Insurance Journal West 2022-11-21

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Business Leaders: Be Prepared

Despite a majority of global business leaders expecting a recession within the next year, many still have a positive outlook on the economy. Some leaders even reported feeling very prepared heading into a recession.

According to Aon’s 2022 Executive Risk Survey, released this October and titled “Making Better Decisions in Uncertain Times,” 79% of global business leaders expect a recession within the next year with 43% believing it is very likely. And just one-third (35%) of leaders say they feel very prepared for the economic downturn with 47% feeling somewhat prepared and 18% feeling only a little prepared or not prepared at all.

So, what separates confident leaders from the rest?

For companies that feel very prepared heading into a recession, addressing risk isn’t a choice — it’s a question of survival. Sixty-two percent of very prepared leaders agree that their company’s appetite to address risk has increased in response to the current economic climate.

Perhaps surprisingly, only 10% of very prepared companies reported becoming risk averse due to current macroeconomic conditions compared to 39% of not very prepared companies. A majority of very prepared leaders — 90% — reported that current economic conditions have actually increased their appetite for risk.

This could be a result of lessons learned from some of the risks business leaders weath ered throughout the past few years, with one majorly disruptive event being the COVID-19 pandemic. The report said the COVID-19 pandemic taught leaders how to respond quickly to emerging risks, which could be giving them confidence as they head into a recession. In fact, 61% of very prepared leaders agreed that all risks are interconnected and that the most successful companies can handle risk regardless of where it comes from.

With this in mind, most surveyed business leaders said their companies are spending a great deal of time on issues related to higher costs/inflation (43%), a financial crisis (42%), energy supply (41%) and cyber attacks (40%).

Higher costs/inflation and a financial crisis have become the second greatest concern for business leaders in 2022, according to the report, compared to last year when inflation ranked tenth. In contrast, last year’s top two risks — cyber attacks and a future global pandemic — fell this year to fourth and eighth, respectively.

As they look to 2023 and a potential recession on the way, Aon’s report said that based on survey data, the most prepared leaders are resisting the impulse to slow hiring or delay capital investment, focusing on input from internal teams as well as outside advisers, and viewing COVID-19 as something that exposed new risks and changed how they need to think. Based on the report’s findings, it seems navigating risk will be a key differentiating factor.

Andrea Wells Editor-in-Chief

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Columnists & Contributors

Contributors: Laura Gookin, Ryan Hong, Nola Morris, Mark Robinson, Jim Sams, Steve Tombarelli, Rhonda Wade

Columnists: Chris Burand, Tony Caldwell, Bill Wilson

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‘For companies that feel very prepared heading into a recession, addressing risk isn’t a choice – it’s a question of survival.’

Insurers Say ‘Bazooka’ of Bogus Boys Scouts Claims Is Abuse of Bankruptcy System

By Chad Hemenway

Agroup of insurers — including subsidiaries of AIG, Liberty Mutual, Allianz, Sompo International, and Travelers — are challenging an approval of the Boy Scouts of America’s $2.46 billion bankruptcy reorganization plan to allow the organization to settle tens of thousands of sex abuse claims.

In the 125-page document filed in U.S. District Court for the District of Delaware, the insurers jointly ask the court to reverse the bankruptcy plan because the claims-count has increased, they said, from “6,000% to over 82,000” since the bank

ruptcy filing — and a “significant portion are likely fraudulent.”

“This court should not tolerate the bad faith, collusion, and outright fraud by claimants’ counsel that resulted in this plan — conduct to which BSA was, at best, willfully blind,” the insurers — more than a dozen in all — said in the filing. “Pointing an 82,000-claim bazooka at insurers” is an abuse of the bankruptcy system, they added.

Other BSA insurers, subsidiaries of Chubb and The Hartford, have previ ously agreed to contributions toward the plan.

However, insurers in the Nov. 7 filing

said plaintiffs’ attorneys “saw the bank ruptcy as an opportunity for a windfall, launched a massive advertising campaign replete with false statements and began enlisting claimants on a contingency-fee basis.”

“The attorneys themselves signed and filed thousands of proofs of claim in the bankruptcy, under penalty of perjury, that had missing or inaccurate information, often without ever reviewing the forms or contacting the claimants,” the insurers allege in the filing.

Furthermore, the plan does not give the insurers due process to control or participate in the defense of the claims, leading to an outcome “designed to lead to claim values that are higher than those that would have been produced in the tort system.”

Nationwide Catalytic Converter Theft Ring Taken Down in Raid

By Chad Hemenway

Twenty-one people in nine states were arrested and charged Nov. 2 with their roles in conspiracies to steal catalytic converters from vehicles across the country and sell them for profit.

According to the U.S. Department of Justice, law enforcement from the federal, state, and local levels were involved in a coordinated takedown of thieves, dealers and processors of the valuable piece of a vehicle’s exhaust system containing precious metals like palladium, platinum, and rhodium. The part can be stolen in less than one minute.

The DOJ said it seeks forfeiture of over $545 million from the cases involving 21 people charged in two federal indictments in California and Oklahoma. More than 32 warrants were also executed, and law enforcement seized millions of dollars in assets, including homes, bank accounts, cash and luxury vehicles.

To put into perspective how lucrative

the theft of catalytic converters can be, the DOJ said one family in Sacramento, California, bought the stolen parts from an alleged unlicensed business run out of their home, and shipped them to DG Auto Parts, with multiple locations in New Jersey. The family allegedly sold over $38 million in stolen catalytic converts to DG Auto, the DOJ said.

The operators of DG Auto then extracted the precious metals from the core of the stolen catalytic convert ers from California and other states to a metal refinery for over $545 million, authorities added.

In March, State Farm released some startling statistics on claims involving catalytic con verters. State Farm said it paid $62.6 million for 32,265 catalytic converter theft claims nationally.

The cost to replace a stolen catalytic converter can easily top $1,000.

“This national network of criminals hurt victims across the country,” said FBI Director Christopher Wray, in a statement. “They made hundreds of millions of dollars in the process — on the backs of thousands of innocent car owners. Today’s charges showcase how the FBI and its partners act together to stop crimes that hurt all too many Americans.”

Judge Orders Alex Jones to Pay $473M More

To Sandy Hook Families

By Dave Collins

Infowars host Alex Jones and his company were ordered by a judge on Nov. 10 to pay an extra $473 million for promoting false conspiracy theories about the Sandy Hook school massacre, bringing the total judgment against him in a lawsuit filed by the victims’ families to a staggering $1.44 billion.

Connecticut Judge Barbara Bellis imposed the punitive damages on the Infowars host and Free Speech Systems. Jones repeatedly told his millions of followers the massacre that killed 20 first graders and six educators was staged by “crisis actors” to enact more gun control.

“The record clearly supports the plaintiffs’ argument that the defen dants’ conduct was intentional and malicious, and certain to cause harm by virtue of their infrastructure, ability to spread content, and massive audience including the infowarriors,” the judge wrote in a 45-page ruling.

Christopher Mattei, a lawyer for the Sandy Hook families, said he hopes the award sends a message to conspiracy theorists who profit from lies.

“The Court recognized the 'intentional, malicious … and heinous’ conduct of Mr. Jones and his business entities,” Mattei said in a statement.

On his show on Nov. 10, Jones called the award “ridiculous” and a “joke” and said he has little money to pay the damages.

“Well, of course I’m laughing at it,” he said. “It’d be like if you sent me a bill for a billion dollars in the mail. Oh man, we got you. It’s all for psychological effect. It’s all the Wizard of Oz … when they know full well the bankruptcy going on and all the rest of it, that it’ll show what I’ve got and that’s it, and I

have almost nothing.”

Eight victims’ relatives and the FBI agent testified during a month-long trial about being threatened and harassed for years by people who deny the shooting happened. Strangers showed up at some of their homes and confronted some of them in public. People hurled abusive comments at them on social media and in emails. And some received death and rape threats.

Six jurors ordered Jones to pay $965 million to compensate the 15 plaintiffs for defamation, infliction of emotional distress and violations of Connecticut’s Unfair Trade Practices Act.

Jones has bashed the trial as unfair and an assault on free speech rights. He says he will appeal the verdicts. He also has said he doesn’t have the money to pay such huge verdicts, because he has less than $2 million to his name, which contradicted testimony at a similar trial in Texas. Free Speech Systems, meanwhile, is seeking bankruptcy protection.

Jones said that he has only a “couple hundred thousand dollars” in his savings account. A message seeking comment was left for Jones’ lawyer, Norm Pattis.

Bellis found Jones and Infowars’ parent company liable for damages without a trial last year, as a consequence for what she called his repeated failures to turn over many financial documents and other records to the plaintiffs. After the unusual “default” ruling, the jury was tasked only with deciding on the amount of compen satory damages and whether punitive damages were warranted.

Jones says he turned over thousands of documents and the default ruling deprived him of his right to present a defense against the lawsuit.

The punitive damages awarded by the judge include about $323 million for the plaintiffs’ attorney fees and costs and $150 million for violations of the Unfair Trade Practices Act.

In Connecticut, punitive damages for defamation and infliction of emotional distress are generally limited to plaintiffs’ legal fees. The Sandy Hook plaintiffs’ lawyers are to get one-third of the $965 million in compensatory damages under a retainer agreement, putting their legal fees at $322 million.

But there is no cap on punitive dam ages for violations of the Unfair Trade Practices Act. The plaintiffs had not asked for a specific amount of punitive damages, but under one hypothetical calculation they said such damages could be around $2.75 trillion under the unfair trade law.

In a similar trial in Texas in August, Jones was ordered to pay nearly $50 million to the parents of another child killed in the Sandy Hook shooting for calling the massacre a hoax. A forensic economist testified during that trial that Jones and Free Speech Systems have a combined net worth as high as $270 million.

A third and final trial over Jones’ hoax claims is expected to begin around the end of the year in Texas. As in Connecticut, Jones was found liable for damages without trials in both Texas cases because he failed to turn over many records to the plaintiffs.

Copyright 2022 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

$3 Million Figures

The amount a federal jury awarded to a former Northern Light Eastern Maine Medical Center worker who said racial discrimination led to his firing. David Ako-Annan of Milford, Maine, who is Black, worked as a practice manager at a primary care medical office operated by Northern Light EMMC. In the lawsuit, he contended his intelligence was questioned and that he was subjected to intimida tion and racially insensitive remarks. The jury awarded $1.5 million in compensatory damages and $1.5 million in punitive damages.

$115,000

The amount Ford Motor Company will pay to settle a pregnancy discrimination lawsuit brought by the U.S. Equal Employment Opportunity Commission (EEOC). According to the EEOC’s lawsuit, Ford vio lated federal law when it refused to hire a pregnant applicant to work at its stamping plant in Chicago Heights, Illinois, due to her pregnancy.

30The percent rise in the rate of deaths in the U.S. during the first year of the COVID-19 pandemic that can be directly attributed to alcohol, according to new government data. The Centers for Disease Control and Prevention previously had said the overall number of such deaths rose in 2020 and 2021. The report focused on deaths that were wholly blamed on drinking, such as alcohol-caused liver or pancreas failure, alcohol poisoning, with drawal and other diseases.

87.5%

%The average increase in insurance rates for mobile home fire policies over the next two years being requested by the North Carolina Rate Bureau. The bureau also asked for a 53.4% increase in rates for casualty policies. Historically, the state Department of Insurance has negotiated with the rate bureau for lower final rates. Earlier this year, the bureau recommended mobile home rate increases of 25%, but it was negotiated down to 11.3%.

Declarations

Oregon Fire Settlement

— Robert Julian, a lawyer for families who were victims of the 2020 Labor Day fires in Oregon and sought more than $100 million in damages from the electricity provider PacificCorp, said they will allow some more time to fully settle the case.

Catalytic Converter Theft

“This national network of criminals hurt victims across the country. … They made hundreds of millions of dollars in the process — on the backs of thousands of innocent car owners.”

— FBI Director Christopher Wray said in a statement after 21 people in nine states were arrested and charged Nov. 2 with their roles in conspiracies to steal catalytic converters from vehicles across the country and sell them for profit. The DOJ said the valuable piece of a vehicle’s exhaust system contains precious metals like palladium, platinum and rhodium. It can be stolen in less than one minute. The U.S. seeks forfeiture of over $545 million from the cases.

Climate Crisis

“The climate crisis is moving far faster than we are. … Superstorm Sandy was a wake-up call ... but from the trudging pace of too many resiliency projects, it seems like we’re still asleep. Without significant improvements to infrastructure design and delivery, New York City will fail to get ready in time for the next storm.”

— New York City Comptroller Brad Lander comments after a report showed that 10 years after Superstorm Sandy pounded the city’s coastal areas taking 43 lives and causing $19 billion in damages, many resiliency projects remain years from comple tion and billions of dollars in recovery funds remain unspent. The city has spent $11 billion of the nearly $15 billion of federal grants aimed at Sandy recovery, and only 13.3% of the $1.9 billion capital funds in the city’s budget for key projects. Some of the coastal resiliency projects may not be completed until 2030.

Case Closed

“This is a final order that resolves the last pending claim and closes the case.”

— Judge Thomas Cameron of the Michigan Court of Claims dismissed part of a lawsuit filed by eight women alleging sexual harassment and assault by a former University of Michigan lecturer. Cameron ruled that the plaintiffs failed to file timely notices of intent to sue the university, its board of regents and the former lecturer, Bruce Conforth. A portion of the lawsuit against Conforth remains, as does a state civil rights claim against the university and its board.

Starting From Scratch

“We’re going to have to start from scratch.”

— Said Lori Davis, a resident of Powderly, Texas, who lost most of her home in a Nov. 4 tornado. Several tornadoes struck northeastern Texas and southeastern Oklahoma, leaving at least 10 injured and destroying 50 homes. While severe weather season typically peaks in the spring, tornados occa sionally develop in October, November, December and even January.

Fires Everywhere

“I’ve been here for 30 years. This is a major occurrence. … This is not something we normally go to. We have about a third of our department on sites.”

— Patrick Armon, assistant fire chief for the Jackson (Mississippi) Fire Department, told WAPT-TV after a suspect was arrested in connection with seven fires set across the city. At least two of the buildings set ablaze in Jackson were churches; one was burned to the ground. Another fire broke out on fences surrounding the baseball practice field at Jackson State University, a historically Black public university. No injuries were reported.

“We went right up to trial and there was a settlement.”

New York Proposes Changes to Financial Services Cybersecurity Regulation

More small financial services businesses will be exempt, the rules will be tailored to reflect more diversity in businesses, and top executives of financial services firms will face height ened accountability under proposed changes to New York’s model financial services cybersecurity regulation.

The New York State Department of Financial Services (DFS) has proposed an update to its original regula tion, which DFS promulgated in 2017. The updated regulation will be subject to comment for 60 days.

The regulation — aimed at protecting New York’s financial services industry from the threat of a cyber attack — was the first of its kind in the U.S.

The regulation requires each company overseen by the New York DFS to assess its specific cybersecurity risk profile and implement a program that addresses those risks.

Insurers, banks and other financial services enti ties regulated by DFS had until March 2019 to comply by adopt ing cybersecurity practices and polices to ensure the security of infor mation systems and nonpublic information. DFS took its first enforcement action under the regulation in July 2020 in the matter of a data breach at a title insurer.

The regulation has become a model that is now used by both federal and state financial regulators.

Superintendent of Financial Services Adrienne A. Harris said DFS has taken a “data-driven approach” to amending the regulation to “address new and increasing cybersecurity threats” and “to ensure cybersecurity risk is inte grated into business planning, decision-making, and ongoing risk management.”

According to DFS, the main changes include:

• The creation of three tiers of companies, further tailoring

the regulation to a diverse set of businesses with different defensive needs.

• An increase in the size threshold of smaller com panies that are exempt from many parts of the regulation as a result of feedback from the industry and in recognition of the realities of operating a small business. It includes exempting businesses with fewer than 20 employees or less than $5 million in New York business.

• Enhanced governance requirements, thereby increasing accountability for cybersecurity at the board and C-suite levels.

• Additional controls to prevent initial unauthorized access to technology systems and to prevent or mitigate the

Many Cyber Criminals Return After Ransomware Payments Are Made

Over a third (36%) of companies who paid a ransom to cyber crim inals went on to be targeted for a second time, according to the latest Cyber Readiness Report from Hiscox.

In addition, more than four in 10 (41%) of those that paid ransom demands to cyber criminals failed to recover all their data.

