INSURANCEBUSINESS.CO.UK ISSUE 3.03
TOP SPECIALIST BROKERS 2018 Discover how these leading brokers found success through specialisation
BUILDING CYBER RESILIENCE How prepared are businesses for today’s cyber threats?
BEAZLEY’S MARK BERNACKI
Why working in the London market was the turning point of his career
THE NEXT BIG THING IN INSURANCE As parametric insurance gains traction, learn how it can benefit your clients
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UPFRONT
EDITORIAL
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EDITORIAL Editor Paul Lucas Journalists Alicja Grzadkowska, Lucy Hook, Libby MacDonald, Bethan Moorcraft, Heather Turner Editorial Researcher Hannah Go Production Editor Clare Alexander
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Jump on the new bandwagon
I
f you’re selling cyber insurance, have a website with a chatbot to answer clients’ questions while you’re asleep, and you’re already considering how the blockchain might transform the insurance business, then you’re right to feel you have your finger on the pulse of a changing industry. However, there’s one more new trend you need to be aware of: parametric insurance. Risk managers have been buzzing about parametric insurance for quite a while. The idea is that rather than indemnifying a pure loss, this new type of policy instead pays out automatically when a ‘trigger’ event takes place within certain parameters – for example, if an earthquake occurs within a five-mile radius of a business’s premises. It’s particularly useful for catastrophic events, but it has plenty of uses in other areas as well, such as agricultural insurance, where the trigger could be a certain amount (or lack) of rainfall that could impact a crop. Generally, parametric insurance is well suited to low-frequency, high-intensity losses.
“Buyers are now more sophisticated, and they understand some of the limitations of a conventional insurance policy” In theory, such a policy could have massive advantages for clients and insurers alike – the payouts would be predictable, making them easier to account for, while also reducing arguments over the amount of damage suffered. Insurers could also reduce transaction costs with the way they write and administer policies. No surprise, then, that the concept is already proving popular. “We have definitely seen more inquiries over the last year,” Steve Harry, risk finance consultant in Marsh’s Financial Solutions Group, told IBUK in June. “I also think buyers are now more sophisticated, and they understand some of the limitations of a conventional insurance policy. Some people like the uncertainty that gives them, in that they can always argue about a policy contract, and other people like the certainty that an index-based product would give them.” Of course, as with anything new, there are areas of debate: What indexes will be used? What triggers will be set, and how will they be monitored? How can it be used to incentivise best practice? While some answers remain hazy, what’s clear is that there’s massive potential in this product – so it makes sense to familiarise yourself with insurance’s hot new thing now before it’s your clients who are asking the questions.
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UPFRONT
STATISTICS
Preparing for the inevitable
THE CHIEF TARGETS Companies in North America and the UK were the most likely to have experienced an intrusion in the last year; North American companies were also more likely to report that the attack had a serious impact and that they expected another attack within the next 12 months. Accordingly, companies in these two locations are making more significant efforts to bolster their boards of directors with cyber-savvy professionals.
When it comes to cyber risks, many companies are likely to face an attack, but not all will be victims Cyber attacks are becoming close to a sure thing: In the past year alone, one in every three companies surveyed by Willis Towers Watson weathered a cyber incident that had an effect on or threatened operations, financials and reputation. Expectations are high that there are more such events to come. High levels of cyber resiliency mean an organisation can quickly respond to an inci-
dent, address vulnerabilities and apply lessons for the future. Many executives are confident in their company’s cyber resilience; however, many conceded that they’re falling behind in attracting talent skilled in cybersecurity. Many also said they lack the ability to drive their workforce to be more cyber-savvy. The combination of these two issues indicates a need for change on the human side of cyber resilience.
Had a cybersecurity incident in the last 12 months The intrusion had a severe impact on operations, finance and reputation Likely to have a breach with a severe impact in the next 12 months Confident in restoring operations, finances and reputation in the event of a breach Have enough directors who know cyber
26%
38%
Companies where HR handles developing employee-related cyber risk policies
Companies where IT takes the leading role in developing such policies
33%
Actively recruiting directors who know cyber
73%
Companies that spend less than 1% of revenue on cyber resilience efforts
Companies that believe more should be spent on cyber resilience
Source: “Decode Resiliency,” The Economist Intelligence Unit and Willis Towers Watson, 2018
FOLLOW THE MONEY
READY FOR ANYTHING?
