. On a more positive note, Swiss Re said, legal tech can benefit insurance operations by helping to mitigate mistakes and fraud, while identifying high-liability risk or high-exposure cases.

Quantum Computing

Swiss Re describes quantum computing as a technology that can solve problems too complex for classical computers. “Insurers and other financial service providers will benefit from the accelerated processing power, high-speed data pattern recognition and elevated machine learning that QC promises,” said Swiss Re. “For insurers, QC opens unprecedented opportunities for simulation and modelling.”

Along with the benefits,

however, there will be new threats to data security “which from the insurer’s perspective, will likely outpace any benefits for the foreseeable future,” the report said.

While the first models are on the market, the report noted that a fully-fledged quantum leap is still a few years off.

“And worryingly, before companies can profit from broad commercial application, QC will likely mature as a threat to existing IT-security protocols — particularly as a yet unseen force that can hack standard encryption keys used in online communications and data transfer,” the report continued.

Here are some of the potential impacts of QC identified by Swiss Re: • It may take longer than anticipated for business-relevant applications to become available, and some could even fail, which translates into strategic, investment and operational risk.

• QC raises the potential for large-scale attacks on data security in general, as well as for targeted attacks on quantum research and development organizations. Further, cyber and property insurance losses could be triggered from attacks on insureds.

• Should standard encryption keys for internet communication, digital banking and electronic commerce be hacked, there could be cyber insurance and business interruption claims.

• Insurance operations also could be affected if an insurer or one of its third-party suppliers experiences a data privacy breach, which could lead to reputational damage and financial losses. In

continued on page 26 INSURANCEJOURNAL.COM

JULY 4, 2022 INSURANCE JOURNAL | 25

Closer Look: Emerging Risks continued from page 25 addition, the transition to safer (post-quantum) data encryption will be time consuming and expensive.

Lower Construction Quality

Scarcity of raw materials due to supply chain disruptions and rising wages are leading to high inflation in the construction sector, which could see builders “cut corners,” leading to lower construction quality and ultimately higher claims in property and professional indemnity.

The use of less expensive and often inferior materials from a fire and integrity standpoint, the report said, pointing to the example combustible cladding for buildings, which can be visually identical to, but far less expensive than non-combustible cladding.

“In the event of a fire in a building with combustible cladding, however, the losses can be much higher,” the report said.

Swiss Re noted that the risk of unexpectedly high claims is a challenge for long-tail business in particular, such as engineering, where there is a long time lag between premium payment and claims filing.

Eroding Trust

“Trust between large segments of the population and government officials, as well as academic experts, has been challenged by the pandemic, and the possibility exists that conspiracy theories and alternative views on health and other behaviors will negatively impact societal resilience more broadly,” according to the report.

Here are some of the potential impacts of eroding trust identified by Swiss Re: • If people refuse treatment, avoid preventative measures, or turn to dubious alternatives for their health conditions, there could be negative consequences on

26 | INSURANCE JOURNAL | JULY 4, 2022

morbidity and mortality.

• Individuals, professionals, and organizations providing harmful treatments may face liability claims.

• Longer lasting and more expensive public health crises may result if growing societal divisions hamper effective resolution of public health emergencies.

• In the case of future pandemics, increased excess morbidity and mortality may occur if large portions of the population do not trust guidance from public health

authorities, further undermining societal resilience.

About SONAR

This is the 10th year of the SONAR report, which identifies 24 macro trends central to the insurance industry in the areas of “demographic and social environment,” “political and economic environment,” “technological and natural environment,” and “competitive and business environment.”

The report conveys early risk signals from a wide range of insurance-relevant fields, said Swiss Re, explaining that the signals do not reflect entire industry-wide thinking with respect to emerging risks, nor do they necessarily cover the full list of topics currently on Swiss Re’s radar screen.

“Some emerging risks presented in this year’s SONAR report may never materialize, while others may form the basis for future risk pools.

Similarly, some of the trends depicted may lose importance, while others may play a growing role in shaping the future business environment.”

SONAR stands for Systematic Observation of Notions Associated with Risk, which is Swiss Re’s process for identifying, assessing and managing emerging risks.

INSURANCEJOURNAL.COM

News & Markets Oregon Business Groups Sue Over Heat and Smoke Worker Prote...

S

ome Oregon business groups are suing over the state’s new job site rules mandating that employers take steps to protect workers from extreme heat and wildfire smoke.

Regulations adopted by the Oregon Occupational Safety and Health Division mandate that employers act once the temperature or air quality reaches a certain threshold. The heat rules took effect June 15, while the wildfire smoke rules started July 1.

Oregon Manufacturers and Commerce, Associated Oregon Loggers Inc. and the Oregon Forest & Industries Council are seeking an injunction to stop the state from enforcing the rules. Together the groups represent over 1,000 Oregon companies and 50 forestland owners.

They filed a lawsuit in the U.S. District Court in Medford. The groups allege several provisions are too vague to be fairly

W2 | INSURANCE JOURNAL | JULY 4, 2022

enforced and that the state’s workplace safety agency overstepped its statutory authority by adopting them.

The groups also contend the wildfire smoke rules don’t give employers a method for determining what percentage of the pollutants in the air at a worksite are caused by wildfire smoke versus other factors, which the groups say makes it impossible for employers to know when the rules go into effect.

They further say requiring employers to pay workers during heat illness prevention breaks oversteps state authority.

Shaun Jillions, executive director for Oregon Manufacturers and Commerce, said the state needs to work with employers to craft new rules that will protect

workers and businesses.

The heat rules require employers to provide shaded areas, water and rest breaks.

They also require employers to develop heat prevention plans and protect workers from heat in agricultural labor housing, among other measures.

The wildfire smoke rules say employers must provide smoke danger training, make respirators available as the air quality reaches unhealthy levels or require workers to wear respirators if air quality levels spike above “very unhealthy” levels on the Air Quality Index.

The federal government does not have similar rules, although it is developing heat regulations. Several states have adopted their own heat standards, including Washington and California.

Oregon adopted temporary emergency rules to protect workers from extreme heat and wildfire smoke last year after workers across the state were exposed to harsh conditions during unprecedented heat in June 2021 and wildfires in September 2020.

At least two workers died from heat-related illnesses after working through blistering heat last year. They were among nearly 100 people across Oregon who died during last year’s heat wave.

Gov. Kate Brown directed Oregon OSHA and the Oregon Health Authority to develop standards to protect employees from excessive heat and wildfire smoke in 2020 as part of efforts to reduce greenhouse gas emissions and mitigate the impacts of climate change.

Copyright 2022 Associated Press. All rights reserved.

INSURANCEJOURNAL.COM

My New Markets Transportation

Private Flood

Habitational

Services LLC is a program manager specializing in the Transportation Industry.

Innovative Risk has in house Quoting & Binding authority for most of the markets we represent. Innovative Risk takes a no nonsense approach to risk underwriting.

Quick quotes with flexible billing options.

Admitted and non-admitted markets available; $255 maximum premium, $255 minimum premium; appointment required.

Available Limits: As needed.

Carrier: Allied World, admitted, non-admitted, rated A+ by A.M. Best.

States: Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana, Michigan, Minnesota, Missouri, Montana, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Tennessee, Texas, Utah, Virginia, West Virginia, Wisconsin, Wyoming.

Contact: Jarrod Huff, Jarrodh@innovativerisks.com, 877-243-9951

Inc. offers private flood insurance. Online quote in minutes. Master policy available for multi-location single-family (no short-term rental). Contact for details on master policies. Available to all distribution sources. Branding API coming soon.

Available Limits: Building value up to $2 million; coverage limit up to $1 million. Additional $1 million for all other coverages, other building, contents, ALE/ loss of rents.

Carrier: Rockingham Specialty Insurance, non-admitted, rated A- By A.M. Best.

States: Florida, Louisiana, North Carolina, South Carolina, Texas. Expanding to additional states monthly.

Contact: Ron Carlson, Ron.Carlson@ iDemandInsurance.com, 615-988-9300

offers habitational insurance with a target appetite for apartments and condo associations. Package policy includes property, GL, D&O, HNOA. Capacity — $10 million TIV. Our partner agents enjoy realtime rate/quote/bind, broad appetite and coverage customization opportunities.

Available Limits: GL Limits — $1 million/$2 million and $2 million/$4 million.

Carrier: Accredited Surety and Casualty Company Inc., admitted, rated A(Excellent) by A.M Best.

States: Arizona, Illinois, Michigan, Ohio, Pennsylvania, Wisconsin.

Contact: Tyler Swanson, tyler@honeycombinsurance.com. 773-337-4954

Renewable Energy Program

Market Details: OSC Insurance Services

Market Detail: Innovative Risk Insurance

Collector Car & Collectibles

Market Detail: American Collectors Insurance (ACI), offered by NSM Insurance Group, provides top-rated insurance for a wide variety of collectibles and collector’s items, including Agreed Value auto insurance for collector vehicles, classic cars, vintage cars, antique trucks and classic motorcycles. With a mission to “Embrace, Protect and Expand the Collector Community,” the brand has shared in the excitement of fellow collectors since 1976. ACI offers the industry leading TreasureGuard Collector/Classic Car policy, which includes additional benefits and coverage options to create custom-tailored policies to meet each collector’s specific needs. $100 minimum premium.

Available Limits: As needed.

Carrier: Unable to disclose, admitted, rated A+ by A.M. Best.

States: All 50 states plus District of Columbia.

Contact: info@americancollectors.com, 800-360-2277

INSURANCEJOURNAL.COM

Market Detail: iDemand Insurance Agency

Market Detail: PPS Specialty Underwriters

Inc. has a renewable energy program responding to double-digit growth in the renewable energy segment. Being well-positioned to assist brokers and insureds has become more important than ever before. Wind Energy Coverage: asset owners; utilities; independent power producers; investment and equity partners. Solar Energy Coverage: ground mount, rooftop and carport; asset owners; utilities; independent power producers; investment and equity partners; consolidated and distributed “aggregators”; and commercially owned residential.

Property Coverage Offering: development; construction; operational. Casualty Coverage Offering: development — vacant land/premises liability; construction — owner interest; operational. Extensions of coverage: hired and non-owned auto (can consider owned auto on an excess basis, minimum $1 million primary limit required); sudden and accidental pollution.

Available Limits: Not disclosed.

Carrier: Not disclosed.

States: All 50 states plus District of Columbia.

Contact: William Hildebrand, bhildebrand@pps-su.com, 909-226-2741

Market Detail: Honeycomb Insurance

Self-Funded Employee Health Benefits

has exclusive access to a medical group captive solution for self-funded employee health care plans. Our Breckenridge HealthySolutions medical group captive program is designed for mid-sized organizations looking to stabilize costs, mitigate high dollar claims, and take control of yearover-year premium increases. By self funding a health plan through a medical group captive, which includes administrative costs, stop loss premiums and claims, firms can regain control over the program and achieve predictable expenses and potential cost savings. Appointment required.

Available limits: Not disclosed.

Carrier: Not disclosed, rated A+ (Superior)

by A.M. Best.

States: All 50 states plus District of Columbia.

Contact: Alan Belthoff, abelthoff@oscis. com, 615-988-9300.

This section brought to you

by Insurance Journal's sister website:

www.mynewmarkets.com

Need a Market?

Find It. FAST JULY 4, 2022 INSURANCE JOURNAL | 27

Special Report: Super Regionals 2022 Super Regional P/C Insurers Demotech Inc. Reveals Leading Multi-State TM

Property/Casualty Insurers

By Barry J. Koestler II

I

n order to continue the discussion regarding what constitutes a Super Regional P/C Insurer™ and to give definition to this important group of insurers, Demotech Inc. analyzed year-end 2021 data for property/casualty insurance companies. This data was utilized to classify and stratify insurers reporting data to the National Association of Insurance Commissioners.

This is the 16th year of this effort; the original criteria

and objective definitions for Super Regional P/C Insurers™ and our other company classifications were established in the Feb. 12, 2007, issue of Insurance Journal.

Demotech Company Classification System

The Demotech Company Classification System categorizes P/C insurers, not groups or families of insurers, into one of 11 categories based on an analysis of the data reported by the companies.

The 11 categories that comprise

2022 Property/Casualty Insurance Cos. Demotech Company Classifications Direct Premium Written Less than $1 million 3.7% Reinsurers 2.0%

Near Nationals 2.6% Nationals 2.6% Super Regionals 5.7%

Surplus Lines Carriers 8.8% Risk Retention Groups 8.9%

Regionals 7.5%

Strategic Subsidiaries 18.3%

State Specialists 25.0% Coverage Specialists 14.9%

28 | INSURANCE JOURNAL | JULY 4, 2022

the system are Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers, and companies with less than $1 million in direct premium written.

