Insurance Journal West 2023-02-06

Accepting large workers’ compensation risks. Most classes. All states, all areas, including New York City, Boston, and Chicago. Few capacity and concentration restrictions. Simpli ed nancial structure covers all exposures.

EXPECT THE WINNING DEAL ON LARGE WORKERS’ COMPENSATION.

Call (877) 234-4450 or visit auw.com to get a quote.

Jumping Auto Carriers

Historic rate increases in the auto insurance line are moving consumers to jump ship and switch carriers, according to a J.D. Powers recent report.

Shopping for auto insurance is now at an all-time high. The 12.1% shopping rate observed in Q4 2022 and the carrier switch rate (4.1%) are both record highs in the more than two years J.D. Powers has been tracking auto insurance shopping daily, according to the quarterly report conducted by J.D. Powers in collaboration with TransUnion.

Auto insurance shopping and premiums have been on the rise but advertising dollars spent by auto insurance carriers have declined.

As insurers have decreased spending in advertising, in some cases they have also closed acquisition channels to slow the growth of new, unprofitable business, J.D. Powers said. “As we see, consumers are out shopping more than in the past, entering a market that is more difficult to navigate and finding carriers who are not as interested in winning their business.” How this trend plays out in 2023 remains to be seen.

And while telematics adoption – “once hailed as the silver bullet for rising auto insurance premiums” – surged in early 2022, new data shows that trend is no more. Telematics adoption remained almost flat throughout the past year. TransUnion’s Annual Outlook survey showed that while 60% of consumers who were offered a telematics program opted-in to participate, nearly half (40%) of those who used a telematics program saw their rates increase anyway, which may hinder continued adoption.

“The value proposition of telematics is that consumers give up some sense of privacy or autonomy to provide insurers a demonstrably safe driving record in real-time,” said Michalle Jackson, senior directo of personal lines market strategy at TransUnion. “If they’re not seeing that translate into lower rates, or if their rates actually increase, some may not continue with the program.”

That’s not great news considering predictions that premiums will continue to rise.

Nearly half (40%) of those who used a telematics program saw their rates increase anyway, which may hinder continued adoption.

The rising costs of vehicle repair and medical expenses, higher driving and accident rates, and the potential for more frequent natural disasters are top reasons that costs will rise even more in auto insurance, according to Insurify, a Cambridge, Mass.-based virtual agent. Insurify predicted in December that by the end of 2023, Americans will pay 16% more for car insurance than they paid for at the beginning of the year.

Chairman of the Board

Mark Wells | mwells@wellsmedia.com

Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION

/ CIRCULATION

Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com

Circulation Manager

Elizabeth Duffy | eduffy@wellsmedia.com

Staff Accountant Sarah Kersbergen | skersbergen@wellsmedia.com

EDITORIAL

V.P. of Content Andrea Wells | awells@insurancejournal.com

Executive Editor Emeritus Andrew Simpson | asimpson@wellsmedia.com

National Editor

Chad Hemenway | chemenway@insurancejournal.com

Southeast Editor William Rabb | wrabb@insurancejournal.com

South Central Editor/Midwest Editor Ezra Amacher | eamacher@insurancejournal.com

West Editor Don Jergler | djergler@insurancejournal.com

International Editor L.S. Howard | lhoward@insurancejournal.com

Assistant Editor Jahna Jacobson | jjacobson@insurancejournal.com

Content Editor Allen Laman | alaman@wellsmedia.com

Columnists & Contributors

Contributors: Syed Ahmad, Erin Ashley, Paul James, Arijeta Lajka, Jessica Lamour, Alicia Morris, Matt O’Brien, Adriana Perez, Kevin V. Small

Columnists: Mary Newgard, Catherine Oak, Bill Schoeffler

SALES / MARKETING

Chief Marketing Officer

Julie Tinney | jtinney@insurancejournal.com

West Sales Dena Kaplan | dkaplan@insurancejournal.com

Romeo Valdez | rvaldez@insurancejournal.com

Kelly DeLaMora | kdelamora@wellsmedia.com

South Central Sales

Mindy Trammell | mtrammell@insurancejournal.com

Southeast and East Sales (except for NY, PA, CT) Howard Simkin | hsimkin@insurancejournal.com

Midwest Sales

Lisa Whalen | (800) 897-9965 x180

East Sales (NY, PA and CT only)

Dave Molchan | (800) 897-9965 x145

Advertising Coordinator

Erin Burns | eburns@insurancejournal.com

Insurance Markets Manager

Kristine Honey | khoney@insurancejournal.com

Sr. Sales & Marketing Coordinator Laura Roy | lroy@insurancejournal.com

Marketing Administrator

Alberto Vazquez | avazquez@insurancejournal.com

Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design

Guy Boccia | gboccia@insurancejournal.com

Web Team Lead

Josh Whitlow | jwhitlow@insurancejournal.com

Ad Ops Specialist

Jeff Cardrant | jcardrant@insurancejournal.com

Web Developer Terrance Woest | twoest@wellsmedia.com

Web Developer Jason Chipp | jchipp@wellsmedia.com

V.P. of New Media

Bobbie Dodge | bdodge@insurancejournal.com

Videographer/Editor

Ashley Waldrop | awaldrop@insurancejournal.com

ACADEMY OF INSURANCE

Director

Patrick Wraight | pwraight@ijacademy.com

Online Training Coordinator George Jack | gjack@ijacademy.com

SUBSCRIPTIONS: Call (855) 814-9547 or visit ijmag.com/subscribe Outside the US, call (847) 400-5951

Insurance Journal, The National Property/Casualty Magazine (ISSN: 00204714) is published 22 times annually by Wells Media Group, Inc., 3570 Camino del Rio North, Suite 100, San Diego, CA 92108-1747.

Periodicals Postage Paid at San Diego, CA and at additional mailing offices. SUBSCRIPTION RATES: $7.95 per copy, $12.95 per special issue copy, $195 per year in the U.S., $295 per year all other countries.

Andrea Wells Vice President, Content

DISCLAIMER: While the information in this publication is derived from sources believed reliable and is subject to reasonable care in preparation and editing, it is not intended to be legal, accounting, tax, technical or other professional advice. Readers are advised to consult competent professionals for application to their particular situation. Copyright 202 Wells Media Group, Inc. All Rights Reserved. Content may not be photocopied, reproduced or redistributed without written permission. Insurance Journal is a publication of Wells Media Group, Inc.

POSTMASTER: Send change of address form to Insurance Journal, Circulation Dept, PO Box 708, Northbrook, IL 60065-9967

ARTICLE REPRINTS: Contact (800) 897-9965 x125 or visit insurancejournal.com/reprints

Cyber and Business Interruption Top 2023 Threats: Allianz Risk Barometer

Cyber incidents and business interruption rank as the biggest company concerns for the second year in a row.

That’s according to Allianz’s Risk Barometer 2023, which found that at the same time macroeconomic developments such as inflation, financial market volatility and a looming recession, as well as the impact of the energy crisis, are the top risers in this year’s list of global business risks.

“For the second year in a row the Allianz Risk Barometer shows that companies are most concerned about mounting cyber risks and business interruption,” said AGCS Chief Executive Officer Joachim Mueller. “At the same time, they see inflation, an impending recession and the energy crisis as immediate threats to their business. Companies — in Europe

and in the U.S. in particular — worry about the current ‘permacrisis’ resulting from the consequences of the pandemic and the economic and political impact from ongoing war in Ukraine. It’s a stress test for every company’s resilience.”

He added the positive news is that, as an insurer, “we see continuous improvement in this area among many of our clients, particularly around making supply chains more failure-proof, improving business continuity planning and strengthening cyber controls. Taking action to build resilience and de-risk is now front and center for companies, given the events of recent years.”

This year’s Allianz Risk Barometer is the 12th annual business risk ranking compiled by Allianz Group’s corporate insurer, Allianz Global Corporate & Specialty (AGCS), together with other Allianz

entities. The report incorporates the views of more than 2,700 risk management experts in 94 countries and territories, including CEOs, risk managers, brokers and insurance experts.

Allianz reported the top four 2023 risks are broadly consistent across all company sizes globally, as well as across core European economies and the U.S. (energy crisis excepted). Risk concerns for businesses in Asia Pacific and African

2022 Was a Banner Year for Billion-Dollar Class Action Settlements

Drugmakers and distributors that settled misconduct allegations related to the national opioid epidemic led to a banner year for class-action plaintiffs in 2022, with 15 settlement agreements that totaled $1 billion or more, according to a report by the Duane Morris law firm.

The number of billion-dollar settlements set a new annual record, surpassing even the extent of settlements from Big Tobacco litigation two decades ago, said Gerald L. Maatman Jr., a Duane Morris partner in Chicago and a general editor of its annual Class Action Review.

“The numbers today dwarf the numbers from back then,” Maatman said. “There’s this notion of social inflation. Juries today, post-pandemic, are very different from juries prior to the pandemic.”

Opioid litigants dominated the list of billion-dollar settlements in 2022. McKesson agreed to pay $7.4 billion to settle national

litigation over prescription drug abuse. AmerisourceBergen, Cardinal Health, Walgreens, Purdue Pharma, Johnson & Johnson, CVS Pharmacy, Teva Pharmaceuticals, Walmart, Abbvie also settled class-action lawsuits for more than $1 billion each.

In aggregate, class-actions and government enforcement lawsuits against opioid manufacturers, retailers and distributors garnered more than $50 billion in settlements for the year. When the final tally is completed, the total for opioid settlements may top $100 billion, the report says.

Plaintiffs’ attorneys set the table for even more billion-dollar settlements in coming years. They succeeded in class certification motions 77% of the time in 2022, a success rate that requires corporate clients to endure an expensive discovery process.

The report says privacy violations will likely continue to provide a rich target for class-action litigation this year. While the federal gov-

ernment hasn’t made any policy changes favorable to the plaintiff’s bar, several states passed new laws that protect consumers from privacy intrusions. Illinois, for instance, passed the Biometric Privacy Act in 2008. Class-action lawsuits alleging BIPA violations first made headlines in 2018. The report says the minefield is becoming more treacherous as other states consider “copycat” statutes. Biometric privacy lawsuits are not considered a top compliance priority nationwide.

The past year also saw a wave of wiretapping violation lawsuits that targeted companies that use technologies that track user activity on their websites, based on the theory that such practices violate electronic interception provisions of various state laws when done without consent.

While Congress has not enacted any new data privacy requirements, many states have adopted their own rules. New privacy laws take effect in California, Colorado, Connecticut, Utah and Virginia this year and the report says companies can expect an increase in lawsuits in 2023.

countries show some deviation, reflecting the different impact of the ongoing war in Ukraine and its economic and political repercussions.

Compared to last year, natural catastrophes fell three spots on the global list, and climate change dropped one. Pandemic outbreak ranked at No. 4 in 2022 and came in at No. 13 this year.

Political risks and violence entered the top 10 global risks in 2023, while shortage of skilled workforce rose to No. 8. Allianz reported that changes in legislation and regulation remain a key risk at No. 5, while fire and explosion dropped two positions from 2022.

Digital Dangers

Allianz reported that cyber incidents, such as IT outages, ransomware attacks or data breaches, rank as the most important risk globally for the second year in succession — the first time this has occurred. Cyber incidents also rank as the top peril in 19 different countries, including Canada, France, Japan, India and the UK. It is the risk that most worries small companies.

“Large companies have become accustomed to being targeted and those with adequate cyber security are able to repel most attacks more effectively,” said Shanil Williams, AGCS chief underwriting officer, corporate, responsible for cyber underwriting. “Increasingly, more smalland mid-size businesses are also being impacted.”

The conflict in Ukraine and wider geopolitical tensions are heightening the risk of a large-scale cyber-attack by state-sponsored actors. In addition, there is also a growing shortage of cyber security professionals, which brings challenges when it comes to improving security.

Allianz forecasts that for many countries, 2023 is likely to be another year of heightened risks for business interruption because many business models are vulnerable to sudden shocks and change, which in turn impact profits and revenues. Ranking No. 2 globally, business interrup-

Risk Barometer Rankings

1. Cyber incidents (34%) 2.Business interruption (34%)

developments (25%)

crisis (22%)

in legislation and regulation (19%) 6. Natural catastrophes (19%) 7. Climate change (17%) 8. Shortage of skilled workforce (14%) 9. Fire, explosion (14%)

10.

Political risks and violence (13%)

*Percentage of all participants (2,712) who responded to the Allianz Risk Barometer. More than one risk could be selected.

tion is the No. 1 risk in countries such as Brazil, Germany, Mexico, Netherlands, Singapore, South Korea, Sweden and the U.S.

The scope of disruptive sources is wide. Cyber is the cause of business interruption companies fear most (45% of responses); the second most important cause is the energy crisis (35%), followed by natural catastrophes (31%). The skyrocketing cost of energy has forced some energy-intensive industries to use energy more efficiently, move production to alternative locations or even consider temporary shutdowns.

Macroeconomic Malaise

Allianz reported that macroeconomic developments such as inflation or economic and financial market volatility rank as the third top risk for companies globally in 2023, up from No. 10 in 2022. It marks the first time this risk has appeared in the top three in a decade.

All three major economic areas — the United States, China and Europe — are in a crisis mode at the same time, albeit for different reasons, according to Allianz Research, which forecasts recession in Europe and the U.S. in 2023. Inflation is a particular concern as it eats into the price structure and profitability margins of many companies.

Risk Risers

The energy crisis is the biggest risk riser in the Allianz Risk Barometer. It appears, for the first time, at the No. 4 ranking. Some industries, such as chemicals, fertilizers, glass and aluminum manufacturing, can be reliant on a single source of energy — Russian gas in the case of many European countries — and are therefore vulnerable to disruption to energy supply or price increases. If such base industries struggle, repercussions can be felt further down the value chain in other sectors.

Driven by 2022 being another year of turmoil with conflict and civil unrest dominating the news, political risks and violence is a new entry at No. 10. Aside from war, companies are also concerned about increasing disruption from strikes, riots and civil commotion activity as the cost-of-living crisis affects many countries.

Despite dropping in the ranking year-on-year, natural catastrophes and climate change remain major concerns for businesses.

In a year that included Hurricane Ian, one of the most powerful storms recorded in the U.S., record-breaking heatwaves, droughts and winter storms around the world, and $100 billion-plus of insured losses, they still rank in the top seven global risks.

Figures 40%

$20.1 Billion

That’s how much private flood insurance accounts for out of California’s entire flood market, according to AM Best.

The cost of illicit cryptocurrency activity in the U.S. in 2022 as transactions involving companies targeted by U.S. sanctions skyrocketed, data from blockchain analytics firm Chainalysis shows. Overall, crypto transaction volumes were lower last year but the value of crypto transactions related to illicit activity rose for the second year running, Chainalysis said.

$333,560

The number of lawsuits filed against a Kentucky-based drug distributor, Quest Pharmaceuticals, over its alleged role in the opioid epidemic. A federal appeals court found in January that the firm’s liability insurance carriers had no duty to defend or indemnify Quest in the litigation, giving succor to insurers’ arguments that they should not be on the hook for the billions of dollars in opioid settlements around the country.

77The amount in penalties the federal Occupational Safety and Health Administration proposed against Eversource Energy Service Co. for five violations of workplace safety standards after its investigation of a fatal arc flash and arc blast in Boston’s Beacon Hill neighborhood on July 12, 2022, that led to a worker’s death. At the time of the incident, Eversource employees were doing maintenance work on electrical equipment located inside an underground electrical vault. OSHA found that Eversource did not fully de-energize the electrical equipment or follow the manufacturer’s recommendations when employees conducted maintenance. Eversource, which serves customers in Connecticut, Massachusetts and New Hampshire, said it disagrees with the agency’s findings.

Declarations

California Storm

traumatizing.”

— Sacramento, California, resident Niki Goffard’s home was damaged by one of more than 1,000 trees that fell in Sacramento after a New Year’s Eve storm.

3D Challenges

“One of the things about printing a second story is you require, you know, the machine. … And of course, there are other challenges: structural challenges, logistic challenges when we print a second-story building.”

— Architect Leslie Lok, co-founder of design studio Hannah and designer of a two-story home in Houston being built by an enormous 3D printer weighing more than 12 tons, on the challenges involved in constructing the 4,000-square-foot home. It is believed to be the first 3D-printed, two-story home in the United States.

ERCOT Lawsuits

“The insurance companies want compensation; the families want compensation.”

— Said Ann Saucer, one of the co-liaisons for family members and insurers that sued the Electric Reliability Council of Texas (ERCOT) and power generators following the 2021 winter storm that left millions of Texans without power in bitterly cold temperatures and hundreds of people dead after electricity was cut in large portions of the state. The Texas Supreme Court in January heard arguments over whether the state’s power grid operator should be protected from lawsuits. ERCOT's lawyers argued it should receive the same “sovereign immunity” that largely shields government agencies from civil suits.