Based on responses from over 5,000 organizations of all sizes across eight countries, paying a ransom does not always work out the way businesses hope it will. More than 40% still had to rebuild their systems, even though they received a recovery key

from the hackers. Nearly a third (29%) who paid a ransom demand still had data leaked, and over a quarter (26%) felt that the attack had a significant financial impact by threatening the solvency and viability of their business, according to Hiscox.

“Ransomware is still the most prevalent and damaging form of cyber attack and it is not uncommon for a company to be hit multiple times,” said Gareth Wharton, Hiscox Cyber CEO. “Even if a business own er makes the decision to pay the ransom, often they cannot fully restore their systems or prevent a data breach.”

The report found the

industries that were forced to pay a ransom were those with “just-in-time” supply chains: food and drink (62%), manufacturing (51%) and leisure (50%)

The report also shows that the frequency of cyber attacks has increased by 12% year-onyear — with 48% of businesses suffering an attack in the past 12 months.

spread of an attack.

• Requiring more regular risk and vulnerability assess ments, as well as more robust incident response, business continuity and disaster recov ery planning.

• Directing companies to invest in regular training and cybersecurity awareness pro grams that are relevant to their business model and personnel.

“With cyber attacks on the rise, it is critical that our regulation keeps pace with new threats and technology purpose-built to steal data or inflict harm,” said Harris. “Cyber criminals go after all types of companies, big and small, across industries, which is why all of our regulated enti ties must comply with these standards — whether a bank, virtual currency company, or a health insurance company.”

Under the cybersecurity regulation, all banks, insurance companies and other

financial services institutions and licensees regulated by DFS are required to have a cybersecurity program in place that protects consumers’ private data, a written policy or policies approved by the board or a senior officer, a chief information security officer to help protect data and systems, and protections of data at third-party providers.

Companies must also report cybersecurity events online through the DFS cybersecurity portal.

DFS said it solicited feedback on proposed amendments from other regulators, industry groups, and regulated entities through the recent Cybersecurity Symposium, industry conferences, and meetings. After the 60-day comment period ends, regula tors will review all comments and either re-propose a revised version or adopt the final regulation, DFS said.

D&O Pricing Falls 14.7% in Q3, Breaking 17 Quarters of Pricing Increases: Aon

By Jahna Jacobson

Directors and officers liability pricing fell 14.7% in the third quarter, according to a recent survey.

Aon’s Financial Services Group’s Q3 2022 pricing index for the quarter ending on September 30 decreased to 1.57 from 1.96 in the prior-year quarter, the second quarterly decrease since Q4 2017. The average cost of $1 million in limits decreased 19.9% compared to the prior-year quarter.

The Aon report noted that Q3 2022 results were significantly impacted by a single large IPO client that purchased a multiyear program in Q3 2021 and, as such, was not in the current quarter. Adjusted for this single client’s exclusion, the pricing index decreased 14.7% in Q3 2022.

Almost all renewing companies renewed with the same limit (98.4%) and the same carrier (98.4%). Most renewals also renewed with the same deductible (89.8%) and limit and deductible (89.8%) These numbers are in line with historical data.

Still, the report found that almost half of renewing primary policies received a price decrease (46%), while about 38% saw virtually no change and approximately 16% saw an increase. Those renewing with the same limit and deductible saw an average price decrease of 9.4%, while the small percentage that saw a premium increase paid only 5.5% more. Overall, prices for primary policies were down 4%.

Of those attacked, 19% were victims of ransomware, com pared to 16% in the previous year.

Phishing remains the number one point of entry for cyber hackers (62%) to suc cessfully infiltrate businesses in a ransomware attack. This was closely followed by entry using credential theft (44%), a third-party supplier (40%), an unpatched server (28%), and brute force credentials, such as password guessing (17%).

“It is vital that businesses take the necessary steps to protect their data and systems against a cyber attack; making it harder for cyber criminals to gain entry to their systems by

keeping software up-to-date, running regular in-house training, and frequently backing-up data,” Wharton said. “Our report shows that investing in building robust cyber defenses and preparing an effective response for an attack are more effective than paying cyber criminals. It is revealing that more than a quarter (26%) of businesses we surveyed paid a ransom in the hope of recovering their data because they did not have any back-ups, when regular and robust back-up processes can be one of the most effective ways of mitigat ing the impact of a ransomware attack.”

This 19.9% year-over-year decrease in Q3 D&O pricing index represents the second quarter of year-over-year decreases, breaking a 17-quarter streak of pricing increases for policies renewing with the same limits and deductible.

The pricing index includes all limits purchased by publicly traded companies during the quarter. Changes in clients renewing during the quarter, changes in limits purchased, or a shift in the mix of limits between ABC limits and Side-A-only limits can affect the index’s overall performance.

ESG Will Increasingly Influence Insurers’ Strategies: Fitch Ratings

By Jahna Jacobson

Environmental, social and governance issues will grow in their influence in insurance industry decision-making as they become more important to stakeholders, according to a report from Fitch Ratings. For most insurance companies, environmental, social and governance (ESG) factors often are not incorporated into risk-based premium calculations, aside from direct material influence on risk, such as weather-related perils for non-life insurers.

However, that thought process is evolving.

Fitch Ratings’ latest ESG report, “Global Insurance Through an ESG and Sustainability Lens: Influence of ESG on Insurers’ Underwriting and Investment Decisions Will Increase,” predicts ESG-driven decisions will influence insurers’ credit ratings in the medium term as social and regulatory pressures push more insurers to account for ESG considerations.

“We believe that most insur ance companies’ decision-mak ing on ESG issues will be steered by risk appetite defined at the governing board and delegated board levels, which will be subject to change over time as internal knowledge and experience grow,” the authors write. “This will include discussion of which ESG issues are most material across the lines of business from either a financial or regulatory/super visory perspective, or whether stakeholders are raising specific ESG issues that may result in reputational or ethical risks.”

In the longer term, sectors most exposed to ESG-related risks will face more significant challenges as stakeholders demand greater rigor and disclosures, including insurers’ ESG implementation strategy. Insurers should also see some opportunities for revenue growth.

Global View

Voluntary ESG-related principles, such as the U.N. Principles for Responsible Investment and the U.N. Environmental Programme Principles for Sustainable Insurance, reveal low representation by North America compared with Western Europe, Asia-Pacific and Latin America. This may reflect that the North American investor base as a whole is less concerned about the impact of ESG-related issues than investors in Western Europe and developed-market APAC

regions, according to Fitch.

The International Platform on Sustainable Finance (IPSA), a multilateral forum for public authorities, is working to create a common ground taxonomy on central issues, including channeling capital from unsustainable activities. The IPSA’s members include Canada, China, the E.U. and the U.K., but the U.S. has declined to join.

Insurance and Economy

Those insurers more suscep tible to stakeholder pressure are more likely to embrace advanced ESG integration approaches, policies and related disclosures. They are also more likely to develop detailed underwriting policies and investment mandates incorporating measures like ESG investment screening and restrictions.

Insurance companies, unlike banks, are hesitant to stop

underwriting specific economic sectors, judging instead on a case-by-case basis.

However, this can lead to a conflict of interest between an insurer’s various ESG targets. For example, a life insurance company may decide to stop underwriting coverage for thermal coal mines to meet an environmental goal but, at the same time, risks contributing to a social issue if the move increases local unemployment.

A greater focus on legal and regulatory frameworks to man age environmental and social issues may spur the growth of new ESG-related insurance products and services to address these needs, the report adds.

Fitch sees potential growth in the environmental pollution liability insurance market. Also, the U.S. Inflation Reduction Act’s funding for clean energy and climate change abatement, as well as government-backed

research into low-carbon technologies, will create oppor tunities for new insurance policies and products. Also, there is increasing demand for more parametric or indexbased cover, particularly for weather-related events, Fitch notes.

Environmental Catastrophes

Climate change contributes to more frequent and more intense weather events around the globe.

Cumulative losses from floods rank among the highest of natural perils — more than 50 severe floods occurred worldwide in 2021, including the costliest in Europe’s history. According to Swiss Re, the combined economic losses from all flood events in 2021

rose to $82 billion.

Today, the U.S. is an epi center of catastrophe-related insurance claims. However, as insurance product penetration increases in those areas, Latin American and Asian markets with relatively higher catastrophic exposure will see more climate change-related financial impacts.

Societal

Less attention has been paid to social issues within the financial services and insurance sectors, leading to a lack of standardized guidelines or benchmarks. This ambiguity makes it challenging for inves tors to compare insurers’ social agendas. Basically, a company’s social justice or equity responsibility claims can sound

good but be unquantifiable, according to the Fitch analysis. Insurers have responded by carefully realigning sellers’ (or agents’) incentives with better customer outcomes, reinterpreting conduct risks to identify material risks, and improving their complaints handling processes, the report finds.

Governance

Of the ESG elements, gover nance has the most significant overlap with Fitch’s core credit rating criteria. Corporate gov ernance, management strategy and financial transparency are essential considerations in Fitch’s credit rating process. However, the insurance sec tor’s credit ratings have been less influenced by governance

or conduct issues than credit ratings for banks and non-bank financial institutions. Insurers have fewer negative rating actions linked to governance issues or risks but more risks tied to environmental issues.

As long as guidelines around reporting and disclosing ESG issues remain ill-defined, companies can misrepresent information to green or social “wash” activities. Even if this misrepresentation is uninten tional, companies may need to convince investors and other stakeholders that they meet ESG requirements.

A global movement toward regulation and benchmarking will mean insurers have greater quantifiable accountability to investors, stakeholders and the insured.

Henley - EVP at SeibertKeck Insurance Partners & Satisfied Insurance Journal Subscriber

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Karl

Business Moves

Included in the acquisition are Burnsville, Minnesota-based f3Logic LLC and f3Investment Management LLC; Richmond, Virginia-based Financial Consultants of America Inc.; Wakefield, Massachusetts-based Compass Point Retirement Planning Inc.; and Burnsville, Minnesota-based Kusske Financial Asset Management Inc.

The f3 Companies are a wealth manage ment platform with over $1 billion in assets under advisement.

National

Independence Pet Group Fairfax

Independence Pet Group completed its acquisition of Fairfax Financial Holdings Ltd.’s U.S. and Canadian interests in the Crum & Forster Pet Insurance Group and Pethealth Inc.

IPG purchased the pet insurers for $1.4 billion in the form of $1.15 billion cash and $250 million in seller notes.

The deal was first announced by IPG’s parent company, JAB Holding Co., in June 2022.

IPG also announced that it appointed Lane Kent as chief executive officer, effective Jan. 1, 2023. Kent has served as IPG’s chief operating officer since IPG’s formation last year.

Kent will succeed current CEO David Kettig, who will transition to vice chairman of the board of IPG.

East

NFP, CIC Group

Alterity Group, a subsidiary of insurance brokerage NFP, acquired CIC Group, a Buffalo, New York-based commercial insurance agency.

CIC Group principals Timothy McMullen, Gina Teresi and Chris O’Donnell will join Alterity and report to Sharla St. Rose, managing director, Alterity.

In addition to its Buffalo headquarters, CIC Group operates offices in Rochester and New York City.

Founded in 1976, CIC provides lender insurance review services, workers’ com pensation, construction risk consulting, and third-party compliance and monitor ing.

The transaction closed on Aug. 19.

Alliant, Trivedi Capacity Associates

Alliant Insurance Services has acquired New Jersey-based Trivedi Capacity Associates, further expanding its reach in the community association and condo minium association underwriting space.

Central to the acquisition is Trivedi’s HARP risk purchasing group, which provides a range of targeted insurance products to associations nationwide.

Trivedi and HARP will be part of Preferred Concepts, a real estate focused managing general underwriter within the Alliant Underwriting Solutions programs division.

Trivedi offers a range of coverages to commercial risks including community associations that includes umbrella coverage, directors and officers liability, crime, and workers’ compensation. These programs are available to independent brokers and agents nationally.

Alliant Insurance Services is based in Irvine, California.

Midwest

Arthur J. Gallagher, f3 Companies

Arthur J. Gallagher & Co. has acquired the f3 Companies. Terms of the transaction were not disclosed.

The f3 Companies will remain in their current locations under the direction of Jeff Leonard, Gallagher’s North American Business line leader for financial and retirement services.

South Central

USI, Beasley & Company

USI Insurance Services acquired Tulsa, Oklahoma-based Beasley & Company.

Beasley & Company is a regional benefit consulting firm specializing in retirement, executive compensation and health and welfare benefit plans.

The company’s operations will be combined with USI Consulting Group, a division of USI, and a premier provider of defined contribution and defined benefit plan consulting and administration services.

Marsh McLennan, Focus

Marsh McLennan Agency, a subsidiary of Marsh, acquired Focus Insurance, a personal insurance brokerage firm based in Houston, Texas.

Founded in 2001, Focus Insurance spe cializes in customized personal insurance programs throughout the United States.

All Focus employees, including vice president at Focus, Mickie Comiskey, will be joining MMA.

Arthur J. Gallagher, Tejas American General Agency

Arthur J. Gallagher & Co.’s U.S. wholesale brokerage, binding authority and programs division, Risk Placement Services Inc., has acquired Cedar Park, Texas-based Tejas American General Agency LLC.

Founded in 1997, TAGA is a managing general agency offering commercial, farm and personal insurance products to independent agents throughout Texas.

Bart Koch, Anita Herzog, Cindy Yurkovich, Richard Salley and their team will remain in their current location under the direction of Kevin Doyle, VP-Western Region and Chicago for RPS.

Specialty Program Group, Catapult Specialty Program Group, an operator of specialty insurance brokerages and underwriting facilities, acquired the assets of Catapult Insurance Solutions.

Based in Carrollton, Texas, Catapult is a privately held managing general insurance agency and wholesale brokerage for niche industries and hard-to-place risks.

Led by president Tim Sunderman, Catapult’s largest delegated authority program is dedicated to providing residential homebuilders, commercial general contractors and trade contractors with best-in-class products and services, including general liability, umbrella, builder’s risk, contractor’s equipment and workers’ compensation.

In addition, Catapult is a Lloyds Coverholder and also provides solutions for hard-to-place risks for coastal and other high hazard property, specialty trade contractor GL, deductible buy downs, commercial DIC (EQ & Flood), and contrac tor’s equipment.

Catapult’s infrastructure is designed for program incubation and development.

Headquartered in Summit, New Jersey, Specialty Program Group is a fully licensed holding company established to acquire and scale insurance underwriting facilities and specialty businesses throughout North America.

Southeast

Marsh, Bradley

Marsh McLennan Agency, a subsidiary of the global insurance broker Marsh, has acquired Bradley Insurance Agency, a com mercial brokerage in Knoxville, Tennessee. Bradley Insurance Agency was founded in 1972 by Steve Bradley and was acquired

by Kendall and Kevin Bradley in 2014. All employees will be joining the Marsh team.

Marsh McLennan Agency, based in White Plains, New York, offers business insurance, benefits plans, retirement and other products. It has 170 offices across North America.

World Insurance, Clinard Group World Insurance Associates has acquired North Carolina-based Clinard Insurance Group (CIG).

WIA, headquartered in Iselin, New Jersey, announced that it had purchased Clinard on Oct. 1.

CIG was launched in WinstonSalem in 2005, offering personal and commercial property/casualty product lines in North Carolina.

It’s the latest acquisition for WIA, which has made 160 acquisitions since it was founded in 2011.

AmTrust, DUAL

AmTrust Financial Services acquired the middle market management liability busi ness of DUAL North America, a Floridabased specialty program administrator that offers property/casualty products.

DUAL is part of the DUAL Group, a large underwriting team based in Naples. It is a nationwide admitted program for-profit and not-for-profit entities.

The portfolio includes directors and officers liability, employment practices liability, fiduciary liability and crime coverage.

AmTrust, headquartered in New York, is a multinational insurance holding compa ny that offers specialty products, including workers’ compensation, business liability and extending warranty coverage.

Alera, Benson Blackburn

Alera Group Wealth Services, a division of Alera Group, an insurance and wealth management firm, has acquired Benson Blackburn.

Based in Naples, Florida, BB is a special ized insurance consultancy with a focus on ultra-affluent families and closely held businesses.

Benson Blackburn specializes in life insurance, private placement life

insurance, corporate benefits and business protection. The firm is a member of M Financial Group.

Prior to relocating to Naples in 2007, Benson Blackburn was in Cleveland, Ohio. Its national clientele continues to include a concentration in the Midwest and south Florida.