A company cannot be assigned to more than one category. Therefore, a company not designated as a Super Regional is given another classification, perhaps Near National, Regional or State Specialist.

Super Regional Criteria and Thresholds

To determine the companies for the 2022 Super Regional P/C Insurer™ list, these specific, objective qualifying criteria and

thresholds evaluated as of Dec. 31, 2021, were used: • Active, individual companies; • Reporting data using the property/casualty annual statement format; • At least $1 million of direct premium written in each of two to 34 states; • Less than 90% of direct premium written in any one state; • Less than 90% of direct premium written in any one line of business; • Policyholders surplus of at least $100 million; • Net premium written of at least $50 million; and • Direct premium written of at least $25 million.

In general terms, a Super INSURANCEJOURNAL.COM

Regional is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers, and reinsurers are not eligible for the Super Regional category as they are assigned to their own classifications.

Prior to the establishment of an industry-wide definition, a number of P/C insurers had referred to themselves as Super Regionals. Demotech, the official research partner of Insurance Journal, has compared the data to the criteria and updated the list of Super Regionals for 2022.

The 2022 Super Regional Property/Casualty Insurers™

For 2022, 147 Super Regional P/C Insurers™ were identified.

They are presented in this Insurance Journal Special Report both alphabetically and by size as ranked by direct premium written as of Dec. 31, 2021.

For 2022, there are 13 Super Regional companies that were not classi2022 fied as Super Regionals in 2021, as well as 11 insurers identified as Super Regionals in 2021 that have been reclassified into another category this year based on year-end 2021 information. Of the 147 Super Regionals for 2022, 64 have been designated as such for all 16 years that the Company Classification System has been applied.

In total, the 2022 Super Regional insurers reported more than $128.1 billion of

continued on page 30

INSURANCEJOURNAL.COM

2022 Super Regional Property/Casualty Insurers™ Alphabetical Listing

Accident Fund Insurance Co. of America Acuity, A Mutual Insurance Co. Agency Insurance Co. of Maryland, Inc. Alaska National Insurance Co. All America Insurance Co. American Commerce Insurance Co. American Family Mutual Insurance Co., S.I. American Hallmark Insurance Co. of Texas American Mercury Insurance Co. American Road Insurance Co. American Select Insurance Co. Amerisure Insurance Co. Amerisure Mutual Insurance Co. AMEX Assurance Co. Arbella Protection Insurance Co. Artisan and Truckers Casualty Co. Ascot Insurance Co. Atlantic States Insurance Co. Auto Club Group Insurance Co. Auto Club Insurance Association Auto-Owners Insurance Co. Bay State Insurance Co. Brethren Mutual Insurance Co. Builders Mutual Insurance Co. California Casualty Indemnity Exchange Cambridge Mutual Fire Insurance Co. Capitol Indemnity Corp.

Central Mutual Insurance Co. Cherokee Insurance Co. Citizens Insurance Co. of America Columbia Mutual Insurance Co. Commerce and Industry Insurance Co. Concord General Mutual Insurance Co. Continental Indemnity Co. Contractors Bonding and Insurance Co. COUNTRY Mutual Insurance Co. Courtesy Insurance Co. Cumberland Mutual Fire Insurance Co. Cypress Insurance Co. DB Insurance Co., Ltd. (US Branch) Donegal Mutual Insurance Co. Electric Insurance Co. Endurance Risk Solutions Assurance Co. Erie Insurance Co. Erie Insurance Exchange Everett Cash Mutual Insurance Co. Executive Risk Indemnity Inc. Farm Bureau Property & Casualty Insurance Co. Farm Family Casualty Insurance Co. Farmers Alliance Mutual Insurance Co. Farmers Automobile Insurance Association Farmers Insurance Co., Inc. Farmers Mutual Insurance Co. of Nebraska Farmington Casualty Co. FCCI Insurance Co. Fire Insurance Exchange First Colonial Insurance Co. First Protective Insurance Co. Frankenmuth Mutual Insurance Co. Goodville Mutual Casualty Co. Grange Insurance Association Grange Insurance Co. Great Midwest Insurance Co. Grinnell Mutual Reinsurance Co. Hallmark Insurance Co. Harford Mutual Insurance Co. Hartford Insurance Co. of Illinois Hastings Mutual Insurance Co. Heritage Property & Casualty Insurance Co. Home-Owners Insurance Co. Horace Mann Property & Casualty Insurance Co. Imperium Insurance Co. IMT Insurance Co. Lightning Rod Mutual Insurance Co.

Lititz Mutual Insurance Co. Lyndon Southern Insurance Co. MemberSelect Insurance Co. Merchants Bonding Co. (Mutual) Merchants Mutual Insurance Co. Mercury Casualty Co. Merrimack Mutual Fire Insurance Co. Mid-Continent Casualty Co. Middlesex Insurance Co. Midwest Family Mutual Insurance Co. Milbank Insurance Co. MMG Insurance Co. Motorists Commercial Mutual Insurance Co. Motorists Mutual Insurance Co. Motors Insurance Corp.

Mountain West Farm Bureau Mutual Insurance Co. Mutual Benefit Insurance Co. Mutual of Enumclaw Insurance Co. Nationwide Insurance Co. of America Nationwide Mutual Fire Insurance Co. North Star Mutual Insurance Co. Occidental Fire and Casualty Co. of North Carolina Ohio Farmers Insurance Co. Old Republic General Insurance Corporation Owners Insurance Co. Palomar Specialty Insurance Co. Patrons Co-operative Fire Insurance Co. Pekin Insurance Co. Penn National Security Insurance Co. Pennsylvania National Mutual Casualty Insurance Co. Philadelphia Contributionship Insurance Co. Physicians Insurance A Mutual Co. Preferred Mutual Insurance Co. Progressive Casualty Insurance Co. Progressive Northern Insurance Co. Progressive Preferred Insurance Co. Progressive Southeastern Insurance Co. Providence Mutual Fire Insurance Co. Quincy Mutual Fire Insurance Co. Redwood Fire and Casualty Insurance Co. Rockwood Casualty Insurance Co. SECURA Insurance Co. Selective Insurance Co. of America Selective Insurance Co. of New York Selective Insurance Co. of South Carolina Selective Insurance Co. of the Southeast Selective Way Insurance Co. Shelter Mutual Insurance Co. Society Insurance, a Mutual Co. St. Paul Fire and Marine Insurance Co. Inc. State Auto Property & Casualty Insurance Co. State Automobile Mutual Insurance Co. Stillwater Insurance Co. The Automobile Insurance Co. of Hartford, Connecticut The Dentists Insurance Co. The Gray Insurance Co. Toyota Motor Insurance Co. TransGuard Insurance Co. of America Inc. Travelers Commercial Insurance Co. Triton Insurance Co. Union Mutual Fire Insurance Co. United Fire & Casualty Co. United Ohio Insurance Co. United Property & Casualty Insurance Co. Utica First Insurance Co. Utica Mutual Insurance Co. Vermont Mutual Insurance Co. West Bend Mutual Insurance Co. Western National Mutual Insurance Co. Western Reserve Mutual Casualty Co. Westfield Insurance Co. Westfield National Insurance Co. Zenith Insurance Co.

JULY 4, 2022 INSURANCE JOURNAL | 29

Special Report: Super Regionals continued from page 29

surplus at year-end 2021. They wrote more than $81.9 billion of direct written premium and $111.2 billion of net written premium in 2021.

These companies are typically strong, stable markets that work hard for their agents, insureds and their reinsurers. This is why Insurance Journal continues to have Demotech quantify and identify the criteria used to define an insurer as a Super Regional. Insurers and interested readers are encouraged to review the selection criteria and thresholds used to determine the 2022 Super Regionals. The selection criteria remain quantitative and transpar-

ent. Demotech is focused on setting benchmarks at levels that accurately categorize the industry. The relative consistency of the company type distribution over time suggests that the categorizations that have been established are valid and effective in classifying the industry.

It is important to reiterate that the Demotech Company Classification System is an objective stratification of the companies that comprise the industry based on their business models. It is not equivalent to or suggestive of ratings of the individual insurers. Moreover, inclusion on the list of Super Regionals does not imply that a company is superior to companies that

were not included in that classification.

Future issues of Insurance Journal will report on the other categories within the Demotech Company Classification System.

Please send suggestions or comments to Barry Koestler at bkoestler@demotech.com.

Koestler II is the chief ratings officer of Demotech Inc., a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Website: www.demotech.com.

For reprints, badges, plaques and more, call 800-897-9965 ext. 125, or email: reprints@insurancejournal.com.

NEW 2022 Super Regionals Company Name Accident Fund Insurance Company of America Agency Insurance Co. of Maryland, Inc. Commerce and Industry Insurance Co. Continental Indemnity Co. Everett Cash Mutual Insurance Co. First Colonial Insurance Co. First Protective Insurance Co. Great Midwest Insurance Co. Hallmark Insurance Co. Lyndon Southern Insurance Co. Merchants Bonding Co. (Mutual) Ohio Farmers Insurance Co. Rockwood Casualty Insurance Co.

2022 Demotech Company Classification

2021 Demotech Company Classification

2020 Demotech Company Classification

2019 Demotech Company Classification

2018 Demotech Company Classification

Super Regional

Near National

Near National

Coverage Specialist

Coverage Specialist

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

Regional Strategic Subsidiary Coverage Specialist Regional Strategic Subsidiary Regional Regional Regional Regional Coverage Specialist Coverage Specialist Regional

Regional Strategic Subsidiary Coverage Specialist Regional Strategic Subsidiary Regional Super Regional Regional Regional Coverage Specialist Coverage Specialist Regional

Regional Strategic Subsidiary Coverage Specialist Regional Strategic Subsidiary Regional Super Regional Super Regional Regional Coverage Specialist Coverage Specialist Super Regional

Regional Strategic Subsidiary Coverage Specialist Regional Strategic Subsidiary Regional Super Regional Regional Regional Coverage Specialist Coverage Specialist Super Regional

RECLASSIFIED 2021 Super Regionals Company Name

Explorer Insurance Co. Lancer Insurance Co. StarStone National Insurance Co. Benchmark Insurance Co. Farmers Insurance Exchange General Casualty Co. of Wisconsin Truck Insurance Exchange FedNat Insurance Co. PEMCO Mutual Insurance Co. Peerless Insurance Co. Preferred Professional Insurance Co.

2022 2021 Demotech Demotech Company Company Classification Classification Coverage Specialist Coverage Specialist National Near National Near National Near National Near National Regional State Specialist Strategic Subsidiary Strategic Subsidiary

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

2020 Demotech Company Classification

2019 Demotech Company Classification

Super Regional Super Regional Near National Super Regional Super Regional Super Regional Near National Super Regional Super Regional Super Regional Super Regional

Super Regional Near National Near National Super Regional Near National Near National Super Regional Super Regional Super Regional Super Regional Regional

Why Company 2018 Does Not Demotech Qualify as a Company 2021 Super Regional Classification Super Regional Coverage Specialist Regional Regional Super Regional Near National Super Regional Super Regional Super Regional Super Regional Strategic Subsidiary

LOB > 90%, DPW States > 34, LOB > 90% States > 34 States > 34 States > 34 States > 34 States > 34 PHS State > 90% States < 2, DPW PHS, NPW

LOB = Line of Business; NPW = Net Premium Written; PHS = Policyholders Surplus; DPW = Direct Premium Written

30 | INSURANCE JOURNAL | JULY 4, 2022

INSURANCEJOURNAL.COM

2022 Super Regional P/C Insurers™

As developed by Demotech Inc. for Insurance Journal. Ranked by Direct Premium Written as of 12/31/21.

Company

12/31/2021 DPW Group OOOs omitted Name

State Of Domicile

Number/States Greater than $1 Million DPW as of 12/31/2021

1

Erie Insurance Exchange

$4,984,940

Erie Insurance Group

PA

12 - DC,IL,IN,KY,MD,NC,OH,PA,TN,VA,WV,WI

2

Auto-Owners Insurance Co.

$4,767,127

Auto Owners Group

MI

3 4 5 6

American Family Mutual Insurance Co., S.I. Progressive Northern Insurance Co. Progressive Casualty Insurance Co. Owners Insurance Co.