Radioactive Tests

“Concerned parents deserve certainty about the safety of their children’s learning environment.”

— Senator Josh Hawley and U.S. Rep. Cori Bush of Missouri, in a request to the federal government for more radioactive contamination testing on properties owned by the Hazelwood School District in the St. Louis suburb of Florissant. District officials have received conflicting information about radioactive contamination at Jana Elementary School, located in the flood plain of Coldwater Creek, which was contaminated with radioactive waste generated when Mallinckrodt Chemical processed uranium in the 1940s and 1950s for atomic weapons.

Innocence Found

“I always said I was innocent, and I am glad that they found me innocent.”

— Owen Turner, 51, the driver of a Boston light-rail trolley that crashed into the rear of another train in the summer of 2021, sending 27 people to the hospital, said after being cleared by a jury of a gross negligence charge. The crash, defense attorney Matthew Peterson said, was nothing more than an accident. The prosecution had alleged that Turner neglected his duties, disregarded some safety protocols, and exceeded speed limits.

Florida Adjuster Impersonation

“While committing these offenses, the conspirators impersonated law enforcement officers by wearing black clothing, gloves, and masks — often with law enforcement insignia or vests with a ‘sheriff’ patch affixed.”

— That was from federal prosecutors who charged that a former adjuster for State Farm and Berkshire Hathaway gathered personal information on Florida drug dealers then orchestrated a scheme to rob them. The woman pleaded guilty in January.

“You never think something like this is going to happen to you. It’s been quite shocking and

AI Tools Can Create New Images, but Who Is the Real Artist?

By Matt O’Brien and Arijeta Lajka

Countless artists have taken inspiration from “The Starry Night” since Vincent Van Gogh painted the swirling scene in 1889.

Now artificial intelligence systems are doing the same, training themselves on a vast collection of digitized artworks to produce new images you can conjure in seconds from a smartphone app.

The images generated by tools such as DALL-E, Midjourney and Stable Diffusion can be weird and otherworldly but also increasingly realistic and customizable — ask for a “peacock owl in the style of Van Gogh” and they can churn out something that might look similar to what you imagined.

But while Van Gogh and other long-dead master painters aren’t complaining, some living artists and photographers are starting to fight back against the AI software companies creating images derived from their works.

Two new lawsuits — one in January from the Seattle-based photography giant Getty Images — take aim at popular image-generating services for allegedly copying and processing millions of copyright-protected images without a license.

Getty said it has begun legal proceedings in the High Court of Justice in London

against Stability AI, the maker of Stable Diffusion, for infringing intellectual property rights to benefit the London-based startup’s commercial interests.

Another lawsuit filed in a U.S. federal court in San Francisco describes AI image-generators as “21st-century collage tools that violate the rights of millions of artists.” The lawsuit, filed by three working artists on behalf of others like them, also names Stability AI as a defendant, along with San Francisco-based image-generator startup Midjourney, and the online gallery DeviantArt.

for corporate memberships. The startup OpenAI also charges for use of its DALL-E image generator, and StabilityAI offers a paid service called DreamStudio.

Stability AI said in a statement that “Anyone that believes that this isn’t fair use does not understand the technology and misunderstands the law.”

A visitor looks at artist Refik Anadol’s “Unsupervised” exhibit at the Museum of Modern Art in New York. The new AI-generated installation is meant to be a thought-provoking interpretation of the New York City museum’s prestigious collection. (AP Photo/John Minchillo)

The lawsuit said AI-generated images “compete in the marketplace with the original images. Until now, when a purchaser seeks a new image 'in the style' of a given artist, they must pay to commission or license an original image from that artist.”

Companies that provide image-generating services typically charge users a fee. After a free trial of Midjourney through the chatting app Discord, for instance, users must buy a subscription that starts at $10 per month or up to $600 a year

In a December 2022 interview with The Associated Press, before the lawsuits were filed, Midjourney CEO David Holz described his image-making subscription service as “kind of like a search engine” pulling in a wide swath of images from across the internet. He compared copyright concerns about the technology with how such laws have adapted to human creativity.

“Can a person look at somebody else’s picture and learn from it and make a similar picture?” Holz said. “Obviously, it’s allowed for people and if it wasn’t, then it would destroy the whole professional art industry, probably the nonprofessional industry, too. To the extent that AIs are learning like people, it’s sort of the same

thing and if the images come out differently then it seems like it’s fine.”

The copyright disputes mark the beginning of a backlash against a new generation of impressive tools — some of them introduced just last year — that can generate new images, readable text and computer code on command.

They also raise broader concerns about the propensity of AI tools to amplify misinformation or cause other harm. For AI image generators, that includes the creation of nonconsensual sexual imagery.

Some systems produce photorealistic images that can be impossible to trace, making it difficult to tell the difference between what’s real and what’s AI. And while most have some safeguards in place to block offensive or harmful content, experts say it’s not enough and fear it’s only a matter of time until people utilize these tools to spread disinformation and further erode public trust.

“Once we lose this capability of telling what’s real and what’s fake, everything will suddenly become fake because you lose

confidence of anything and everything,” said Wael Abd-Almageed, a professor of electrical and computer engineering at the University of Southern California.

As a test, The Associated Press submitted a text prompt on Stable Diffusion featuring the keywords “Ukraine war” and “Getty Images.” The tool created photo-like images of soldiers in combat with warped faces and hands, pointing and carrying guns. Some of the images also featured the Getty watermark, but with garbled text.

AI can also get things wrong, like feet and fingers or details on ears that can sometimes give away that they’re not real, but there’s no set pattern to look out for. And those visual clues can also be edited. On Midjourney, for instance, users often post on the Discord chat asking for advice on how to fix distorted faces and hands.

With some generated images traveling on social networks and potentially going viral, they can be challenging to debunk since they can’t be traced back to a specific tool or data source, according to Chirag

Shah, a professor at the Information School at the University of Washington, who uses these tools for research. “You could make some guesses if you have enough experience working with these tools,” Shah said. “But beyond that, there is no easy or scientific way to really do this.”

But for all the backlash, there are many people who embrace the new AI tools and the creativity they unleash. Searches on Midjourney, for instance, show curious users are using the tool as a hobby to create intricate landscapes, portraits and art.

There’s plenty of room for fear, but “what else can we do with them?” asked the artist Refik Anadol at the World Economic Forum in Davos, Switzerland, where he displayed an exhibit of his AI-generated work.

At the Museum of Modern Art in New York, Anadol designed “Unsupervised,” which draws from artworks in the museum’s prestigious collection — including “The Starry Night” — and feeds them into a massive digital installation generating animations of mesmerizing colors and shapes in the museum lobby.

The installation is “constantly changing, evolving and dreaming 138,000 old artworks at MoMA’s Archive,” Anadol said. “From Van Gogh to Picasso to Kandinsky, incredible, inspiring artists who defined and pioneered different techniques exist in this artwork, in this AI dream world.”

For painters like Erin Hanson, whose impressionist landscapes are so popular and easy to find online that she has seen their influence in AI-produced visuals, she is not worried about her own prolific output, which makes $3 million a year.

She does, however, worry about the art community as a whole.

“The original artist needs to be acknowledged in some way or compensated,” Hanson said. “That’s what copyright laws are all about. And if artists aren’t acknowledged, then it’s going to make it hard for artists to make a living in the future.”

Copyright 2023 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Business Moves

established to acquire and scale insurance underwriting facilities and specialty businesses throughout North America.

Midwest

Inszone Insurance Services, Brinch Agency Insurance

Inszone Insurance Services has acquired Michigan-based Brinch Agency Insurance.

National

Howden Group, TigerRisk Partners

Howden Group Holdings has completed its acquisition of TigerRisk Partners to create the “world’s fourth largest global reinsurance broker.”

In June 2022, Howden Group announced the purchase of Stamford, Conn.-based TigerRisk — a risk, capital and strategic advisor to the insurance and reinsurance industry — to further consolidate the group’s position as a global insurance intermediary creating a $30 billion GWP business with an enterprise value of over $13 billion, employing 12,000 people across 45 countries.

The new entity, Howden Tiger, represents nearly $400 million of combined reinsurance revenue and provides clients with access to 450 experts in a business across more than 30 offices and a track record of delivery in local markets, Howden Group said.

Rod Fox, co-founder of TigerRisk, will become executive chairman of Howden Tiger.

East Hilb Group, Oak Ridge Surety Agency

The Hilb Group has acquired Oak Ridge Surety Agency in West Chester, Pennsylvania, which specializes in surety bond programs and commercial insurance. Martin Hellman and his team of insurance professionals will become part of Hilb Group’s Mid-Atlantic regional operations. The business will join with

Wayne, Pennsylvania-based Wharton Surety Consultants, a Hilb Group agency. The acquisition took effect Dec. 30, 2022.

The Hilb Group, headquartered in Richmond, Virginia. is a portfolio company of The Carlyle Group, a global investment firm. Hilb Group has completed more than 150 acquisitions with over 100 offices in 22 states.

Specialty Program Group, Euclid Fiduciary New Jersey-headquartered Specialty Program Group LLC acquired the assets of Euclid Specialty Managers LLC, which does business as Euclid Fiduciary, from Euclid Insurance Services Inc.

Euclid Fiduciary, based in Vienna, Virginia, is a managing general agency specializing in complex fiduciary liability and related professional liability insurance for employee benefit plans.

Founded in 2011, Euclid Fiduciary insures some of the largest single-employer, multi-employer, and governmental employee benefit plans. Euclid Fiduciary has underwriting and claims authority from Hudson Insurance Group, an underwriter of specialty lines programs.

Euclid Fiduciary is led by Managing Principal Daniel Aronowitz.

MarshBerry served as financial advisor to Euclid Fiduciary for the transaction.

Euclid Insurance Services is a holding company and platform for the launching and running of specialty program administrators. It is headquartered in Itasca, Illinois.

SPG is a fully licensed holding company

Brinch Agency Insurance was founded in 2001 by Chris and Kathy Brinch. Located in Roseville, Michigan, Brinch Agency provides personal, commercial and health insurance to Macomb County and the surrounding areas.

The team at Brinch Agency prides themselves on being friendly and knowledgeable about the products available across multiple insurance companies, giving them the flexibility to offer clients affordable prices and individualized policy options.

The acquisition of Brinch Agency provides Inszone Insurance with its first location in Michigan, as well as expands the agency’s presence in the Midwest.

Clients of Brinch Agency will continue to be serviced by the team in the Roseville office, now working under Inszone Insurance brand.

Hub, Grace & Porta Benefits

Hub International Limited acquired the assets of Grace & Porta Benefits Inc.

Located in Brighton, Michigan, Grace & Porta Benefits is an independent agency specializing in employee benefits consultation. President/CEO Jon Porta, Vice President/CMO Travis Porta, Treasurer/ CFO Josh Porta, Secretary/CIO Dave Porta, and the Grace & Porta Benefits team will join Hub Midwest East.

Grace & Porta Benefits was represented by Marsh Berry for the transaction.

Evertree Insurance, Provision Insurance

Evertree Insurance, an omni-channel property/casualty insurance distribution platform, acquired Provision Insurance Group, a Michigan-based independent insurance brokerage firm.

The acquisition of Provision follows Evertree’s acquisition of Frankfort, Illinois-

based Gnade Insurance Group, previously announced on Dec. 9, 2022.

New York, New York-based Evertree is a technology-enabled insurance platform specializing in personal lines that is focused on building the next generation of independent brokers.

South Central Inszone Insurance Services, Mattis Insurance Agency

Inszone Insurance Services acquired Mattis Insurance Agency, based in Houston. Founded in 1998 by Derrick and Dalia Mattis, Mattis Insurance Agency provides protection for hundreds of individuals, families, and businesses throughout the state.

The Mattis Insurance team will merge and continue to operate out of Inszone Insurance’s Houston location. Mattis Insurance customers can expect the same service they are accustomed to, now under the Inszone Insurance brand.

Southeast

Alera, Sutter McLellan Agency

Alera Group, a national property insurance and benefits firm, has acquired Atlanta area-based Sutter, McLellan & Gilbreath, a full-service agency.

Sutter McLellan, headquartered in Buford, Georgia, was founded in 1953 and offers employee benefits, auto, home, business, life and builders’ risk policies.

The Sutter team will continue to serve there clients. Drew Gilbreath is vice president of operations.

Alera, headquartered in Deerfield, Illinois, reports more than $1 billion in revenues. It has 4,000 employees in more than 180 offices.

World, Volaris

New Jersey-based World Insurance Associates has acquired Volaris Insurance Group of Tampa.

World Insurance, one of the larger brokerages in the United States, said in a statement that Volaris will expand the broker’s presence in Florida.

Volaris provides business insurance,

including trucking and cell tower coverage. Elizabeth Vargas, unit leader of Volaris, said the firm’s products also include workers’ compensation, bonds, general liability and more.

World Insurance, headquartered in Iselin, New Jersey, has completed more than 175 acquisitions since it was founded in 2011.

Purmort & Martin, Lovinger Agency

Purmort & Martin Insurance Agency, one of the oldest agencies in the Sarasota, Florida, area, is expanding with the acquisition of Tampa-based Lovinger Insurance.

Lovinger is a property/casualty agency serving policyholders in Hillsborough and Pinellas counties. It will continue to do business under the Lovinger name.

Lynne Lovinger will remain manager of the firm. She has more than 25 years’ experience in the insurance business.

West

Arthur J. Gallagher, John C. Breckenridge

Arthur J. Gallagher & Co. acquired Sacramento, California-based John C. Breckenridge Insurance Solutions Inc.

John Breckenridge, Lisa Breckenridge and their team will remain in their current location under the direction of Kevin Garvin, head of Affinity North America for Gallagher’s retail property/casualty brokerage operations.

JCB is a brokerage and plan management firm specializing in student health and intercollegiate athletics insurance for higher education institutions.

Arthur J. Gallagher is an insurance brokerage, risk management and consulting services firm headquartered in Rolling Meadows, Illinois.

Alera Group, Insurance Benefits by Design

Alera Group has acquired Insurance Benefits by Design in Colorado.

Insurance Benefits by Design offers insurance benefits for employers, individuals and families. IBBD is an affiliate of Sage Benefit Advisors, an Alera Group company. The team will continue serving clients in their existing roles.

Alera Group is an independent, national insurance and wealth services firm.

Inszone Insurance, Vaught, Wright & Bond Insurance

Inszone Insurance Services acquired Vaught, Wright & Bond Insurance in Placerville, California.

Vaught, Wright & Bond Insurance was originally founded in 1933 by Mance Vaught. They originally offered bonds in addition to personal and business insurance.

Over the years, Mance Vaught was joined by Donald Wright, Paul Bond and Bill Crow and was later incorporated in 1972, keeping their name as Vaught, Wright & Bond Inc.

In 1982, Leonard Stroud joined the team as a producer and added life and health insurance to the agency’s offerings. In 1990, he acquired all of the corporate stock and was appointed as the sole director.

Bruce Dezzani started as a commercial lines and personal lines producer in 2000 after spending. He then rose to the position of general manager and bought 50% of the company’s shares in 2005. In August 2015, he became the only stakeholder.

Over the past two decades, the company has expanded outside of El Dorado County while remaining a generalist and writing mostly local risks.

As part of the acquisition, Inszone Insurance will retain Vaught, Wright & Bond Insurance employees, as well as the current location in Placerville.

Relation, Napa Valley Insurance

Relation Insurance Services Inc. acquired the assets of Napa Valley Insurance in California.

Co-owners Mike Hogin and Pam Hogin will continue running the offices as part of the Relation family of brands.

Napa Valley Insurance offers a range of insurance products including commercial lines, personal lines, and employee benefits. The firm is based in Napa Valley, with an additional location in Sonoma.

Relation Insurance Services is an insurance brokerage that offers risk management and benefits consulting services across the United States.

National

NFP named Andrew Canning senior vice president and head of project risk advisory for the company’s North America

construction and infrastructure group. The group, part of NFP’s specialty business, provides clients with comprehensive construction and surety services designed specifically for complex national and cross-border projects.

Canning joins NFP from Marsh, where he served as managing director and led the construction team. He also has served as senior vice president at Aon Risk Services and in leadership roles with Amoco, Near North Insurance Brokerage and Wrapid Specialty.

Specialty P/C insurance platform Everspan Group appointed Darwin Lucas as chief underwriting and reinsurance officer. He will oversee the company’s program business and reinsurance relationships.

Based in Atlanta, Lucas has more than 24 years of experience in program insurance. Most recently, he was U.S. head of Casualty & Professional Hybrid Solutions at Everest Reinsurance Co. Prior to that, he was senior vice president of casualty programs for Maxum Specialty Insurance Group.