Founder Michael Benson launched his insurance career in 1976 and started an independent firm 10 years later. Scott Blackburn was named principal in 2015.

Both will remain with the firm as it continues under the banner Benson Blackburn, an Alera Group Company.

West

AmTrust, CMGIA

AmTrust Financial Services Inc. acquired Contractor Managing General Insurance Agency Inc. in California.

CMGIA offers surety bonds to small to mid-size contractors across 50 states. The company is led by Stephanie Shear, a surety underwriter with more 40 years of experience.

Shear will join AmTrust’s surety busi ness along with several underwriters and support staff from CMGIA.

AmTrust Financial Services is a multinational insurance holding company headquartered in New York.

Ryan Specialty, Centurion

Ryan Specialty acquired certain assets of Centurion Liability Insurance Services LLC in Tustin, California.

Centurion is a professional lines whole sale insurance broker and has employees based in Florida and California.

Prior to the acquisition, Centurion was partially owned by Insurance Office of America.

Ryan Specialty is a service provider of specialty products and services for insurance brokers, agents and carriers.

Ryan Specialty provides distribution, underwriting, product development, administration and risk management ser vices by acting as a wholesale broker and a managing underwriter with delegated authority from insurance carriers.

National

Chubb named Bill Hazelton executive vice president, head of North America industry practices. Hazelton will continue to serve in his current role as real estate and hospital ity industry practice leader, which is a part of Chubb North America industry practices with life sciences, construction, private equity, energy, financial institutions, transportation, manufacturing, technology and healthcare.

He joined Chubb in 2005.

Specialty managing general agent Nexus Underwriting appointed Christof Bentele president of its new specialty casualty business. Bentele is based in Morristown, New Jersey.

Bentele has run specialty casualty teams at Aon, JLT group and, most recently, Allianz Global Corporate & Specialty, where he was a director within the alternative risk business.

Dean Vander Plas joined the Kapnick Insurance Group executive team in the newly created role of chief growth officer.

As CGO, Vander Plas is responsible for all aspects of sales leadership, including pro ducer recruiting, coaching, and taking Kapnick’s mentorship program to the next level. He is based in Kapnick’s Ann Arbor, Michigan, office.

Kapnick is an independent insurance brokerage providing corporate risk, personal insurance, employee benefits, risk management and financial strategy solutions to clients across the U.S. and internation ally.

AmTrust Financial Services Inc., a global specialty property/casualty insurer, added Steve Jennings as senior vice president, under writing. Jennings will oversee AmTrust’s nonprofits practice and a newly created dedicated residential real estate practice.

Jennings began his career with Federated Insurance. Most recently, he spent more than a decade with Philadelphia Insurance Companies.

The Hartford named Tracey Ant head of middle and large commercial business units effective Jan. 1. In this newly created role, Ant will oversee all middle and large com mercial business units across multiple industries.

Ant has over 25 years of insurance industry experience, beginning her career as a casualty underwriter at The Hartford, followed by roles at Marsh McLennan.

Effective Jan. 1, 2023, Gretchen Thompson will take over Ant’s role leading middle and large commercial general industries, technology, life sciences, and large property, as well as field operations, alternative distribution and underwriting centers. Thompson is currently head of construction, inland marine,

excess solutions, and complex liability solutions for middle and large commercial.

Thompson has been with The Hartford since 2005.

Stephen Screen is The Hartford’s new head of enter prise sales and distribution and is based in Charlotte, North Carolina. With over 14 years at The Hartford, Screen has served as technology under writer, middle market manager and, most recently, head of distribution management.

WTW appointed Michael Holt as associate director, client relationship management, within the company’s aero space business.

Based in Florida, Holt brings 17 years of experience in man ufacturing, aircraft leasing, and managing client relationships.

Holt rejoins WTW from McGill, where he served as partner, aviation and aerospace, since last February. Before McGill, Holt contrib uted to the growth of WTW’s aerospace business as a client relationship manager.

WTW also appointed Andy Blasher as a global client advo cate in its Corporate Risk and Broking business, focusing on bringing industry expertise and value to clients and prospects.

Blasher joins WTW with over 25 years of brokerage and carrier experience, with prior leadership roles in managing large accounts at Cigna, Marsh and AIG. Most recently, Blasher served for over five years as vice president, account executive, at Woodruff Sawyer.

Tim Anders joined Ryan Specialty Underwriting Managers’ National Specialty Programs (NSP) practice as an

executive vice president.

Anders will support under writing practices, launch new program opportunities, and reinforce efficient operational activities for the Chicago, Illinois-based company.

Anders joins NSP with more than 30 years of experience in program development, underwriting and manage ment. Anders has extensive underwriting knowledge of the excess and surplus lines seg ment with property/casualty expertise and holds the CPCU designation.

East Insurance broker Newfront named several executives and leaders in its newly established Boston, Massachusetts, office.

Brian Kelleher joins the Boston office as senior vice president on the property/ casualty team and a found ing partner. Kelleher brings 25 years of experience managing the risks of life science and technology companies. Before Newfront, Kelleher was a senior vice president at Arthur J. Gallagher & Co. and William Gallagher Associates.

Newly named executive vice president and founding partner Louisa Bolick leads Newfront’s five-person employee benefits team. Bolick brings more than 30 years of industry experience to her role. Previously, she served at Arthur J. Gallagher & Co. and William Gallagher Associates.

Bill Hazelton

Christof Bentele

Steve Jennings

Brian Kelleher Louisa Bolick

Industry veteran Michael Talmanson leads the Boston property/ casualty team as executive vice president and founding partner. He brings nearly two decades of experience. Previously, he led the technology and cyber risk practice at William Gallagher Associates before being named area senior vice president at Arthur J. Gallagher & Co.

Jon Curran, new vice presi dent, property/casualty, joined the insurance industry in 2021 following a successful, nearly decade-long PGA Tour run. While a member of the Boston office, Curran is located in Jupiter, Florida, and serves clients across the country. He joins Newfront from Gallagher, where he was area assistant vice president.

Newfront is a brand name of ABD Insurance and Financial Services Inc., which is the surviving company of the Jan. 1, 2022, merger of three insur ance agencies: ABD Insurance and Financial Services, Inc., Newfront Insurance Services, and Aviation Marine Insurance Services.

Integris Group, a mem ber-owned medical profession al liability insurance company, added Kirk C. Tweedy as chief operating officer. Integris Group is headquartered in Glastonbury, Connecticut.

Tweedy has 32 years of insurance experience

across multiple disciplines, product lines, and distribution channels. Most recently, he held the position of chief operating officer at Berkley Small Business Solutions in Wilmington, Delaware.

Midwest

J.M. Wilson promoted Chris Struck to property/casualty underwriter for its Indiana team.

Struck is responsible for under writing a wide variety of new and renewal property and casualty accounts and strength ening relationships with independent insurance agents and company underwriters in Indiana and Kentucky.

Struck joined J.M. Wilson as assistant property/casualty underwriter in January 2022. Before joining J.M. Wilson, he worked as a client service manager trainee for an insur ance agency and held various positions for an insurance carrier.

J.M. Wilson also hired Ian Crook as property/casualty underwriter for its Ohio team.

Crook is responsible for under writing a wide variety of new and renewal commercial property/casualty accounts and maintaining relationships with carriers and independent insurance agents in Ohio, Pennsylvania, Virginia, and West Virginia.

Crook previously was an assistant underwriter for an insurance company.

Indium, an agency network representing over 300 agencies, appointed Katherine Ternes chief executive officer.

She is based in Columbus, Ohio.

Before joining Indium, Ternes gained corporate experience with Vertafore from 2021 to 2022 and served as vice president of sales AgencyZoom from 2019 to 2021.

South Central

Oklahoma Insurance Commissioner Glen Mulready won reelection to a new term, which runs through 2026.

Mulready, a Republican, served eight years in the Oklahoma House of Representatives before running for commissioner in 2018.

As a House member, Mulready served as the insur ance committee chair. He has 35 years of experience in the insurance industry, including as an independent agent and broker, and has held executive positions at two Oklahoma health insurance companies.

Southeast

The Florida Peninsula Insurance group of companies named Joe Fagan to succeed Michael Koscielny as vice president of underwriting for Boca Raton-based Peninsula and its subsidiary, Edison Insurance Co.

Fagan previously spent 16 years in leadership positions

with Travelers Insurance, including six years as senior managing director of national underwriting.

Koscielny, who is retiring, spent more than 40 years in the insurance business and joined Peninsula in 2014.

The Liberty Co. Insurance Brokers, based in Gainesville, Florida, named Douglas Choi vice president for risk management and program underwriting.

Choi worked 15 years at insurance carriers, including Travelers and Nationwide, before moving to the broker side.

West Newfront, the tech-driven insurance brokerage based in San Francisco, named Greg Kaplan to serve as senior vice president over its retirement services team.

Kaplan joins Newfront from Specialized Bicycle Components, where he was head of strategic finance and operations. He has 15 years of experience in the financial industry and spent nearly a decade on the finance team at Microsoft.

Woodruff Sawyer named Todd Dorsey as vice president in the private equity and venture capital group. Before joining Woodruff Sawyer, Dorsey served three years at Lockton.

Dorsey will partner with private equity firms, growth equity firms, alternative asset managers, strategic acquirers, family offices, and their portfolio companies.

California-based Woodruff Sawyer is an independent insurance brokerage.

Michael Talmanson

John Curran

Chris Struck

Ian Crook

Joe Fagan

Glen Mulready

New SEC Disclosure Rules May Drive Up D&O Claims

By Jim Sams

New rules proposed by the U.S. Securities and Exchange Commission on cybersecurity and climate impact disclosures may generate more lawsuits that will generate claims against directors and officers (D&O) poli cies, panelists said during the Professional Liability Underwriting Society’s recent conference in San Diego.

“More disclosure, more securities litigation,” said attorney Noelle M. Reed, a partner with the Skadden law firm in Houston. “Any time you have more disclosure you’ll have plaintiffs scrubbing, looking for more claims.”

Reed and fellow panelist Doru Gavril, a partner with Freshfields Bruckhaus Deringer, said cyber disclosure rules proposed by the SEC in March may be counterproductive if not amended. The proposed rules would require public companies to disclose any “material cyber security incident” within four business days.

Gavril questioned the prudence of creating a specific deadline for reporting material incidents. SEC regulations require corporations to disclose to shareholders any incidents that could have a material impact on share value, but there are no specific time frames listed in the rules for other types of incidents.

He said he recently represented a client who grappled with an incident that may have generated a required disclosure under the new rules. He said typically managers are not immediately aware of a data breach, and if they are aware, it takes time to understand what data was compromised.

“It’s incredibly difficult know if you’ve been breached, when you’ve been breached and where you’ve been breached,” he said.

Sometimes, the U.S. Justice Department asks corporate leaders not to disclose cyber incidents because national security is involved, Gavril said. A rule requiring quick disclosure could work against the secrecy needed by law enforcement, he said.

Knowing whether an incident rises to the level of required reporting can also be a tough call. Reed said she recently counseled a client who was hacked. “We had twice-aday meetings to determine if the event is material.”

Also in March, the SEC proposed rules that would require public corporations to disclose climate-related risks. Reed said this may create an opportunity for activists investors to look for any misrepresen tations. She said the SEC itself may take enforcement action.

“At some point the SEC may decide it has to do something because they are the ones who promulgated the rules,” Reed said.

The SEC took 697 enforcement actions against corporations in fiscal year 2021 and collected $3.85 billion in penalties. That

was down from 715 enforcement actions and $4.68 billion in penalties in 2020.

Gavril said if the climate disclosure rules are adopted, corporations will have to be careful about making reckless “aspirational statements,” such as overly optimistic promises about reducing the business’ car bon footprint. He said if corporations state any goals, the board of directors needs to ensure they are monitoring those efforts and hearing updates on the progress. Detailed minutes of board meetings are imperative, he said.

Jack Flug, a managing director and claims and professional leader for Marsh, said the new disclosure requirements come at a time when the D&O line has become more affordable for corporations. He said insureds currently are in a better position than underwriters. He said only two years ago, policyholders were finding it difficult to find any bargains.

“The market went up way too fast, it went down just as quickly,” Flug said. “It’s hard to judge what the real price ought to be.”

Sams is the editor of Claims Journal, the online resource and daily newsletter for property/casualty insurance claims professionals. Claims Journal is a member of the Wells Media Group. Email: jsams@ wellsmedia.com

Noelle Reed

Doru Gavril

Closer Look: Personal Lines Leaders

Personal Lines Leaders

Top 50 Personal Lines

Ranked

Agencies

1 Alliant Insurance Services Inc./Confie

About the Personal Lines Leaders: The 2022 Personal Lines Leaders in this special feature are taken from Insurance Journal’s Top 100 Property/Casualty Independent Agencies as reported in August. This list utilizes only the 2021 personal lines property/casualty revenue numbers of the independent agencies and brokerages that submitted data to the Top 100 agencies report. For more information on Insurance Journal’s Top 100 Property/Casualty Independent Agencies list, contact awells@insurancejournal.com.

$597,539,527 $2,183,087,323 $2,366,371,090 9,529 Irvine, California

2 HUB International Ltd. $494,849,898 $3,000,000,000 $2,017,825,215 15,081 Chicago, Illinois

3 Acrisure $250,821,807 $746,613,114 $2,347,119,636 12,793 Grand Rapids, Michigan

4 Baldwin Risk Partners

$222,253,072 $777,000,000 $487,768,057 3,300 Tampa, Florida

5 AssuredPartners Inc. $203,709,026 $1,507,408,268 8,279 Lake Mary, Florida

6 PCF Insurance Services $130,000,000 $1,100,000,000 $470,000,000 2,492 Lehi, Utah

7 BroadStreet Partners Inc. $127,680,000 $971,000,000 $921,760,000 5,360 Columbus, Ohio

8 TWFG Insurance Services $112,964,000 $805,741,000 $124,964,000 155 The Woodlands, Texas

9 USI Insurance Services $111,255,659 $730,000,000 $1,304,201,153 8,661 Valhalla, New York

10 High Street Insurance Partners $105,000,000 $224,000,000 1,800 Traverse City, Michigan

11 AIS Insurance* $100,920,000 $657,000,000 $106,000,000 440 San Diego, California

12 Westwood Insurance Agency* $84,173,645 $474,320,509 $84,173,645 153 West Hills, California

13 Cross Insurance $76,776,000 $839,538,600 $207,942,000 1,093 Bangor, Maine

14 Hilb Group $76,389,795 $284,433,293 1,958 Richmond, Virginia

15 NFP $73,203,635 $869,610,000 $632,589,166 6,849 New York, New York

16 Leavitt Group $63,742,216 $720,684,765 $261,716,764 2,224 Cedar City, Utah

17 RSC Insurance Brokerage Inc. (DBA Risk Strategies Co.) $62,646,425 $438,348,986 $442,820,067 3,271 Boston, Massachusetts

18 Premier Group Insurance Inc. $52,700,000 $430,000,000 $62,000,000 46 Littleton, Colorado

19 Patriot Growth Insurance Services LLC $51,100,000 $286,350,000 $104,450,000 1,175 Fort Washington, Pennsylvania

20 World Insurance Associates LLC $45,905,076 $518,391,727 $154,346,670 1,479 Iselin, New Jersey

21 Alera Group $45,000,000 $480,000,000 3,500 Deerfield, Illinois

22 Home Services Insurance $40,500,000 $266,400,000 $40,000,000 275 St. Paul, Minnesota

23 EPIC Insurance Brokers & Consultant $37,421,000 $280,000,000 $678,511,800 2,830 San Francisco, California

24 Eastern Insurance Group LLC** $32,545,108 $154,804,029 $76,071,244 404 Natick, Massachusetts

25 Higginbotham $26,619,000 $200,000,000 $239,303,000 2,000 Fort Worth, Texas 26 Atlas Insurance Brokers LLC $26,179,939 $195,145,475 $37,560,888 26 Rochester, Minnesota 27 Professional Insurance Associates $25,000,000 $175,000,000 $60,000,000 75 San Carlos, California 28 NavSav $24,298,559 $181,437,206 $38,258,473 320 Beaumont, Texas 29 Lockton $23,065,000 $100,000,000 $1,755,563,000 9,328 Kansas City, Missouri 30 The Liberty Company Insurance Brokers $21,000,000 $168,000,000 $92,400,000 647 Gainesville, Florida 31 Marshall & Sterling Enterprises Inc. $20,131,935 $108,883,064 $77,110,179 531 Poughkeepsie, New York 32 Huntington Insurance** $18,527,000 $109,000,000 $40,563,000 353 Columbus, Ohio 33 Towne Insurance** $17,902,290 $129,303,719 $65,832,414 422 Norfolk, Virginia 34 Starkweather & Shepley Insurance Brokerage Inc. $15,533,483 $102,070,292 $67,640,828 266 East Providence, Rhode Island 35 Insurance Office of America Inc. $15,107,871 $151,078,710 $223,186,545 1,364 Longwood, Florida 36 IMA Financial Group $14,870,670 $98,279,000 $450,130,337 1,707 Denver, Colorado 37 Shepherd Insurance $14,737,353 $115,149,144 $58,008,213 431 Carmel, Indiana 38 Robertson Ryan & Associates $14,680,426 $103,000,000 $57,931,594 419 Milwaukee, Wisconsin 39 Inszone Insurance Services LLC $13,785,414 $91,902,760 $45,787,268 218 Rancho Cordova, California 40 Kaplansky Insurance Agency

$13,759,243 $85,704,088 $20,857,702 88 Needham, Massachusetts 41 Lawley LLC $13,698,222 $81,649,150 $57,230,801 424 Buffalo, New York 42 Sunstar Insurance Group $13,500,000 $135,000,000 $90,000,000 550 Memphis, Tennessee 43 Ansay & Associates LLC $13,150,590 $80,704,883 $44,452,027 234 Port Washington, Wisconsin 44 Oakbridge Insurance $12,164,154 $93,570,415 $45,573,571 300 LaGrange, Georgia 45 Tompkins Insurance Agencies Inc.**

$10,779,024 $61,089,311 $27,341,501 170 Batavia, New York 46 TRICOR LLC $10,758,684 $58,972,451 $29,456,280 209 Lancaster, Wisconsin 47 BXS Insurance** $10,000,000 $92,000,000 $110,000,000 782 Gulfport, Mississippi 48 JMG Insurance Corp. $9,695,841 $66,494,399 $25,738,766 180 Norwalk, Connecticut 49 INSURICA Inc. $9,563,735 $66,423,138 $120,574,551 663 Oklahoma City, Oklahoma 50 ALKEME

$9,200,000 $62,000,000 $61,034,000 300 Ladera Ranch, California

Closer Look: Cannabis Summit Coverage

Insuring Cannabis Summit

2022: Capacity, Rates, Lawsuits and More

Cannabis insurance is a complex and developing space, and ample proof of that assertion was provided at a two-day event in October focused solely on the topic.