$3,898,219 $2,540,266 $2,530,754 $2,457,721

American Family Insurance Group Progressive Group Progressive Group Auto Owners Group

WI WI OH OH

7 8

Erie Insurance Co. Acuity, A Mutual Insurance Co.

$2,240,488 $1,996,258

Erie Insurance Group N/A

PA WI

9

COUNTRY Mutual Insurance Co.

$1,902,296

IL

10 11 12

Shelter Mutual Insurance Co. West Bend Mutual Insurance Co. Nationwide Insurance Co. of America

$1,788,325 $1,640,150 $1,619,267

Country Insurance & Financial Services Group Shelter Insurance Group N/A Nationwide Corp Group

MO WI OH

13

Fire Insurance Exchange

$1,567,395

Farmers Insurance Group

CA

14 15

$1,501,845 $1,328,246

Progressive Group Iowa Farm Bureau Group

OH IA

16 17 18 19 20

Progressive Preferred Insurance Co. Farm Bureau Property & Casualty Insurance Co. Artisan and Truckers Casualty Co. MemberSelect Insurance Co. Farmers Insurance Co. Inc. Progressive Southeastern Insurance Co. Westfield Insurance Co.

26 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MO,NE,NC,ND,OH,PA,SC, SD,TN,UT,VA,WI 18 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,NE,NV,ND,OH,OR,SD,UT,WA,WI 19 - DE,IL,IA,KY,ME,NE,NV,NH,NM,NY,OK,PA,RI,SC,SD,VT,VA,WI,WY 16 - CA,CO,CT,DC,HI,KY,MD,MA,MO,NY,OH,PA,RI,TN,TX,WA 25 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MN,MO,NE,NC,ND,OH,PA,SC,SD, TN,UT,VA,WI 13 - DC,IL,IN,KY,MD,NY,NC,OH,PA,TN,VA,WV,WI 29 - AZ,CO,ID,IL,IN,IA,KS,KY,ME,MI,MN,MO,MT,NE,NV,NH, NM,ND,OH,OR,PA,SD,TN,TX,UT,VT,VA,WI,WY 31 - AL,AK,AZ,AR,CO,CT,GA,ID,IL,IN,IA,KS,KY,MA,MI,MN,MO,NV,NH, NJ,NY,ND,OH,OK,OR,PA,TN,UT,VA,WA,WI 15 - AR,CO,IL,IN,IA,KS,KY,LA,MS,MO,NE,NV,OH,OK,TN 14 - IL,IN,IA,KS,KY,MI,MN,MO,NE,NC,OH,TN,VA,WI 33 - AL,AZ,CA,CO,CT,FL,ID,IL,IN,KS,KY,MD,MN,MS,MO,MT,NE,NV, NM,NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA,WV,WI,WY 25 - AL,AZ,CA,CO,ID,IL,IA,KS,MI,MN,MO,MT,NE,NV,NM,ND,OK,OR,SD,TN, TX,UT,WA,WI,WY 10 - AZ,CO,GA,HI,MN,MO,NM,OH,PA,UT 8 - AZ,IA,KS,MN,NE,NM,SD,UT

$1,183,198 $1,048,316 $1,020,503 $1,010,358 $966,467

Progressive Group Automobile Club MI Group Farmers Insurance Group Progressive Group Westfield Group

WI MI KS IN OH

21 22

Home-Owners Insurance Co. Selective Insurance Co. of America

$960,857 $905,485

Auto Owners Group Selective Insurance Group

MI NJ

23

Accident Fund Insurance Co. of America

$830,659

BCBS of MI Group

MI

24

Citizens Insurance Co. of America

$802,538

The Hanover Insurance Group

MI

25

Nationwide Mutual Fire Insurance Co.

$801,107

Nationwide Corp Group

OH

26

State Automobile Mutual Insurance Co.

$775,936

State Auto Mutual Group

OH

27 28

Frankenmuth Mutual Insurance Co. Selective Insurance Co. of South Carolina

$769,398 $761,411

Frankenmuth Group Selective Insurance Group

MI IN

29

Lyndon Southern Insurance Co.

$753,811

Tiptree Financial Group

DE

30

State Auto Property & Casualty Insurance Co.

$749,045

State Auto Mutual Group

IA

31

Central Mutual Insurance Co.

$714,593

Central Mutual Insurance Co. Group

OH

32

Selective Insurance Co. of the Southeast

$707,699

Selective Insurance Group

IN

33 34 35

$702,648 $702,262 $680,431

N/A Frontline Insurance Group IAT Reinsurance Co. Group

FL FL NC

$654,550 $652,751 $652,324 $613,640 $582,856 $558,175

Secura Insurance Group United Ins Holdings Group Heritage Insurance Holdings Group Fairfax Financial Group Pennsylvania National Insurance Group Travelers Group

WI FL FL CA PA

41

Courtesy Insurance Co. First Protective Insurance Co. Occidental Fire and Casualty Co. of North Carolina SECURA Insurance Co. United Property & Casualty Insurance Co. Heritage Property & Casualty Insurance Co. Zenith Insurance Co. Pennsylvania National Mutual Casualty Insurance Co. Travelers Commercial Insurance Co.

42 43

American Select Insurance Co. United Fire & Casualty Co.

$550,443 $547,321

Westfield Group United Fire & Casualty Group

OH IA

44 45

FCCI Insurance Co. The Automobile Insurance Co. of Hartford, Connecticut North Star Mutual Insurance Co. Farmers Mutual Insurance Co. of Nebraska Vermont Mutual Insurance Co.

$538,306 $519,458

FCCI Mutual Insurance Group Travelers Group

FL CT

$518,902 $452,461 $449,306

North Star Co Group N/A Vermont Mutual Group

MN NE VT

36 37 38 39 40

46 47 48

INSURANCEJOURNAL.COM

CT

5 - CO,IL,OR,WI,WY 10 - GA,IL,IN,IA,MI,MN,NE,ND,OH,TN 5 - AR,IA,KS,MO,OK 3 - GA,IN,NC 27 - AL,AZ,AR,CO,DE,FL,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO,NE, NM,NC,OH,PA,SC,TN,TX,VA,WV,WI 7 - GA,IL,MI,MO,OH,UT,VA 31 - AZ,CA,CO,CT,DE,DC,GA,HI,IL,IN,IA,KY,MD,MA,MI,MN,MO,NH,NJ, NM,NY,NC,OH,PA,RI,SC,TN,UT,VA,WA,WI 33 - AL,AR,CA,CO,CT,DC,FL,GA,ID,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NE, NV,NJ,NY,NC,OK,PA,SC,SD,TN,TX,VA,WI 30 - AL,AZ,CA,CO,CT,DE,GA,IL,IN,KS,ME,MD,MA,MI,MN,MO,NV,NH, NJ,NY,NC,OH,PA,RI,SC,UT,VT,VA,WA,WI 25 - AL,AR,CT,DE,DC,GA,IL,IN,KY,ME,MD,MI,MS,NH,NY,NC,OH,PA,RI,SC, TN,TX,VT,VA,WV 30 - AL,AZ,AR,CO,CT,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS,MO,NC,ND,OH,OK, PA,SC,SD,TN,TX,UT,VA,WV,WI 17 - AL,FL,GA,IL,IN,KY,ME,MA,MI,NH,NC,OH,SC,TN,TX,VT,WI 27 - AZ,CO,CT,DE,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO,NH,NJ,NM,NY,NC,OH,PA,RI,SC,TN,UT,VA,WI 33 - AL,AZ,AR,CO,DE,FL,ID,IL,IN,KS,KY,LA,MD,MA,MI,MN,MS,MO,NE,NV, NJ,NM,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WA 30 - AL,AZ,AR,CO,CT,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS,MO,NC,ND,OH,OK, PA,SC,SD,TN,TX,UT,VA,WV,WI 24 - AZ,CO,CT,GA,ID,IL,IN,KY,MD,MA,MI,NV,NH,NM,NY,NC,OH,OK,SC,TN, TX,UT,VA,WI 32 - AL,AZ,CO,CT,DE,DC,FL,GA,IL,IN,IA,KY,LA,MD,MA,MI,MN,MS,MO,NH, NM,NY,NC,OH,PA,RI,SC,TN,TX,UT,VA,WI 17 - AL,CA,CO,FL,GA,IL,MD,MA,NJ,NC,OH,PA,SC,TN,TX,VA,WI 5 - AL,FL,GA,NC,SC 33 - AL,AK,AZ,CA,CO,CT,FL,GA,IL,IN,KY,LA,MD,MA,MI,MN,MS,MO,NV,NJ, NM,NY,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WA 12 - AZ,CO,IL,IN,IA,KS,KY,MI,MN,MO,ND,WI 11 - CT,FL,GA,LA,MA,NJ,NY,NC,RI,SC,TX 6 - AL,FL,GA,MS,NC,SC 17 - AZ,CA,FL,GA,IL,IN,KS,MD,MS,MO,NV,NJ,NM,OK,OR,PA,TX 10 - AL,DE,MD,NJ,NC,PA,SC,TN,TX,VA 22 - AL,AZ,CA,CO,DE,FL,GA,IL,IA,KY,ME,MD,MA,MN,NE,NY,OR,SC,TN, TX,VA,WA 18 - AZ,CO,GA,IL,IN,IA,KY,MD,MI,MN,NM,NC,OH,PA,SC,TN,VA,WV 32 - AL,AZ,AR,CA,CO,FL,ID,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,MT,NE,NJ, NM,ND,OH,OK,OR,PA,SD,TN,TX,UT,WI,WY 19 - AL,AR,FL,GA,IL,IN,KY,LA,MD,MI,MS,MO,NC,OH,PA,SC,TN,TX,VA 33 - AL,AZ,AR,CO,CT,DC,GA,ID,IL,IN,KS,KY,ME,MD,MA,MN,MS,MO,MT,NV, NH,NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA,WI 8 - IA,KS,MN,NE,ND,OK,SD,WI 3 - NE,ND,SD 7 - CT,ME,MA,NH,NY,RI,VT

JULY 4, 2022 INSURANCE JOURNAL | 31

Special Report: Super Regionals Company

12/31/2021 DPW Group OOOs omitted Name

State Of Domicile

49 50 51 52 53

Western National Mutual Insurance Co. Motorists Commercial Mutual Insurance Co. Grange Insurance Co. Mutual of Enumclaw Insurance Co. Amerisure Mutual Insurance Co.

$448,160 $436,980 $435,317 $402,653 $399,055

Western National Mutual Group Encova Mutual Insurance Group Grange Mutual Casualty Group Mutual of Enumclaw Group Amerisure Co. Group

MN OH OH OR MI

54 55 56 57 58 59 60 61 62

Farm Family Casualty Insurance Co. Merrimack Mutual Fire Insurance Co. Grinnell Mutual Reinsurance Co. Pekin Insurance Co. Hastings Mutual Insurance Co. Donegal Mutual Insurance Co. Builders Mutual Insurance Co. Atlantic States Insurance Co. Redwood Fire and Casualty Insurance Co.

$396,287 $391,486 $389,676 $386,508 $379,253 $356,646 $345,846 $331,084 $325,927

American National Financial Group Andover Group Grinnell Mutual Group Pekin Insurance Group N/A Donegal Group Builders Group Donegal Group Berkshire Hathaway Group

NY MA IA IL MI PA NC PA NE

63 64 65

Auto Club Group Insurance Co. American Road Insurance Co. Amerisure Insurance Co.

$325,158 $323,420 $321,978

Automobile Club MI Group N/A Amerisure Co. Group

MI MI MI

66 67 68

Palomar Specialty Insurance Co. Selective Way Insurance Co. Middlesex Insurance Co.

$321,770 $316,540 $311,706

Palomar Holdings Group Selective Insurance Group Sentry Insurance Group

OR NJ WI

69

Utica Mutual Insurance Co.

$304,873

Utica Group

NY

70 71

Westfield National Insurance Co. California Casualty Indemnity Exchange

$304,787 $302,064

OH CA

72 73

Milbank Insurance Co. Ascot Insurance Co.

$300,130 $295,843

Westfield Group California Casualty Management Group State Auto Mutual Group Ascot Insurance US Group

74 75 76 77 78 79 80 81

Preferred Mutual Insurance Co. Alaska National Insurance Co. Merchants Mutual Insurance Co. Cypress Insurance Co. Arbella Protection Insurance Co. Stillwater Insurance Co. Cherokee Insurance Co. Imperium Insurance Co.