Liberty Mutual Insurance appointed Meg Sutton as chief

operating officer for Global Risk Solutions North America and Taylor Archambault as senior vice president for U.S. casualty claims.

Sutton, who joined Boston, Massachusetts-based Liberty Mutual in 2015, formerly led the U.S. casualty claims team. She has more than 25 years of experience in leadership positions ranging from claims and operations to reinsurance and specialty insurance.

Archambault, who previously led the North America property and marine claims team, succeeds Sutton in his new role. Before joining Liberty Mutual in 2019, Archambault held a number of senior claims roles at The Hartford and worked as an attorney representing national insurers in complex litigation.

East

Boston-based Risk Strategies appointed Doran Lamond commercial lines leader for the New England region. In this new role, Lamond will be responsible for building a regional strategy for the commercial property/casualty business.

Lamond brings nearly 30 years of industry experience to this new role. She joined Risk Strategies in 2021 through the acquisition of Tripoint Insurance.

Fred C. Church Insurance, headquartered in Lowell, Massachusetts, added Amy

Daley to its commercial insurance team as a client executive. Daley’s focus is on the insurance and risk management needs of educational institutions across the U.S.

Daley joins Church from FM Global, where she worked for more than 12 years, most recently as practice leader for FM Global’s Education and Healthcare Group Practice. She previously worked for Arch Re, Gen Re and Lockton.

Midwest

Great American Insurance Group, based in Cincinnati, Ohio, has promoted Brian D. DeSoto, Carrie A. Little and Richard (Rich) L. Suter to divisional group presidents.

DeSoto started his career with Great American in the corporate claims division in 2008.

In 2010, he joined Great American Risk Solutions, formerly the specialty E&S division. He was promoted to divisional president in January 2021. With this promotion, in addition to serving as divisional president, DeSoto assumes reporting responsibilities for Great American’s environmental division and mid-continent group.

Little joined Great American in 2004 as a business analyst. In 2006, she joined the lead-

ership development program and subsequently the specialty human services division. She most recently served as divisional senior vice president.

In her new role, she will oversee the accident and health, surety bonds, public sector, excess liability and innovative markets divisions, and Great American’s loss control services.

Suter joined Great America’s Alternative Markets Division in 2012. He was promoted to divisional president in 2017.

Suter will continue to serve in this role with the additional responsibilities of overseeing Great American’s strategy and innovation, new revenue and strategic partnerships and agency and broker relations functions. He has 30 years of insurance industry experience.

CRC Group named Kristyn Smallcombe as casualty practice group director.

Based in CRC Group’s Chicago, office, Smallcombe will join Commercial Solutions Division’s National Casualty Practice Group Leader Bob Greenebaum in supporting the CRC Casualty team nationwide.

Smallcombe comes from Argo Group US. She brings over 20 years of industry experience to the role. She has held senior casualty positions at Argo, Swiss Re, and AIG/Lexington.

CRC Group is headquartered in Norcross, Georgia.

South Central

The Texas Oil & Gas Association (TXOGA) named Neal Carlton as president of

Andrew Canning

Darwin

Lucas

Meg Sutton

Taylor Archambault

Brian D. Desoto

Carrie A. Little

Richard (Rich) Suter

Kristyn Smallcombe

the TXOGA Insurance Agency, headquartered in Austin.

Carlton most recently served as vice president of membership and corporate secretary at TXOGA.

As president of the agency, he will oversee the TXOGA Workers’ Compensation Safety Group.

Before his stint with TXOGA, Carlton was the coordinator for state and federal relations at the Texas Department of Agriculture.

Benefits consultant Nick Long has joined Alliant Insurance Services as senior vice president within its Employee Benefits Group.

Long, who is based in Texas, has helped businesses and municipalities manage their employee benefits for more than 15 years. Before joining Alliant, Long was an area vice president at Gallagher Benefit Services.

Alliant is headquartered in Irvine, California.

Cadence Insurance Inc., a subsidiary of Cadence Bank headquartered in Houston, Texas, hired Gabrielle (Gabby) Bryant as cyber practice leader.

Among Bryant’s specialties are enterprise security assessments, pre-deal cyber due diligence and the development of cybersecurity policy for private equity clients. Before joining Cadence Insurance, Bryant worked for a large international insurance broker for nearly a decade, where she held various key positions in its cyber security practice.

Michael Mayton has been appointed to the Arkansas Workers’ Compensation Commission (AWCC).

Mayton is a lawyer in private practice specializing in the defense of employers and insurance carriers. He has practiced law for 46 years and for the past 30 years has focused his practice on the defense of workers’ compensation cases in Arkansas.

Mayton has served twice as Special Chief Justice of the Arkansas Supreme Court.

Texas Mutual Insurance Co., based in Austin, Texas, hired Meredith Duncan as the president and chief executive officer of the company’s new health-focused subsidiary.

Subject to regulatory approval, the subsidiary will seek to offer additional health insurance options to small businesses.

Duncan previously served as president of the Texas market at Bright HealthCare and as the chief growth officer for CVS/ Aetna in the Texas, Oklahoma and New Mexico markets.

She has 20 years of experience in strategic planning, sales and business development, consumer market research and operations management.

Duncan spent nearly eight years at Ascension Seton Texas, where she served as CEO of Seton Insurance Co. and vice president of accountable care and physician engagement.

The Texas Department of Insurance (TDI) announced new leadership for the Administrative Operations, Life and Health, and General Counsel divisions, along with a new chief deputy commissioner.

Jessica Barta is TDI’s new general counsel. Since 2014, she has served as the public counsel for the Office of Injured Employee Counsel (OIEC). Before Barta’s appointment at OIEC, she spent four years at TDI as the workers’ compensation legislative liaison and assistant director of government relations. Prior to her state government service, Barta was general counsel for Great American Financial Resources Inc. Barta starts her new role on Feb. 1.

Melissa Burkhart is the new deputy commissioner of administrative operations. Burkhart joined TDI in 2000 and worked in property/ casualty and regulatory policy before moving to administrative operations. For the past five years, she has served as TDI’s associate commissioner of procurement and general services.

Debra Diaz-Lara is the new deputy commissioner of Life and Health. Diaz-Lara joined TDI in 1999 as an insurance specialist. She has served as the director of the Managed Care Quality Assurance Office and the associate commissioner for Life and Health. Before coming to TDI, she worked for a commercial health insurance plan and in hospitals and physician offices.

Dan Paschal is the new

chief deputy commissioner. Paschal was TDI’s deputy commissioner for external relations and served as a deputy commissioner at the Division of Workers’ Compensation. Before joining TDI, he worked at the Texas Department of Transportation, the Texas House of Representatives and the Governor’s Office. Paschal is a licensed attorney.

Southeast

The board of directors for Mississippi-based SouthGroup Insurance & Financial Services named Cyndi Tullos chief executive officer. Tullos, the chief operating officer since 2019, replaces Ronnie Tubertini, who was CEO for 21 years. Tubertini will remain as president and a board member.

Tullos, who joined SouthGroup after leaving the WorldCom telecommunications company in 2002, held leadership roles in the Independent Insurance Agents of Mississippi, ACORD and other organizations.

West

Ategrity Specialty Insurance Co. named former Deputy CEO Justin Cohen as CEO of the company.

Cohen has led the evolution of Ategrity’s business in the excess and surplus (E&S) lines market, including an expansion into the middle market segment.

Cohen also serves on the board of Ategrity Specialty Holdings, the parent company of the E&S insurer.

Ategrity is headquartered in Scottsdale, Arizona

Meredith Duncan

Jessica Barta

Melissa Burkhart

Debra Diaz-Lara

Cyndi Tullos

Closer Look: Business Interruption

The Infrastructure Crisis As Business Losses Mount, New Demand for Utility Coverage?

By William Rabb

When aging water pumps in Jackson, Mississippi, were shut down by floodwaters last August, knocking out water service to most of the city, companies that depend on clean water saw many of their customers and their revenue disappear overnight.

Most of those businesses were not covered for the loss by their business interruption insurance policies.

When Jackson lost water service again in December, due in part to freezing temperatures and burst pipes, businesses suffered again. At a popular restaurant in the heart of the downtown business district, only a handful of customers

trickled in for a weekday lunch three days after Christmas. Across town, a famous bookstore had to inform customers that restrooms and water fountains were not working.

City officials asked residents to help find broken water mains that were contributing to low pressure throughout the system.

Some 200 miles to the north of Jackson is Memphis, Tennessee, with 630,000 residents and water pipes that are 100 years old in some areas. The city endured rolling power blackouts just before Christmas, along with frozen pipes, low water pressure and a six-day boil-water notice — for the third time in two years, according to news reports and local business owners.

Similar water-loss stories have played out in Houston; Baltimore; Shreveport, Louisiana; and Selma, Alabama.

While weather events have been the latest triggers for the system failures, experts say the shutdowns are ultimately the result of a decades-long lack of government investment in infrastructure maintenance.

At the moment, the problems appear to be worse in Southern cities, where municipal tax bases have been eroded by years of flight to the suburbs. But cities nationwide are now on the list of those facing massive infrastructure problems that will soon translate to frequent losses and insurance claims for business owners.

“This is not a sign of things to come. It’s a sign of things that are here, right now,” said Joseph Schofer, emeritus professor of civil and environmental engineering at Northwestern University. “To me, the message is that there are 10 other cities that need help and haven’t popped up yet — but they will.”

The warning signs have been building for years.

“It is likely that the nation will have to weather more high-profile drinking water contamination incidents before public opinion forces action,” University of California engineering Professor David Sedlak wrote for the Pew Charitable Trusts in 2019.

A loss of potable water can be life-threatening for

some residents. It can also be devastating for commercial operations, such as restaurants, forcing them to close down or to truck in bottled water, ice and portable restrooms to serve a dwindling number of patrons.

While frozen pipes may often be covered by commercial insurance policies, a loss of water service from flooding, from a loss of power or from a lack of maintenance usually is not — unless policies include special endorsements. And policyholders are not always knowledgeable enough in insurance matters to request the needed coverage, experts said.

The crisis facing American cities may now present insurers, insurance agents and brokers with grim

new opportunities — and potential pitfalls — in assisting businesses with what could be a frequent and expensive headache in the months and years to come.

“If you can define it and can agree on a peril to be insured against, and a way to

measure damages, we’ll sell you insurance, if it meets the requisites,” said Bryan Tilden, a former broker, a lecturer and an expert witness on insurance coverage issues. He explained that, despite the growing need to make businesses aware of gaps in

their coverage, insurance agents may be somewhat constrained. Courts and regulators have sometimes frowned on solicitation or upselling by agents. That can, in essence, make agents the “insurer of last resort,” potentially exposing them to lawsuits from underinsured policyholders, Tilden said.

A safer approach is to reach out to potential clients through trade associations. And vulnerable businesses need to take it upon themselves to ensure they’re fully insured, said a Memphis restaurant owner who felt the full force of an infrastructure failure but was largely protected by business interruption insurance.

“My advice is, do your continued on page 20

Water on tap at a Jackson restaurant. (AP Photo/Rogelio V. Solis, File)

Closer Look: Business Interruption

continued from page 19

due diligence and read your insurance policy,” said Shawn Danko, owner of the Kooky Canuck restaurants in Memphis, known for their 6-pound hamburgers.

In early 2021, Memphis suffered a widespread loss of water service after a severe deep freeze gripped the area. Danko’s restaurants lost out on revenue for eight days — a $30,000 loss. But it was a covered peril and his carrier paid promptly on the claim, he said.

Danko, who is also the incoming chairman of Hospitality TN, formerly known as the Tennessee Hospitality and Tourism Association, urged other business owners to investigate their coverage and add endorsements as needed.

“If you have to make cuts, don’t let it be your insurance coverage. You might think you’re saving money but it’s not worth it if something happens,” he said. “Make sure your policy covers you, in one way

or another. If it takes a special endorsement, add it. It’s your livelihood that’s at stake.”

Insurance agents in the Southeast said they’ve heard little from businesses about amending their coverage in the face of growing infrastructure threats. But Danko said many company owners may not be aware of the extent or the limits of their business interruption policies.

“I know there are some people who have coverage but they don’t realize it. They didn’t utilize it after the freeze,” he said. “And their carrier never called and offered to help. Claims went unfiled.”

Utility-loss coverage can be nuanced. Businesses can purchase off-premises utility policies that cover freezing and breaking of pipes upstream in the municipality’s water system, agents have explained. A tornado strike on the pumping station also would be likely covered in many cases.

But if the city water system is damaged by flooding, as was the case in Jackson in

August 2022, that’s not generally covered without a special arrangement, sometimes known as difference-in-conditions and difference-in-perils. It’s something like an umbrella policy that wraps around the business’ property insurance coverage.

“But these are highly sophisticated techniques,” Tilden said. The average restaurateur may not know to buy that type of instrument.

Some national restaurant chains require franchisees to buy extensive coverage with all the bells and whistles, but some don’t, he noted. And even if a business policy includes a utility loss, the carrier may argue that it was lack of maintenance to the municipal system — not freezing — that caused the water service to collapse, Tilden explained.

That is exactly what appears to have happened in Jackson, the capital of Mississippi, after city officials said they’ve been unable to afford significant upgrades to the decades-old water system. Businesses there

have reported that their losses have not been covered.

“These cities that have neglected their water systems for so long; they have to do the maintenance or it’s not covered and everyone’s in trouble,” said Ron Travis, chief executive officer of Big I Tennessee, and Insurors of Tennessee, an association of insurance agents. And insurance can’t cover every conceivable loss, insurance groups have said.

“I think they are good coverages to recommend and have in place, but not all loss of utility is covered,” said Chris Boggs, vice president of agent development, research and education for the Independent Insurance Agents and Brokers of America.

Millions in federal funding were recently set aside to tackle some of Jackson’s enormous water problems. The $1.2 trillion infrastructure bill approved by Congress in November is designed to provide some assistance for other cities with similar problems.

But Schofer and others have warned it may not be enough and won’t provide funds to maintain upgraded water systems in the years ahead.

One possibility for businesses and insurance agents to consider is the expanded use of parametric insurance, Tilden said. Parametric can provide a set amount of indemnity when agreed-on events occur, such as flooding, weather events or other disasters. Parametric is not authorized in all states, and it should not replace standard coverage, he noted.

But as an addition to a business policy, “this is a classic example of where parametric would have a beautiful use.”

The city of Jackson’s O.B. Curtis water treatment facility. (AP Photo/Steve Helber, File)

Special Report: Emerging Markets

10 Emerging Risks & Markets to Know About

By Chad Hemenway, Don Jergler, Andrew Simpson & Andrea Wells

Insurance Journal examined industries experiencing changes and a few challenges due to economic forces, tough insurance market conditions, and societal pressure. Here are 10 industry sectors that could see new and emerging risks in 2023 and beyond.

Cyber Complexities

It may be a long time before cyber risk finds itself off a list of emerging risks. Though firmly established as a wellknown concern, cyber risk remains dynamic and complex.

Rate increases for cyber insurance started to stabilize in 2022 following a period of recalibration by cyber insurers to stem loss ratios as they put even more emphasis on underwriting discipline with a focus on a policyholder’s controls and overall cyber hygiene.

Primary and excess cyber insurance renewals were flat to +25% in the fourth quarter

2022 — a big change from possible +200% renewals seen not too long ago. There are signs that capacity is broadening, according to WTW’s “Insurance Marketplace Realities 2023.”

“An increased level of competition from cyber underwriters eager to write new business following the recalibration of cyber rates last year has led to more nominal rate increases when organizations can demonstrate good cyber security controls year over year,” the broker summed up the situation.

2023 has already seen two significant developments in the cyber market. Specialist insurer Beazley launched the market’s first cyber catastrophe bond. The $45 million

bond gives Beazley indemnity against all perils more than a $300 million catastrophe event, with the potential for additional tranches to be released through 2023 and beyond.

Beazley said this is the first time that a liquid InsuranceLinked Securities (ILS) instrument has been created for cyber catastrophe risks.

“Given the ongoing challenge of the imbalance of supply and demand for insurance capacity, the opportunity for material ILS transactions to occur there is to be seized in 2023,” said Oliver Brew, cyber practice leader at Lockton Re. “This year could prove to be an inflection point, in which

ILS becomes a regular source of capital to address the catastrophe components of cyber risk. This will provide much needed additional capacity to flow into the market.”

Additionally of note already this year, the Lloyd’s Market Association issued a bulletin to update exclusions for state-backed cyberattacks in standalone cyber policies to continue efforts to limit systemic risk and clear up coverage uncertainty. Eight new clauses replace the original suite of cyber war clauses published in November 2021.