Issues like capacity, rates, lines of insurance, lawsuits, and market forecasts were among the subjects tossed around by more than 30 speak ers appearing during Insuring Journal’s annual virtual Insuring Cannabis Summit on Oct. 26 and 27.

The event featured panels on cannabis laws and lawsuits, a panel with carriers, insuring cannabis market intelligence, experts tackling tough ques tions, and a large roundtable panel.

The event was too large to cover completely in the pages of the magazine, so the

editors of Insurance Journal have summarized some of the highlights of only a few of the panels below. The conference is available on demand at ij.insur ingcannabissummit.com, and video clips of the panels can be found on InsuranceJournal.tv.

Carrier Panel Highlights

A panel of insurance carrier executives moderated by Keith Distel, associate vice president of underwriting for AmTrust Financial Services, laid out the evolution of cannabis insur ance and where it’s headed.

Panelists Michael Hall, vice president of the cannabis department for Golden Bear Insurance Co., and Joseph Lyons, vice president of com mercial lines underwriting for Conifer Insurance Co., painted a picture of a market that has come a long way — and one that has a long way yet to go.

“When we started, we were trying to keep limits about $5 million, and now we’re up over $15 [million],” said Hall, vice president of the cannabis department for Golden Bear. “But what you’re seeing, I think, especially in the MGA space, is people getting $30-,

$40-, $50 million worth of capacity in house. And that’s definitely a new development. I mean, two years ago you were lucky if you could buy $10- or $15 million, and it definitely opened up, especially on the property end.”

Distel asked Lyons if there is more room for carriers in the space, or if it is reaching a saturation point.

“I think my answer to your question would be, ‘Yes, no, and it depends,’” Lyons said. “If it’s a market-driven marketplace versus a state like Michigan or Colorado versus a state like Illinois or Ohio, where you have limited market, cap ping of license — no, there’s not a need to have more capacity. The pie isn’t big enough for all of us to kind of play in there, to have more people come in. I would say that my answer of ‘No’ would be if there’s another main street carrier that’s going to write, just provisioning centers, there’s not a need for that now ... that market is saturated.”

Roundtable Highlights

A roundtable provided the biggest panel of the day.

Charles V. Pyfrom, chief marketing officer at CannGen Insurance Services, moderated a panel that included Jesse Parenti, national director at Nine Point Strategies, Summer Jenkins with Cannabis Insurance Wholesalers, Jon Spratt with Greensite Insurance Services, Kathleen Brown-Hurtado with Curotech Specialty and T.J. Frost with Symphony Grow.

Jenkins talked about the importance of helping to create an environment of culture, safety and accountability for cannabis businesses.

“And then everything else is manage, tweak and continue to be worked on,” she said. “Because this is a space that is going to continue to evolve. And it’s not one piece, it’s like 10 pieces all working together. Communication within your HR, your safety department, your loss control department, your risk manager, your attorneys, your CPAs, we are all on the same page and we have to be communicating to make these businesses successful.”

Parenti discussed a big challenge in the space, which he said comes from the risks

Michael Hall

Summer Jenkins

Matt Engle

T.J Frost

Alex Buschmann

Stephanie Bozzuto

Joe Lyons

Jim McErlean

Kathleen Brown-Hurtado

Keith Distel

posed by alcohol and cannabis together. He is hopeful better sobriety tests will come along to enable brokers to work with carriers to come up with “a product that actually is viable that will provide protection and defense when needed.”

Experts Answer Highlights

Five cannabis insurance experts agreed to tackle tough insuring cannabis questions distributed by Insurance Journal on social media ahead of the conference.

The experts were Stephanie Bozzuto, co-founder of Cannabis Connect Insurance, Beth Medvedev, division manager at James River Insurance Co., Jason Scheurle, national product lead, cannabis for Burns & Wilcox, Alex Buschmann, national cannabis practice leader at Risk Strategies, and Carson Post, senior vice president of underwriting at QuadScore.

Medvedev was asked how insurance professionals get into the business of insuring cannabis.

“I think the most important thing is doing a lot of research first,” Medvedev said.

“Cannabis is just like any other product, but there’s so many unique things about it and the way it’s distributed. So even learning about the history of insurance and cannabis, some of the science behind the actual product is really helpful, because as more and more people get into the cannabis market, it’s obviously getting much more full. So, finding some place that there’s a gap, whether it’s coverage or particular service that you can specialize in, would be really helpful. And then I think really just understanding the particular challenges of the cannabis market and figuring out a way to get around those.”

Scheurle was asked how the cannabis insurance specialty compares with other specialties he’s been involved with. He was previously in the special event space, which he said compares with insuring canna bis in some ways. However, the cannabis specialty may be the tougher one to be in right now, he added.

“They are very, very different in their risk profile and underwriting processes,” he said. “Special event is

fairly simple. If you have a day and a number of attendees, you’re probably okay to get an indication or a quote.

“Cannabis is very, very different. We’re looking at several different applications and pieces of information to even reach price indication. So, I think when you look at cannabis, the main difference from various other classes is just how difficult and tricky the underwriting can be, especially in the very beginning of the life of the policy.”

Foresights & Intelligence Highlights

A panel titled Insuring Cannabis Foresights & Intelligence for 2022 and Beyond kicked off day two of the conference.

It was hosted by Jim McErlean, business develop ment manager at Cannasure. Also on the panel were Erich Schutz, vice president at Jencap, Jay Virdi, chief sales officer for Hub International’s cannabis specialty practice, and Matt Engle, vice president with Insurance Office of America.

Schutz said “2023 will be

a year where claims contract certainty, and accurate and fair law settlements being made is going be really important.”

Virdi, who oversees some 200 brokers who work in the cannabis specialty, also believes ligation is coming to the space soon.

“You know, there’s going to be a lot of lawyers that are jock eying for position or looking for ways to really put themselves out there and attack this emerging space,” Virdi said.

Engle said he believes the evolution of the space will continue.

“Nowadays you’ve got probably five different specialty programs through MGA programs and a host of other carriers both in the E&S and now the admitted market space that are coming into play here,” he said. “So, the evolution of the markets and what’s available from a customer standpoint, from the operator side is getting better. And I would say even on those specialty programs, they’re starting to add some of the management liability lines and your D&O, your EPL, your cyber to their offerings.”

Jon Spratt

Jay Virdi

Jason Schuerle

Erich Schutz

Beth Medvedev

Jesse Parenti

Carson Post

Charles Pyfrom

Closer Look: Non-Standard Markets

The Imperfect World of Insurance

In a perfect world, there would be perfect markets, including a perfect insur ance market. A perfect market means that every market partici pant is able to transact their business exactly perfectly. All partici pants have perfect information, which allows them to buy or sell at precisely the optimal price. The value of the product is perfectly matched to the expectation of the purchaser. The supply of products matches exactly the demand of the market.

the exposures for which they want to buy insurance. Add to that the fact that risk exposures are continually evolving in ways that are both predictable and unpredictable and that insurance companies don’t want to write every possible coverage. You find that a perfect insurance market is impossible to create.

of business. Some companies really like to write homeown ers’ insurance. Others really like to write personal auto. Some companies that write commercial business like to write BOPs (business owner policies), some write com mercial package policies, and others just like to write certain lines of business.

By Patrick Wraight

You get the point. This kind of market only exists in the minds of academic economists, who spend their days thinking grand thoughts about what the world could be if only it were perfect. Since we live in the real world, where perfect markets are only a figment of smart imaginations, we have to deal with the markets that exist.

In our imperfect insurance market, we must deal with the market the way that it is. Insurance companies aren’t interested in writing insurance for all available customers. Not all potential insurance customers are interested in the insurance they need. Also, some insurance customers aren’t interested in providing perfect information regarding

Two tangible results of this imperfection are the existence of insurance regulation and the existence of market fragmen tation. Insurance regulation is beyond the scope of where we want to go today. Our focus is on this idea of market segmen tation. What I mean by market segmentation is the truth that not every insurance consumer can buy insurance from those companies you normally think about. The name-your-price tool doesn’t work for everyone.

The Admitted Market and What

It’s Good At

You may already be familiar with this, but the admitted market includes the insurance companies that submitted their plans, financials, rules, rates and forms to the state department of insurance. The state then graced them with a certificate of authority to transact insurance business within the state. They were admitted to the market.

As a rule, the admitted market is very good at writing insurance policies that fit easily into certain boxes, which they will usually refer to as classes

The admitted market is best for exposures and coverages where there is plenty of histor ical data available. The more information a company can gather, the more they will like writing the business. There are over 200 years’ worth of data about buildings that catch fire. This is an example of what the admitted market does well.

The admitted market is a reactive market. It does not

anticipate what the next insur ance need is. It also doesn’t really take well to emerging risks. This goes back to the need for data and how it can be applied. Without proper data, an admitted company won’t be able to calculate proper rating factors or anticipate the most appropriate base rates for their filings. Without proper rating justification, the insurance department may

reject the filing, which means that the company won’t be able to write the business well. Also, without proper exposure information, the company will have trouble creating coverage forms, including the best coverage and appropriate exclusions.

The Residual Market and What It’s Good At

There are certain risks that fall outside the appetite of the admitted market. We’re not dealing with unusual risks and exposures. We’re dealing with risks and exposures that are too risky for the admitted

market for some reason. These are the risks that the residual market is designed to deal with. The residual market is where you see terms such as joint underwriting association, assigned risk, or wind pool.

The residual market is designed to pick up the insur ance policies of those insureds who should seek coverage in the standard market but for some reason, they are not eligible for coverage in the standard market. It’s the market of last resort (or at least

it should be, Florida).

Think about personal auto, homeowners or dwelling fire type policies. These are the homes that the big companies won’t write because of some issue. They have existing unre paired damage. They have had a series of losses that makes actuaries sick. The insured has had several claims at different properties. The location is too close to the ocean. The insured has had six moving violations, two multi-vehicle accidents, continued on page 26

Closer Look: Non-Standard Markets

and a mysterious rollover collision.

These tend to be risks that underwriters look at and give a hard "no" to. No negotiation. No haggling over price. There is no rate high enough to write the policy. That’s why the residual market exists and why there needs to be a robust residual market.

Residual markets need to provide bare-minimum coverages at a price that makes people wince in pain. They can’t just set the price so high that people choose not to maintain coverage, though. (There's a big enough uninsured driver problem out there.) But the price needs to reflect the risk and so does the coverage.

The purpose of the residual market is to help the insured to

clear up their loss history, make the investment in the property, or whatever else is necessary to allow them back in the standard market. I also support automatic thresholds where the residual market attempts to place risks back in the standard market annually, or at some consistent interval. That keeps the residual market small, as it should be, and the standard market healthy.

The E&S Market and What It’s Good At

That leaves us with one more market to look at. This is the most responsive of the insurance markets — the excess and surplus market. This isn’t the market of last resort, it’s the market where risk takers and risk profiters meet up to make new things happen.

Consider the emerging risks

we’ve seen in the last few decades, such as cannabis busi nesses and cyber insurance. For the most part, the standard market doesn’t want to touch risks like these because there is too much unknown for them. That’s not judgment. It’s just a fact. The insurance companies that work in the standard market are established and they like the routine of their markets. They don’t want surprises.

The E&S market thrives on surprises. That might be an overstatement, but they have always been available to write risks that are too far outside the proverbial box for most companies.

Consider again why people buy insurance. We buy insur ance either to pay for losses that we cannot afford to pay for ourselves or to protect assets

in the event of a loss. The E&S market exists to help meet that goal when the loss relates to something that’s not exactly “normal.” Consider the soccer player who wants insurance to cover the financial impact of serious injury to his legs. Also, the actress who needs insurance to cover the financial implications if something hap pens to her trademark smile. Or the business who needs insurance to cover damages that may occur if something happens to the founder and face of the company.

That doesn’t mean that the E&S market can’t write more normal exposures. They come alongside other companies and write DIC policies to cover the exposures that standard market insurers won’t touch for certain properties. They write physical damage coverage for exotic, expensive and custom autos. They write condos on the beach because no one else will.

The fact that there are insureds that admitted com panies don’t want makes the existence of both the residual market and the E&S market not only viable, but necessary.

Some call the residual mar ket a problem because it’s often run (at least partially) by a state (or the federal government, which should always stay out of insurance). Some think that the E&S market is unstable and unreliable. I would ask how often an E&S carrier pulls out of a state, becomes insolvent, or stops operating. My guess is that it is less frequent than the insolvency rate in Florida among property insurers.

Wraight, CIC, CRM, AU, is director of IJ’s Academy of Insurance. Email: pwraight@ijacademy.com.

Investigators Say Car Buried in California was Insurance Fraud

Acar was buried in the backyard of a Northern California mansion 30 years ago as part of a scheme to commit insurance fraud, authorities said.

The convertible Mercedes was discovered last month by landscapers in the affluent town of Atherton in Silicon Valley.

Crews excavated the vehicle and police said no human remains were found after cadaver dogs and ground penetrating radar were used to examine the scene.

Investigators said they determined the Mercedes was buried for insurance fraud

purposes.

The car was reported stolen in nearby Palo Alto in 1992. Its owner, Johnny Bocktune Lew, had owned the home where the Mercedes was found. He was accused in 1999 of hiring people to sink a yacht worth $1.2 million to cash in on the insurance.

Lew, who is dead, had also served jail time for murder and attempted murder in Los Angeles County decades ago. Copyright 2022 Associated Press. All rights reserved.

Cal. Father And Son Charged for $12M Workers’ Comp Fraud

Edgardo Cabrales Sr., 61, and his son, Edgar Cabrales Jr., 36, both of San Jose, California, were charged with five felony counts each of insurance fraud after a California Department of Insurance investigation found they allegedly underreported $12 million in employee wages and payroll to save on workers’ compensation insur ance premiums.

The Cabrales own two com mercial cleaning companies in

San Jose.

An investigation by the CDI began after the State Compensation Insurance Fraud discovered that since 2016 the Cabrales had only secured insurance coverage for a fraction of their PBM employees and they had never secured a workers’ comp insurance policy to insure their NFM employees, even though the majority of their business was operated through NFM.