On average, companies spend 1.7% of their revenue on cyber resilience efforts, but a majority of executives would like to see this number increase by at least 10%.
When asked to rate themselves on a scale of one (below average) to five (well above average) on 10 areas of cyber resilience, most companies were optimistic about their level of preparedness, particularly when it comes to assessing their risk level.
REVENUE SPENT ON CYBER RESILIENCE 11%
2%
COMPANIES’ ASSESSMENT OF THEIR CYBER CAPABILITIES Well above average
6%
4 Average
5% or more 22%
3% to 5% 2% to 3% 0.5% to 1% Less than 0.5%
32%
Source: “Decode Resiliency,” The Economist Intelligence Unit and Willis Towers Watson, 2018
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3 2
27%
1% to 2%
2
5
Below average
1
3.71
3.62
3.57
3.57
3.56
3.53
Allocate enough budget
Balance accept versus transfer
3.46
3.44
3.41
3.15
0 Assess and Assess Integrate Incident quantify cyber risk technology/ response risks culture governance post-acquisition
Incorporate Cyber- Identify and Apply cyber into savvy fill talent lessons from business workforce gaps incidents continuity
Source: “Decode Resiliency,” The Economist Intelligence Unit and Willis Towers Watson, 2018
UK 41% 29% 18% 30% 27% 36%
NORTH AMERICA
EUROPE
ASIA
41%
21%
21%
54%
14%
14%
36%
14%
14%
45%
27%
21%
46%
27%
17%
36%
18%
9%
Source: “Decode Resiliency,” The Economist Intelligence Unit and Willis Towers Watson, 2018
TRAINING THE WORKFORCE Where companies’ cyber efforts generally lag is in training employees to become cyber-savvy: Fewer than half of the companies surveyed by Willis Towers Watson have implemented even basic cyber-related HR initiatives. The presence (or absence) of such policies can be an indication of the overall culture of cybersecurity governance in an organisation. PERCENTAGE OF COMPANIES THAT EMPLOY CYBER-RELATED HR INITIATIVES 50%
WHO’S RESPONSIBLE FOR OVERSIGHT? More than a third of organisations believe it’s the responsibility of the board as a whole to provide oversight for cyber efforts, rather than a specialised cyber, risk or audit committee. WHO CURRENTLY OVERSEES CYBER RESILIENCE
40%
Specialised cyber committee 19%
30% The entire board 33%
20% 10%
44%
44%
Ongoing security awareness training
Identification of talent/skills deficits in IT/cyber
40%
40%
39%
38%
37%
32%
30%
0% Business Identification/ Security Measurement continuity/ action of atincident of training workforce risk employees communication effectiveness planning
Post-breach workforce planning
Post-breach Behavioural change rewards/ management incentives
Source: “Decode Resiliency,” The Economist Intelligence Unit and Willis Towers Watson, 2018
WHO SHOULD OVERSEE CYBER RESILIENCE Specialised cyber committee 24% The entire board 38%
Source: “Decode Resiliency,” The Economist Intelligence Unit and Willis Towers Watson, 2018
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UPFRONT
HEAD TO HEAD
Should insurers be able to control driverless cars? Could autonomous vehicles that respond to the commands of an insurer be the perfect course correction?
David Williams Technical director AXA UK
“People might think insurers would jump at this opportunity, but one of the biggest lessons from our involvement in five government-backed driverless consortia is the scale of the ecosystem being created. It’s estimated that one vehicle will generate around four terabytes of data a day; multiply that across an insurer’s motor and fleet book, and you will quickly appreciate how difficult the proposal would be. Many parties will have a stake in the data created – the passenger/driver, connected infrastructure providers and transport network operators, for example – and it’s clear that our focus needs to be on working together.”