Systemic risk will get increased regulatory scrutiny in 2023, according to market players. A focus will be on critical infrastructure industries such as financial services, energy, health care and communications, and will extend to several other sectors,” said a 2023 cyber insurance market outlook from Arthur J. Gallagher.

Cannabis Trends

Several macro trends undergird the health of the cannabis insurance sector in the year ahead, but perhaps none are as weighty as the volatility in cannabis flower prices in mature markets.

Some Western U.S. states face a glut of supply that have put downward pressure on prices, hurting already struggling small and midsize operations in these states. The effects of the volatile pricing promise to trickle down on cannabis insurance in the coming year.

An added drag on the cannabis industry is a downward trend in capital coming into the market, as financiers put the brakes on their enthusiasm for the green rush.

Roy Bingham, CEO of cannabis data firm BDSA, recently forecast continued cannabis flower price stagnation in states like Arizona, California, Colorado, Nevada and Oregon, as well as “substantial consolidation of both the brands and retailer operators.” Bingham

said he sees the pricing problems short-term and merely a step in the continued evolution of a newly emerging industry.

It’s not all negative. Massive growth is forecast in newly emerging East Coast markets, particularly with New York rolling out adult-use sales. These new East Coast markets promise to bolster the industry through what appears to be the first challenge in the short history of its legal existence.

Retail insurance brokers are feeling the impact of falling flower pricing, which is pinching operators’ bottom-lines, resulting in some businesses cutting their insurance spend.

Despite the fervor that drove so much monetary and human capital to the green rush of the past few years, insurers have been slow to get into the space — leaving those who work in insuring cannabis without an overabundance of competition.

That lack of capacity has been good for those steeped in the specialty, but bad for businesses that face high insurance rates. While cannabis insurance

capacity has improved in recent years, it’s expected to be a challenge into the foreseeable near future.

Jay Virdi, chief sales officer for Hub International’s cannabis specialty practice, who oversees a force of roughly 200 brokers who specialize in insuring cannabis, is one of those who believes lagging capacity will continue to prop up high rates in certain lines.

“There are a couple more players that are entering,” he said on a recent Insuring Cannabis podcast on InsuranceJournal.tv. Favorable reinsurance terms and profitability brought some capacity into the market in 2022 for certain lines. But it’s still not enough, he added.

Lines like crime, environmental and cybersecurity are “very challenging segments,” he said.

Flower prices are down for now, but cannabis is a large industry that includes myriad consumption forms, and it extends into other commercial segments.

Subsets of the cannabis industry include CBD, or cannabidiol, a compound found in marijuana that is non-impairing. CBD is often used for therapeutic purposes like pain and stress relief.

Many projections call for rapid growth of CBD products, as CBD is being increasingly included in beverages, foods, supplements, and beauty products. Recent data from IBISWorld put the market size for CBD alone at over $2 billion, with

growth in revenue projections at 28% from 2023 to 2024.

The Food Network

The food supply chain that runs from farms to tables is enormous, complex and, obviously, supremely important. Agriculture, food, and related industries contribute 5.4% to U.S. gross domestic product and provide 10.5% of U.S. jobs. On average, Americans spend 12% of their household budgets on food.

The food chain includes people and companies in production, processing, distribution, consumption and disposal. The network includes owners, growers, pickers, animals, crops, shippers, truckers, cargo, butchers, packers, grocers, cooks, caterers, waiters, food trucks, pantries and recyclers. Their operations are different, but they depend on one another and on insurance to manage some unprecedented risks. The pandemic exacerbated certain vulnerabilities in the network, and then inflation came along.

The other risks the network faces include extreme weather, labor shortages, shipping disruptions, materials scarcity, energy costs, import restrictions, safety requirements, wage pressures, government regulations, equipment break-

Special Report: Emerging Markets

downs, chemical exposures, liability issues, changing consumer preferences and cyber risks. Not to mention human errors, mental stress, bad actors, employee attitudes and generous juries.

Wherever or whenever the risks descend, insurance is critical including: To rebuild a vineyard destroyed by a wildfire and implement a recall of contaminated peanut butter. To nurse a waitress injured after slipping on a greasy floor and care for workers burned in a poultry plant accident. To defend a claim that a granola is organic and replace inventory after the refrigeration fails. To settle discrimination claims by former employees and respond to an allegation of food poisoning.

Current trends are a recipe for challenge and change. Consumers are demanding increased transparency over where and how their food is produced. Farms are diversifying by adding specialty crops such as hemp, herbs and mushrooms. Meats are being grown in labs. Kitchens are cooking up plant-based foods, mood foods and butter boards. Technology is also on every menu. Be on the lookout for more regenerative farming, smart packaging, DNA fingerprinting, biosensor testing, autonomous trucks and tractors, ghost kitchens, robochefs and even bioplastics.

Like businesses in other sectors, many are also looking to reflect social responsibility in their operations. Insurers will need to know what controls and monitoring systems a business has in place and what

changes a business makes. Insureds should be hungry for custom risk management and insurance. But the question is: Will they be able to stomach the prices?

Renewable Energy

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.

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, this emerging technology comes at a much higher price tag that may not appeal to buyers.

Plus, carriers have begun charging solar developers higher premiums with large deductibles in response to recent hail losses. “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 insurance for zero-carbon assets. That’s changed, he said. “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.

The wind energy sector, the most prevalent source of renewable electricity in the U.S., has also 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.

While the U.S. renewable energy market growth slowed its pace in 2022 due to rising costs and project delays driven by supply chain disruption, trade policy uncertainty, inflation, increasing interest rates, and other delays, growth in this emerging sector is likely to accelerate in 2023, according to a recent report by Deloitte.

In 2023, the sector is expected to see continued growth in new areas, such as offshore wind, clean hydrogen production and low-income solar programs.

“Overall, as the industry heads into 2023, soaring demand and attractive, longterm incentives are creating strong tailwinds, but there’s still a patch of turbulence to get through,” Deloitte says.

Environmental, Social and Governance

Environmental, social and governance continues to be an important topic across all industries but being ESG and promoting a company as being ESG is not without risks.

Credit rating agency Moody’s recently forecast heightened ESG credit risks this year. The

risks were heightened by economic and political turbulence caused by the COVID-19 pandemic and Russia’s invasion of Ukraine.

According to Moody’s, company emission reduction efforts will come under increased scrutiny as more ambitious, transparent and credible objectives are required by investors despite short-term energy security concerns.

Some lawsuits began to emerge last year over companies overstating their ESG practices. Jonathan Meer, an attorney with Wilson Elser, talked to Insurance Journal for a recent podcast about the risks.

Meer is advising clients to look closely at the ESG claims being made.

“Is that something you’re saying, but you’re not going to do it, or try to do it, or make substantial efforts to do it?” he said. “So, if you’re a company that says, I am going to invest in ESG-type entities, but you are not, that’s when the liability could potential be.”

He added: “Are you going to walk the walk? Are you going to … have diversity in the workforce and actually do something about it? Are you going to try to have the best cyber policies as you say? Or you’re just saying it to get the companies to feel better about you, that’s where the potential

concerns can come in from, for those D&Os.”

While ESG seems to be all the rage, it may not be as big a deal as some think.

Bloomberg recently reported the U.S. market for ESG-related products is less than half the size previously reported.

The U.S. SIF Foundation reported sustainable assets totaled roughly $8.4 trillion in 2022, down from the $17.1 trillion stated two years ago. One reason for the drop could be tied to the risk of companies overstating their ESG attainments.

Europe has started stripping ESG labels from funds amid stricter rules in the region, and Asian regulators have also set stricter standards, Bloomberg reported.

Crypto Market

Months of turmoil in the cryptocurrency sector has toppled several major crypto investors, lenders, and exchanges as $1.3 trillion was wiped off the value of crypto tokens. Crypto exchange FTX headlined the bankruptcies after billions of dollars were withdrawn in three days, and charges were levied against its CEO.

Recent developments have shined a spotlight on the crypto market, which typically means increased regulation for the crypto industry.

The Securities and Exchange Commission is sharpening its teeth when it comes to crypto firms. Federal lawmakers have introduced bills to tune cryptocurrency regulation.

The Federal Reserve, Federal Deposit Insurance Corp., and the Office of the Comptroller of the Currency (OCC) said they are concerned about the safety and soundness of bank business models that are highly concentrated in crypto and about fraud and misleading statements from crypto firms, as well.

The insurance industry had been warming to the crypto market, introducing some solutions despite concerns of meager regulation as well as volatility. But old fears resurfaced, as well as reports that insurers were denying or limiting coverage to clients with exposure to FTX.

Nevertheless, the need for crypto insurance will remain and may be stronger. In fact, insurance may be an angle for crypto firms to attract investors once more. Firms have advertised their insurance purchases to bolster trust and pick up business, said one broker, who added submissions for tech E&O, D&O, Cyber and Crime insurance have been rolling in steadily.

Healthcare: In-Home Care and Mental Health Services

Within the healthcare sector, two subsectors in particular appear to present opportunities: home health care and mental health care. Demand for their services is expected to increase even as they face challenges, particularly in staffing, to meet those expectations.

The market for mental wellness will be driven by the increased awareness of mental illnesses, more government initiatives supporting mental health services, the increasing role of employers in providing mental health benefits, the continued aging of the population and a growing appreciation of the value or earlier intervention.

The launch of the 988 national suicide prevention line in 2022 is one new service that could drive demand. The market is expected to rise from about $80 billion in

Special Report: Emerging Markets

any retail segment.

to travel again.

2022 to $105 billion by 2029, according to Fortune Business. Executives see inflation, the threat of recession, and potential corporate layoffs in 2023 as creating a greater need for behavioral services as well as a financial challenge on providers.

Healthcare is becoming more consumer-driven — and home-oriented. A recent survey by JPMorgan of leading healthcare executives found that nine in 10 industry leaders said they plan to complement their traditional models, with a majority (52%) considering in-home care (52%) and virtual care (51%). Consultants at McKinsey found that traditional home health and personal-care services still make up about two-thirds of home health market revenues. However, emerging home care segments such as home infusions, home-based dialysis, primary home care, and hospital-at-home models are growing rapidly. These services tend to be more complex and reliant on technology including data from wearables and home monitoring devices.

Some in the field believe the staffing challenges in health care will ease in 2023, while

others are not so optimistic.

Cybersecurity and fraud remain a widespread concern. More than two-thirds (71%) of those surveyed by JPMorgan indicated they have been directly impacted by cyberattacks in the last six months.

Behavioral Health Business expects more newcomers will enter the field and established providers will expand beyond mild to moderate mental health conditions to address more serious conditions. And while there may be more digital providers, it’s unlikely they will impact this space.

Pet Services

A 2019-2020 National Pet Owners Survey found that two-thirds of American families have at least one pet. The data varies on how many households have added pets since the pandemic, with one report indicating five million and another 12 million. But a rise in pet ownership is a main driver behind what continues to be a boom in spending on pet services. Morgan Stanley Research predicts such spending will rise 143% by 2030 to $118 billion, which represents an 8% annual growth rate, one of the largest rates of return in

Demographics also play a role in the spending spree on veterinarian medical care, grooming and boarding, and pet food. Morgan Stanley Research found that younger Americans (18- to 34-years-old) account for 32% of those with new pets, which is good news for the pet industry as these owners tend to spend more on food, treats and care for their pets. More and more of these owners like to pamper their pets with luxury items, gourmet foods, organic treats and accessories, even Halloween costumes — indulgences made easier by savvy online sellers and subscription services. They are also buying supplements like hemp chew sticks and fish oils for allergies. And, yes, there is such a thing as pet tech that includes self-cleaning litter boxes and collars with GPS trackers.

Another driver for the industry is the increasing adoption of pet insurance that is boosting demand for veterinarians, who have also been expanding their care to include medications, wellness services and diagnostic tests that previously were available only to humans. According to the Bureau of Labor Statistics, veterinary positions are projected to grow 16% by 2029, nearly four times the average of most other occupations. Vet tech jobs are expected to increase nearly 20% in the next five years. The number of pet stores is estimated to be 12,800, according to IBISWorld., and growing.

Pet boarders and sitters who may have struggled during the pandemic should now benefit as owners start

This labor-intensive industry faces its share of risks including staff shortages and burnouts, rising wages and rents, and increased competition. There are bite, scratch and kick wounds and strains, sprains and back injuries. Liability lawsuits are not all that common, and damages are limited. However, as more people perceive their pets as members of their families, have support animals, and bring their pets with them to more places, the liability picture may change.

Success in this business is not a walk in the park. Survival requires hard work, innovation, discipline, talent, and, increasingly, technology such as AI in customer service and in the surgical unit. But it can be rewarding and profitable.

“It’s a huge growth industry,” one veterinarian insurance veteran told Insurance Journal. “I’ve had colleagues tell me, ‘If you go out of business now, you would have to be trying.’”

$930M to Curb Western U.S. Wildfires Crisis

By Matthew Brown

The U.S. is directing $930 million toward reducing wildfire dangers in 10 western states by clearing trees and underbrush from national forests, the

Biden administration announced in late January, as officials struggle to contain infernos made worse by climate change.

Under a strategy now entering its second year, the U.S. Forest Service is trying to prevent out-of-control fires that start on

public lands from raging through communities. But, U.S. Agriculture Secretary Tom Vilsack acknowledged that the shortage of workers that’s been plaguing other sectors of the economy is hindering the agency’s wildfire efforts.

He warned that “draconian” budget cuts floated by some Republicans, who control the U.S. House, could also undermine the Democratic administration’s plans. Its goal is to lower wildfire risks across almost 80,000 square miles of public and private lands over the next decade.

The work is projected to cost up to $50 billion. Last year’s climate and infrastructure bills combined directed about $5 billion to the effort. He added that fires on public lands will continue to threaten the West, after burning some 115,000 square miles over the past decade – an area larger than Arizona – and destroying about 80,000 houses, businesses and other structures, according to government statistics and the nonpartisan research group Headwaters Economics.

The sites targeted for spending in 2023 cover much of Southern California, home to 25 million people; the Klamath River Basin on the Oregon-California border; San Carlos Apache Reservation lands in Arizona; and the Wasatch area of northern Utah, a tourist draw with seven ski resorts. Other sites are in Idaho, Oregon, Nevada, Washington state, Colorado, New Mexico and Montana.

The idea is to focus on “hotspots” that make up only a small portion of fire-prone areas but account for about 80% of risk to communities and developed infrastructure.

Copyright 2023 Associated Press. All rights reserved.

Political Risk

Economic uncertainty and disruptions in the global supply chain continue to worry business leaders who report feeling unprepared for growing geopolitical risks and inflation.

The geopolitical and macroeconomic shocks that occurred during 2022 included the war in Ukraine, fractured energy markets, 40-year high inflation, interest rate hikes, depleted capital and Hurricane Ian, the second most expensive natural disaster.

Aside from war, businesses are also concerned about increasing disruption from strikes, riots and civil commotion activity as the cost-of-living crisis affects many countries, according to Allianz’s Risk Barometer 2023.

Across the UK and U.S., fewer business leaders feel well prepared to manage geopolitical risks and concerns about the possible consequences of war — notably, war and terrorism risks and economic unrest — are off the scale compared with a year ago.

Inflation is a dominating concern, said Beazley in its report titled Spotlight on Geopolitical Risks published

in mid-2022.

The report emphasized that business leaders need to better understand their geopolitical risks and prepare for and seek to mitigate them where possible. Specialist political risk, trade credit and terrorism insurers have a role to play in providing appropriate cover that provides the risk mitigation that they need, it explained.

Further, businesses will need to consider the likely heightened need for additional insurance cover such as D&O and trade credit.

Commenting on the scourge of deadly weapons attacks in the U.S., the report said, the U.S. domestic threat environment “is almost as challenging as overseas.”

The report indicated that it is vital that U.S. risk managers are not complacent about this risk. They need to actively prepare “to help prevent and mitigate the impact of these horrendous incidents,” according to Chris Parker, head of Terrorism and Kidnap & Ransom, who was quoted in the report.

Secondhand Treasures

The resale industry is one of the fastest growing segments

of the retail economy. While there remains discrepancy on the annual revenues reported for the U.S. resale industry, estimates show this is a thriving multi-billion dollar sector of the economy.

First Research, a division of Dun & Bradstreet, estimates the used merchandise industry in the U.S. includes about 20,000 stores with combined annual revenue of about $15 billion.

The secondhand and resale market is forecast to reach about $53 billion in 2023, according to the annual forecast from thredUP, an online resale marketplace. A report by GlobalData estimates that the U.S. secondhand market will more than double by 2026, reaching $82 billion.

Coresight Research, a global research and advisory firm specializing in retail and technology, reported recently that it expects continued momentum in 2023 and 2024, with year-over-year growth of 14.6% and 13.0%, respectively.