The father and son accom plices allegedly failed to report approximately $12 million in wages to SCIF to save money on insurance, resulting in $4.2 million in lost premiums.

My New Markets

Workers’ Compensation Market Detail: XPT offers workers’ compensation coverage for a wide variety of classes. XPT launched its workers’ comp online platform to offer access to multiple A-rated carriers from a single submission. The platform offers a fast, efficient way to submit business. It allows agents to deter mine if the account is eligible for under writing based on the class code(s), provides quick turnaround time, and allows for direct communication with XPT’s team. The program has a PEO option, offering coverage for artisan contractors, auto deal ers, golf clubs, truckers, restaurants, bars and taverns, hotels, manufacturers, and many more. Eligible premiums range from $2,500 to $1 million-plus; it provides quick turnaround time, competitive commission and the highest level of customer service. Appointment required.

Available Limits: Eligible premiums ranging from $2,500 to $1 million-plus.

Carrier: Multiple, rated A-VII or better by AM Best.

States: Available in most states plus District of Columbia. Not available in North Dakota, Ohio, Washington and Wyoming. Contact: Dan Rieden; dan.rieden@ xptspecialty.com; 714-395-5068.

Commercial Surety Bonds, Bid, Performance Payment Bonds, and Fidelity

Market Detail: USA American Eagle Bonds INS Agency LLC writes surety bonds, performance bonds and fidelity nationwide for bad credit, good credit and weak financials. Many instant-issued license bonds — just a credit check is required for performance bonds and bid bonds; good-credit clients can be written up to $750,000. Performance bonds over $750,000 would require financial state ments. Get approvals for non-standard and hard to place performance bonds for any amount. Most non-standard bonds written without any cash collateral or funds control. Performance bond plus reclamation and subdivision bonds. Easy performance bonds for good credit clients up to $3,000,000 with a simple application a current year-end business financial

and a personal financial statement. Has pen. Available Limits: See above.

Carrier: Admitted. States: Available in most states plus District of Columbia; not available in Alaska, Hawaii, New York and South Dakota.

Contact: Kathryn White; aebonds@msn.com; 855-852-2663.

Residential Flood Market Detail: reThought Insurance offers a residential flood insurance program. Coverages: building; contents (basement included); other structures; loss of use; increased cost of construction; increased cost of compliance debris removal building ordinance and law; basement coverage included. Primary and excess coverage available. Elevation certificates not required. Has pen. Available Limits: Available aggregate limits of up to $5 million on homes valued up to $20 million.

Carrier: Trisura Specialty. States: Available in most states plus District of Columbia; not available in Alaska and Hawaii.

Contact: Joe Simmons; joseph@rethough tinsurance.com; 215-398-1948.

Trucking

Market Detail: Blackmoor General Agency has a new, exclusive trucking facility avail able in 10 states. Carrier is non-admitted, Demotech “A”-rated with the ability to handle all necessary filings. Blackmoore targets mostly small fleets of one-to-five units, including owner-operator opera tions, but larger fleets can also be enter tained. Looking for heavy, extra-heavy and semi-trucks for short, intermediate and long-haul routes hauling common goods and non-hazardous payloads. Can enter tain new and newer ventures, as well as exceptional, average and challenging risks. Coverage includes auto liability, personal injury protection, medical payments and uninsured/underinsured motorists. Has pen; appointment required.

Available Limits: Up to $1 million.

Carrier: Art Torrington; non-admitted; “A”-rated by Demotech.

States: Available in California, Florida, Georgia, Illinois, Louisiana, Michigan, New Jersey, North Carolina, Ohio and Pennsylvania.

Contact: Sue Lafferty; slafferty@black mooragency.com; 267-495-2315.

E-Cigarettes/E-liquids/Vaping Products

Market Detail: SHG Insurance Services LLC offers coverage for e-cigarettes, e-liquids and vaping products. Coverage is available for a full range of CGL, including products liability, competitively priced. Capabilities include coverage on both occurrence and or claims made, with limits up to 5/5/5/5, depending on form and coverage needed. Can provide insurance in all 50 states and internationally, with true foreign cover. Has pen.

Available Limits: Limits up to 5/5/5/5.

Carrier: Non-admitted. States: Available in all 50 states plus District of Columbia.

Contact: Bill Ambler;billambler@shgins. com;805-686-1148.

This section brought to you by Insurance Journal's sister website: www.mynewmarkets.com Need a Market? Find It. FAST

By Ezra Amacher

As the renewable energy insurance market continues to grow, there are risk concerns including catastrophe exposures, inflation and supply chain challenges.

The insurance industry is well aware of the risks and knows it will require increased underwriting, risk capacity and specialized talent to adequately serve the sector.

The renewable energy insurance market is set to grow by more than $200 billion worldwide in the next decade. Solar and wind outpace other forms of renewable energy deployment in North America, while the continent trails Europe and parts of Asia in developing offshore renewable sources.

Solar, in particular, is on the rise, driven by its affordability as well as federal incentives included in the Inflation Reduction Act. Solar has experienced a 33% average annual growth rate in the last decade, according to Solar Energy Industries Association, and with that expansion comes increased exposure to natural catastrophe risks.

An October report from GCube Underwriting found that natural catastrophe and extreme weather event claims continue to hit the renewables sector with greater frequency and severity. The report found that Texas hailstorms resulted in solar losses almost twice as severe as the other top renewable losses of the last three years combined.

“This has been the year of the hail loss,” said Patrick Stumbras, president of PERse, a managing general underwrit er that specializes in renewable energy. “The industry has

suffered over $300 million in hail losses in 2022 thus far. Ten years ago, I would’ve told you that hail is not a problem, but the footprint has grown so large.”

This year’s hail losses were almost entirely the result of a series of severe convective storms that hit Texas between May and June. Convective storms usually include hail and high degrees of lightning strikes, and are likely to generate tornadoes. Solar installations are most vulner able to hail, which damages solar panels and takes away their output.

Advancements in solar engineering have led to the development of panels that are more resistant by moving away from hail or turning in the right direction to protect themselves. However, the kinds of panels that are resistant to hail aren’t going to give operators the price break that they would probably want to justi fy purchasing them, said Ted Dimitry, energy and marine prac tice leader at Higginbotham.

Dimitry said supply chain issues will impact how soon hail-resistant panels can be purchased and whether they are cost effective enough to bring to market.

“There’s a function of under writers not necessarily wanting to tell their developers and operators what materials to buy specifically,” said Dimitry. “That’s not really their place. And in some cases, there just isn’t enough data available to see which hail-resistant panels

work and how long which ones last.”

Carriers have begun charging solar developers higher premi ums with large deductibles in response to recent hail losses. The market hardened dramat ically after a 2019 hailstorm caused upwards of $70 million at the Midway Solar project in West Texas, which damaged 400,000 of the plant’s 685,000 panels.

“In 2019 it was really cheap for a solar developer to pay someone else to take the risk at the end of the day,” said Jason Kaminsky, CEO of kWh Analytics, an insurtech that delivers data-enabled insur ance for zero-carbon assets.

“It takes a while for things to change,” said Kaminsky. “In the last two or three years, clients are now realizing, ‘Oh I have to wear the risk. I’m wearing a huge deductible and a sublimit and my lender is more exposed to these risks.’”

Now that owners are more on the hook, the solar industry has begun an era of “really high innovation” to understand what’s working and what’s not, said Kaminsky.

Where the Wind Blows

Michael Bernay, CEO and managing director of PERse, likes to tell the story about how almost every CEO of an insur ance company wants to have a wind turbine somewhere on their annual report showing that they’re doing renewables.

“They have no idea how to do that or how to get there, but that’s sort of the mandate that they push down into their own

underwriting teams and say, ‘Look, you guys, figure it out,’” said Bernay.

The wind and solar sectors face many of the same natural catastrophe perils, such as flood, lightning and wildfire, as other industries such as con struction. Wind farm under writers are also concerned with the availability of cranes and rigging contractors to respond to repairs and installations.

Wind has experienced multiple significant loss events in the past few years, including Hurricane Hanna in 2020 and Tropical Storm Nicholas in 2021. The storms led to losses of $25 million and $35 million, according to GCube.

2021 Winter Storm Uri proved that wind is also susceptible to freezes.

“If a turbine or other facility is not insulated and hardened against severe cold weather, it’s not going to work,” said Dimitry. “It might even be damaged, but underwriters are going to want to see that that hardening has happened, that it’s been winterized, and that winterization has been maintained.”

Because wind turbine machinery breakdown isn’t automatically included in property coverage, it’s critical for insureds to make sure they’re covered there. The same goes for transformer failure, which often needs to be added to coverage or bought by a separate policy.

Dimitry said there has been a focus on increases in deduct ibles or retentions. Operational deductibles for wind turbines that are out of warranty are typically $250,000 and above, while older assets in the wind sector are going to have continued on page 30

Special Report: Energy

higher deductibles.”

“Assets that are being built or in construction is a big focus on wind as there have been a number of installation claims,” said Dimitry. “The experience of the contractor is essential to get that priced well.”

While wind, like solar, is prone to losses during convec tive storms, many wind farms have monitoring systems that can identify when a lightning strike takes place.

“A quick inspection following an event is key to diminishing the potential size of a loss,” said Dimitry. “We’ve seen blades fail following a lightning strike that aren’t taken out of active service and in the worst case bring the whole turbine down. So taking the cost of the loss to insurers for a blade change out is far better than reinstating a whole tower along with the cell of the blades.”

Repair time can lead to busi ness interruption losses, which is why underwriters like to see a preferred supplier agreement for an operator to have a crane company ready to go. If a crane company can’t supply a crane, there should be an agreement to bring somebody else quickly.

“Sometimes different operators will have a shared crane contractor in the same geographic region and some even have their own crane or cranes that they will operate in order to mitigate being charged too much or having long waiting periods,” said Dimitry.

Wind, the most prevalent source of renewable electricity in the U.S., is still in the infancy stages of offshore develop ment. Most of the country’s existing offshore wind sources are in the Northeast. In October the U.S. Bureau of Ocean

Energy Management (BOEM) finalized the first two zones for offshore wind farms in the Gulf of Mexico, one a 174,000acre zone south of Lake Charles, Louisiana, and the other a 508,000-acre zone near Galveston, Texas. BOEM said the two areas could generate power for three million homes.

on environmental, social and governance (ESG) requirements has led many to believe that the renewable market is constantly developing. On the inside, however, he sees a shortage of underwriters and focused investing.

“It’s cool and sexy to be in the space, if you will,” said Stumbras. “Along with that, there’s a limited amount of expertise in the space to underwrite this stuff. So you’re seeing maybe a little bit of an influx of somewhat aggressive capital coming into this space and underwriting or not underwriting these accounts.”

growth?’ It is in renewables.”

Kaminsky, whose company kWh Analytics provides a revenue floor to solar projects by using a leveraged database, thinks that renewable capacity has room to expand as carriers adopt smarter terms and con ditions and better incorporate data and natural catastrophe management.

“Offshore wind is finally starting to come,” said Stumbras. “There actually is permitting going on, there are land leases, but every time you kick the football down the field, it seems that some other issue comes up with it.”

Though capacity and rates are well-maintained for fixed offshore wind, Dimitry said domestic carriers are unlikely to write 100% of any given project, instead relying on off shore underwriters in London.

“Typically those policies will be subject to tightened word ings on serial losses and using a marine warranty surveyor to monitor, approve and monitor the installation,” said Dimitry.

More Players Needed

Over the last decade, Stumbras has noticed a dichotomy of sorts surrounding the renewable energy market. Media attention on green energy and, more recently,

Stumbras is most critical of financially-backed players that enter renewables without doing their due diligence in finding underwriters who know the core sectors well. He recalls traveling to London last year to hire another renewable underwriter and being told by a headhunter, ‘Yeah, that’s great, you’re 13th in line.’”

“What you’re doing is you’re taking people who are either oil and gas or traditional power and you’re saying, ‘okay, now you’re anointed a renewable energy underwriter,’” said Stumbras. “Companies go out and take them and put their capital up.”

With the new wave of renewable players having just experienced major hail losses, Stumbras expects a lot of people to “tighten their belts” for January 1 renewals.

Bernay said insurers remain eager to enter renewables because it is brand new.

“It’s opportunistic in the sense that it is true organic growth,” said Bernay. “That’s what most insurance compa nies are looking for, ‘How do I grow and where is organic

“There’s a fear of nat cat right now happening in insurance and reinsurance and there’s a history in our space of some pretty significant property losses,” said Kaminsky. “We’ve seen carriers dip their toe in and some leave and some come back, and they leave again. And really improving the quality of the underwriting — the data available for underwriting — I think is going to be needed.”

For the renewable energy market to improve profitability in wind and solar and expand into emerging sectors like offshore wind and battery storage, it must also attract and develop young talent.

“When we got started in this, renewables were 2% of the premium that would go into an energy sector,” said Bernay. “People laughed at us like ‘Okay, that renewable energy stuff that you’re doing, isn’t that cute?’ But now where it’s over 57%, people are getting out of oil and gas. You can’t do oil and gas. If you do oil and gas, then you have to go glue yourself to a picture at some art museum and that’s not good.

“The culture has changed. Whereas before a young underwriter would see no future in renewables, today that’s the only future that you might have if you were getting into an energy related underwriting position. It’s turned full circle.”

‘Whereas before a young underwriter would see no future in renewables, today that’s the only future that you might have if you were getting into an energy related underwriting position.’

Spotlight: Auto

What to Know About Electric Vehicle Safety

Electric vehicles (EVs) were once a rare sight. Now, we regularly pass them on highways and park next to them at shopping cen ters. There are over 8 million new EVs being produced and sold annually today. This number is projected to hit 30 million per year by 2030, and as states mandate EV usage, growth will only accelerate. As promising as EVs are for the future of our environment, as with any new technology it’s important to

analyze EV losses to identify and mitigate associated risks.

Fire Hazard

A key concern with EVs is fire from lithium batteries.

By Victor Sordillo

One of the earliest warnings on the fire hazard of lithium batteries was the Federal Aviation Administration’s action regarding the use of personal electronics on commercial aircraft. This policy was established due to the spontaneous fire exposure risks that first-generation lithium batteries presented.

The most recent reported fire exposure problem from lithium batteries comes from the growing E-bike industry.

The National Law Review

recently published a warning of a “recent surge in electric bike fire in New York City,” listing four causes of fires from the lithium batteries in E-bikes: design flaws; battery damage; exposure to heat; and use of the wrong charger. Storing and charging electric bikes and scooters in homes and apart ments thus exposes occupants to a potential severe fire risk.

In the last 18 months, there were over two dozen lithium fires investigated in New York City public housing buildings. The increased frequency and severity of scooter and E-bike fires has led the New York City Housing Authority to consider a ban of these vehicles in public housing.

Some safe practices when charging E-bikes are as follows:

• Only use the original equip ment manufacturer’s battery charger.

• Do not charge a battery near any combustible material, including carpeting and drapes.

• Do not use damaged batteries.

• Avoid overcharging batteries.

• Ensure that the area where batteries are being charged is equipped with a fire detection system.

• Choose batteries and charging equipment that is Underwriters Laboratory listed.

EV Fire Problem

For electric automobiles, the fire problem is more internal. The size of the batteries in

EVs, as well as the combustible materials that make up the automobile, provide both a fuel source and source of ignition.

Electric automobile fires can be very difficult to extinguish, and water can have little firefighting impact. Vehicles have been observed in some cases to reignite after they have been towed away.

Although codes have not caught up to technology, we can use common sense in the placement of battery chargers and EV parking. Vehicles should be parked away from combustible structures or other vehicles, especially when charging. If an EV is in an acci dent, an immediate inspection of its electrical system and batteries is necessary and high ly recommended. Any impact could damage the battery and/ or electrical system, leaving the EV more vulnerable to ignition. Parking and charging in a location firefighters can easily access is also advisable.

If getting the hose streams to the vehicle is too difficult, it will burn uncontrolled and potentially ignite adjacent materials. Automobiles parked in the vicinity could also ignite, creating a domino effect if not immediately extinguished.

Safety Standards

Safety standards have been established to reduce the chance of fire or electrical inju ry. Article 625 of the National Electrical Code provides stan dardization for the charging of electric vehicles. In addition, Underwriters Laboratory has two standards, UL 2202 and UL 2594, expressly for electric vehicles. UL 2202 is a standard for charging systems and UL 2594 classifies the charging systems as level I or level II

charging equipment safety. A level I system is a slower charger of 110 V and a level II is a faster charger at 220 V.