$286,516 $276,388 $271,391 $271,042 $266,828 $262,854 $260,403 $258,732

N/A Copperpoint Group Merchants Mutual Group Berkshire Hathaway Group Arbella Insurance Group WT Holdings Group N/A Skyward Specialty Insurance Group

NY AK NY CA MA CA MI TX

82 83 84 85 86 87

Endurance Risk Solutions Assurance Co. DB Insurance Co. Ltd. (US Branch) First Colonial Insurance Co. Auto Club Insurance Association MMG Insurance Co. Electric Insurance Co.

$248,839 $245,241 $243,330 $236,125 $231,234 $229,571

Sompo Group Dongbu Insurance Group Allstate Insurance Group Automobile Club MI Group N/A General Electric Group

DE HI FL MI ME MA

88 89 90 91 92 93

$225,957 $224,512 $223,976 $223,285 $220,697 $217,431

Midwest Family Group Quincy Mutual Group Harford Group N/A Pekin Insurance Group Mountain West Farm Group

IA MA MD NY IL WY

94 95

Midwest Family Mutual Insurance Co. Quincy Mutual Fire Insurance Co. Harford Mutual Insurance Co. Utica First Insurance Co. Farmers Automobile Insurance Association Mountain West Farm Bureau Mutual Insurance Co. Society Insurance, a Mutual Co. Motors Insurance Corp.

$213,788 $213,217

N/A Ally Insurance Holdings Group

WI MI

96

St. Paul Fire and Marine Insurance Co. Inc.

$208,519

Travelers Group

CT

Agency Insurance Co. of Maryland Inc. Horace Mann Property & Casualty Insurance Co. 99 Goodville Mutual Casualty Co. 100 Great Midwest Insurance Co.

$203,436 $202,478

N/A Horace Mann Group

MD IL

$201,360 $192,259

Goodville Mutual Group Skyward Specialty Insurance Group

PA TX

101 Mercury Casualty Co. 102 Union Mutual Fire Insurance Co.

$189,835 $189,690

Mercury General Group Union Mutual Fire Insurance Group

CA VT

97 98

32 | INSURANCE JOURNAL | JULY 4, 2022

IA CO

Number/States Greater than $1 Million DPW as of 12/31/2021

13 - CA,ID,IL,IA,MN,MT,NV,ND,OR,SD,UT,WA,WI 18 - IL,IN,IA,KY,ME,MA,MI,MN,NE,NH,OH,PA,RI,SC,TN,VA,WV,WI 8 - GA,IL,IN,KY,OH,PA,TN,VA 7 - AZ,ID,MT,OR,UT,WA,WY 33 - AL,AZ,AR,CA,CO,DC,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NV,NJ, NM,NY,NC,OH,OK,PA,SC,TN,TX,UT,VA,WI 12 - CT,DE,ME,MA,NH,NJ,NY,PA,RI,VT,VA,WV 8 - CT,IL,ME,MA,NH,NJ,NY,RI 12 - IL,IN,IA,MN,MO,NE,ND,OH,OK,PA,SD,WI 6 - AZ,IL,IN,IA,OH,WI 6 - IL,IN,IA,MI,OH,WI 20 - AL,CO,DE,GA,IL,IN,IA,MD,MI,NE,NM,NC,OH,PA,SC,TN,TX,UT,VA,WI 9 - DC,FL,GA,MD,MS,NC,SC,TN,VA 15 - DE,GA,IL,IN,IA,MD,MI,NE,NC,OH,PA,SD,TN,VA,WI 32 - AZ,CA,CO,CT,DE,DC,GA,ID,IL,IN,IA,KS,LA,MD,MA,MI,MN,MO,NV,NH, NJ,NM,NY,NC,OK,PA,SC,TN,TX,VT,VA,WI 6 - IN,IA,MI,NE,ND,WI 17 - CA,CO,FL,GA,IL,IN,KS,LA,MI,MO,NJ,NY,OH,OK,PA,TX,VA 26 - AL,AZ,AR,CO,FL,GA,IL,IN,IA,KS,KY,MD,MI,MN,MS,MO,NV,NC,OK,PA,SC, TN,TX,UT,VA,WI 14 - AL,CA,HI,IL,MS,MO,NC,OR,RI,SC,TN,TX,UT,WA 14 - AZ,CO,DE,DC,GA,MD,MI,NJ,NM,NY,PA,SC,UT,VA 28 - AL,CA,CO,CT,FL,GA,IL,IN,IA,ME,MA,MI,MN,MS,MO,NE,NV,NH, NJ,NY,NC,OR,PA,SC,TN,TX,WA,WI 25 - CO,CT,DE,FL,GA,IL,MD,MA,MI,MN,MO,NH,NJ,NY,NC,OH,OR,PA,RI,SC, TN,TX,VA,WA,WI 20 - AZ,CA,CO,GA,IL,IN,IA,KY,MD,MI,MN,NM,NC,OH,PA,SC,TN,VA,WV,WI 18 - AL,AZ,CA,CO,CT,DE,GA,IN,KS,MD,MN,MT,NV,NM,PA,TN,TX,VA 18 - AZ,CO,GA,IL,IN,IA,KS,KY,MN,NC,ND,OH,PA,SC,SD,TN,UT,WV 33 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,KS,KY,LA,MD,MA,MI,MN,MO,NV, NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WA,WI 4 - MA,NH,NJ,NY 8 - AK,AZ,CA,CO,ID,NV,OR,WA 8 - MA,MI,NH,NJ,NY,OH,PA,VT 7 - AL,AR,CA,GA,LA,SC,TN 4 - CT,MA,NH,RI 22 - AZ,CA,CT,FL,ID,IL,IN,MN,MO,MT,NE,NV,NM,NY,OH,PA,SC,TN,TX,UT,VA,WA 21 - AL,AR,CA,FL,IL,IN,KS,KY,MI,MS,MO,NE,NJ,NC,OH,OK,PA,SC,TN,TX,VA 33 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,KY,LA,MD,MA,MS,MT,NV,NJ, NM,NY,NC,ND,OH,OK,PA,TN,TX,UT,VT,VA,WA,WV,WY 7 - AL,CA,MN,NM,NC,TN,VA 7 - CA,HI,IN,NY,OH,PA,TX 16 - CA,CT,FL,GA,IL,ME,MD,MA,NH,NJ,NY,NC,OH,PA,TX,UT 4 - IL,MI,MN,WI 5 - ME,NH,PA,VT,VA 32 - AL,AZ,CA,CO,CT,FL,GA,IL,IN,KS,KY,LA,ME,MD,MA,MI,MN,MO,NH, NJ,NY,NC,OH,OK,PA,SC,TN,TX,VT,VA,WA,WI 21 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,MT,NE,NV,NM,ND,OH,OR,SD,UT,WA,WI,WY 4 - CT,MA,NY,RI 10 - DE,DC,GA,MD,NJ,NC,PA,SC,TN,VA 9 - CT,FL,MD,MA,NJ,NY,OH,PA,VA 4 - IL,IN,IA,WI 2 - MT,WY 7 - CO,IL,IN,IA,MN,TN,WI 25 - AL,AR,CA,CO,FL,GA,IL,IN,IA,KS,LA,MI,MN,MO,NE, NJ,NY,NC,ND,OH,OK,PA,SD,TN,TX 23 - CA,CO,IL,KS,LA,MA,MI,MN,MS,MT,NV,NJ,NM,NC,ND,OH,OK,PA,TN, TX,UT,WV,WY 3 - MD,PA,VA 33 - AL,AK,AZ,CA,CO,CT,DE,FL,GA,IL,IN,IA,LA,ME,MI,MN,NE,NV,NH, NM,NC,OH,OR,PA,RI,SC,TN,TX,UT,VT,VA,WA,WV 8 - DE,IL,IN,KS,OH,OK,PA,VA 33 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,ME,MD,MA,MI,MS,MO,NE, NJ,NY,NC,OH,OK,PA,SC,TN,TX,UT,VA,WI 5 - AZ,CA,NV,NY,VA 7 - CT,ME,MA,NH,NY,RI,VT

INSURANCEJOURNAL.COM

Company

12/31/2021 DPW Group OOOs omitted Name

State Of Domicile

Number/States Greater than $1 Million DPW as of 12/31/2021

103 American Hallmark Insurance Co. of Texas 104 Commerce and Industry Insurance Co.

$183,797 $181,531

Hallmark Financial Services Group American International Group

TX NY

105 TransGuard Insurance Co. of America, Inc.

$181,337

IAT Reinsurance Co Group

IL

106 United Ohio Insurance Co. 107 Toyota Motor Insurance Co.

$177,165 $176,922

Ohio Mutual Group N/A

OH IA

108 Concord General Mutual Insurance Co. 109 Executive Risk Indemnity Inc. 110 Triton Insurance Co.

$172,205 $171,799 $171,111

Auto Owners Group Chubb Ltd. Group OneMain Holdings Inc. Group

NH DE TX

111 112 113

Farmers Alliance Mutual Insurance Co. American Commerce Insurance Co. Penn National Security Insurance Co.

$166,212 $164,246 $163,267

KS OH PA

114 115 116

Cambridge Mutual Fire Insurance Co. Grange Insurance Association Farmington Casualty Co.

$161,731 $161,637 $160,395

Alliance Insurance Group Mapfre Insurance Group Pennsylvania National Insurance Group Andover Group Grange Insurance Group Travelers Group

MA WA CT

117 118 119 120 121 122

Columbia Mutual Insurance Co. Mid-Continent Casualty Co. Brethren Mutual Insurance Co. Cumberland Mutual Fire Insurance Co. Motorists Mutual Insurance Co. AMEX Assurance Co.

$156,085 $139,354 $132,944 $123,770 $118,937 $117,788

Columbia Insurance Group American Financial Group N/A Cumberland Group Encova Mutual Insurance Group N/A

MO OH MD NJ OH IL

123 124 125 126

Continental Indemnity Co. Mutual Benefit Insurance Co. IMT Insurance Co. Physicians Insurance A Mutual Co.

$116,203 $116,075 $115,672 $111,006

NM PA IA WA

127 128 129

Bay State Insurance Co. Western Reserve Mutual Casualty Co. Merchants Bonding Co. (Mutual)

$110,172 $106,205 $105,134

AU Holding Company Group Mutual Benefit Group IMT Mutual Holding Group Physicians Insurance, a Mutual Group Andover Group Western Reserve Group Merchants Bonding Company Group

130 131 132 133 134 135 136

Selective Insurance Co. of New York The Gray Insurance Co. American Mercury Insurance Co. Patrons Co-operative Fire Insurance Co. Hartford Insurance Co. of Illinois Lightning Rod Mutual Insurance Co. Philadelphia Contributionship Insurance Co.

$101,841 $101,137 $95,997 $92,399 $91,667 $89,546 $87,455

NY LA OK VT IL OH PA

137 138 139 140 141 142 143 144 145 146 147

The Dentists Insurance Co. Old Republic General Insurance Corp.

Rockwood Casualty Insurance Co. Providence Mutual Fire Insurance Co. Everett Cash Mutual Insurance Co. Capitol Indemnity Corp.

Lititz Mutual Insurance Co. Contractors Bonding and Insurance Co. All America Insurance Co. Hallmark Insurance Co. Ohio Farmers Insurance Co.