The luxury resale fashion industry will gain market share this year, driven by consumer demand for pre-owned luxury, the resiliency of luxury shoppers in an inflationary environment and the more

affordable offerings of luxury resale platforms, according to Coresight. Luxury players including Balenciaga, Kering, Gucci, Valentino and Coach all stepped up their involvement in the resale space.

There are numerous reasons for the growing popularity of resale, says The Association of Resale Professionals (NART). One reason for the growth in this sector is the public’s increased awareness of recycling, NART says.

“People would rather consign, sell or donate their unwanted or unneeded items than add to the waste stream,” NART’s website says.

Increased consumer commitment to resale has resulted in new shops being opened throughout the country.

NART offers its members an exclusive insurance program designed specifically for resale and thrift shops through The Horton Group, underwritten by Travelers Insurance.

“More and more consumers will consider buying secondhand clothes, bags and accessories to avoid the overall resource waste in the fashion market and extend the lifecycles of fashion products,” Coresight wrote in its recent report on the sector.

2022 AGENTS of the Year

Welcome to Insurance Journal’s Agents of the Year report. This report features 25 agents who defined what it meant to be a successful independent agent in 2022. These agents are more than top sellers. While they have achieved impressive success in sales and demonstrated laudable business intelligence

and entrepreneurial skills, they also have shown they have a passion for what they do and a commitment to professionalism and, in many cases, specialization. For them, being an insurance agent is more than a job. Insurance Journal’s Agents of the Year come from all regions of the country, live

and work in cities or towns big and small, and know the importance of giving back. Information included in this report was voluntarily submitted online by agents and was supplemented by other public information sources. There are many more agents who deserve mention than are profiled here.

Jonathan Axel

The Liberty Company Insurance Brokers

Woodland

Hills, California

New York native Jonathan Axel has lived in Los Angeles for over 25 years. His areas of specialty include cultural institutions such as performing arts centers, museums, community centers, live entertainment, technology, and all aspects of apparel, from manufacturing to retail and online services. Axel has 30 years of experience working in property, casualty and financial insurance products. Before joining Liberty, he was at HUB International for 11 years and with Marsh for 14 years. He said the insurance industry is facing several challenges, chief among them attracting talent, investing in human capital, and fostering a diverse and inclusive industry. “The next generation that is coming into our industry needs to be part of the solution,” he added. “They will need to be able to create new risk methodologies, be experts in their fields of study, understand the moral implications of these new technologies, and be able to work together to face these new challenges.” Keeping up with client needs will mean increasingly looking outside the insurance industry for expertise, he added. “Hiring economists, environmentalists, mathematicians, computer scientists and other experts in their fields, and assisting them to understand the insurance industry as an attractive place to work will be critical.”

Ray Roentz

Heneghan White Cutting & Roentz Insurance

Jerseyville, Illinois

Ray Roentz doesn’t dally. Since launching his insurance career in 2009, he has earned big awards, purchased the majority interest of his business and surrounded himself with a successful team. The biologist-turned-insurance professional isn’t in a lab, but he’s implementing a winning formula. Heneghan, White, Cutting & Rice Insurance Agency hired Roentz as a producer in 2012 — and he immediately began preparing to purchase the agency. Roentz earned the Illinois Young Agent of the Year award in 2017 and was named the state’s Independent Agent of the Year in 2022. HWCR was also named the state’s 2022 Agency of the Year. Small businesses cover approximately 80% of its commercial book; nearly 50% of that number were new start-ups when first added. Roentz values lifelong education. He also values continued growth. “I would never be so bold to consider myself as a ‘top agent’ because I owe a good deal of my success to many gracious agents who have taught me a lot over the last 10 years,” he said, “but if forced to make such a tag, I’d say that I should be considered as a top agent because no matter what level of success I achieve, I continue to improve every year, month and day in the service of my clients and this industry.”

Chip Renno

Snellings Walters Insurance Agency Atlanta, Georgia

Chip Renno is a relationship builder. “What has been most helpful to me in growing my book has been, first and foremost, is taking great care of my existing clients with a very proactive service and marketing strategy model,” he said. “I strongly believe in the independent agency system and in continuing education for myself and for my valued clients.” He specializes in manufacturing, distribution, artisan contractors and service companies. “For over 30 years, I have worked diligently to be an advocate and commercial insurance/risk management advisor/agent for a variety of my valued commercial P&C clients,” he said. His career has taken him through a few long-term stints with independent agencies, and in 2018 he joined the team at Snelling Walters as a producer. He became principal and board member in 2021. He credits his excellent service team with helping him build his reputation. Every team member works with a high sense of urgency to go above and beyond to exceed clients’ expectations, he said. “My exceptional team is able to help free up my time so that I can spend quite a bit of each day on building relationships with others and prospecting for new business,” he said. “Referrals from clients and others in my community help me continue to grow my client base each and every year, and I am very thankful for all of those that I work with each and every day.”

2022 AGENTS of the Year

Steven

Baggett

Insurance Office of America Gainesville, Georgia

Steven Baggett’s primary focus is dealerships, including RV, marine, motorcycle, equipment, trailer and auto dealers. He has a significant focus on property, focused on resorts, timeshares and RV parks, as well. He also works with construction, including general contractors, developers and trade contractors. Baggett joined IOA in 2018 from a position as a marketing rep with Federated Mutual. At IOA, he started from scratch. “I wanted to build a book with difficult classes of business where the clients needed a true expert,” he said. “Large garage risks are complex and have few carrier options. We have built a program for the open lot coverage for a specific group of dealers. We grew it by 40% last year.” Technology helps Baggett create a seamless experience for his clients, from scheduling meetings to fillable apps and forms to providing ongoing updates. He’s helping bring his entire team up to the cutting edge as a Salesforce coach for IOA producers and by assisting producers in optimizing their use of efficiency-building technologies such as Calendly, Zoominfo and email marketing. “Lastly, I am a hustler, a grinder,” Baggett said. “I love the work I do; I love fixing problems and providing solutions. The next 12 months will be the largest growth year because of the programs and specialties I have focused on for the last two years.”

Laura Noderer BKS Partners

Tampa, Florida

Laura Noderer likes to make connections and collaborate with her clients to guide them through their most challenging insurance needs. An independent insurance advisor since 2015, today she works with successful, accomplished individuals and families with complex private insurance requirements. She specializes in high-valued homes, autos, collections, equine/farming risks, coastal properties, multiple and jointly held properties, domestic staff, board participation and international travel. “I analyze their risks and collaborate with my clients to design customized solutions with the goal to ultimately deliver them peace of mind.” Noderer finds the best strategy is first to help her clients define and set their goals. Those goals serve as the foundation for building the right private risk program. She is always prepared to bring other partners on board to ensure a client’s best interests and needs are being met. One of the books from which “I gleaned my approach early in my career was ‘The Go-Giver’ by Bob Burg and John Mann,” she said. “It really sets the goal to be a good connector for people in general, and they remember this, and in turn, business will always increase. In the next year, I plan to partner with more external and internal centers of influence to better strategize how we can help each other grow.”

Adam Frugoli Leavitt Group Idaho Falls, Idaho

If you want to reach Adam Frugoli, you may have to call his satellite phone. Frugoli lives in a small community of about 60,000 people in rural Idaho. But he spends many hours on the road to become a top insurance specialist for doctors in the state. He’s often in rural areas with no cell service, so he carries a satellite phone. “I tell my clients, 'I work when you work,'” Frugoli said. “I’m never unavailable.” Frugoli went into specializing in the healthcare sector full-time after the Affordable Care Act passed. Today he specializes in small to medium-sized hospitals and senior health, and represents several hundred doctors around the U.S. “I was raised by a single mother and learned at an early age that selling things of value could get me the things I wanted,” Frugoli said. “This is a career that you can come from poverty and become someone very respected in your community and live a great life!” At 43, he is celebrating 22 years in the industry. He credits persistence and consistency with his success, recently landing a healthcare client he had worked on for 10 years. And once he gets them, he keeps them, claiming a 98% to 99% retention level. “I feel I’m just hitting my stride and am planning for more growth in several other states with exclusive products and carrier relationships.”

2022 AGENTS of the Year

Christian Smith Kern Insurance Bakersfield, California

Years of underwriting large-frame course of construction insurance and apartment schedules with a global insurance carrier made Christian Smith a successful broker. Ten years after making the move, he specializes in construction and real estate. “Given my underwriting background, I possess a unique ability to structure and place high-hazard risk on behalf of my clients. 95% of my book of business is in those industries,” he said. After six years with Heffernan Insurance Brokers, including three years as a top 10 producer, Smith moved to Newfront Insurance Services as a partner. After four years at Newfront and through their merger with ABD, he accepted a partner position with PCF Insurance Services’ Kern Insurance agency, where he serves as a national resource on construction and real estate risk. It was a natural transition, Smith said. “Even from my early days as a broker, I was consolidating and redesigning insurance programs for large real estate developers and owners, as well as clients in the hospitality and entertainment sectors,” he said. “My clients hire me and stay with me not only because I understand their risk exposure as it relates to their specific operations but because I educate them along the way.”

Jason Upton

The

Upton Group (Acrisure)

Guntersville, Alabama

Jason Upton went from delivering pizzas at the age of 16 years old to owning an agency specializing in insuring pizza franchisees. Upton spent about 24 years with Domino’s, beginning as a driver and ending with 17 years as a successful franchisee. In about 2009, he started making referrals to his insurance agent, and within a few months, that agency wanted him to join their ranks. Upton opened his own agency in the fall of 2010. “My mission, our mission is simple: help franchisees,” he said. “We identify our client’s needs, and we find solutions. If there isn’t a solution, then we create one!” His success is rooted in having a background that makes him authentic and trustworthy to his clients. His clients know that he knows the operations and the coverages specific to their business. “Without question, my personal experience in the pizzeria world and franchise world has been most helpful to growing my book,” Upton said. “Without those years and years of spinning pies, none of this would have been possible.”

Aubrey Cook

Presley Insurance Group Dallas, Texas

Aubrey Cook started at Presley Insurance Group as a single agent just over five years ago. “We now have over seven agents working here,” Cook said. The company has a “How much? How fast?” mentality balanced with the pride they take in educating clients on products and proper insurance, he said. The team found quick success by building channel partners that included loan officers, realtors and others in the real estate field while rates were low. People were buying new homes and others were taking advantage of low rates to refinance. “Through our partnership with lenders and brokerages, we were able to capture the ability to at least quote each home involved in a mortgage transaction.” Even though the market has cooled, Cook said the agency’s book of business now organically generates business to prevent any reduction in sales. “Of our staff, three agents have purchased homes for their families for the first time, while two others have been able to lease apartments and move out on their own,” Cook said. “As an agent and principal, I pride and judge myself based on the success of those around me each day in the office.”

2022 AGENTS of the Year

Robby McGehee

Smith McGehee (Acrisure)

St.

Louis, Missouri

Robby McGehee started his professional career as a star on the racetrack and was named Rookie of the Year at the 1999 Indianapolis 500. When he retired from racing in 2004, he put his ambition and winning attitude to work in the insurance industry at Huntleigh McGehee Inc., leading a team in risk management for a large international real estate developer. He joined Smith McGehee Insurance Solutions as president in November 2011, specializing in international residential real estate development and construction. “For me, it started with three basic concepts that my father (who was in the business 50 years) taught me — honesty/integrity, knowledge of the business, and willingness to serve,” McGehee said. His expertise includes the assessment and management of land development, horizontal construction, vertical construction and international risk exposures. In his day-to-day work, McGehee follows those three basic concepts that his father, a 50-year industry veteran, passed down to him. And he pursues growing his book with the same determination he showed on the racetrack — with vigor to win.

Benjamin Rathbun

The Rathbun Agency

Lansing, Michigan

The insurance industry is in Ben Rathbun’s blood. He is the third generation of Rathbuns at the helm of the family agency his grandfather’s two brothers founded in 1956. Rathbun joined The Rathbun Agency as a business and personal insurance agent in 2014 and became a partner in 2019. In 2021, he took over the role of president. Rathbun is invested in the future of the industry and developing up-and-coming talent. He serves the Michigan Association of Insurance Agents as a past chair of the Young Agents Council. He is an active volunteer in several nonprofits that serve youth, including the Insurance BFF Mentorship program within Lansing School District’s insurance and risk management program. The program pairs high school students one-on-one with an insurance professional for a semester-long mentorship. Rathbun also serves on the board of Insuring MI Future, which facilitates and promotes opportunities for a diverse network of students to pursue a career in insurance. He also serves the Michigan Association of Insurance Agents as a past chair of the Young Agents Council. The agency is involved with several local nonprofits, and Rathbun founded the nonprofit For Good Foundation, dedicated to diversifying the independent agency distribution channel. “Community is at the fabric of all we do,” Rathbun said.

Michael Ferraro

Woodruff Sawyer

San Francisco, California

As senior vice president of Woodruff Sawyer’s Management Liability practice, Mike Ferraro feels he has the best seat in the house. “I have a front seat and insight into exciting industries like tech and biotech,” Ferraro said. “From new treatments to cancer to what travel will look like in five years, I get to see how the world evolves and changes. I work with brilliant people and get a behind-the-scenes look at true thought leadership and ingenuity.” Ferraro specializes in developing and implementing both public and private company D&O liability programs, ranging from small start-ups to Fortune 500 corporations. He works with a variety of industries, but tech and biotech are his most extensive areas of focus, making up about 70% of his client base. With over 23 years at Woodruff Sawyer, Ferraro has built long-lasting relationships with tech and biotech companies as they go through all phases of their development, including going public. Ferraro’s strategy is to empower his science-focused clients with analytics, the backstory behind big changes and the foresight to mitigate adversity. The results are his success story: clients who feel confident that they’ve made well-informed and thoughtful decisions.

2022 AGENTS of the Year

Cheryl

Forman

Rightsure Inc. Tucson, Arizona

After 20 years as an agent, Cheryl Forman sees being a trusted advisor to her clients as one of her greatest accomplishments. She has worked on the independent side for almost 15 years after working five years for a captive agent. “I love the fact that I am able to offer an array of different products and carriers as an independent agent,” she said. “I feel that has made me successful in a lot of ways.” Having the opportunity to offer so many different carriers and great referral sources helps her retain and grow her book, she said. “I have some awesome long-term clients that have trusted me with their whole family,” she said. “That says a lot about what they think about me as an agent. I love the fact that I can be their top trusted advisor. It has been a truly rewarding experience.”

Adam DeSanctis

DeSanctis Insurance Agency Inc. (Acrisure)

Woburn, Massachusetts

At an age when most teens are clueless about careers, Adam DeSanctis was already starting his insurance industry success story. After starting in the mail room at age 15, DeSanctis worked his way up to vice president at age 25. He took over the family business at 27. Desanctis Insurance Agency Inc. acquired another privately owned surety specialty agency 12 years ago, then partnered with Acrisure in 2018. Today, the agency specializes in property/casualty and surety for the construction industry in the New England region. DeSanctis credits the company’s continued new business success to a team that combines the enthusiasm of younger, highly motivated talent with the mentorship and expertise of seasoned pros. “I believe our DeSanctis Brand, coupled with the size and scale of Acrisure, will continue to lead to more opportunities both in our local market and also reaching a bit further,” DeSanctis said. “I think with the combination of knowledge and available markets, we are poised for continued growth.”

Blake Shannon Andreini & Company

San Mateo, California

Blake Shannon’s family has deep roots in agriculture, having farmed in central California for over 100 years. He worked in the family business that involved farming nuts and table grapes, trucking, green waste recycling, beef cattle and manure composting before his 1994 graduation from Fresno State with a degree in agricultural business. He started with Andreini after graduation, drawn to the agricultural industry niche. His focus includes grower-shipper packers, ag transportation, poultry operations, feed manufacturers, grain elevators, and all types of farming — vineyards, citrus, nut crops, blueberries — including large farm labor contractors. “I truly understand my customers’ needs, their industry’s hurdles, costs, and other issues that only a business owner can comprehend,” Shannon said. “My family currently operates four different businesses and employs more than 100 full-time employees. I have come across just about every type of claim, lawsuit and issue from both the broker’s side and the business owner’s side. I think that helps a great deal in relating to our clients.”

2022 AGENTS of the Year

Joseph Tejeda Rice Insurance Bellingham, Washington

Joseph Tejeda wants to help build the things that last. “I come from a family that is heavily involved in the construction industry, and it is something I was always proud to be a part of,” he said. “There is a special kind of achievement to see things become tangible and part of a community from start to finish.” Today, construction insurance and surety, project policies and insuring portfolios make up 95% of his book of business. Before insurance, Tejeda worked for his family business that does large masonry and stone public works projects. “My dad took enormous pride in his work, valued his employees, and had a phenomenal reputation in the industry, and my grandfather was inducted into the masonry hall of fame.” His respect for the industry and firsthand expertise, help him give his clients the support and services they need. Ultimately, he says, it comes down to knowledge, work ethic and being a good business partner for clients rather than a salesman. “What I knew about construction was a great jumping-off point, and it’s been an asset in the way of insight to support clients,” Tejeda said. “I believe this experience gave me the opportunity to partner with business owners in the way they truly need from their insurance broker.”