There are many other elec trical standards for testing and safety that influence the proper design and maintenance of charging systems. They cover cords and cables, grounding, power storage, and more. Always look for the UL label.

Shock or electrocution exposure also are risks. It does not take much electricity to harm an individual, whether in the form of burns or cardiac arrest. Between 1 and 4 Amps, a person can get severely burned and/or the heart could stop. This is about the power of a 100 W light bulb at 110 V.

To avoid electrical injury, EV owners should follow the manufacturer’s charging recommendations. Avoid damp or wet surfaces and never use damaged equipment. Remain alert to cables and public charging stations, which may get worn or damaged through excessive use, exercising caution in the selection of a

charging station to ensure it is compatible and not damaged. Remember, as well, that water is a good conductor of electrici ty and if the electrical system is not operating safely, you could be subject to injury.

Ground fault circuit interrupters (GFCI) should be provided in charging stations. The Consumer Product Safety Commission notes that public charging stations have a signif icant percentage of damaged GFCIs. These safety features will shut down the system if electricity presents a potential injury to the operator. GFCIs should be trip-tested as per manufacturers’ specifications or at least quarterly.

There is a significant amount of testing and experimentation being conducted on the safety of electric vehicles. Unfortunately, it is usually a tragedy that results in the adaptation of codes to protect the public. With the rapid increase in technology and the proliferation of electric vehi cles, we cannot let safety take a backseat to environmental

issues. They must run a parallel path to ensure success with limited losses.

Moving Forward with EVs

Today, industry is recogniz ing that EV success will rely in large part on customers feeling protected. General Motors recently provided the National Fire Protection Association with a $225,000 grant to train firefighters throughout the U.S. to control and extinguish a fire in an EV. As EVs become more ubiquitous, additional attention on issues of safety will be essential.

Climate change is a clear result of our large climate foot print, and EVs present a strong opportunity to address these challenges. With proper risk management in place as the EV market grows, we can make significant progress in the future to protect our planet, our people, and our property.

Sordillo is the international executive vice president and global director of risk control services at Sompo International. Email: vsordillo@sompo-intl.com.

Spotlight: Flood

Questions Surround Accuracy of Federal Flood Maps

By Allen Laman and William Rabb

Wondering if you need flood insurance?

There are maps for that.

But some say the federal flood maps are inadequate and misleading, causing thousands of homeowners to avoid purchasing needed flood insurance. And even Federal Emergency Management Agency officials have said FEMA is moving away from a binary depiction of “in or out” of flood areas.

For now, a growing number of critics are questioning the system currently in place.

Researchers at North Carolina State University added their voices to that group earlier this month. Their report

highlighted how only about 4% of homeowners nationwide have flood insurance, “a prob lem that can be largely attribut ed to the flood maps created by the Federal Emergency Management Agency.”

In a November interview with Insurance Journal, Craig Poulton, CEO of Salt Lake City-based Poulton Associates, which sells its own type of flood and catastrophe insurance, specifically called attention to the horizontal for matting of FEMA’s flood zones. For this reason, he believes the flood zone map doesn’t paint the whole picture: flooding is vertical, at different depths depending on topography.

“It won’t tell you all you

need to know,” said Poulton, a frequent critic of the NFIP. “It will only tell you whether you’re in the flood zone or not. And very often, it is lying to you about flood risk.”

FEMA flood maps show designated flood zones, known as special flood hazard areas, that are considered most susceptible to a so-called 100-year flood event. Most federally backed mortgages require homeowners in those areas to purchase flood insurance. Outside of those zones but still in low-lying and vulnerable areas, however, flood insurance is not strictly required, prompting many property owners to forego policies—even though coverage

can cost less than $2,000 a year on average, experts have said.

Hurricane Ian shined a stark spotlight on the issue of flood insurance when it caused wide spread storm surge and inland flooding across parts of Florida in late September. Thousands of homeowners were flooded in the storm and its aftermath, but few carried flood coverage through FEMA’s National Flood Insurance Program or through private carriers, reports have indicated.

At the core of Poulton’s argu ment is that the country’s flood insurance maps “should not be shape files on the surface” of a map. Instead, he believes they should be pin dots of low-lying structures across the United

States. Looking at vertical land levels is more valuable than broad horizontal swaths.

To visualize why he believes this, Poulton described a hypothetical scenario in which a scuba diver swims into an ongoing flood. The diver can see some homes in a flood zone have been inundated to four feet, while others don’t have any water touching their first floors.

And while Poulton did acknowledge the NFIP is now pricing its flood insurance on that pin-drop modality, it still uses those horizontal shape files to define who must purchase flood insurance.

“So the people who are in those hard shape files should feel hard done-by,” Poulton said. “Because they are. They’re being forced to buy flood insurance, when other people with exactly the same, or higher, flood risk are not being forced to buy flood insurance.”

Or, from another lens, while the NFIP will charge homeowners adequate fees to protect their homes from flooding, they won’t require homeowners to purchase policies if they live outside des ignated flood zones. Poulton sees a disconnect in the NFIP flood maps and the way the organization prices risk.

“So, the NFIP communicates two different things,” Poulton said. “'You really need insurance … It’s going to cost you $1,750 a year. But you really don’t need insurance because you’re not in the flood zone.’ Which one of those are you going to go with? And if you never price your risk with them, you believe you don’t have risk, because you’re not in the flood zone.”

According to the FEMA web site, the NFIP is managed by FEMA and is delivered through a network of more than 50 insurance companies and the NFIP Direct. It provides flood insurance to property owners, renters and businesses and is

available to anyone living in one of the 23,000 participating NFIP communities.

FEMA leaders have recog nized some of the issues. David Maurstad, senior official of FEMA’s Office of Resilience and senior executive of the National Flood Insurance Program, said in a statement to Insurance Journal that homeowners outside of the designated flood zones should always evaluate the need for flood insurance

flooding happens outside of high-risk areas.”

The agency would not comment directly on the NC State report, but officials have said that FEMA is moving away from the binary depiction of flood areas. The FEMA website shows that property owners can petition the agency to reconsider a flood designation, but no path appears available for those who want to be included in flood zones.

FEMA Projects $3.5-$5.3B NFIP Losses for Hurricane Ian

The Federal Emergency Management Agency has projected an initial estimate of Hurricane Ian losses for the National Flood Insurance Program, putting them in the range of $3.5 bil lion to $5.3 billion, including loss adjustment expenses.

The losses include flood insurance claims received from five states, with the majority of claims coming from Florida, FEMA said.

As of Nov. 10, NFIP had received more than 44,000 flood claims from Hurricane Ian, paying nearly $437 million to policyholders.

FEMA said it based the initial estimate on several data points, including policy information, daily reports of claims and payments made, patterns of reported claims and payments in significant historical events, current economic conditions and claim adjuster observations. FEMA will continue to update models and confirm future estimates as the claims process evolves.

NFIP flood insurance claims are paid from the National Flood Insurance Fund and Reserve Fund. The program also has the ability to borrow an additional $9.9 billion in funds, FEMA said.

Providing details of the reinsurance program for NFIP, FEMA said the program includes an annual, tradi tional reinsurance program with a $4 billion trigger for a percentage of recovery payments. It also has three capital market placements with a recovery payment

beginning at $5.32 billion in received claims payments.

To collect the maximum reinsurance amount, NFIP would need to incur at least $10 billion in flood insurance claims losses, FEMA said.

FEMA currently holds roughly $2.5 billion of rein surance coverage for fiscal year 2022.

If a covered flood event results in NFIP claim payouts that equal or exceed an agreed-upon amount, then reinsurers agree to pay a certain percentage.

'[I]f you never price your risk with them, you believe you don't have risk ...'

“because

Idea Exchange: Merger & Acquisition

What to Know When Selling Your Insurance Agency

Want to cash in? Suffering from burnout? Looking for a strategic partner? Itching to pursue other interests? Or is it simply time to have a family member or friend take over and grow the business?

There are many reasons to sell your insurance agency, that’s clear. Less obvious is exactly how owners should go about preparing their companies for sale and the items to focus on to ensure a seamless and profitable transaction.

By Mark Robinson and

sale, some corporate, financial and legal housekeeping is in order. Without ques tion, any serious buyer will be conducting thorough due diligence before agreeing to an acquisition. In preparation, you should attend to several items so that a sales transaction can proceed with minimal issues.

Below are a few questions and answers owners might consider selling their agencies.

Is there anything I should do preliminarily to get my agency ready for sale?

Yes, to best position your business for

To begin, you should review your corporate documentation, including bylaws, minutes, shareholder agreements and the like, making sure that all corporate formalities have been properly managed and any deficiencies are addressed and corrected. Next, it’s imperative that you marshal meaningful financial documen tation — commissions statements, tax returns, and your balance sheet and profit/ loss statements, to name a few — all of which will be requested by a buyer and necessary to substantiate your profitability and ultimate sales price.

Of course, the universe of buyers will want to know what’s in store in terms of legal obligations in the event an acquisition materializes, so legal documentation should be flagged and made available for

review. This includes the corporate records previously mentioned, all agreements binding your agency (for instance, sales and service contracts, carrier agreements, rights of first refusal, NDAs, purchase agreements, restrictive covenants, employment and independent contractor agreements, leases, credit agreements, and contracts with vendors), documents related to pending or potential litigation, regulatory complaints, liens, loan docu mentation, licenses, and files pertaining to your intellectual property.

Beyond these corporate, financial and legal records, are there any other documents I should be thinking about?

Absolutely. Let’s not forget, you’re selling an insurance agency, which means you need to confirm that your carrier agreements and appointments are up-todate, and commissions (and commission statements) are accurate. Additionally, you should identify any required consents that’ll need to be obtained prior to closing. Likewise, you’ll want to review any aggre gator and network relationships — those

Ryan Hong

providing market access — and modify your agreements with them to the extent applicable restrictive provisions affect your ability to sell.

What about my employees — do they create any issues for considerations?

They certainly do. To the extent an acquisition is on the horizon, employee retention may be of critical importance to your buyer. Consequently, this is another area requiring your attention, as is an accounting of who within the agency may have a vested interest in the books of business that form the basis of your asking price. To the extent an employee or independent contractor owns a book, in whole or in part, that interest will need to be negotiated during the sale. In addition, the due diligence process will require you to present your employee handbook, written workplace policies, and all other employee-centric documentation.

Selling my agency is a huge deal. I imagine that I should be consulting with professional advisors, but who exactly should I be seeking advice from?

You’re right, selling your business is very consequential. For this reason, you want to make sure you’ve dotted all “I”s, crossed every “T” and are commanding a fair price for your agency. To get there, you should be sure to seek counsel from a CPA to cov er the accounting and tax consequences of a sale. Along with your attorney, a CPA can help you settle the deal structure. This will be dependent on a variety of factors (for example, are you a C-Corp., S-Corp or LLC and is this a stock or asset sale?). Also, a CPA will help you to better understand your financial statements and a purchase price, likely based upon a multiple of gross revenues and/or EBITDA (earnings before interest, taxes, depreciation and amortization).

An investment banker can get a handle on the current market, flush out and gauge interest from numerous potential buyers, and assist with the valuation of your business. Once a buyer is secured, the investment banker, together with your lawyer, can also assist in negotiating the terms of a letter of intent. Be aware that

these services don’t come cheap (typically, investment banking fees are up to 5% of the purchase price).

As for legal counsel, you’ll need guid ance from an attorney with experience managing mergers and acquisitions who can negotiate the terms of the transaction, navigate the complexities of the deal, and draft and review all the documentation, including the purchase agreement and related schedules.

Of note, you’ll also want to look internally to determine who within your agency is “in the know” and can be trusted to manage the M&A on a day-to-day basis.

It sounds like I’ll be on the receiving end of some rather meaningful doc uments if I decide to sell. What are the most significant ones that I would expect to see?

Two of the weightier agreements that would come your way if a sale was in the works are a letter of intent (which is typically generated by the buyer and, for the most part, is non-binding) and an asset purchase agreement.

The letter of intent covers a laundry list of a deal’s terms, including:

• Identification of the parties (of course, you’ll want to connect with referrals, carriers and trusted advisors to ensure that the buyer is a good fit);

• An outline of the deal structure;

• The purchase price and payment details (a lump sum, payment over time (cash plus a promissory note), or an earnout (cash plus a percentage of net profits), in which case the earnout payment structure will also be specified;

• A period for due diligence;

• The applicable exclusivity period (typically, when a buyer is spending time and energy conducting due diligence, a seller can’t continue to shop around for another buyer for 60 to 90 days);

• Confidentiality provisions.

The letter of intent will make reference to definitive agreements, the most

important of which is the asset purchase agreement. This is the document that governs the sale of your agency and specifies every term of sale. The asset purchase agreement sets forth the parties; the purchase price and related provisions; an inventory of seller liabilities, if any, that aren’t transferable to the buyer as part of the transaction (e.g., certain excluded con tracts, taxes, etc.); a list of representations and warranties (essentially, statements and promises of fact related to title, financial statements, employees, carriers, customers, and litigation, among other things); indemnifications; restrictive covenants (clauses that prevent, prohibit, restrict or limit your actions); and reference to ancillary documents like employee agreements, leases and lease assignments, and carrier notices and consents.

Again, given the consequence and complexity of the asset purchase agreement, this is a document that should be negotiated and drafted by experienced legal counsel.

Anything else I should keep in mind as I contemplate the sale of my agency?

To be clear, this Q&A isn’t an exhaustive review of the items to be thinking about as you consider the sale of your business, though it does touch upon the big picture issues that should be front of mind. As you get closer to pulling the trigger on a sale, it’s important that you huddle with your trusted advisors — CPA, investment banker and attorney — so that your purchase price is maximized and financial and legal interests are adequately protected.

Robinson is a co-founding partner of Michelman & Robinson LLP, a national law firm headquartered in Los Angeles. In his capacity as Property & Casualty Regulatory Chair at M&R, he primarily represents retail brokers and agents. Hong is a partner and corporate and securities lawyer at Michelman & Robinson LLP. He is sought after to handle a host of transactional matters, including complex mergers and acquisitions across industries, the insurance space included. Phone: 310-299-5500. Email: mrob inson@mrllp.com and rhong@mrllp.com.

Idea Exchange: Is It Covered?

Logic & Language and Forms & Facts

Better Isn’t Always Better

Anumber of years ago, I worked with an agency that specialized in insuring residential condominiums.

Their personal lines department focused on insuring unit owners, including homeowners who owned condos as secondary homes. Their commercial lines department insured many dozens of homeowner associations ranging from condo associations with multiple two-story buildings covering sev eral acres and those in 16-story high rises, as well as fee simple homes in residential communities.

By Bill Wilson

modified ISO policy forms. In one case that I became involved in, the agent had issued what I’ll refer to as a Deluxe Condo Policy to a condo unit owner. This form was based on ISO’s 1991 HO-6 Unit Owners homeowners form but added a number of bells and whistles. As a whole, the form was notably superior to ISO’s HO-6. But that doesn’t mean it covers everything the ISO form covers and more.

Deluxe vs. Vanilla

The agency used several insurers who had special association and community insurance programs based on non-ISO or

What happened was there was a water leak from an upstairs condo unit that caused $26,000 in damage to the subject unit on the first floor. For purposes of this article, we’ll assume that, under the condo association bylaws, there was no liability of the upstairs unit owner nor coverage under the association’s master policy. Our focus here is on coverage under the Deluxe Condo Policy vs. a plain, vanilla ISO HO-6 form.

Both the ISO HO-6 and the Deluxe Condo Policy cover “accidental discharge or overflow of water” from within a plumbing system with a few exclusions. The ISO HO-6 excludes loss that occurs “On the ‘residence premises’ caused by accidental discharge or overflow which occurs away from the building where the ‘residence premises’ is located.” In other words, the exclusion applies only if the water originates outside the building. So, in the subject claim, the ISO HO-6 would cover the damage.

The Deluxe Condo Policy has language almost identical to that in the ISO HO-6, but a notable exception is in the exclusion cited above. The Deluxe Condo Policy excludes loss that occurs “On the ‘residence premises’ caused by accidental discharge or overflow that occurs off the

‘residence premises.’” The “residence premises” under both the ISO and Deluxe policies is defined to mean the condo unit itself. Since the water originated outside the unit itself, the exclusion applies.

Was this significant difference in cover age between the ISO HO-6 and the Deluxe Condo Policy intended by the insurer?