$85,056 $83,445 $82,480 $80,573 $80,456 $80,135 $77,949 $77,219 $75,670 $71,722 $29,073

Selective Insurance Group Gray Insurance Group Mercury General Group N/A Hartford Fire & Casualty Group Western Reserve Group Philadelphia Contributionship Group N/A Old Republic Group Argo Group US Providence Group Everett Mutual Group Alleghany Group Lititz Mutual Group RLI Insurance Group Central Mutual Insurance Co Group Hallmark Financial Services Group Westfield Group

3 - MA,NJ,NY 2 - IN,OH 27 - AL,AZ,CA,CO,FL,GA,IL,IN,IA,KS,MD,MI,MN,MO,NE,NV, NM,NY,OH,OR,PA,SC,TN,TX,VA,WA,WI 4 - AZ,CO,MA,NY 10 - AL,CA,FL,GA,LA,MS,NC,OK,PA,TX 4 - CA,OK,TX,VA 2 - NH,VT 11 - AZ,CO,CT,GA,IL,MI,MO,NY,PA,TN,VA 2 - IN,OH 4 - DE,MD,NJ,PA

CA IL PA RI PA WI PA IL OH AZ OH

6 - CA,HI,IL,OR,PA,WA 10 - CA,FL,HI,IL,MA,NJ,NY,NC,TX,UT 12 - AL,CO,IL,IN,KY,MD,MT,PA,UT,VA,WV,WY 7 - CT,ME,MA,NH,NJ,NY,RI 10 - AR,GA,IN,KS,KY,MO,NC,PA,TN,VA 18 - AZ,CA,FL,GA,IL,MD,MA,MI,MN,NJ,NY,NC,OH,PA,TN,TX,VA,WA 8 - DE,KS,MD,MO,NC,PA,SC,VA 9 - AZ,CA,FL,MT,NV,NC,OR,TX,WA 17 - AZ,CT,GA,IL,IN,KY,MA,MI,NV,NY,NC,OH,OK,SC,TN,TX,VA 15 - AL,AZ,CA,FL,GA,IN,IA,MI,NY,OH,OK,PA,TN,TX,UT 5 - IL,IN,MN,OH,WV

MA OH IA

20 - AZ,AR,FL,HI,ID,IL,MN,MT,NV,NJ,NM,OH,OK,OR,TN,TX,UT,VA,WA,WY 28 - CA,CO,CT,FL,GA,HI,IL,IN,IA,LA,ME,MI,MS,NE,NV, NJ,NY,NC,ND,OH,OR,PA,RI,SC,TN,TX,UT,VA 29 - AL,AZ,CA,CO,CT,FL,GA,IL,IN,KY,LA,MD,MA,MI,MN,MO,NV, NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,VA,WA 6 - CT,ME,NH,OH,RI,VT 22 - AZ,CA,CO,CT,DE,FL,GA,ID,IL,KY,MD,MA,MN,NV,NJ,NY,OH,OR,PA, TN,VA,WA 4 - ME,MA,NH,VT 19 - AZ,CA,CO,FL,GA,HI,IL,LA,MD,MA,MO,NV,NJ,NY,OK,PA,RI,TX,VA 28 - AL,CA,CO,FL,GA,IN,IA,KY,LA,MD,MI,MN,MS,MO,NV, NJ,NY,NC,OH,OK,PA,SC,TN,TX,VA,WA,WV,WI 8 - CO,ID,KS,MT,NE,ND,OK,SD 13 - AZ,CA,CO,CT,FL,ID,IL,NY,OH,OR,RI,TX,WA 9 - AL,DE,MD,NJ,NC,PA,SC,TN,VA 8 - CT,IL,ME,MA,NH,NJ,NY,RI 6 - CA,CO,ID,OR,WA,WY 29 - AL,AZ,AR,CO,CT,DE,GA,IL,IN,KS,KY,LA,MD,MI,MN,MS,MO, NH,NY,NC,OK,OR,PA,SC,TN,TX,UT,VT,WV 11 - AR,GA,IL,IA,KS,MS,MO,NE,OK,SD,TX 18 - AR,FL,GA,KS,LA,MI,MO,MT,NJ,NM,NC,ND,OK,SC,TX,UT,WI,WY 4 - DE,MD,PA,VA 4 - DE,MD,NJ,PA 5 - IN,KY,OH,PA,WV 22 - AZ,CA,CO,CT,DE,FL,GA,IL,MD,MA,MI,NJ,NY,NC,OH,PA,SC,TN, TX,UT,VA,WA 17 - AL,AZ,CA,FL,IL,IN,IA,LA,MD,MA,NJ,NY,NC,PA,SC,TX,VA 2 - MD,PA 6 - IL,IA,MN,NE,SD,WI 5 - AK,ID,NJ,OR,WA

Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from an SNL product.

The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data.

INSURANCEJOURNAL.COM

JULY 4, 2022 INSURANCE JOURNAL | 33

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From property and casualty to personal lines, our excess and surplus team specializes in complex and hard-to-place risks with tailor-made solutions that work.

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Excess & Surplus Experience our expertise: nationwide.com/experience Products unavailable except through a licensed surplus line broker. Availability varies by state. Policy eligibility is subject to underwriting qualifications and approval by the insurer writing the policy. Insurance products underwritten by eligible surplus lines insurer affiliates of Nationwide Mutual Insurance Company, One Nationwide Plaza, Columbus, Ohio, 43215-2220, including Scottsdale Insurance Company (unlicensed except in AZ, DE and OH), Scottsdale Indemnity Company (unlicensed in AZ and DE), or Scottsdale Surplus Lines Insurance Company (unlicensed except in AZ and NJ). Scottsdale Surplus Lines Insurance Company is not an eligible surplus lines insurer in CA. Nationwide, the Nationwide N and Eagle, and Nationwide is on your side are service marks of Nationwide Mutual Insurance Company. AM Best A+ (12/2021, The second highest of 16 ratings). Standard & Poor’s A+ (5/2021, The fifth highest of 21 ratings). ©2022 Nationwide.

is on your side

Closer Look: Earthquakes Who Needs Earthquake Coverage and Why

N

atural disasters are events that create fear.

When you add the flavor of how these events are reported, the fear is ratcheted up significantly, especially when you’re not

By Patrick Wraight accustomed to a particular event. For someone who grew up in an area where snowstorms were common, in an era before the Weather Channel decided to name winter storms (a choice that I see as dubious at best), blizzards don’t scare me. And since I’ve lived in Florida for 17 of the last 22 years, and dealt with hurricanes in different ways, they don’t really scare me, either.

Earthquakes are another story. I was watching the World Series in 1989 when the Loma Prieta earthquake (yes, I had to look up that name) happened and that was one of the most frightening things I had ever seen on television. For me, the thought of being in an INSURANCEJOURNAL.COM

earthquake is actually terrifying. If you’ve been through an earthquake and you’re not terrified like I am, that’s good and I’m glad. Just let me have my irrational fear.

That behind us, we intend to answer three questions: What’s the risk? What does a property policy cover? Who really needs earthquake cover?

What’s the Risk?

While that sounds like a simple question, like most insurance questions, it’s more complicated than it first looks.

While we’re looking at the risk, we are not talking about the risk to life or any liability that might be associated with an earthquake event. We are only talking about the risk to property associated with an earthquake event.

Part of the risk of earthquake is what may happen to the building and associated personal property. When an earthquake happens, the earth moves. This isn’t exactly a shock to anyone (it’s not even an aftershock). An earthquake occurs when the ground begins to move in unexpected ways;

this causes everything on the ground to shake. When this happens, property can be damaged.

Damage to buildings could be a few windows knocked out, cracked or broken, and some items falling from walls and shelves. At worst, an entire building could be destroyed if it is not able to handle the stresses that are placed on it from the shaking. Whether the damage is minor or major, there are events following the initial quake that can cause more damage. This ranges from fire or explosion caused by damaged gas or electrical service to water damage caused by pipes broken by the quake to the aftershocks that continue to come after the initial quake. Those aftershocks can be strong enough to finish the job that the initial quake started.

Another part of answering the question of what the risk is, is to answer the question — what is the actual risk of an earthquake happening in a particular location? According to the FEMA website there are no locations in the contiguous

United States where there is no possibility of feeling the effects of an earthquake. This doesn’t mean that every location has the same risk of having earthquakes or having a strong earthquake. But there is no zero-risk area. Sorry.

So, depending on where the building is, there are certain areas that have a higher risk for more and stronger earthquake activity and there are many areas where the risk is lower.

What Does the Policy Cover?

This is also a bit complicated and depends on whether you’re talking about a homeowners’ policy or commercial property policy, an admitted policy or an excess policy, a California policy or a Florida policy. But here are some general thoughts from the ISO Special Causes of Loss form (CP 10 30 09 17).

Covered Causes of Loss When Special is shown in the Declarations, Covered Causes of Loss means direct physical loss unless the loss is excluded or limited in this policy. continued on page 36

JULY 4, 2022 INSURANCE JOURNAL | 35

Closer Look: Earthquakes continued from page 35 That’s a good start, but you know there’s more to the story, don’t you?

Exclusions Earth Movement (in part) (1) Earthquake, including tremors and aftershocks and any earth sinking, rising or shifting related to such event; (2) Landslide, including any earth sinking, rising or shifting related to such event; If you’re keeping score, we have now excluded coverage because this is a specific exclusion. In fact, it’s exclusion B (when you start counting at A). Very early in the form, we have excluded coverage for damage related to earthquakes.

You have likely noted already that we didn’t add the entire exclusion. That’s because we’re not talking about mine subsidence (that’s another article for another day) nor are we talking about sinkhole (which is covered) or the natural settling that occurs over time under a building (that’s not covered).

However, there is an exception that we might need to look at because you’re already thinking that you thought that fire following an earthquake should be covered. Let’s see how that happens.

But if Earth Movement, as described in b.(1) through (4) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.

So, the earth shakes and causes damage to a building, but in the course of that damage occurring, a gas line breaks

and two pieces of metal scrape together causing a spark large enough and in the right place to ignite that gas, causing an earth shattering kaboom. The damage from the earth shattering kaboom is covered. Good luck to the claims adjuster who tries to discern which damage was from the earthquake and which wasn’t.

There are no locations in the contiguous United States where there is no possibility of feeling the effects of an earthquake.

So, when there is an exclusion, you have to wonder if there is a way to provide coverage to close that gap.

The answer is that there are solutions. ISO has several endorsements that can provide earthquake coverage. If you’re considering an ISO solution, consider whether the insured is best served by a flat deductible or percentage deductible. You don’t need a primer on the differences between the two.

You already understand that, but if I were the underwriter and your client’s building was a $3 million building in an area at higher risk for earthquake, I’m looking to give a percentage deductible, but that’s just me.

Another solution exists.

You can go looking for a difference-in-conditions policy to provide earthquake coverage and any other coverage that

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you think might be lacking on the current policy that the insured has. The same caveat applies. Look for the deductible provision to make sure that the insured is aware of it and how it applies. Those percentage deductibles can turn into large dollar amounts.

Who Needs Earthquake Coverage?

So, the insurance practitioner in me responds first — that everyone needs earthquake coverage. I mean, if everyone buys it then it can cost less for those people who really need it, right? Not exactly. In this case, when it comes to earthquake coverage, those who should buy it because they are in an area where earthquakes are more likely will pay more for their earthquake coverage.

To be clear, not everyone needs to buy earthquake coverage.

This is no doubt going to irritate that company out there trying to build their earthquake book by adding inexpensive coverage to all policies that are in a relatively less risky area. It may help that I have no intention of listing out the risks that I think don’t need earthquake coverage. I can’t do that, and not because I have someone from our risk management team looking over my shoulder making faces at me whenever I think about offering blanket insurance opinions without considering the details of the individual risk.

One client who needs earthquake coverage is the one who thinks that they do. If they want coverage, whether they are located somewhere along the New Madrid fault or if they are located somewhere in Nebraska, find them coverage.

It’ll likely cost them next to nothing and they’ll feel better about it. I for one would not generally dissuade someone from buying more coverage, even if I am not sure that they have enough of a risk to make the purchase.

I bought earthquake coverage on my HO-4 in Florida. OK, it was included, but still I didn’t ask for it to be excluded when I discovered it.

It may seem clear to most of us, but I’ll put it here anyway.

Any client who has property in an area where an earthquake is more likely to happen and more likely to be stronger, should consider the purchase of earthquake coverage.

This is going to become a conversation about the costs

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and potential benefits of making this purchase because the higher the risk, the higher the replacement cost, the lower the deductible, and at least 17 other factors will go into the decision-making process. In short, unless the client is one of those already convinced about earthquake coverage, you may have to help them with making this decision.

Some clients will think that the cost is too high compared to the likely benefit of getting the coverage. Others will think that they need the coverage, but they might need a considerable deductible to make the cost make sense to them.

Then you might need to have a conversation about where they’ll get that money for the deductible that they chose because not everyone just has 10% of $5 million lying around in petty cash.

There are some clients who may not be in a high-risk area and they’re also not in a low-risk area, but to add to the

complexity, they are located in a highly developed area, or city. Not a city like Jacksonville, but more a city like Boston.

Risks in those areas might consider earthquake coverage not because they are at high risk of loss due to earthquake, but because they are in a relatively lower risk of loss, but higher risk of catastrophic loss.

The benefit of purchasing insurance for a lower risk event in an area where there are more buildings at risk is

two-fold. First the insurance is less expensive. Yes, the risk of a catastrophic event is higher because of the sheer numbers and values of the property, but most companies that are writing earthquake coverage may have a lower concentration of buildings on their book in that region so with a lower exposure and lower risk, there is the potential for a lower premium.