Shane Vander Giessen Rice Insurance

Bellingham, Washington

When Shane Vander Giessen graduated from the University of Washington in 2009, it was the peak of the recession, and job prospects were bleak. But he was ready to improvise. “I was able to convince a local brokerage to take a shot on me, paying me commission only while I lived in a renovated chicken coop to make ends meet while my wife finished college.” The career clicked. “I quickly realized an affinity for connecting with personal lines clients and became the agency’s top performing producer as a solely personal lines producing agent,” he said. After four years, he moved to Rice Insurance as their first personal lines-focused producer. “Since coming to Rice in 2013, we have now grown to eight full-time personal lines producers and grown the entire personal lines book by more than 800%,” he said. He credits internal managers that developed a top-notch in-house service team, including an in-house technology manager that keeps them on the cutting edge of leads, sales and service. “Insurance brokerages are at the precipice of having the same scalability of growth that large captives have had for the last decade-plus,” he said. “And I can’t wait to see what the next couple years hold!”

Mark Anelli Morris & Garritano

San Luis Obispo, California

Descended from a family of farmers in Italy, Mark Anelli specializes in wineries and agriculture, joining the industry after a detour onto the gridiron. The former NFL player joined Morris & Garritano after leaving the league in 2008 and currently serves as their regional vice president and senior risk advisor, heading up operations in Irvine, California. “I have developed a strong passion for agricultural science and viticulture going back to my experience with my family’s farm in Italy,” Anelli said. “It’s there I learned the challenges and intricacies of the industry and how to care for those involved.” Anelli’s agricultural background helps him develop meaningful relationships with his clients across the country, working to understand their challenges and find solutions that work. “In a particularly difficult market this year, I’ve been able to lean on my knowledge of the industry and expertise in the field to create specialty products and tailor innovative solutions for my clients,” he said. “I’m honored to be a leader among my peers where other brokers can come to me for advice and insight.” Anelli also volunteers in the community and helps create a new generation of leaders as the head coach for Newport Beach Seahawks Youth Football.

2022 AGENTS of the Year

Chris Huebener Brightway Insurance Jacksonville, Florida

Before kicking off his insurance career in 2008, Chris Huebener worked in the service industry for 10 years — and continued to work in a restaurant for four years while learning the property/casualty business. Today, he specializes in home purchases for first-time buyers. He’s been named the top agent within Brightway in sales production every year since 2012. Despite Florida’s challenging marketplace, Brightway continues to see growth year after year, working exclusively with referral partners. The agency receives more than 5,000 referrals per year. “Growing our book of business was never the intended goal, but to just take care of our clients, and the rest will follow,” he said. “We use many different strategies to help with our processes and are always adapting and growing our model in our office to keep up with the ever-changing market. ... Implementing different ways of communication, automation, and overall experience has catapulted us into our next phase of growth.”

Cameron Annas

Granite Insurance

Granite

Falls, North Carolina

Cameron Annas joined Granite Insurance in 2013 as a business risk consultant and quickly built what is known today as the Adventure, Amusement & Entertainment National Practice Group. In 2017, Annas was promoted to vice president of business development, where he led the organization through unprecedented growth ranging from 18% to 42% annually. Over the past seven years, the adventure, amusement and entertainment team has grown from one client to over 300 clients throughout all 50 states. In January 2021, Cameron was promoted to CEO. He also serves as the national practice leader for the Adventure & Entertainment team. “Surrounding yourself with a talented and high caliber team is the only reason I’ve been able to be successful,” Annas said. “Our whole team never takes our eye off empowering others! By focusing on empowering others, we continually are able to matched with the top clients in the adventure and entertainment industries across the United States.”

Edward Nagel II IBTX Risk Services (Acrisure) Addison, Texas

Edward Nagel started his insurance career in 1989 as a medical malpractice underwriter. The more he worked, the more he became interested in all areas of insurance and risk management. Ultimately, he found he relished the complexity of the commercial lines segment. Today, he deals with widely varying industries from construction, street and road, energy, food industry, manufacturing and distribution and transportation. In 1996, he moved to the Dallas-Fort Worth, Texas, area, where he got into the risk management sector of insurance. There he began to change how he partnered with clients, providing more consultative services so they could make more informed decisions on managing their company’s risk profile rather than just focusing on an annual renewal premium. He credits early mentorship from the insurance industry in both coverage and sales with influencing the unique perspectives that have led to his success. “Today, I embrace this knowledge when I mentor younger professionals in our industry,” he said. He added that everyone in the industry can benefit from ongoing training and education as the world becomes more complex and clients need more information and guidance. “I am actively pursuing and promoting this much-needed training and mentorship to benefit our entire industry.”

Francesca Forlivio Lipp

JMG Insurance Corp

Norwalk, Connecticut

Francesca Forlivio Lipp started at the scanner — and now she’s here. The Connecticut-based agent entered insurance as an intern who organized data and scanned documents to help her family agency go paperless. Today, she’s a top agent who splits her days 60-40 between protecting clients and working human resources. “After obtaining my P&C license, I started full time in human resources with no desire to sell,” she reflected. “After chatting with our producers and actively training with account managers and managers to learn coverages and forms with all 200+ carriers, I dove in and have not looked back.” Lipp works with individuals and families at JMG Insurance Corp. She specializes in personal lines insurance with a niche in high-net-worth clientele and habitational investments. That incredible feeling when clients glowingly refer her to friends, family and neighbors has guided her professional path. She said it has led her to phenomenal financial and real estate professionals. “Between these two streams, I am ever busy expanding my network and my clients,” she said. “I am very grateful to be continuously growing these last nine years with no intention of slowing down!”

2022 AGENTS of the Year

John Chamness Jr. Energy Insurance Agency Lexington, KY

John Chamness Jr. offers two words as the key to success: lifelong learning. “Overall, the important thing is not to become a dinosaur in any area, whether it’s regarding customer service, product knowledge, or sales expertise,” he said. “Dinosaurs become extinct. In the insurance industry, perhaps more so than in other fields of endeavor, staying current, staying educated, and staying engaged are the best ways to stay relevant and successful.” Four years ago, Chamness moved from a direct writing company to writing commercial business. In his first year, he wrote nearly 70 accounts, about 90% construction and contractors. Since then, that has been the primary focus of his book growth. Chamness’ strategy is built on excellent customer service, product knowledge and, of course, continual learning. Because the landscape of insurance changes frequently, from carrier appetites to underwriting personnel changes, to additions and changes to coverage, it requires an agent to be fluid in their pursuit of ongoing education, he said. “So many agents are taught to sell insurance but are never schooled on the intricacies of insurance coverage. From my start, I have always viewed that as not only careless but dangerous,” he said. “… The more you know about what you are providing, the better you will do at presenting it to your prospects. So, by combining product knowledge with continued sales training, an agent can become a double threat.”

Rick Neyman

IOA West Palm Beach

West Palm Beach, Florida

At IOA West Palm Beach, Rick Neyman manages the global insurance interests of some of South Florida’s most successful companies, including businesses with ten-figure annual insurance spends. “I view business risk globally, and both human risk and healthcare are always part of the risk-management and risk-financing discussions,” he said. Neyman specializes in large and complex risks with broad experience in manufacturing, construction, healthcare and technology. He also maintains dual expertise in both property/casualty and employee benefits. After college, he started his insurance career in Washington, D.C. He relocated to Florida 25 years ago, spending a large part of his career working at the 100-year-old firm, Slaton Risk Services, where he grew to over half of the firm’s total revenue. About five years ago, when Slayton’s owner passed away, Neyman purchased a little over half of the assets to open IOA WPB Florida. That agency now has 25 total insurance professionals (partners and staff). “I would especially credit working relentlessly to protect the best interests of my clients through innovation while only bringing quality risks with ethical owners and managers to my carrier relationships,” he said. “This is a business of long-term relationships where smart people who are driven to find a better way for their clients can achieve unlimited success, literally.”

Travis Smith

Trade Risk Guaranty

Bozeman, Montana

Teaching English in Tokyo? Check. Building mansions in Montana? Check. Selling customs bonds and cargo insurance? Add it to the list. Travis Smith’s talents are borderless. At Trade Risk Guaranty, he helps U.S. importers secure tools for continued international trade success. “Building relationships with clients and understanding their pain points has been key,” he shared. “Given the events over the past six-plus years, there has been ample opportunities to relate to a client based on their struggles.” The trade war with China, container congestion and the increased visibility of U.S. Customs have all presented hurdles. Free TRG webinars and content enable clients to succeed. Smith believes the risks of transporting goods through any mode can’t be ignored. “Our niche products (the customs bond and cargo insurance) can’t be properly administered without a deep knowledge of many different aspects,” he said. “From U.S. Customs compliance to relationships with key cargo insurance underwriters to new U.S. laws such as the UFLPA, knowledge, and experience from the TRG team as a whole supports the growth of my book of business.”

Idea Exchange: Emerging Risks

Risk Management in the Metaverse

By Syed Ahmad, Kevin V. Small, Adriana Perez and Jessica Lamour

For many, the “metaverse” sounds like some obscure sci-fi fantasyland. You may be asking, where is it? How does one get there?

Well, if you’re reading this article on a screen, you are already scratching the surface of what could be characterized as the metaverse. That’s right. Generally speaking, the metaverse is just a new way of talking about cyberspace. And you know cyberspace. Think about that line you say when you’re on the phone with a colleague and you send an email: “I just sent it and its traveling through cyberspace to your inbox.” That is cyberspace. Only now, instead of being an exclusive highway for sending data, people are showing up and doing things.

Not physically, of course. After all, the metaverse is a virtual universe. You can access and interact with others there simply by playing a game on your phone. You could also put on a headset that will virtually transplant you to the metaverse or bring the metaverse to you in an augmented reality. And the communities in the metaverse are thriving. They are buying things, building things, visiting old friends and making new ones.

For example, in the metaverse, individuals can buy one-of-a-kind digital art to hang on their wall inside their home, which others will see when they visit. They can park a car in their driveway or take their boat for a ride.

The metaverse is just getting started. Many believe the introduction of the metaverse is a critical inflection point in our relationship with technology — the point where the physical world and the virtual world begin to merge into singular form. It could also sputter out if its use isn’t widely adopted. Only time will tell whether the metaverse lives up to the hype it’s currently receiving.

A Pivotal Role

One thing is certain, though. If the

metaverse is to succeed, insurance will play a pivotal role. The metaverse is not without risk.

Goods purchased in the metaverse can be damaged or stolen via hacking or ransomware, and there can be errors or mistakes made in providing services in the metaverse.

Employers that hold events in the metaverse may be held responsible for things that happen during those events. For example, metaverse users have reported that their avatars have been groped or even raped by other users. If this is done between employees at a virtual event hosted by an employer, one can see how the employer could face liability for these actions.

‘If the metaverse is to succeed, insurance will play a pivotal role. The metaverse is not without risk.’

Thus, whether the metaverse becomes widely used will depend on the risk associated with that use and how we manage it. Put simply, if people can’t afford the risk associated with “living” in the metaverse, then they won’t live there. And what better device do we have for managing risk than insurance? After all, most banks won’t lend money to a person to buy a house if the home isn’t insured. Banks won’t view the purchase of a home in the metaverse any differently. So, if the metaverse is going to succeed, you can be sure there will be insurance for the attendant risks.

But, are these and other risks posed by the metaverse currently insurable? The answer is, possibly.

Currently there is no insurance that is specifically designed to insure every aspect of the metaverse; however, insurance

products are beginning to emerge to manage some of the risks associated with digital assets. For example, Breach Insurance, a crypto insurtech, recently introduced two products to protect against the theft of digital wallets that hold cryptocurrency. According to its website, Breach Insurance provides up to $1 million in crypto coverage and covers 20 types of coins.

In addition, existing policies insuring risk in the real world may implicitly provide coverage for digital assets. For example, policies insuring “cyber” risk do not specifically contemplate covering losses to digital assets; however, such policies typically cover loss resulting from a cyber intrusion (i.e., a breach), including the restoration and recollection of electronic data. Thus, one could argue that such policies cover the cost of restoring or recollecting digital assets containing electronic data that are stolen or damaged as a result of a

Syed Ahmad

Adriana Perez

breach.

Similarly, traditional property insurance may provide coverage for some digital assets. At least one court found that virtual currency was property and rejected the insurer’s argument that it was “money.”

[Kimmelman v. Wayne Ins. Grp., No. 18 CV 1041, 2018 Ohio Misc. LEXIS 1953, at 3 (Ct. Com. Pl. Sep. 25, 2018) (relying on IRS guidance that cryptocurrency is property and not currency).]

Interestingly, the policy covered both loss of “money” and loss of property, but the coverage for money was much lower than the coverage for loss of property. Thus, the dispute wasn’t whether the

property policy covered the loss of the virtual currency; rather, it was about how much coverage was available.

Likewise, general liability policies may provide coverage for “bodily injury” or “property damage” that occurs in the metaverse. Most general liability policies issued in the United States provide coverage for “bodily injury” or “property damage” occurring in a particular “coverage territory” that is usually defined broadly to include the United States and the activities of a person anywhere in the world if that person’s home is in the United States.

Most policies are silent on whether this extends to virtual areas like the metaverse. Thus, one could argue it does or, at best, the policy is ambiguous (i.e., it’s not unreasonable to interpret it that way).

For some policies, the locale of the coverage-triggering event should be irrelevant for purposes of determining whether coverage is available. For example, discrimination or harassment in the metaverse is conceptually no different than such conduct taking place in the

real world. Thus, employment practices liability coverage should still cover such claims.

As the risks associated with the metaverse materialize and metaverse users make more claims under their traditional insurance policies, insurers will likely start adding exclusions to limit their exposure. But this will simply open the door for the industry to create and market new products to fill this need. Thus, insurance specifically designed for the metaverse will likely begin to emerge in the not-so-distant future. If it doesn’t, it’s doubtful the metaverse will ever achieve its potential.

Ahmad is a partner head of Hunton Andrews Kurth’s Insurance Coverage group in the firm’s Washington D.C. office. He can be reached at 202-955-1656 or sahmad@HuntonAK.com. Small is an associate in the firm’s Insurance Coverage group in New York He can be reached at 212-309-1226 or ksmall@HuntonAK.com. Perez is an associate in the firm’s Insurance Coverage group in Miami. She can be reached at 305810-2545 or pereza@HuntonAK.com. Lamour was a summer associate in the firm’s Insurance Coverage group in Miami and is a Juris Doctor Candidate at Duke University School of Law.

Kevin V. Small

Idea Exchange: Sales & Marketing

Business as Usual Won’t Work in a Hard Market

4 Steps to Help Your Agency Come Out on Top

Prices are increasing. Customers are at risk of being underinsured. They have questions. And your phone is starting to ring more.

Many agents were already struggling with staffing post-pandemic. But with historically higher renewal increases on the horizon, many agency owners will find themselves facing higher call volumes they’re not ready — or able — to staff for. With the best of intentions, teams will scramble to retain as many customers as possible by remarketing to save a few dollars.

The same is true for how we operate our business and the customers we serve: 80% of your agency’s growth and profitability likely come from 20% of your customers. Let’s call these customers your “A” customers and do a quick exercise to see why these customers are important for your agency:

By Paul James

• Picture who you’d consider to be an “A” client. There are a few themes that tend to stand out: They generate the most referrals; they’re an account customer; they pay on time, have no claims and

they rarely call you. When they do, it’s for counsel on their insurance needs.

• Then there’s the “B” client. What’s different?You might picture them also as an account. They have some billing delinquencies and a few claims. And they probably call you a lot more about price increases and help with billing.

• Now let’s think about a “C” client. Monoline.They have late payments — you’ve probably fought for reinstatement for non-payments for them more than once. They have multiple claims. And you

But that’s the opposite of what you should be doing now. Why?

This approach inherently means you’re being reactive to the loudest customers — and not spending your time proactively recognizing your most valuable clients, who are your agency’s lifeblood. Many agents tell me they speak to their customers all the time. But when I ask them what about, it’s usually when customers call regarding a bill, a policy change or a claim. What they overlook is that these calls are — at their core — negative. Our customers don’t wake up and get excited to call their insurance agent. They call when there’s a problem. And just solving a problem isn’t enough to build a deep customer relationship — not without proactive, positive touchpoints built in.