Probably not. The exclusionary language used in the Deluxe Condo Policy was identical to that in the ISO HO-3, not HO-6, form. “Residence premises” is defined differently in those forms and I suspect the Deluxe Condo Policy drafter simply overlooked that difference.

IF that was the case and this fact was known, perhaps the equitable thing to do would be to pay the claim in the spirit of the “Deluxe” form title, then revise the language so that the form is at least as good in all respects as the ISO HO-6.

I’ve actually had insurers do that on more than one occasion. That is, acknowl edge that either broader coverage was intended or that the language in question in other situations was ambiguous and coverage would be provided until the form was revised to more accurately express an exclusionary intent.

Preferred Auto

In another case, a private client insured was covered under a very broad package that included a “Preferred Auto” policy that was significantly superior to a plain vanilla ISO Personal Auto Policy (PAP).

The ISO PAP generally covers acquired autos as long as the insurer is notified within “X” number of days. However, the Preferred policy allowed the insurer to discontinue coverage after 30 days. The policy provided for no specific notice of coverage so, presumably, the insurer could advise the insured on the 29th day that coverage would end on the next day (30th day). Whether the state’s nonrenewal law applied was debatable.

In addition, while the Preferred policy had numerous coverage perks beyond the ISO PAP, it had more restrictive provisions, as well. For example, pretty much all auto policies exclude “racing,” but what is meant by “racing” can vary tremendously from one form to another. The plain

vanilla ISO PAP only excludes racing that takes place “inside a facility designed for racing.” Lots of non-ISO auto policies in the marketplace exclude any prearranged or organized racing event, regardless of where it occurs. Some even specifically exclude street racing, whether organized or not.

In the case of the Preferred policy, the racing exclusion applied to ANY “com petitive, prearranged or organized racing, speed contest, rally, stunting activity, timed event, etc.” Not only does this policy not require that the “racing” take place inside a facility designed for racing, it also does not require that it be prearranged or organized, just “competitive.”

Again, RTFP!

This is why my coverage mantra is “RTFP!” Read The … Policy! I would not hesitate to suggest any policy that is generally far broader than another to an insured, but I’d want to make them aware of pertinent exclusions and recognize that a particular insured might have circum stances that warrant a somewhat lesser policy if the generally superior form has

deficiencies that are more likely to apply to that insured.

For example, if the family has a youthful son with a high-performance auto, the racing exclusion could be extremely important. Given that, other than weather related losses and possibly fire, water leaks are a major cause of loss, if your insured buys a home with a decades-old plumbing system, how “repeated seepage and leak age” claims are addressed by homeowners policies is a material consideration.

I always encourage selling coverage not price. Just be aware that “better” isn’t always better and “deluxe” isn’t always superior. As best as you reasonably can, tailor coverage to each individual insured. That is one of the strategic sales advan tages that independent agents have over captive agents and direct sales insurers, though admittedly it may heighten the agent’s E&O exposure.

Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of seven books, including “When Words Collide… Resolving Insurance Coverage and Claims Disputes.” Email: Bill@InsuranceCommentary.com.

Idea Exchange: Agency Management

Agency Growth: A SWOT of the Independent Agency Industry

By Tony Caldwell

As you read this you are probably finishing up planning for 2023 (or thinking, “Yikes, I need to get started!”). If you’re like me, this is not your favorite thing to do. Our industry tends to attract doers rather than analyz ers. The analysis that good planning requires is often not our strong suit.

That said, I find that big-picture planning, which is tremendously valuable for leaders of businesses of all sizes, can be simplified with time spent in the SWOT exercise.

SWOT is familiar to many and is an acronym for Strengths, Weaknesses, Opportunities and Threats. Spending time contemplating these topics as they relate to your career or agency can set an

excellent foundation and define your path forward. Planning, via SWOT analysis, just strengthens what most of us are already good at — and enjoy — doing.

With that in mind, I thought I’d take a stab at doing a SWOT analysis on the independent insurance agency industry. Just as a SWOT analysis can be valuable in moving your agency forward, I’m hoping a SWOT of our industry will give us some quick insight into what’s working, as well as what isn’t, and inspire you to get your analytical juices flowing.

Strengths

For me, defining the strength of our industry is easy because I’m very bullish on its future. As I look at us as a group I see:

Choice of Products, Carriers and Pricing. This has always been a hallmark of our industry, but it’s never been more pronounced, with more capability here

among all agency sizes than ever.

Skilled People. We have a deep bench across the industry in experience and expertise. The average employee in the business is in the middle-to-latter-third of their career, which means they possess deep competence and capability to serve customers and grow businesses.

Strong, Diversified, Capable Carriers. Insurance companies have their challeng es, but they’ve never offered a broader product set and better claims handling (the promise we mutually sell) than they do right now.

Stable, Recession-Resistant Income and Operating Profits. While we need to be concerned about the economy in which we operate, the dramatic swings and tough results that affect many businesses typically don’t impact us. Yes, premiums and commissions are exposed to changes in sales and payrolls, but they don’t pose the same risks to us that they

do to many businesses.

High Agency Values. Agency values are staying high despite rapidly rising interest rates, which demonstrates how the investment market views the strength of our industry.

Weaknesses

Though more strengths than weakness es stand out to me, it’s important that we acknowledge these risks to our industry and work to address them. Top line weaknesses to strengthen include:

Talent. We aren’t attracting enough people to work in the industry to sustain productivity. Though technology may help, almost every agency principal I talk to sees this as their biggest challenge.

Perpetuation. Despite nearly a decade of remarkable value increases for insur ance agencies, a large swath of the indus try, particularly in smaller “hometown” agencies (what I think of as the backbone of the industry) lack a plan to perpetuate, and to finance the perpetuation, of the business.

Relationships with Customers. This used to be a foundation of our business, and for many agencies it remains so. But multi-carrier rating systems, price-focused competition, and declining training pro grams have created a price-based business model in many agencies. This is ultimately a loser as technology will weed out pricebased sellers. Many in the industry will need to discover, or rediscover, the power of building deep relationships.

Opportunities

Now, comes the fun stuff. Our industry is rife with opportunity. Despite its many negatives, COVID has opened the door to new technology and new ways of doing business. Opportunities for our industry include:

Agency Turnover. Our workforce is aging and so are agency principals. Most estimates show a large percentage of agencies will have new leadership, one way or the other, in the coming decade. This creates huge opportunities as new leaders with fresh visions take the reins of their businesses.

New Technology. While some see

technology as a threat, I see it as an enabler of greater productivity, improved customer service, greater income, and more job satisfaction as it removes the “drudgery” from our work and allows more time to be spent either on technical excellence or relationship building.

New Agency Creation and New Business Models. One outgrowth of agen cy consolidation has been, and will contin ue to be, employees leaving organizations to start or acquire their own agency. This is a dynamic activity that ultimately benefits everyone in the business.

Geographical Spread of Risk and Business Opportunity. COVID has made geography largely irrelevant for those who master niche business-building and video communications. Zoom, and similar tech nologies now commonplace allow selling and servicing at a distance. Additional advantages of work/life flexibility and employee recruitment can benefit all who make use of these opportunities.

Hardening Market. This represents a huge opportunity for agencies with aggressive marketing capabilities.

Threats

Though the future looks bright for our industry, it’s critical that we don’t bury our heads in the sand. Many of the same trends listed above as strengths and oppor tunities could also be perceived as threats for those who are unprepared. Those could include:

Technology. Technology is creating efficiencies, but there are risks. The first is a risk of failure to adopt technologies on a timely basis, making it harder to compete or be profitable. Another is failure to understand that the technology replacement cycle is getting shorter and the need for more frequent investment is speeding up. Finally, there is also increased operations risk related to picking the wrong technology or tech that consumes time resources instead of creating them.

Disintermediation. We’ve worried about this forever and suffer sometimes from “Chicken Little” syndrome. But it’s clear that personal insurance and eventually small business insurance can and will be sold in large volumes by carriers, nontra

ditional sellers like auto manufacturers or your alma mater and algorithms.

Talent. The Baby Boomer generation is the largest in American (and world) history. Gen X is the smallest. Labor shortages will exist everywhere, including our industry, for a long time.

Loss Ratios and Contingent Income. Changing weather patterns coupled with an inability to predict and keep up with appropriate rate changes have become a constant challenge. This has been exacerbated by insurance carriers’ failure to understand, predict and respond to inflation, as well as by carriers’ struggles to adjust rates in a timely manner in accordance with politically sensitive regulators. As loss ratios rise, the industry’s contingent payments are threatened, and these threats will continue at least until 2024 and likely beyond.

Hardening Market. The hard market represents a huge threat to unprepared agencies as inflationary premiums force customers to shop.

Carrier Cost Containment. As carriers increasingly focus on costs, with even greater urgency driven by inflationary pressures, they have and will continue to look at agent compensation, leading to cuts in some premium dollar revenue.

Well, that’s my end-of-2022 independent insurance agency industry SWOT analysis. Did I get everything? Not likely, but I hope I listed enough to inspire you to jump-start your own thinking.

How does my list impact your agency? What did I leave out that matters to your future? What “strength” are you missing? Is there a “weakness” you think is more important than what I listed? Did I men tion an “opportunity” you want to explore? What “threat” to the industry represents an opportunity for you?

It’s time to start or finish planning for a great 2023. I hope that you will "SWOT" your challenges away and seize opportuni ties to grow your agency for the future.

Caldwell is an author, speaker and mentor who has helped independent agents create 250+ indepen dent insurance agencies. Website: www.tonycald well.net. Email: tonyc@oneagentsalliance.net.

Idea Exchange: Sales & Marketing

To Improve Client Relationships, Agents’ Digital Strategies Should Reflect Authenticity

digital universe. Social media provides a new platform for staying top of mind with customers and prospects alike.

So, how should agents be more authen tic on social media? Same as they would offline — with relationships.

View social media as an opportunity to provide value. Marketers and agents alike already know that authenticity is important to customer acquisition. That same authenticity should show up in social media activity.

By Nola Morris

Customer relation ship-building is one of the greatest value drivers for insurance agents. A benchmark analysis from McKinsey & Co. found agents with deeper customer relationships have higher product density than those lacking in relationships — often cross-selling three or more products per customer.

With that in mind, it’s essential that agents understand how to best leverage their humanity and personality to truly connect with their audiences. In today’s age, this extends to how agents present themselves and connect online.

When prospective clients meet an agent for the first time, they’re asking them selves, “Is this person likable? Can I trust them?” Clients want to feel an authentic connection that gives them peace of mind and assures them that someone has their best interests at heart.

This desire for connection isn’t limited to the insurance industry. In fact, 88% of consumers say that authenticity is a key factor when deciding the brands they like and support, and that trust is vitally important to entering working relationships. That desire for trust grows exponentially when it comes to insurance sales because the business is built around protecting clients’ futures.

Insurance agents have a head start on this — their businesses have always been rooted in authenticity. But as digital transformation in the insurance industry continues, it’s more important than ever that agents assert themselves through authenticity on social media. It’s no differ ent from what agents and other insurance professionals have been doing in person for years. It’s about conveying expertise, building trust, and showcasing industry knowledge — except now it’s within the

Good selling starts with genuinely listening to clients and being authentic, no matter what. Insurance agents are there to identify clients’ life needs and build a solution to protect them against loss. They must genuinely care about clients’ needs to find the right solutions and demonstrate that level of care to earn trust.

Here’s how agents can bring that energy to social media:

Agents should still be themselves, just on digital channels. After all, in the insurance business, agents are selling a promise that a consumer may or may not ever see delivery on. If the client never has an accident, they’ll never make a claim. This means a lot of time can pass between a point of sale and delivery of promise.

With the rise of social media, however, there is a growing opportunity to deliver

value in the long term. Whether it’s sharing thought-leadership articles, checking in with clients on social media, or providing digital tools to help educate clients, the digital landscape provides ample opportunity to reinforce proof of agent value on an ongoing basis. Including both paid and organic social media marketing for insurance agents in the mix of sales practices is critical.

This won’t replace traditional tools like phone, email and in-person meetings, but having a mix of organic and paid content alongside them will complement other relationship-building efforts, keep agents top of mind, and continually provide value to clients and prospects.

Lean into the power of real-life expe rience. There’s a good chance that agents live and work in the communities they serve. Agents should use that advantage with prospective clients when building

their authentic brands. Showing on social media what’s happening in their com munities and their offices will help foster a sense of belonging and drive interest among followers.

Need more marketing ideas for insurance agents? Look to everyday expe riences. If an agent runs into someone at a local event, they should take a selfie and tag the person on Instagram, Facebook or LinkedIn. If a client drops off cookies, the agent should post a photo and a heartfelt message about what it meant to the team. Social media followers will connect with those real-life moments far more than they would with a branded post.

Embrace storytelling. Too often, social media marketing for insurance agents consists only of market statistics or limited-time promotions. While this type of content can absolutely be useful and helpful, it’s not enough on its own.

Think about the brands you follow: Would statistics and discounts be enough to get you engaged?

Social media is about creating a narra tive, not just posting facts or promotions.

Agents should share the true picture of what it’s been like to grow a practice. Tell client stories about how they’ve benefited from your insurance products (with permission and privacy in mind, of course). When agents share authentically, they build trust with clients and prospects.

Be themselves. If agents are only profes sional and stuffy, audiences won’t connect. Agents and marketers alike shouldn’t be afraid to let a little personality shine through on social media. Thought leader ship can create credibility and demonstrate expertise, and it’s always better received when served up by a real-life person.

That’s what social selling is all about.

Posting is only one part of the strategy. Agents should also comment on and engage with clients’ posts as appropriate. Two-way communication is critical to building authenticity. Think about it as if you were having an in-person conversation; there would be plenty of back-and-forth throughout the discussion. Did a client become a grandparent? Their agent should congratulate them. Social selling is all about creating conversation, just like in real life.

Engagement provides the added benefit of personalization. Customers don’t want to feel like marketing collateral. When agents engage with them honestly and authentically, they’re well on their way to creating deep, lasting consumer relation ships.

Building authenticity through social media is similar in principle to building authenticity in real life; it’s just using a different medium to do so. When intermediaries share personal stories and helpful content with clients in a way that reflects their true personalities, they’ll build lasting relationships both online and offline that will serve as the foundation of future sales.

Morris is the vice president of strategy at Denim Social, leading the SaaS provider’s strategy for insurance.

Idea Exchange: Agency Errors & Omissions

Beware the Hidden E&O Risks of Remote Work

more difficult to get all of the agency’s players together to cover timely topics in a half-hour, and it might not be as apparent when someone is not on the same page — particularly if they are calling in from home, off camera.

By Laura Gookin

Independent insurance agencies with a blended remote and in-person work environment are discovering errors and omissions (E&O) issues that were rarely seen when everyone was in the office. Whether it’s employees working longer hours than intended from the comfort of home or fewer checks and balances because there is less face-to-face interaction, the latest trends have created new risks since pre-COVID 2020. At the same time, the market hardening that followed the pandemic is challenging agencies, prompting leaders to adjust their approach to E&O risk management.

Agency Operations

Once upon a time agency staff members could gather around the water cooler to discuss the issues of the day. Agency leaders could be reasonably confident that staffers were up to speed and understood current industry trends. Now it can be

Agency employees who are processing binders, policies and certificates of insur ance from home may not be able to quickly turn to a supervisor or co-worker with a question. If the remote worker doesn’t get a timely response to a phone call, email or IM, they might not get the process right. Delays in getting answers also can lead to increased processing times and risks of errors.

In addition, while employees may like flexibility, and productivity and conve nience might be enhanced with remote work, at-home team members who just don’t put the work down could wind up overworking, leading to burnout, subpar performance or wage-and-hour violations.

Marketplace Contraction

But it’s not just shifts in agency operations that are affecting E&O risk.

The pandemic — similar to the Sept. 11 terrorist attacks — has altered the market, notably through contraction of coverages and limits, increases in premiums, shifts in underwriting requirements and uncertain ties in claims.

With this market hardening, agencies might need to take renewals to 10 or more markets, compared to the standard three, to get the best options for insureds. This approach is tremendously time-con suming, but an agency that doesn’t shop insurance could face issues for failure to procure the proper coverage. In effect, “renew as expiring” rarely exists after the pandemic.

Increased prices and deductibles also might prompt agencies, by necessity, to move insureds and even books of business. Although the marketplace is forcing this action, agencies should be aware of the risks involved.