Here’s another thing to think about. If there is an earthquake in a larger metropolitan area, and there are relatively few buildings insured against earthquake, where is the money coming from to rebuild?

Right. Some will come from the

pockets of the building owners and way too much is going to come from the local, state and federal governments in the form of emergency funding from FEMA or another similar organization.

When there are thousands of people looking for money from those sources, it takes longer to get the money. When it takes longer to get money, it takes longer to get buildings rebuilt and rubble removed. If the building was insured, the possibility of getting a check quicker is higher.

What have we learned?

Earthquakes are terrifying and expensive. More clients need earthquake insurance than don’t need it. And I don’t have someone from our risk management team standing over my shoulder making sure that I don’t write anything that’ll get me (us) into trouble with anyone, anywhere.

Promise.

Wraight, CIC, CRM, AU, is director of Insurance Journal’s Academy of Insurance. He can be reached at pwraight@ ijacademy.com.

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JULY 4, 2022 INSURANCE JOURNAL | 37

Idea Exchange: Ask the Insurance Recruiter 6 Conversation Starters About Recruiting for Your Next Executive Meeting

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ow that we’re halfway through the year, I assume a big planning session is on the horizon. I want to arm you with ways to start meaningful discussions about hiring and recruiting.

Ultimately, these conversation starters should help you discover: Consensus on strengths and weaknesses; Ways to recreate success; Opportunities to improve the process; and How executives can be catalysts for change.

1. How Do We Feel Things Are Going?

“We need more candidates,” or “The market is really tough right now,” are answers you will hear. What is said, and by whom, reveals: Which executives care about or are impacted about talent acquisi-

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tion, and the executive group’s awareness about “in the weeds” hiring challenges.

Your group has the ultimate power to make changes. If you don’t think things are going well it stands to reason your hiring managers feel the same. Use what comes out of this dialogue to talk your leaders about finding recruiting solutions.

onboarding timelines, and declined offers?

• Does this data provide insight into where there are opportunities to improve hiring and recruiting?

2. What Insights Can We Gleam From Our Data?

There is a certain amount of intuition that goes into hiring. After all, we’re talking about people not widgets.

However, relying on feelings will not create the big picture changes you may need. Analyzing data on hiring activity and seeing recruiting trends starts to build long-term talent acquisition strategies.

• Do you have data about hiring activity readily available?

• What information does your company track? Examples include job ad performance, candidate engagement, referral sources, submission-to-interview conversion, compensation, interview and

By Mary Newgard

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3. What Are our Success Stories?

Have you seen the “Welcome to Our Team!” posts on social media? A new hire is a success story, but you can’t stop there. Think about how each hire can build upon one another to create success.

Share hiring success stories companywide.

Challenge teams to accomplish this with their openings. Tell managers to walk away from situations that don’t measure up.

4. What Are Our Hiring Challenges Ahead?

This is a goal oriented, workforce planning question.

• How do you define challenges? It is based on candidate volume, creating roles, expanding hires into markets, etc.?

• What do you want to accomplish? More real recruiting, greater diversity in your sourcing or better integration/synergy/best practices among teams?

Remember, what you care about is ultimately what your hiring managers will focus on and how success will be judged.

5. What Do People Think When They Hear That Our Company Is Hiring?

Have you read reviews before making an online purchase? Job seekers do the same before they apply for a job. This question is about self-reflection and the answers could be hard to hear: • What information has been written about us on Google and Glassdoor?

• How do candidates find our job openings? What’s working on social media, job boards, our Careers page and LinkedIn messages — and what’s not?

• What percentage of our hires are sourced by referral —employees, market connections (carriers, vendors) and past applicants?

This question is about engagement, i.e., how you communicate with people when they apply; how you keep in touch with candidates during the interview process; INSURANCEJOURNAL.COM

and how you communicate and foster a candidate database.

6. Is What We’re Doing Working?

Recruiting is likely not your area of expertise. That’s okay; there are plenty of people internally and externally you can utilize as subject matter resources. The way to understand this question is from the lens of subjects you do understand — finance, sales and operations. It’s easy to apply those principals to talent acquisition.

• Finance: We have $X allocated to a recruiting budget. Do we have a ROI expectation for each resource? Is our spend in certain areas out of control?

• Sales: Are we falling behind on our recruiting goals? Do we get enough ‘at bats’ with candidates and win head-to-head battles with competitors?

• Operations: Do we have the right people

and processes in place? Do we ask hiring managers to be too involved in recruiting?

Is HR overwhelmed with open job requisitions?

Remember, your passion, care and commitment makes a HUGE difference whether those on the front lines — human resources, operations, department managers and employees — are happy and engaged in recruiting. This ultimately determines if your company’s talent acquisitions goals can be accomplished.

Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry.

Email: asktherecruiter@ csgrecruiting.com.

JULY 4, 2022 INSURANCE JOURNAL | 39

Idea Exchange: Is It Covered?

Logic & Language and Forms & Facts Should You Buy the Rental Car Damage Waiver?

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s I have expressed on many occasions, I believe the myth that insurance is a commodity differentiated only by price is the greatest misconception perpetrated on the public. Sadly, most of the misconception comes from our own industry in the form of price-focused advertising. But, if I had to pick a secBy Bill Wilson ond-place contender, it would probably be the recommendation that there is no need to purchase the damage waiver when renting a car.

There must be thousands of consumer articles written on this subject, most advising that your own auto insurance or a credit card is sufficient to cover any damage to a rented auto. Almost all of these articles are full of misinformation and bad advice as many individuals who have paid thousands of dollars out of pocket can attest.

I published my first article over 25 years ago telling the truth about why it is almost always advisable to purchase the damage waiver, even if you have insurance and think you have coverage under a credit card or another option. If you Google “top 10 reasons to purchase the rental car damage waiver” you’ll get about 90 million hits … many of them are my original article or an updated version.

Space does not permit addressing all 10 reasons to buy the damage waiver here but let me elaborate on a couple of them and then introduce you to a rental car issue you may not be aware of.

My auto policy has excellent coverage for the use of nonowned autos. A notable exclusion found in almost all personal auto policies is that coverage for damage to the vehicle is limited to private passenger cars, pickups (most of the time), and (with a dollar limit) trailers. If I rent a U-Haul truck or an RV, I have no coverage if the vehicle is damaged. If I rent a really nice camper 40 | INSURANCE JOURNAL | JULY 4, 2022

trailer, I have very limited coverage, most often about $2,000. But, even if I rent a private passenger auto, my policy has exclusions and limitations for certain things.

For example, I have limited coverage for loss of use of any auto. “Loss of use” refers primarily to the rental car company’s loss of revenue. There are per-day and maximum limits on my policy that can be increased by endorsement, but few insureds elect to do so. Even if the limits were adequate, sometimes the rental company and insurer (or credit card company) can’t agree on what the appropriate charges should be. In one case, that resulted in the renter paying $2,000 out of pocket.

Worse, the limits are sometimes grossly inadequate. One renter of an upscale vehicle was hit with a $9,000 loss of use charge that cost him $4,500 out of pocket.

Everyone is probably aware of supply chain issues that have affected many businesses, including the automobile industry. Delays in obtaining repair and replacement parts can drive costs up. Due to the unavailability of Japanese auto parts

‘The main reason, though, that I always buy the loss damage waiver is because every rental agreement I’ve seen over at least the last 10 years makes the renter responsible for the reduction in value of a rental car, otherwise known as diminished value.’ following the 2011 tsunami, one renter incurred a $6,000 loss of use charge in excess of his policy limits.

Solution? Buy the rental car company’s loss damage waiver and as long as you are in compliance with the rental agreement, there are no loss of use charges.

The main reason, though, that I always INSURANCEJOURNAL.COM

buy the loss damage waiver is because every rental agreement I’ve seen over at least the last 10 years makes the renter responsible for the reduction in value of a rental car, otherwise known as diminished value. The majority of auto policies exclude this, though I’ve seen a few insurers who cover it, most often as an option.

I’ve personally been involved in assisting agents with uncovered claims for diminished value that range from $3,000 to $8,000. I read an article about a $15,000 diminished value claim on an upscale SUV rental. A business acquaintance was hit with a $3,500 diminished value charge that he negotiated down to $1,500.

David Thompson, CPCU, tells the story in his seminars on rental cars about an insured who was sued by a rental car company and incurred a diminished value charge of $3,100 plus court costs and attorney fees in his fruitless defense.

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Solution? Buy the rental car company’s loss damage waiver. If you damage a rental car, the likelihood that you’ll be hit with a diminished value charge is high and, again, most insurance policies won’t cover this.

The same is true for many, if not most, credit cards and certain supplements you can buy from web sites like Expedia and Orbitz.

Yes, the loss damage waiver is expensive, sometimes half or more of the daily rental rate. For that reason, when I’m comparing the cost to rent a car, I include their damage waiver expense. For the peace of mind I get, I’m willing to pay the extra $100 to $300 expense on a short-term trip. I view it as just part of the cost of the trip.

Here’s one final recommendation on rental cars even if you buy the damage waiver. Don’t valet park a rental car at a hotel, restaurant or other venue. The

damage waiver may be voided by allowing an unauthorized person to drive the vehicle. In addition, many auto policies only cover nonowned autos “while in the custody of or being operated by you or a family member.”

If you relinquish possession of the rental car, you may also relinquish your insurance and your coverage under the loss damage waiver. Hopefully, the venue has some form of garagekeepers coverage or otherwise will cover damage to an auto being valet parked, but it is foolhardy to rely on the insurance or goodwill of others.

What are your thoughts and experiences on this issue?

Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of six books, including “When Words Collide…Resolving Insurance Coverage and Claims Disputes.” He can be reached at Bill@InsuranceCommentary.com.

JULY 4, 2022 INSURANCE JOURNAL | 41

Idea Exchange: Technology Becoming Truly Digital

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ecoming truly digital is going to be a long, arduous, zigzag, stop-and-go journey for all companies involved with

By Barry Rabkin insurance commerce regardless of their role in the insurance ecosystem.

Insurance commerce becoming truly digital is decades away from fruition. Very few, if any, of the insurance ecosystem participants are going to succeed becoming truly digital within the next two plus decades. Truly digital insurance commerce, which encompasses all aspects of getting and keeping customers, mandates a digital integration of processes and information flows among and between all members of the insurance commerce ecosystem.

As all insurance industry professionals know full well: Insurance commerce involves activities well beyond sales to acquire customers. The insurance commerce ecosystem supporting these

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activities is a large and expanding portfolio of firms whose objectives are critical to keeping customers. These firms include, at a minimum, claim adjudication firms, auto body shops, property restoration firms, physical remediation firms, medical providers, outside legal firms, construction firms, police stations (providing accident reports), and fire stations (providing arson reports).

The reality is that sub-optimization of truly digital insurance commerce is, and will continue to be, a reality in the decades ahead. As examples, consider an insurance firm that becomes truly digital but continues to work with auto body shops or property restoration firms that provide hard copy reports to the insurance firm. The insurer must re-key in data into the claim administration system from the hard copy reports. Or consider that these third-party firms provide digital reports but the data must still be re-keyed into the claim administration system because of different data formats. Both are examples of sub-optimized digital solutions from whatever points of view you can name,

including the claimant. Truly digital insurance commerce, not so much. (Note that we haven’t discussed the mandate to rationalize the multiplicity of core administration systems which most [all?] insurance carriers have currently.)

Truly Digital Insurance Firms and Insurance Commerce

Firms participating in the insurance commerce ecosystem need a description of what it means to become truly digital.

Without descriptions of becoming truly digital, participants will flail around in the dark not knowing when to declare success.

Here are my descriptions of firms and insurance commerce being truly digital: • A firm conducting or supporting every aspect of insurance commerce is truly digital if it consists of professionals using only digital artifacts augmented with the absolute minimal number of physical artifacts (and then only those physical artifacts required to generate digital artifacts) to create, access, store, consume, and manage data flows and processes within the firm, as well as among and between firms in the insurance ecosystem

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supporting the full spectrum of getting and keeping insurance customers.

• Insurance commerce is truly digital if it consists of firms participating in the insurance ecosystem conducting and supporting every aspect of insurance commerce by providing their professionals with only digital artifacts augmented with the absolute minimal number of physical artifacts (and then only those physical artifacts required to generate digital artifacts) required to create, access, store, consume, and manage data flows and processes among and between the firms in the insurance ecosystem supporting the full spectrum of getting and keeping insurance customers.