While some agents may have gotten away with a non-proactive approach before, with more customers calling to discuss price increases, there isn’t going to be enough time to answer all of them and protect your most valuable clients. Agents will need to reprioritize.

Leveraging the 80/20 Rule

You’ve probably heard of the Pareto Principle — or the 80/20 rule: 80% of all outcomes come from 20% of causes.

are talking with them all the time about minor rate increases and shopping their policy. You may even be reaching out to them regularly to remind them to pay.

Which of these clients is more desirable for your agency? Hands down, the answer is A. In fact, our internal data support that, showing that an A client on average may provide up to a 10-times higher value over time than a C customer.

So, what if I asked how much time you spend with each of these groups?

When I talk with my agency partners, most say they spend between 60% - 70% of their time with their C clients, 20% with B and the last 10% with A. If you’re in a similar boat, you might consider reprioritizing your efforts.

Identify who your A customers are and make a conscious effort to focus on those clients. Here are four steps you can take:

1. Segment your customers, and then reallocate time to proactively serve your A clients. Don’t wait for them to call you. Reach out to these customers to explain trends, what to expect at renewal, and review potential coverage risks. This creates a positive experience that shows these customers you value their loyalty and have their best interests in mind.

2. Partner with carriers that focus on serving more complex clients. Accounts with common effective dates retain up to nine points better than monoline business according to our internal data. You need partners that offer solutions for common

80% of your agency’s growth and profitability likely come from 20% of your customers.

effective dates, package policies, and keeping everything together with one account to help you maximize retention and provide an optimal customer experience.

3. Leverage efficiency resources to help free up capacity for your agency. Self-service tools, EFT and carrier service centers can be your best friends here. Automatic payments help recurring delinquent payers stay on track. And mobile apps help your customers find answers to their questions while you focus on your A customers to consult and advise. The more advanced service center partners can even handle more complex questions and consultations on your behalf.

4. Remove your remarketing threshold. Many of our partners have shared they have a built-in remarketing threshold at a 10% increase. But this year, a 10% increase is going to be common — don’t overwhelm your team trying to requote all these customers. Plus, remarketing should only be used as a last resort. It reinforces an annual shopping habit that can eventually end with your customer leaving for an even lower price elsewhere, and losing your agency money each year. Our research shows that agencies lose 10% premium on every remarketed policy. On top of that, based on average CSR compensation, you’re essentially paying your staff $25-$30 in time spent to remarket each one. By changing your remarketing practices, you’ll protect your agency’s profitability and free up valuable time you can repurpose for proactive outreach.

With more of the standard auto and home market being commoditized, the future of independent agents is more with their complex accounts that value consultation and risk education. Agencies can take a big step in this direction by segmenting and identifying customers in their book of business accordingly, and refining how they proactively add value and defend those clients. By prioritizing where they spend their time, agents will set up their businesses for long-term success.

James is national sales leader, Personal Lines, at The Hanover.

My New Markets

Workers’ Compensation

Market Detail: Normandy Insurance Co. offers workers’ compensation coverage in 14 states. The company said it is committed to delivering excellence in workers’ compensation insurance to both agents and policyholders through strong agent partnerships; financial strength including A++ rated reinsurance; proactive loss prevention programs; exceptional customer service with a personal touch; accessible underwriting; unique association and wholesale workers’ comp programs. Many classes of business considered.

Available Limits: Not disclosed. Carrier: Normandy Insurance Co. States: Available in Alabama, Arkansas, Connecticut, Florida, Georgia, Mississippi, Missouri, North Carolina, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Texas, Virginia.

Contact: Laura Lieberman; applications@ normandyins.com; 866-688-6448.

Residential Coverage for Real Estate Investors

Market Detail: SES Risk Solutions offers residential coverage for real estate investors. Its REI program offers leading-edge technology, preferred pricing, and flexible coverage built for residential portfolios. The SES Master Policy safeguards the entire portfolio and enables online real-time schedule changes and reports throughout the course of the term. Coverage highlights: residential rental portfolios (single-family, duplexes, apartments up to 30 units, etc.); replacement cost valuation; additional umbrella liability available upon request; no coinsurance requirements; flexible direct billing options — pay monthly or annually; no cap on limited liability companies (LLCs); no vacancy restrictions. Ineligible risks: student housing; short-term rentals; homeless shelters; senior living. $5,000 minimum premium; has pen; appointment required.

Available Limits: Property coverage — $1 million per property, higher upon referral; $1 million per occurrence/$2 million aggregate GL coverage (per property).

Carrier: Zurich; non-admitted; rated A by AM Best.

States: Available in 50 states plus District of Columbia.

Contact: Jack Madsen; jack.madsen@ ses-ins.com; 800-955-4737.

New Auto Dealers Open Lot & Package Insurance — Franchised New Car

Market Detail: Ryan Specialty National Programs provides access to industry-leading carriers and competitive coverage forms tailored specifically to the needs of franchised auto dealers. Franchised Auto Dealers Package Program is available nationwide, excluding Alaska, Hawaii, Idaho, Massachusetts, Montana, New Hampshire, New York, Virginia and Wyoming. The companion program can provide access to stand-alone Dealers Open Lot (DOL) coverage in most states. Program can offer access to multi-state capabilities with no audits and no monthly reporting. The Dealers Open Lot Program is available in all states, excluding Arkansas, Kansas and Oklahoma. The description of this program is only a summary of available coverages. Actual policy language will dictate the scope of coverage in the event of a claim. Agents should read the full policy form and any applicable endorsements for full terms and conditions, and should encourage their policyholders to do the same. Appointment required.

Available Limits: Not disclosed. Carrier: Multiple; not disclosed. States: Available in most states plus District of Columbia, with exceptions. See above.

Contact: Hollie Degutis; hollie.degutis@ ryansg.com; 800-366-5810.

Cannabis Insurance Marketplace — Quote to Bind Online

Market Detail: Flux Insurance Services LLC, a managing general agent (MGA) and wholesale insurance brokerage, offers specialty insurance products for the cannabis and hemp industries. Flux is an online transactional distribution marketplace providing coverages for auto, builders risk, cannabis surety bonds, cargo/inland marine, cyber, crime, employee benefits, excess liability, employment practices liability (EPL), general liability, lessor’s

risk (LRO), management liability (D&O, EPL), professional liability (E&O), product liability, property, and workers’ compensation. Coverage is offered for the following classes of business: cultivation; dispensaries; distribution (wholesale); delivery (non store front — B2C); laboratories; and manufacturers. $1 million maximum premium; $500 minimum premium; has pen; appointment required.

Available Limits: Not disclosed.

Carrier: Various A rated carriers; admitted and non-admitted.

States: Available in 50 states plus District of Columbia.

Contact: Curtis Prince; cprince@fluxins. com; 888-358-9467.

General Liability for Scaffold and Crane Companies

Market Detail: Construction Insurance Services LLC provides liability insurance for construction companies with a specific focus on the scaffold industry. CIS offers an exclusive program providing general liability and excess liability through an A rated carrier for scaffold companies located in all 50 states. In addition, CIS provides general liability for small and medium sized crane companies. CIS can arrange other insurance coverages for construction companies including workers’ compensation, property, commercial automobile and inland marine. $5 million maximum premium; $2,500 minimum premium; has pen.

Available Limits: As needed.

Carrier: AM Best Rating XV.

States: Available in 50 states plus District of Columbia.

Contact: Kevin Curley; kcurley@curleyfinancialgroup.com; 214-884-1800.

This section brought to you by Insurance Journal's sister website: www.mynewmarkets.com

Need a Market? Find It. FAST

Idea Exchange: Ask the Insurance Recruiter

Answers Inexperienced Job Seekers Want About Insurance Careers

February, aka Insurance Careers Month, makes me nostalgic. I ask myself, “Had I known then what I know now about insurance would it have changed the trajectory of my career?”

The fact is I stumbled into the business a year after graduating college. Nowhere in my line of sight was insurance. The agency that hired me as a total newbie exposed me to the industry, invested in my training and taught me sales. Those two-and-a-half years as a commercial insurance producer proved invaluable. It’s that insurance experience that led me to Capstone, an insurance-specific recruiting firm, where I’ve now worked for 17 years. Sometimes things just work out!

As a hiring manager, you know spring graduation is right around the corner. If you plan to recruit young or inexperienced talent, I hope you’ll think about my journey and incorporate my advice into your process. Not only is this 40-plus-year-old me talking, but it’s also the 22-year-old college grad who would have loved to hear this information from insurance organizations so many moons ago.

Tell me what insurance is. It sounds simple enough, but I honestly had no idea besides personally buying auto and health

insurance. I would have been so much more excited if I had understood how insurance plays a big role in the broader business community, as well as provides risk management for individuals and businesses.

Tell me how I’ll learn insurance. My first 30 days on the job were spent in a dark room studying for my insurance license. That’s probably not the training and onboarding plan that will inspire enthusiasm among today’s youth. Talk about mentoring, internships, continuing education, insurance schools, systems training/simulations, etc.

Tell me how my degree will be put to good use: My college degree is in public relations. I’m a good communicator and writer who is naturally outgoing. That’s a recipe for sales, yet insurance producer never crossed my mind. What are the academic skills, as well as personality traits that fit into insurance no matter if your degree is in business, finance, HR, IT, marketing, communications, etc.? Better yet, if someone wants to pursue an advanced degree, how can it be put to good use in a role within insurance?

Tell me about recurring revenue. Granted, this is just for producers, but it’s

a huge draw if any type of non-traditional candidate is weighing two sales offers. I don’t know of another industry that has recurring revenue. For non-sales roles (client service/account management, claims, risk management/loss control, etc.) emphasize opportunities to earn variable incentives, deferred compensation, stakeholder/ shareholder/ownership and ultimately creation of wealth.

By Mary Newgard

Tell me about being consultative. Working 100% commission jobs, calling your 100 closest friends and family is one stereotype the insurance cannot seem to shake. Oh yeah, boring is the other. Cut right through the perception of being a “slick used car salesperson.” This is about being technically gifted, knowledgeable, and client-focused to help businesses of all shapes, sizes and industries make smart financial decisions in their pursuit of profit and growth.

Tell me about career flexibility. You expected me to say, “career advancement,” right? One of the reasons I left the agency I worked for is because my husband and I were ready to start a family, but our support system was three hours away. At that time working remotely wasn’t an option. Today, remote work is widely accepted. During an interview, explain what you offer for benefits (maternity and paternity leave). Talk about internal transfer opportunities to accommodate relocation preferences and long commutes. Talk about pivoting between product groups and teams should the person decide down the road that they want a new challenge.

Newgard is partner and senior search consultant for Capstone Search Group, a national recruiting firm dedicated to the insurance industry. Email: asktherecruiter@ csgrecruiting.com.

Idea Exchange: Talent Trends Talent Considerations for a Successful 2023

The insurance industry continues to settle into new working environments, grapple with the effects of “the Great Resignation” and prepare for a potential recession. While 2022 brought continued unpredictability, insurance organizations were provided an opportunity to embrace change and begin to define clear parameters around longer-term working expectations.

this influence how you approach recruiting, developing and retaining the right talent to most effectively move forward.

Emphasis on Upskilling and Reskilling

By Alicia Morris

Now, at the beginning of 2023, there are several areas hiring managers, human resources teams and company leaders must consider and reevaluate as they establish competitive talent strategies and prepare for a successful year.

Focusing on Future Needs

The pace of change continues to accelerate, making it vital for firms to look beyond their immediate needs and what worked well in the past. Define your department or organization’s goals for the coming year, take a fresh look at how you’ll meet those goals and adapt talent strategies accordingly. This includes considering both internal factors, such as pending retirements, potential modernization initiatives, and expansions into new products or markets, as well as external factors like economic conditions or increased competition. Let

As business priorities shift and more repetitive tasks are delegated to automation, many employees will be able to leverage their skills in new ways. In the latest World Economic Forum The Future of Jobs Report, it’s estimated reskilling will be required for half of employees worldwide by 2025. Take a look at your current workforce; are the right people in the right seats? Are there emerging areas or needs where their talents and skills could be developed to better support the organization’s goals?

Being creative and open to lateral moves can help ensure individuals stay productive and relevant within the scope of the organization’s greater needs.

Broad Succession Planning

Voluntary quits within the finance and insurance industry remain elevated, according to data from the Bureau of Labor Statistics. However, The Jacobson Group’s recent 2022 Insurance Industry Succession Planning Study found 38% of insurers have no succession plans in place. As industrywide reshuffling persists, defining who can step into key roles in the event of a planned or unforeseen vacancy helps limit disruption and ensure ongoing

viability. The most effective succession plans take a comprehensive look at the organization and include positions beyond the executive ranks, extending into middle management and essential individual contributor roles.

The Virtual Environment

In-office expectations continue to evolve, and leaders are exploring different tactics and determining best practices for their organizations’ unique needs. However, virtual meetings and interviews are the new normal, and the ability to work remotely has become a priority for many professionals. In fact, 88% of property and casualty insurers are planning to maintain hybrid environments and 53% plan to continue offering full-time remote work, according to The Jacobson Group

and Aon-Ward’s Q3 2022 Insurance Labor Market Study. Rather than placing strict parameters around working hours and locations, determine how your employees work best and what contributes to their productivity. Then, aim to cultivate positive and engaging environments within that context.

‘The pace of change continues to accelerate …’

Reimagined Company Culture

In hybrid and fully remote environments, corporate culture is experienced much differently than it was in the past. As professionals adjust to long-term virtual work, it’s important to rethink how to connect individuals across multiple geograph-

ic locations and ensure employees have a shared understanding of the organization’s values and vision. Prior to the pandemic, many aspects of culture were demonstrated physically and working relationships were developed more organically. Now, insurance organizations are tasked with evaluating traditional tactics and activities in the scope of the current environment. Being proactive and exploring how culture is demonstrated within areas such as company perks, management styles, internal communication, organizational charts, leadership visibility, and more, is essential.

Formal Retention Strategies

A recent Bureau of Labor Statistics report shared the median tenure for employees aged 55 to 64 is more than three times higher than the median tenure

of younger employees (25 to 34 years old).

As the workforce continues to mature, securing individuals’ long-term loyalty may present a challenge. Additionally, now this often must occur within virtual and geographically diverse environments. In the coming year, managers need to focus on understanding individuals’ current career satisfaction and future goals, and develop more formal retention plans to avoid losing them to competing organizations.

Acceptance of Remote Hiring

Although many professionals now feel comfortable meeting in person, remote recruiting is here to stay. Hiring managers must lean into the benefits virtual interviews offer — such as expanded talent pools and the opportunity to interview individuals across locations. This eliminates travel expenses, improves ease of scheduling, and provides the ability to move through the interview process at an accelerated pace. For more experienced roles, we’ve seen organizations leverage this extra time to incorporate additional technical assessments, helping further confirm candidates’ skills and potential fit. Becoming comfortable conducting effective interviews and making hiring decisions without meeting an individual in person will be even more important in the coming year.

Embracing and Adapting

Moving into 2023, embracing the current working environment and adapting accordingly is essential for coming out ahead. Consider the skills and talents your team will require moving forward, refresh your talent strategies in the context of the hybrid environment, and determine how to remain agile as needs shift in response to internal and external factors. The virtual world is here to stay and those who lean into it, while uncovering and leveraging its opportunities, will be best positioned for success.

Morris is a vice president at The Jacobson Group, a provider of talent to the insurance industry. She can be reached at 800-466-1578 or by email: amorris@ jacobsononline.com.

Idea Exchange: Minding Your Business

Industry Trends to Exploit for 2023

Agency owners must watch and learn about major trends when they start. Following are the eight key trends that insurance agencies should be tracking for 2023.

Insurtech

Insurtech will continue to be the shiny object that gets much attention but

By Catherine Oak &

might not live up to the hype. The common trope is that the insurance industry is facing its most profound disruptions in decades through artificial intelligence (AI), machine learning, the internet of things (IOT), blockchain, data analytics and other emerging technologies. Yes, those things are happening, but a “profound disruption” is hyperbole. So many new companies call themselves “insurtechbased,” but scratch the surface, and it’s more or less standard business operations.

There are plenty of areas for technology to improve the insurance industry. AI and blockchain technology can improve customer service and handling of claims.

The management of “Big Data” will streamline the underwriting process. New software applications will improve internal operations overall for the industry. The key is that all this technology is being incorporated across the industry, so it is difficult for any company to gain a distinct advantage over its competitors.

For 2023, the hype will continue because there is so much invested in promoting “insurtech.” Look at how many conferences are scheduled with an insurtech theme! However, actual industry adoption of technology will steadily continue with much less fanfare. Most likely there will be a culling of new insurtech companies.