Details, Details, Details

One independent agency learned the hard way how a simple error, the result of the factors just discussed, can create sig

nificant E&O risk. The agency had several properties to be renewed on a package policy. The incumbent carrier increased the deductible from $50,000 to $500,000, but the employee working on the renewal package solo typed up a new certificate with the $50,000 deductible from the prior-year coverage in the client file.

The mistake was not caught until a prop erty insurance claim came in for $177,000. The insured expected $127,000 of the loss to be picked up by insurance — after the $50,000 deductible.

This situation quickly led to an E&O claim against the agency. It was resolved as an “E&O carrier will pay” claim because there were no defensible facts, as the fault was solely with the agency.

Another E&O risk area within a remote or hybrid work environment is late reporting of claims. Previously, when a client notified the agency about a claim, the agency could typically get the claim to the carrier on the same day. Once the

pandemic arrived, a variety of factors led agencies to delay forwarding claims to carriers. That trend continues, and it’s adding to E&O risk for agencies.

they are separate policies, tend to be costly and carry high deductibles.

• Create a checklist of processing steps for use by all staff, whether remote or in the office. This increases the chances of all staff operating consistently, regardless of where or when they are working.

• Use a carrier processing center for processing efficiency and E&O risk man agement. Some carriers make a processing unit available without charge or at a reduced rate, depending on production.

Risk Management Tips

Independent agencies can take steps to reduce their E&O risk profile. For example:

• Document declined coverages. This might require a refreshed process and focus, but it is important to get signoffs from clients about coverages they decline. These declinations can occur in various lines, but especially wind and flood, as

If an agency’s operations have altered in response to the pandemic or post-pan demic challenges, leadership must analyze their firm’s new risk profile. Then, adjust ments can be made to workflow protocols to minimize the risks, and the E&O policy can be reevaluated for potential coverage gaps.

Gookin is senior vice president for Berkley Service Professionals, a Berkley Company. Email: lgookin@ berkleysp.com.

‘If an agency’s operations have altered in response to the pandemic or postpandemic challenges, leadership must analyze their firm’s new risk profile.’

Idea Exchange: The Competitive Advantage

Another Day, Another Insurance Regulator Failure

As I am writing this article, AM Best reported another property/casualty insolvency this morning. If I am not mistaken, more P/C insolvencies and P/C carriers have become nonfunctioning over the past 12 months than in the last five years combined.

and as a result limits consumer choice. Another factor I am seeing, especially with start-up “insurtech” carriers, is the amount of surplus with which they start is so tiny as to not be relevant. While $25 million is a lot of money in most scenarios, a $25 million surplus is peanuts.

At that figure only 33 homes are covered. If a carrier is not profitable and there really is no future for it, giving agents and their insureds the expectation that they are safe is not fair or smart.

Blame is being placed on hurricanes and other natural catastrophes that are easy scapegoats, and most people will not look any further. However, the industry will benefit if people delve deeper because the industry is being damaged by entities taking advantage of lax insurance regulations and enforcement.

By Chris Burand

If writing in a catastrophe prone state where the average Coverage A is $500,000, that surplus will only cover 50 homes, maximum. If you look at the homes that burned in Colorado in 2022, the average Coverage A was around $500,000. Add Coverage C, additional living expenses, guaranteed replacement cost, debris removal, etc., and the average claim is close to $1 million, but let’s use $750,000.

In catastrophe zones, property loss ratios should be exceptionally good except when a catastrophe hits. This is because in non-catastrophe years, the extra rate for catastrophes will go to profit. Therefore, if the loss ratios are not exceptionally good in non-catastrophe years, it should be pretty easy to identify the problem and force the carriers to act while they still have time.

I saw one property carrier focused on catastrophe areas recently advise they needed about an 85% rate increase. If they

The damage is not yet evident at the highest levels where insurance commis sioners have far too much to do. Perhaps a direct correlation between the entities that take advantage of the situation and the damage done is too obscure to recognize at the highest levels.

At the ground level though, the issues are plainly obvious.

Property in Duress

Some of the carriers were running marginal to high loss ratios without natural catastrophes. It is completely obvious what happens when a catastrophe hits and the carrier’s non-catastrophe loss ratios are already elevated. Clearly, the pricing model was insufficient.

The industry, however, is not primar ily regulated to guarantee that carriers breakeven or make a profit. Regulations should address the need of carriers to generate enough profit to support surplus. Adequate surplus is critical — the most important variable — to ensure that claims are paid, and the state does not have to make payments out of its guarantee funds. This is especially true if a state’s guarantee fund must assess money from other carriers that are more prudent or simply smarter than their peers and makes that state a less appealing place to do business

need an 85% rate increase, they needed a 40% rate increase last year. Whether they asked for it and were denied is one issue. If they failed to ask, as insurance carriers are apt to do, for regular rate increases every year rather than one large increase every five years, is another issue. However, that 85% increase request is key to under standing what is happening by permitting an environment in which insolvencies happen.

The property market in much of the country is in duress. The rates required for a prudent business model are so high that many people simply cannot afford coverage. Carriers are then developing and promising all kinds of innovations. Whether it is a financial engineering innovation, or a mapping innovation, or using a RRG or a reciprocal model that

relieves pressure on regulators for an open market solution — they get approval. Then everyone keeps their fingers crossed.

This “hope and prayer” approach dam ages the talented players and consumers. The carriers that have the right models and pricing are prevented from capitalizing on their hard work. Consumers are hurt more by staying with carriers that are inade quately stable than by paying higher rates. Agents who emphasize the right coverages with strong carriers lose sales to purveyors of snake oil.

On the Ground

On the ground, the damage is obvious. Insurance is, in so many ways, a simple industry. The rates charged need to be reasonable and adequately profitable enough to give a carrier a reason to write the account and generate enough profit to build surplus. Anything less than this scenario will eventually fail. That is not to say that people will not get rich along the way, and many are. Rates are supposed to be regulated to fall within the range of reasonably profitable so that shareholders are happy, and surplus is created without over-charging. Inadequate rates and exces sive rates both lead to market instability.

protection they need?

The situation is preventable if insurance regulators insist on carriers charging ade quate premiums from day one. Adequate means not taking the carrier’s word for it, either.

For example, one of these carriers that recently quit existing started writing business in a non-catastrophe state so they could acquire more premium to quickly offset their losses and to appease regula tory/rating people with greater geographic diversity. The rates they offered were 30% to 50% below the rates offered by any established carrier in that market.

Seriously? If all the other carriers were overcharging by 30% to 50%, their loss ratios should have been averaging around 25% to 40%, which was not the case. I analyzed the numbers. Even if it was the case, then the regulators were at fault for allowing such over-charging, or they were at fault for allowing under-charging. That kind of rate disparity is impossible for standard lines like homeowners within a strong regulatory environment.

I know regulators must go through a strict actuarial analysis to determine rate adequacy, but sometimes the math is so obvious the actuarial analysis is perfunctory.

An example of the on the ground prob lems involves an agency having to address 150 clients whose carrier had become insolvent.

Who is going to pay their claims? Who is going to take their policies? Have you ever tried to move an account mid-term? How do you explain to a customer that they may have to pay their homeowners premium twice because the carrier with whom you placed them is insolvent? How much time is spent putting out this fire rather than helping insureds get the

By a strong regulatory environment, I do not mean insisting carriers provide coverage that is not in the policy. I do not mean to insist carriers write business in areas where they do not want to write. Those are headline grabbers, but ineffec tive in building a better consumer market. Those actions do not support the carriers and agencies working to build sustainable rating models or help consumers get the coverages they truly need.

Stepping up protects consumers, and leadership is required. The industry has been down this path before, especially with auto insurance and it led to excessive rates and few consumer choices. That was about a generation ago so maybe the industry must repeat the lesson again. I hope not.

Burand is the founder and owner of Burand & Associates LLC based in Pueblo, Colo. Phone: 719-4853868. E-mail: chris@burand-associates.com.

‘I know regulators must go through a strict actuarial analysis to determine rate adequacy, but sometimes the math is so obvious the actuarial analysis is perfunctory.’

Idea Exchange: Personal Lines

Insider’s Report on Personal Lines Market What’s Changed, What to Expect & How to Prepare

By Rhonda K. Wade

The personal lines sector took a beating in 2022 due to significant deterioration in personal auto, as well as rising loss cost severity, pricing pressures and elevated reinsurance costs. Added to these challenges for per sonal lines insurers is slow overall economic growth, leading to uncertainty and depressed consumer and business sentiment.

This year’s In2Risk 2022 conference outlined some of these pressures affecting personal lines insurers today but also offered ways that the industry and consumers can help the future of risk. The following is a glimpse of some of the changes and what to expect.

The Bad News: Auto

According to the Insurance Information Institute, the low miles driven in the first year of the pandemic contributed to favor able experience, and the industry returned $14 billion to policyholders.

Current miles driven are back to 2019 levels, but with riskier driving behaviors and higher inflation. Supply chain disruption, labor shortages, and costlier replacement parts all contribute to current and future loss pressures, which will result in higher premiums.

The Bad News Continued: Homeowners

For the homeowners insurance line, the national 2022 net combined ratio spiked to 115.4% in 2021, the highest since 2011, thanks to natural catastrophe losses and replacement cost pressures. It is forecasted to improve in 2023 and 2024 while con tinuing to operate at a loss. Loss pressure and expected catastrophes indicate greater rate increases are needed to restore homeowners insurers to an underwriting profit.

‘Repair and Replace’ to ‘Predict and Prevent’

Technology is being used to change the insurance paradigm. As agents and brokers, we need to change the consumer’s mindset from, “Why do I need to spend money on leak detection technology, that’s

what I have insurance for” to “the best claim is the claim that never happens.”

Here’s one example: The Problem. According to Laurie Conner, president of The Detection Group Inc., water damage represents more than 50% of property loss claims in buildings. More than $16 billion has been paid in water damage losses due to plumbing leaks with an average loss cost of $10,000 for personal risks and $100,000 for commercial risks. Mold is possible within 24 hours and can add $10,000 to a claim. Most big leaks start small and escape man ual detection. Early detection dramatically reduces costs, provides peace of mind and benefits all parties — the owner, the carrier, and the agent.

The Solution. It is important for agents to become familiar with the various technologies available to reduce the cost of risk. This might include recommending the installation of strategically placed sen sors and whole house automatic shutoff devices via a smart phone app capable of sending actionable alerts to the property owner. Most carriers offer credits for the installation of this technology, which is a

benefit to the insured.

The Benefit. Early identification of water leaks reduces water damage losses, lowers utility bills, and improves the risk profile. If the sensors fail, the liability may even be shifted to the sensor manufacturer allowing the carrier to pursue total recov ery, including the deductible, through subrogation.

Focusing on technology and prevention will differentiate you from the other agents who are just trying to sell a policy based on price and improve your overall customer experience.

The Good News

The future of risk begins with you. There is a lot of disruption in the world, but insurance is in the business of helping people.

The insurance industry is using technology for more than pricing risks. Technology is an important tool to reduce losses, improve fire safety, manage exposures without physical visits, and encourage resilience. Rather than using Big Data to charge more, it is being used to earn the trust of the consumer.

Technology will not replace people, the human touch or relationships. Technology enables rather than replaces people. Remember, “know-ware” and technology were created by humans to serve humans.

Discussing and recommending techno logical advances to our customers makes what we do slightly more interesting than just talking about insurance. Make your own experience with your customer unique and hard to replicate.

Closing Tip: The Meta Universe, Blockchain, Crypto Currency, IoT Agents need to get educated about how to insure homes and other property pur chased with bitcoin. Learn more about the meta universe and blockchain technology and develop relationships with carriers who can meet the demands of younger consumers.

Per Betsey Brewer, CPCU, principal of EPIC Insurance Brokers & Consultants in Pasadena, California, “It is important to get educated about upcoming technologies.” Although she is not insuring autonomous vehicles now, she will be in five years and is learning about the issues now. At the time of a covered loss, who is the responsi ble party? The programmer? The hardware provider? Ask lots of questions and keep learning.

Betsey continues: “In an age of automa tion and automatic renewals, we need to keep doing what we do best; asking lots of questions rather than relying on infor mation insureds give us or information on past applications; know your customer!”

Thank you, Betsey!

In2Risk22, an annual conference organized by The Institutes CPCU Society, attracted approximately 1,000 insurance professionals, educators, vendors and other service provid ers from over 500 companies, representing 78 Chapters of the CPCU Society from six different countries including Bermuda, Guana, Hong Kong, Kuwait, India, Japan and the United States. In2Risk Encore is available on-demand Nov. 18–Dec. 18, 2022.

Wade, CPCU, CIC, AIDA, is a licensed agent and broker and the scholarship chair for the Syracuse NY Chapter of the CPCU Society.

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November 21, 2022

Nassau Life and Annuity Company

One American Row Hartford, CT 06103

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Life, Accident, Variable Life or Variable Annuities and health 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 request ed 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.

November 21, 2022

Monroe Guaranty Insurance Company 9025 River Road, Suite 300 Indianapolis, IN 46240

The above company has made application to the Division of Insurance to obtain a 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 request ed 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.

November 21, 2022

American Century Life Insurance Company 1333 W McDermott Dr. #200 Allen, TX 75013

The above company has made application to the Division of Insurance to obtain a Foreign Company License to transact Life, Accident and Health 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 request ed 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.

Navigating the Hard Market: How Proactive Communications Are Essential to Retaining and Building Business Today

Across all lines, the insur ance industry is expe riencing macro-hard markets, with large rate and premium increases, as well as re-underwritten renewals as the U.S. deals with broader economic uncertain ty.

ideal, a well-prepared agent will find there are valuable opportunities for growth available. The process starts with a thorough approach to education.

Prioritizing Education

conditions and how business owners feel. They should be able to comprehensively answer questions about the state of the industry and why costs are rising.

clients, which is critical when trying to properly convey rate and premium increases.

By Steve Tombarelli

Agents are also navigating renewal season with clients while managing changing capacity and increased premiums resulting from the hard market. In times such as these, agents often struggle to properly communicate with their clients.

How you convey raising rates and premiums matters, and taking the right steps to discuss current market conditions with clients is essential to client retention. Customer service is the backbone of the industry, particularly as we navigate an increasingly online world, and agents need to know how to communicate all news, good or bad, with their clients.

While a hard market is not

We know the industry is in a hard market, but that means very little to clients who aren’t familiar with the nuance of the insurance industry. Business owners simply aren’t inter ested; they want to hear from their insurance partners about how inflation is impacting their bottom line, and they are looking for guidance and a strategy to insulate them, where possible, from future increases. Agents looking to grow their business need to take a proactive and aggressive approach with this mindset as a central organizing point for every interaction with clients.

Fortunately, we’ve seen internal education among agents and brokers become a greater priority at successful agencies.

To properly communicate with clients, account managers and coordinators need a thor ough understanding of market

Some basic steps for educa tion can include reaching out to carrier partners to get their read on the market, seeking out data and market trends that will help address possible client concerns, and checking in with other agents to see how they have been impacted by the market. Following industry trade media helps, as well.

An Aggressive Approach

Once educated, agents should take an aggressive approach to client outreach.

Business owners will want a comprehensive review of why costs are changing. Agents who have put in the upfront work can help connect the dots to help clients understand why they may have to allocate more of their budget to securing coverage, along with the pros and cons involved in any related decision making.

Email conversations are not enough. The hard market has kept agents across the industry busy but making time for regu lar face-to-face communication is important.

In recent years, our industry has implemented new tech nologies designed to improve efficiency and handle potential schedule clogging tasks.

Embracing digital capabil ities and offloading some of these projects can help create time for regular phone calls and in-person meetings with

Ongoing communication that keeps clients informed is the best means of eliminating surprises and frustrating clients. This outreach should begin well in advance of renewals.

Business owners need time for financial planning. Reaching out early will help agents identify what their clients’ major concerns are and where they may have an opportunity to help strategize and address these concerns in advance.

Agents should take this same approach with their prospect lists. There are bound to be businesses that haven’t heard enough from their insurance partners and may be uncom fortable with an unexpected rise in rates. An agent armed with comprehensive knowl edge about the hard market can take advantage of others’ missed opportunities to build out their book of business.

A hard market may seem like bad news, but with the right communication tactics in place, agents can often retain their clients and position themselves for growth.

A proactive education and outreach strategy will make the rate and premium increase conversation much easier for agents and help create oppor tunities to grow their book of business.

Tombarelli is SIAA's senior vice president of Programs & Services. Email: steve.tombarelli@siaa.com.