My descriptions are just that: mine. I recommend that you create your own descriptions of what being truly digital means to your company — your end-state that you want your company to achieve.

Hopefully, it’s not just a package of sub-optimized solutions but instead a comprehensive, cohesive description of what it means to be truly digital to conduct insurance commerce with any of the members of your insurance industry ecosystem.

Conducting Insurance Commerce

The phrase “conducting insurance commerce” encompasses not just getting-and-keeping customers but also the plethora of initiatives to, at a minimum: • Operate the insurance firm on a day-to-day basis inclusive of regulatory compliance and reporting, and conduct financial activities with reinsurers.

• Onboard and train employees, producers and all other insurance professionals regardless of whether they work in the

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home office, field office, agency or broker firm, or third-party claim firms.

• Strengthen employee, producer, customer, claimant and ecosystem firm participant satisfaction.

• Communicate and collaborate with colleagues throughout the insurance firm as well as with third-party professionals participating in the insurance ecosystem the firm conducts business.

• Collect, create, store, access, analyze and otherwise manage the data from internal and external information flows coming into and through the firm to enable, at a minimum, product development, producer productivity, target marketing, identifying new markets and supporting partnerships.

Phase 2: Firms in this phase use more physical artifacts than digital artifacts to conduct or support insurance commerce.

Phase 3: Firms in this phase use more digital artifacts than physical artifacts to conduct or support insurance commerce.

Phase 4: Firms in this phase use all digital artifacts (excluding the minimal number of physical artifacts required to generate digital artifacts) such as systems of record inclusive of broker management systems, systems of engagement, accounting solutions, office productivity software, download/upload solutions, rating solutions, imaging solutions, video solutions, and communication and collaboration solutions to conduct or support insurance commerce.

Physical and Digital Artifacts

‘The reality is that suboptimization of truly digital insurance commerce is, and will continue to be, a reality in the decades ahead.’

I use the terms “physical artifacts” and “digital artifacts” in my descriptions of the firms in the insurance ecosystem’s pursuit to becoming truly digital. Generally, physical artifacts are tangible objects that you can touch while digital artifacts are intangible objects that you cannot touch.

In the visual below, I illustrate a framework encompassing four phases of a firm’s mixture of physical and digital artifacts.

The framework of four phases is a gradient describing firms who use some mixture of physical and/or digital artifacts to conduct all activities of insurance commerce.

Phase 1: Firms in this phase use all physical artifacts such as fax machines, interoffice envelopes, typewriters (aren’t they all in the Smithsonian now?), dot matrix and/or laser-jet (or other) printers, paper, pencils, and pens to conduct or support insurance commerce.

I believe that most firms in the insurance ecosystem are operating with a physical artifact/digital artifact mixture somewhere between Phase 2 and Phase 3.

I also believe that most current personal and commercial lines property/casualty insurance customers are operating in that same location between Phase 2 and Phase 3.

Steps to Becoming Truly Digital

There are many steps a firm in the insurance ecosystem needs to pursue to become truly digital.

Here are my suggestions for five of

continued on page 44

JULY 4, 2022 INSURANCE JOURNAL | 43

Idea Exchange: Technology continued from page 43 those steps, and they encompass determining: • Which of your firm’s insurance business objectives are you going to support as completely digital processes and concomitant activities?

• What are the minimal physical artifacts your firm requires to support/enable the digital artifacts that support the chosen insurance business objectives?

• Which of your firm’s partners’ insurance business objectives do you know are currently or assume are planned to be supported by digital artifacts?

• Which of your clients’ activities — from their perspective rather than your perspective — want to conduct insurance commerce using digital artifacts?

• Which of your firms’ insurance ecosystem participants are currently or are planned to be supported by all digital artifacts?

Repeating myself or perhaps clarifying my position — every activity of conducting insurance commerce must be truly digital.

Bringing on customers digitally, adjudicating claims digitally, communicating with producers digitally are steps along the journey of a firm in the insurance ecosystem becoming truly digital. But each of these steps, even taken together, will not make any firm in the insurance

ecosystem, or insurance commerce itself, become truly digital.

Rabkin is an insurance industry author and commentator with nearly four decades of experience and more than 20 years of that in insurance technology.

This article is part of a series of articles from his upcoming book titled “From Stone Tablets to Satellites: The Continued Intimate but Awkward Relationship Between the Insurance Industry and Technology.”

“Great publication to keep me informed & on top of my game.”

Stephen Peters - Producer at Hamrick Insurance Services & Satisfied Insurance Journal Subscriber

Thanks to Stephen for the kind words and thank YOU for reading.

Our journalists take pride in serving the industry. If this publication is valuable to you, please consider upgrading your subscription at www.insurancejournal.com/pro

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Idea Exchange: Cyber SMBs Are Struggling to Get Cyber Insurance

Here’s How to Stay Protected

By Pavel Sternberg, Caitlin Smith and Asaf Lifshitz

F

or the first time ever, cyber insurance is facing a hard market.

Since the product line’s inception about 20 years ago, carriers, brokers and policyholders have reaped the benefits of soft market conditions. Policies were cheap, and they provided generous coverage and low retentions. Losses were minimal, and therefore, cyber insurance books were very profitable. Over the last few years, the cyber risk landscape has shifted. The frequency and severity of losses has grown astronomically, forcing carriers to constrict their offerings and raise premiums. Agents and wholesalers are feeling squeezed as

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insureds are looking for more coverage options, greater understanding of coverage, and competitive rates.

Why are we in a hard market?

When carriers began selling cyber insurance, the risks facing large companies were one-off incidents like lost unencrypted laptops, misfired emails with lists of employee information, and the occasional malicious insider. Smaller companies had even fewer issues. Over time the threats evolved and grew to include more email compromises and small ransomware interruptions.

But even those could be resolved quickly by restoring from backups and resetting passwords.

However, in the last few years, the attack

landscape has transformed significantly.

Companies of all sizes started experiencing significant email compromise events that very often involved the expensive combination of large-scale data breach investigation and notification, and the loss of funds through misdirected wire transfers or ACH payments. Phishing and social engineering campaigns exposed a lack of employee training, technical safeguards, and data retention policies across many companies. Each of these incidents may cost tens of thousands of dollars to resolve on average, and the frequency led to huge loss ratios for cyber carriers. Further, small companies were not immune to these issues, and the costs associated with the investigations and

continued on page 46 JULY 4, 2022 INSURANCE JOURNAL | 45

Idea Exchange: Cyber continued from page 45 response compared to the premiums paid for the policies exposed the small business space.

Just as carriers and brokers seemed to wrap their arms around business email compromises, by pushing extensive training and technical solutions, ransomware events exploded much larger than ever anticipated. Early on, ransomware was typically used to encrypt data in place.

Attackers would access a network, quickly encrypt what they could, and demand a few hundred or a few thousand dollars in exchange for a decryption key. For many companies, restoring from backups was a way around having to pay. For others, the demand was so minimal compared to the potential cost of interruption that it made more sense to pay for the decryption key.

As attackers saw companies responding successfully to these events, they shifted the nature of their attacks. Instead of simply locking users out of a network the moment access was acquired, attackers saw the potential for larger pay days with some additional effort.

They sat stealthily in a network performing reconnaissance to understand the company’s backup strategy and to steal important company data, ultimately using internal phishing campaigns to escalate user privileges to gain access to critical systems. Once sufficient network administrator level access was obtained, the ransomware attack was launched, encrypting the network a few days or months later. When these types of attacks hit companies, they were not only dealing with an overwhelming hit to critical systems and data and backups being encrypted, but also the added concern of data being accessed or stolen, and potentially exposed. This allowed attackers to demand higher ransom payments — to the tune of millions of dollars per event.

Between the business interruption, extortion demand, data restoration, and incident response, policies with $5 million or $10 million in coverage that had never been touched were exhausted on a weekly basis. Further, unlike a typical data breach matter, ransomware matters are immedi46 | INSURANCE JOURNAL | JULY 4, 2022

ately public events — which draw attention from regulators and class action attorneys, especially when downstream services to customers are interrupted as a result.

What does that mean for the market?

Carriers have responded to the new landscape by increasing premiums, decreasing policy limits, and being more conservative in their underwriting process. Where it was previously hard to convince certain markets with minimal data collection and personally identifiable information that cyber insurance is essential for business, the demand for policies in those markets now outsizes supply.

At renewal, carriers have updated application questions, often times with assistance from forensic experts, to better understand a company’s preparation for ransomware attacks and the subsequent business interruption. Carriers are now requiring additional technical safeguards, like multi-factor authentication (MFA) and endpoint detection and response tools (EDR), where previously organizations that implemented these tools were considered leagues ahead of their peers. The sudden shift towards requiring these protections as a prerequisite for coverage has left many organizations scrambling to find time and money in their IT budgets to implement these services ahead of a policy renewal.

In addition to increased premiums, limited coverages, and higher security expectations, many carriers are declining risks in certain markets that have proven to be susceptible to expensive attacks.

Manufacturing, technology supply chain providers, and healthcare institutions have faced an uphill battle in finding carriers willing to underwrite their businesses.

This forces those organizations to purchase more expensive policies with lower coverage and build more complex towers of insurance to maintain the amount of risk protection enjoyed for many years prior.

Carriers are expecting organizations to have basic modern IT security controls and data protection policies in place, and to be

able to demonstrate that they are implemented correctly and enforced constantly.

Effective Backup Strategy and Testing

A big reason ransomware has exploded so successfully is that attackers have taken away a company’s option to restore without paying the ransom by either encrypting or deleting backups as part of the initial attack. In response, many forensic experts recommend the “3-2-1” approach — 3 copies of the data (production, on-site backups, off-site backups), 2 different media types (cloud, disk, snapshot or tape), and 1 offsite copy (cloud, tapes).

When it comes to ransomware, best laid plans often go awry. All too often an organization implements what they believe is a sound strategy, only to find out during an attack that their backups were not segregated properly, or the daily snapshot stopped functioning months ago.

Carriers expect organizations to be able to demonstrate a regular testing schedule and the results of those tests. These tests will enable organizations to better anticipate potential downtime, restoration strategy and prioritization.

Multi-Factor Authentication (MFA)

Most ransomware attacks start with an account takeover. Once credentials are stolen, attackers typically use credential-harvesting malware to escalate privileges in order to gain access to a network administrator account. Companies that properly implement MFA across all users can thwart many of these attacks.

Rather than just asking for a username and password, MFA requires one or more additional forms of verification (like a onetime use code sent to a user’s phone), which decreases the likelihood of an attacker gaining access to the account.

MFA should be implemented on all email accounts, local administrator accounts and domain administrator accounts, and on any remote access points. If you work with third party vendors who have direct access to perform some function on your network, MFA should also be enabled here too.

Data Retention Policies

As mentioned above, ransomware attacks INSURANCEJOURNAL.COM

Stenberg, a partner at Polsinelli LLP, advises clients on a wide range of ever-evolving privacy and cybersecurity laws and regulations.

His practice involves Pavel A. Stenberg assisting clients through data incident responses, conducting privacy and cybersecurity compliance exercises, and helping clients respond to regulatory investigations.

Smith is an associate in the Technology Transactions and Data Privacy practice at Polsinelli LLP. Smith’s professional focus is privacy and cybersecuCaitlin A Smith rity compliance. Smith advises clients on best practices to prepare for, prevent, and respond to cybersecurity incidents.

Lifshitz is CEO and co-founder of Sayata.

He previously was a consultant at the Boston Consulting Group, advising clients on their strategic Asaf Lifshitz business issues. Prior to that, after graduating from the Israeli Defense Force’s elite Talpiot Program for R&D leadership, Lifshitz was a physicist in the Israeli Ministry of Defense.

have shifted from encryption only, to encryption plus data access. While much of this article is focused on the business interruption and data restoration issues caused by ransomware attacks, the access and acquisition of sensitive data is another hurdle organizations must overcome.

For organizations that can restore from backups and avoid a huge interruption, they still must consider the data breach implications of the stolen data. Most often, attackers will provide a sampling of stolen data at the outset of a conversation with the victim organization, in order to encourage payment for the return and destruction of the information. Organizations that have strong data retention policies and enforce those policies limit the amount of extraneous data available for attackers to monetize.

They can also use the sampling to pinpoint where on the network the attacker may have stolen the data from, in order to get a better sense of what they might have and to better focus a forensic investigation.