Bill Schoeffler

This would be the result of higher interest rates impacting private equity and venture capital money, a lack of tangible results, and an overall shrinkage of the tech sector.

Market Conditions

2023 will bring a mixed bag of market conditions. Inflation could increase property/casualty premiums while lowering company profitability. There is a consensus that the P/C market will generally have hard market conditions with increases in the ballpark of about 6%. Cyber policy rates (which doubled in 2021) will most likely continue with higher rate increases compared to other lines of business.

Weird things are showing up post-COVID. Both commercial and personal lines auto claims have significantly increased since 2021. There are reports of unusual non-COVID-related death rates. The potential is high for medical malpractice claims to increase due to both COVID treatments and the postponement of testing and treatment of non-COVID diseases. Health insurance premiums are expected to increase; however, as noted below, government subsidies will offset much of the increased costs.

Florida has been dealing with a variety of issues with personal lines coverage. Next up will be California. Despite the high cost of homes and the significant losses due to wildfires, the average cost of homeowners insurance there is less than the national average. This is primarily due to the rate increase limitations from Proposition 103 (passed in 1988). Several insurers are no longer writing in the state, noting loss ratios and regulatory burdens. Most likely, more companies will leave or limit writing business in 2023, which will result in a crisis as people will be unable to get any coverage.

2023 M&A Activity & Pricing

The prices currently paid by publicly traded brokers, large regionals, and agencies funded by private equity firms are still high. They hopefully will continue to be high for the valuable, desirable firms. Since the supply is dwindling, the prices may be even higher for those that remain, if they

fit the profiles of the key buyers today. As long as insurance agencies remain profitable, there will be buyers.

What might put a damper on some of the acquisition activity is the potential increase in federal taxes on the transaction that could occur as early as the second quarter of 2023, if President Biden has his way. (See the tax section of this article.)

Inflation is also increasing greatly, and interest rates are beginning to put a damper on the number and value of the transactions occurring.

M&A activity is again expected to continue during 2023 with some caveats, according to our discussions with key acquirers.

According to Clark Wormer, M&A director for HUB International, “HUB has brought on 70 excellent merger partners by the end of 2022 and hopes to continue this in 2023!” HUB has the tools, resources, expertise, and technology, which they believe merger partners are seeking. Their

current acquisitions help expand their business.

IMA has been a new buyer in the space over the past three years and this past year did a great job acquiring some very astute firms in California and Oregon. They closed five transactions in 2022 and expect to do several more in 2023. They are looking for more retail, P/C, and employee benefit firms, as well as MGUs and wealth management firms for 2023.

Inszone is very aggressive and a relatively new buyer on the scene. It made 36 transactions for the 2022 year and anticipates doubling that number of acquisitions in 2023. They remain focused and vigilant about pricing and selection, especially in this interest rate environment and other deal-specific strategic aspects.

Foundation Risk Partners started in November 2017. They do not announce their transactions; however, they are now in the top 20 largest independent agency continued on page 46

Idea Exchange: Minding Your Business

brokers. This past year they made numerous acquisitions and will continue that trend in 2023. They are very competitive and easy to work with and bring some significant synergies to acquired agencies.

FRP is looking for more add-ons and some new niches to spread across the nation. They would especially like to add firms in the Pacific Northwest, the Midwest, Texas, the Rockies, the Southwest, and of course, California, where they have many acquisitions already. They have 139 offices in 18 states.

Risk Strategies is a nice, mid-size national broker based in Boston. They closed 32 transactions in 2022, which was their biggest year, and expect to do quite a few in 2023. They look to continue to buy quality firms of scale, and are very well capitalized with excellent capital structure. Another privately held broker growing

quickly through acquisitions is Heffernan Insurance Brokers. Their main offices are in California (with home office in Walnut Creek), Portland, Phoenix, St. Louis, and Philadelphia, which they would like to add to and are also interested in new regions. They made nine acquisitions in 2022 and plan on acquiring another 15 in 2023.

2022 was another record year for Acrisure and one that saw them make further investments in technology, data analytics, and AI to complement new verticals in Asset Management, Real Estate Services, Title Insurance, and Cyber Services. Acrisure completed 105 independent agency transactions in 2022 and has reached $4 billion in revenues. Management expects to do a similar number in 2023. Acrisure is also acquiring specialty wholesaler organizations.

In 2022, Liberty Co. Insurance Brokers closed 37 transactions of retail firms. CEO

Bill Johnson said, “We will continue to look for entrepreneurial partners that fit our culture and that we believe we can help them grow with our resources. We are already seeing cracks in the M&A market as a number of the highly leveraged PE-backed brokers are slowing down as they struggle to raise additional capital or deal with the high cost of their capital. As a result, we expect and are already seeing a softening in both the amount of competition and the multiples being paid.”

Alera closed 30 transactions in 2022, down from 49 in 2021. However, they expect to complete 10 to 20 deals in 2023. It all will depend on economic/market conditions in 2023. They will be highly selective going forward until they see improvements in the capital markets, particularly interest rates. Many 2022 transactions they completed have been registered investment advisors (RIA) rather

than P/C or employee benefits agencies.

Arthur J. Gallagher will continue to be a good player in the acquisition field. They do not advertise the number and value of their transactions. However, they are competitive and looking for great agencies throughout the country.

BroadStreet Partners, NFP, High Street, and USI, as well as other new players called World, Relation, and Patriot, are funded by private equity and venture capitalists. They continue to solicit and buy independent agencies aggressively. They all have large amounts of capital to use for transactions.

Private equity firms have been buying up insurance agencies for their investors. This makes a lot of sense because the return on investment is typically 20% to 30%-plus, which is greater than most other available investments today. PE firms often pay typically eight to nine times EBITDA for well-run agencies!

Deal Terms

There is a broad spectrum of prices today based on the motivation of the uniqueness of the seller. Common multiples of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) range between 6.0 to 10. Occasionally we may see an EBITDA multiple higher than 11 times, but that is rare. Common multiples of revenue range between 2.0 to 3.3 times revenue! Usually there are additional earnouts based on profitability and growth that can add a significant amount if the targets are reached.

In some cases, the fixed price has an earn-out over two years, especially since Covid. Most down payments consist of approximately 80% of the price in cash and the balance in stock. Sometimes the stock can be used for key perpetuation candidates to have equity that the seller and buyer want to ensure will remain in the agency after the sale. In this way, they feel a part of it and have some skin in the game to stay on for years after the key owners retire. We usually recommend

that our sellers take the stock, as it can give them a significant additional amount of money when they sell it due to the high rate of growth these acquirers have compared to a typical independent agency.

Smaller books are purchased at around 5.0 to 8.0 times EBITDA. However, there aren’t many books or agencies today that do not command at least two times revenues as a minimum!

Peer Acquisitions

There will continue to be a price differential between those that receive offers from “well-funded” buyers and those that sell internally or to local competitors. Local peer buyers and internal buyers cannot easily compete at these high prices and multiples because they usually need to pay for the transactions out of cash flow.

Some independents prefer not to sell to a more prominent, often publicly traded

typically 20% to 30% down, with the buyout over five to 10 years. The number of years over which it is paid out depends on the agency’s cash flow and whether or not the internal buyer has any money of their own. An internal buy-out rarely has an earn-out component, so the value should be conservative, to not jeopardize the internal buyer’s ability to use the agency’s cash flow to pay the loan off over time.

Buyers often want the retiring owners to retire after a few years so they can manage the firm without their influence and use their compensation and perks to pay off the note.

If an owner sells internally, it is usually for less than the value of an external sale. There is a risk that the internal candidates might not work out, and they often don’t have any or very little money to do a buyout.

Often the retiring principal needs to finance the deal for the internal candidate. Oak & Associates recommends that the internal buyers get an SBA loan for 10 years, so the retiring shareholders don’t have to worry about getting paid. O&A also recommends that all owners of internal sales should consider whether a GRAT (which stands for Grantor Retained Annuity Trust) would be the internal perpetuation tool to use if the owners are still healthy. There is typically a minimum payout of five years, and both principal and interest can be deductible.

firm, as there is often a sense of pressure to produce and write larger accounts. In addition, producers in acquired agencies usually have to write commercial lines and benefits accounts over $5,000 in commission, or even more, for some acquirers in order to get paid. On the other hand, other acquirers leave the agency alone except to provide markets, accounting, and HR support. Acquirers such as Acrisure, Foundation Risk, and BroadStreet don’t even change the seller’s name.

Internal Perpetuation Can Be Difficult

The internal purchasers’ terms are

It is often problematic for small and medium-sized independent agencies to perpetuate internally. The next generation often lacks the management and sales skills set to be able to replace the majority owner. In some cases, there are no perpetuation candidates at all. If this is the case, an external sale makes a lot more sense, as an internal sale may not work out, and retired principals don’t want to have to come back to work.

Tax Law Changes Likely

With the Democrats continuing to get bills passed with a large amount of spending, it is very doubtful that the lower tax

Idea Exchange: Minding Your Business

structure of the previous administration will continue. For agency owners, this also includes whether or not capital gains will be at their current low federal rate of 15% to 20% or be changed to perhaps 39.6%.

What is proposed is that for over $1 million in the sale value of any assets, the capital gains rate be eliminated. Instead, a much higher ordinary income tax rate could be put in place, perhaps 39.6% versus the current 34.6% rate.

Many agencies concerned about higher taxes insisted on selling in 2021 and 2022 to avoid this concern. There is also a strong possibility that the state income tax rates will increase, such as in California. Personal income taxes, especially in the higher brackets, are predicted to rise substantially because of the stimulus money and the infrastructure and federal budget packages that were passed.

Natural Disasters’ Effect on Insurance

Natural disasters and severe weather are on the rise. Insurance companies tighten their underwriting and raise prices with disasters such as fires in the Pacific Northwest and California, hurricanes on the Southeast coast, and tornadoes all over the Midwest and South. There are often non-renewals, as well, and legislators don’t usually allow this without an adequate amount of time for non-renewal. But often this has no longer been the case, and many agencies get non-renewals monthly from several of their carriers.

Insurance agencies can help educate their clients on how they can mitigate the risks of fires, floods, hurricanes and tornadoes. We also advise agencies to review with the client the limitations of their current coverage and then offer any new options available. People still need insurance, despite the common threat of natural disasters.

Agents’ E&O exposure and coverage are at stake. Hence, producers need to ensure the insureds know that the limits and coverages in their new policies are not what they were with their preferred carriers and policies written previously. A signed agreement that the insured understands that the coverage is more limited is an

astute way for the agency to protect itself.

Group Benefits and Health Insurance 2023 will see another year of fine-tuning the Affordable Care Act (ACA) with adjustments to several rules and limits.

Premium rates are expected to increase on average by about 4% nationwide. However, many will see no changes due to expanded and enhanced marketplace premium subsidies. This includes the American Rescue Plan Act (ARPA), which took effect in 2021, and the recently passed Inflation Reduction Act (IRA), which ensures that the ARPA’s subsidies continue without interruption for an additional three years through 2025. Affordability due to expanded subsidies and an extended enrollment period likely contributed to marketplace enrollment in 2022, reaching a record high of 13.8 million, with 12.5 million people receiving a subsidy.

New rules will take effect in the 2023 coverage year regarding measuring the affordability of family coverage based on the worker’s premium contribution for family coverage. If the amount is more than 9.12% of household income, family members will have the option of buying health coverage through the Marketplace

and will be eligible for premium tax credits based on their income. This fixes the “Family Glitch” issue.

There is a trend for medium-sized businesses (for this discussion, assume a mid-sized company is around 100-500 employees) to develop customized healthcare plans. These plans include basic medical coverage augmented with specialized coverages and services. For example, there are services that search for the best price for medical procedures, lower-cost pharmaceutical services, mental health services, and medical management services for the chronically ill. Very often, these companies opt to have self-funded plans. However, a high-deductible, fully insured plan can also be used. In addition, some employers add benefits like pet insurance, group personal lines, and travel insurance as additional perks.

Summary

The first step is being proactive and knowing how current trends will affect the firm. Managing the agency in a way that exploits these trends will then allow the firm to succeed. Agency owners must also establish business and marketing plans to stay ahead of the competition.

Please look at Oak & Associates’ website www.oakandassociates.com to download our Sales and Marketing or Business Planning templates for free.

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

Vantage Risk Insurance Company 123 North Wacker Drive, Suite 1300 Chicago, IL 60606

The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts.

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

February 6, 2023

Forge Insurance Company

7910 Woodmont Ave, Suite 925 Bethesda, MD 20814

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 requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

February 6, 2023

Sutton National Insurance Company

1855 Griffin Road, Suite B-390 Dania Beach, FL 33004

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 requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

February 6, 2023

FCCI Insurance Company

6300 University Parkway Sarasota, FL 34240

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 requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

February 6, 2023

HiRoad Assurance Company

One State Farm Plaza Bloomington, IL 61710

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 requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

February 6, 2023

Westfield Select Insurance Company

One Park Circle Westfield Center, OH 44251

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 requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

February 6, 2023

Prescient National Insurance Company

217 S. Tryon Street Charlotte, NC 28202

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 requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Advertisers Index

Applied Underwriters

Branch Insurance www.ourbranch.com 5

Golden Bear Insurance Company www.goldenbear.com W1

Insurance Associates of America www.iaanetwork.com 19

JM Wilson www.jmwilson.com W2, S2, M1

Nationwide Mutual www.nationwide.com 21

What Ancient Roman Firefighting Can Teach Us About the State of Commercial Insurance Today

Crassus’ crass firefighting business model provides a lesson for many commercial insurers and risk professionals as property owners face double-digit rate increases in insurance premiums.

By Erin Ashley

There are rare moments in one’s professional life when you can take what you were taught in childhood into present-day learning. I’m thinking back to my 8th-grade Ancient Roman history class, where I learned information that I had thought would forever be useless but have since found that presumption to be untrue.

The history of firefighting in Ancient Rome, for example. is a tad sordid but it offers lessons about the state of the commercial insurance industry today. According to Wikipedia, Marcus Licinius Crassus (115 – 53 BC) was a Roman general who was referred to as the “richest man in Rome.” He also is credited with creating the first-ever Roman fire brigade. Rome had no fire department, so Crassus formed a brigade of enslaved people who would rush to the scene of a fire when alarms of an inferno in progress went out. Upon arrival, however, he and his brigade would not begin extinguishing the fire until the building owner agreed to sell it to him at a severely discounted price.

The choice for an owner was relatively straightforward. Either sell your building at a loss and come away with something or let it burn and come away with nothing.

Though predatory, Crassus was providing a service. His firefighting brigade wasn’t an insurance product, but it was the transference of the risk of the total loss of one’s investment. In an environment where insurance premiums continue to rise, insurers can’t simply look at their clients and say, “here’s the price to recover your losses; take it or leave it.”  So it is no surprise that risk managers likely will ask insurers what supplemental services they can offer to reduce the risk of losses and to justify the cost of insurance, which is increasingly becoming untenable for property owners with expansive portfolios.

Consider the following.

Prevention Mindset

Preventing a loss in the first place is the most effective method by which to avoid having a claim made. Asking insurers to build teams around preventing losses before they happen will not only preserve capital spent but will serve both risk managers and insurers by providing clients with an invaluable touch of added customer service.

Tech-First Risk Detection

In 2023, technologies exist that can do things the human mind cannot and at speeds of less than a second. Whether placing gas leak sensors inside

buildings, or water leak and flood detection systems, those who can advise risk managers on best practices for risk detection will win the hearts and minds of their clients. In addition, Brownie points to insurers who can provide insight on implementing such mitigation strategies at scale.

Risk Mitigation

Risk mitigation reduces or avoids the impacts of various risks, such as earthquakes, floods and fires. What are your buildings at risk of in the first place? What are the plans for addressing and mitigating those risks? How can the practice be folded into the broader business management efforts? In today’s market, ignorance isn’t bliss. If anything, ignorance puts insureds and their properties at even greater risk.

Risk Mitigation Credits

With a hardened insurance market, every dollar counts. The U.S. tax code offers tax credits for the purchase of electric and solar panels on our homes. What if insurance companies offered “credits” to incentivize property owners

and risk managers to install risk mitigation measures? How could this increase resiliency across the insurance value chain?

Institutionalizing Your Response

What happens when your distribution warehouse is at risk of flooding from an approaching hurricane? Do your facilities managers understand what actions they should take? They need guidance on how to respond when disaster hits and what they can do to reduce the impacts.

Risk managers who ask their insurers to take the lead on innovating past their primary product offering and into the next generation of services will be in a great position to thrive, allocate capital and ultimately, increase resilience for their clients and bring the value premiums are worthy of.

Ashley is a passionate risk professional who has focused her career on assessing and improving commercial property resiliency. She holds a Ph.D. in risk engineering from the University of Maryland.