Further, for the ongoing issue of business email compromises, inbox hygiene and email archiving drastically limit the data potentially available in a compromised inbox, substantially decreasing the time and money spent determining what the attacker could have had access to while in the compromised account.

organizations to contain an incident before it becomes catastrophic.

Further, when an incident does occur, forensic investigators can use the EDR logging to understand the timeline of the attack and any movement that occurred in the network. This can speed up the response and help an organization understand what, if any, data is at risk as a result of the limited intrusion.

However, EDR is only as good as the monitoring of alerts. Because attackers tend to strike at inopportune times, it is important to have dedicated resources to rule out false positives from legitimate threats.

There are many 24/7 security companies that offer these services.

controls to it. Cyber brokers are on the front lines of the frequent changes in underwriting and how these translate to real-life adjustments that small businesses have to make to their cyber hygiene,” said Diane Templin, director of insurance operations at FifthWall Brokerage.

In line with that, through their connections to the legal and forensic fields, brokers also help insureds by putting them in touch with resources that can assist them in identifying gaps in their current cybersecurity posture and remediate those gaps prior to the application process.

Templin added, “Often brokers, work directly with a business’s law firm and IT department, or MSP, to communicate the needs of carriers so the business can get coverage as well as stay protected.” This includes specifics like conducting privileged risk assessments, penetration tests, and gap analyses, and then implementing solutions based on the results of those activities.

Brokers are in the unique position of understanding the insured’s cyber posture (as per above) and their business needs. As cyber coverage constantly changes to adapt to the ever-changing threatscape, brokers are keeping a pulse on product updates from carriers, allowing them to recommend the best, most relevant coverage for the insured.

Brokers know the market and coverage options available. Once the insured adjusts their cyber posture to align with carrier guidelines and coverage needs are identified, brokers have vision into the market options and can shop and secure competitive coverage and rates for new and renewal policies.

Endpoint Detection and Response (EDR)

EDR is a next level antivirus solution.

It not only provides real-time monitoring of your endpoints for any anomalous activity, but it can also quickly alert security personnel to security issues, allowing INSURANCEJOURNAL.COM

How can brokers help?

Brokers are keenly positioned in the ecosystem to ensure that organizations seeking coverage are optimally informed and prepared.

Brokers can help insureds navigate increasingly stringent carrier expectations and adapt to them. Having access to applications across the market, brokers are in the best position to educate and prepare clients for the inevitable squeeze. Because many of the required safeguards need additional IT financing and company buy in, brokers can help clients by flagging issues they need to be prepared for earlier in the application process.

“Cyber wholesalers are in a particularly unique space, acting in concert with their agency partners to constantly educate insureds on the ever-changing cyber threatscape and how to adapt security

JULY 4, 2022 INSURANCE JOURNAL | 47

Idea Exchange: Minding Your Business

Financial Management 101

W

hat makes the difference between an average agency owner and a great one? The key is learning the

By Catherine Oak skills of financial management.

There are many times that consultants are called in to assisst owners with financial problems. Some owners have left this financial management function to an agency employee, like a bookkeeper, or to a partner that may have taken on this task 48 | INSURANCE JOURNAL | JULY 4, 2022

by default. Often the other owners trust this person to handle everything with very little checks and balances in place.

Agency owners frequently start off as producers for another agency. The step to ownership occurs after many years of selling insurance. Producers can get frustrated working for others, decide to quit and start their own firm.

The required management skills for the role of an owner are typically learned on the job rather than through formal training. Owners that do not embrace the various management tasks will tend to ignore the functions that they deem to be a

burden or a necessary evil.

Accounting and financial management tasks in a firm tend to suffer because of owner indifference, fear and ignorance of the subject. And, if this is the case the astute agencies hire the right chief financial officer (CFO) or accounting manager to perform this role, reporting to the owners.

Importance of Financial Management

Today, firms have fewer dollars available due to lower commissions being paid, cyclical market conditions and increases in expenses. These pressures make management of the financial affairs of the INSURANCEJOURNAL.COM

firm even more critical.

Effective financial management is necessary to provide the owners with the same personal income and value for their stock as in the past.

There are certain financial management characteristics that all well run firms exhibit. Financial management starts off with efficient analysis of revenue, expenses, assets and liabilities. Periodic review of financial statements should include comparisons in three areas: 1. Past performance; 2. Future budgets; and 3. Industry standards.

The well run firm always displays good control over all expenses. Compensation expenses (which account for two-thirds of all expenses in the average firm) are thoroughly reviewed. Better firms run “meaner and leaner” and will have fewer employees, but might pay them each above-average salaries. These firms work toward hiring the best.

Use Profit Center Accounting

Profit centers are a key financial tool used by high performing firms. This accounting technique provides owners with very insightful information, such as the source of revenue, expenses and profit.

Profit center accounting should be done by line of business as well as within lines (such as small commercial accounts), whenever possible. Separate income and expense statements can be easily produced for each profit center on most agency management software systems.

Direct expenses should be charged to each line of business. Allocations can be easily determined by management for indirect expenses (especially for expenses of owner compensation and bonuses, computer and accounting) based on time used or percentage of total revenue that line of business is to the total commissions of the firm.

Improve Collections

The collection practices in well run agencies are streamlined, enabling the firm to earn some investment income. Putting INSURANCEJOURNAL.COM

many commercial accounts on direct bill, especially the smaller accounts will eliminate the costs of personnel to handle the invoicing and collections of small accounts.

‘Today, firms have fewer dollars available due to lower commissions being paid, cyclical market conditions and increases in expenses. These pressures make management of the financial affairs of the firm even more critical.’

A stringent collection policy should be in place. Deviations from the policy, such as advancing premiums on behalf of clients should rarely be allowed.

Capital expenditures should be made by investing in better people (both technical and salespersons), good computer systems, efficient office equipment and funds for sales tools, such as target marketing.

This allows the owners to build future value rather than reaping short-term gains through bonuses or by taking out as much profit as possible. Owners that do this are essentially selling the firm’s value to themselves by not reinvesting in the firm.

July 4, 2022 WCF National Insurance Company 100 West Towne Ridge Parkway Sandy, UT 84070 The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Strategically Manage the Firm

The owners’ role in most medium to large-size firms should be strategic rather than focused on the day-to-day tasks.

The employee handling the accounting/ bookkeeping will perform all the necessary functions, including preparing reports for management. The accounting manager’s job description should include a checklist of all the typical tasks that he or she is expected to perform. (Contact Oak & Associates if you would like to have an Accounting Manager Job Description/ Financial Review Checklist.)

All management decisions should be made with a focus on how these decisions could impact the value of the firm. This type of focus helps management choose the direction that will ultimately lead to more money for their retirement from either the sale of their stock internally, their merger with another firm and/or the eventual sale of the firm to a third-party buyer.

Oak is the founder of the consulting firm, Oak & Associates, based in Northern California and Central Oregon. Oak & Associates specializes in financial and management consulting for independent insurance agencies, including valuations, mergers acquisitions, sales and marketing planning as well as perpetuation planning. Phone: 707-935-6565. Email: catoak@ gmail.com..

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JULY 4, 2022 INSURANCE JOURNAL | 49

Closing Quote 3 Lessons From the Microphone

I

n spring 2009, we launched “On Point, brought to you

by Wells Media,” making it one of the first podcasts in the insurance industry.

That’s

By Peter van Aartrijk more than 13 years of podcasting, every other week.

(Thank you, loyal listeners.)

In 2009, we were in the middle of the financial services crisis. It all started with the unravelling of collateralized mortgages in the summer/fall of 2008. Later, in 2020, the pandemic disrupted our world.

Because there will always be major events unfolding, we should feel fortunate about working in this industry. As we have repeatedly proved, insurance is a resilient, financially stable industry.

What have we learned from all those podcast episodes on insurance brand, culture, technology and general shenanigans? Three major themes come to mind:

Disrupting The Agent? Not So Fast

Insurance is rarely on the leading edge of technology change. The first industries we saw evolving were the result of “fintech,” “medtech” and “edtech.” Insurtech was late to the party, but it arrived fast and furious. There was lots of money behind it, pushing some good ideas

— and some whacky ideas.

Originally, it seemed like everyone sought to eliminate the retail agent. They declared they were launching an online insurance company and going directly to personal or business lines customers. (“We will disrupt the industry. We’re cutting out the middleman.

We’re going straight to the consumer!”)

Well, that didn’t turn out so well for many of them. Maybe most of them, actually.

(Six months later: “It turns out that we do need to work with agents, so we’re pivoting. We’re going to be an MGA instead of a carrier, and we’re going to distribute via retailers.)

For its part, however, the established insurance industry wasn’t embracing new insurtech ideas at first. In an industry all about taking on risk, carriers weren’t willing to take a chance on disrupting themselves.

That has changed. Not only are some insurtechs strong players, but they have updated that staid old insurance technology thinking.

And of course, what has not changed is the independent agent and broker as a proven, effective resource for distributing advice and product. Their financial position has strengthened in the last two decades.

50 | INSURANCE JOURNAL | JULY 4, 2022

Evolution of Work

The pandemic left an enduring mark on insurance

professionals: Work isn’t necessarily somewhere we go.

It is a thing we do.

That’s a sea change. Our guests talked about where, when, how and why we work.

It’s all evolving.

Smart owners and managers in our industry are embracing new leadership ideas. Not everybody will be able to do that, however. They’re the “I want butts in the seats” managers. Who knows if this mentality will last, but I don’t see how it can when workers, not the bosses, vote with their feet these days.

One of my favorite episodes, which aired in December 2020, was with agency owner Spencer Houldin. “We had our best year ever, and we did it in our pajamas,” he said.

Some guests said the workplace has become an extension of our personal and social lives.

We don’t just arrive at work and stop being ourselves. It’s OK to be vulnerable. Nobody has all the answers. It’s OK to say you screwed up. Learn from it, fix it, iterate and get better. That is a big change from my early professional days. In those days, you just put your head down and did the work. Don’t ask questions.

Culture Is King

“On Point” episodes covered culture-related topics such as diversity, managing others,

remote work, etc. Yes, we heard a lot of corny phrases, such as “new normal.” But what’s the big picture behind all of this buzzy chatter?

I have learned that creating and managing culture strategy is as powerful as brand strategy. In fact, they’re one and the same. Culture is the employment brand, the internal brand, and smart organizations manage a relevant culture where people are committed to working with you — not because they have to but because they want to.

Some of our favorite guests offered novel ideas for managing the five — count ‘em!

— generations in the workforce: seniors, boomers, Gen X, millennials and Gen Z. In looking back at the podcast episodes, I’m optimistic about the industry’s future. It’s a stable employer, community helper and a flexible environment. Results are measurable.

Opportunities abound. What’s not to like for younger workers?

In the end, it’s always about the people. I’ve enjoyed listening to our guests on “On Point,” and I hope you have, too. van Aartrijk (peter@Aartrijk.com) is principal of insurance marketing-communications firm Aartrijk, based in Fairfax, Virginia. His “On Point” show is hosted at Wells Media and at Apple Podcasts.

INSURANCEJOURNAL.COM

INSURANCE INDUSTRY CHARITABLE FOUNDATION

Helping communities and enriching lives, together.

Insurance Industry Charitable Foundation (IICF) is a unique nonprofit that unites the collective strengths of the insurance industry to help communities and enrich lives through grants, volunteer service and leadership. Having contributed $42 million in community grants and over 300,000 volunteer hours, to hundreds of charities and nonprofit organizations, IICF continues to reinvest locally where funds are raised for greatest community impact.

#insurancegivesback

Register your Week of Giving volunteer team and sign up for projects at: volunteer.iicf.org

IICF Week of Giving October 8–15, 2022 Be a Part of Something Greater Since 1998, IICF has hosted its annual Week of Giving, the largest ongoing volunteer initiative in the insurance industry. Through eight days of volunteer projects and service, both in-person and virtual, the IICF Week of Giving is a culmination of community volunteerism throughout the year by the insurance industry.

Midwest Division Kelly Hartweg Phone: (773) 991-2149 khartweg@iicf.com

Northeast Division Betsy Myatt Phone: (917) 544-0895 emyatt@iicf.com

Southeast Division Sarah Conway Phone: (214) 228-2910 sconway@iicf.com

Western Division Melissa-Anne Duncan Phone: (714) 870-1084 maduncan@iicf.com

UK Division Wendy Wilder Phone: +44 (0) 7469 392 453 wwilder@iicf.com

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