Thom Rickert
VP and emerging risks specialist Trident Public Risk Solutions/Argo Group “The answer is no, at least for now. The insurance industry should work to develop best practices and innovative coverage, influence safety regulations, and deploy technology to reduce claims. But directly controlling autonomous vehicles would change the carrier’s role from transferring or managing risk to assuming the risk for any vehicle hardware or software failure. This would be analogous to an insurance company controlling an airplane’s autopilot system or a utility’s supervisory control and data acquisition [SCADA] platform. I think the industry would agree that this would be problematic.”
Tom Super
Director, P&C insurance practice JD Power “Insurer intrusion is more disruptive than beneficial for partially automated [vehicles]; insurers may be better positioned to share data with consumers to improve decision-making. Fully automated options, some of which are years from becoming mainstream, allow insurers to better price all types of risk and then pass those efficiencies on to the consumer. Ultimately, consumer preferences will determine insurer involvement. Manufacturers and ridesharing companies will likely remain in control, while insurers’ role will evolve to empower consumers with information and tools that inform their driving choices.”
TAKE THE WHEEL In a recent interview with the MIT Technology Review, Paul Newman, the co-founder of driverless car startup Oxbotica, raised the possibility of self-driving cars being monitored by insurance companies, which could address proximate risk factors by altering vehicle behaviour. He gave the example of a car noticing a sudden increase in the number of children on a sidewalk outside a school and reporting seeing more potential obstacles than normal; an insurer processing that data could either reroute vehicles or only allow them down the road at a reduced speed. “Insurers can adjust the envelope [in which a car can operate] to control the risk on the policy,” Newman said. “The autonomy system has insurance built into it that allows it to control risk over a fleet.”
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UPFRONT
OPINION
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Insurance: the new kale Rebranding the industry to appeal to fresh talent requires rethinking the human factor, writes Bri Burkhart REMEMBER WHEN kale sat untouched beside your meal at a restaurant, eventually ending up in the trash? In those days, kale wasn’t exciting or noticeable, and it definitely wasn’t the star of a single social media photo. Now, people brag about eating kale and have dubbed it a ‘super food.’ Smoothies, chips, you name it – if someone is delving into green goodness, kale is the star of the show, and you’re going to hear about it. Right now, the insurance industry is stuck in the same place kale once was. Insurance careers can become something young professionals aspire to and brag about at mixers, but for that to happen, the industry needs an attitude adjustment. Recent graduates look upon the insurance industry as old-fashioned. Before applying to an open position in your company, you can bet they’ll be scrolling through your website and examining your social media pages. If the impression they get is boring, bland and unappetising, they’re probably not even going to apply. And it’s not just new talent that is put off by the industry’s apparent resistance to change and a fear of new technology; such attitudes keep the best established talent looking elsewhere. Just as kale had to reveal its superpowers to become popular, the insurance industry needs to reveal its hidden greatness. So what’s holding the insurance industry back? It’s simple: the human factor. We’re afraid. Some people fear failure. Some people fear the unknown. But, more than that, some
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people fear that their business’s mission will get lost in change. Although change and innovation can be frightening, they’re vital to keeping an aging industry alive. We don’t just need to adjust our attitudes about change; we need to adjust our mindset about what’s important. Beyond attracting new talent or being ‘trendy,’ advancement doesn’t just keep us relevant – it makes us better.
case that. Instead of getting lost in applications, submissions and policies, try getting lost in the situations that create claims. Those moments can be life-changing. Whether it’s an accident, a natural disaster or even something small, it’s our job to be at our best for clients in their time of need. As counter-intuitive as it might seem, at the heart of this move to cultivate the human element is technology. We need to continue to evolve to meet the world’s everchanging needs, because part of being there for our clients means meeting them where they currently are. If the client is our priority, changing with them should be, too. You can no longer hand a potential client a business card and assume that they’re going to call you. You can no longer be silent online and expect your competitors to do the same. You can no longer talk to your clients in insurance lingo and assume they aren’t going to look elsewhere for a partner who can explain those concepts in understandable terms. You simply can’t afford to stay in the past. This means finding a way to talk about
“Just as kale had to reveal its superpowers to become popular, the insurance industry needs to reveal its hidden greatness” The good news is that the very thing holding the insurance industry back is the thing that can move it forward. Rebranding and updating requires us to prioritise the human factor. To most people, insurance is a necessary evil or a small piece of financial planning. We need to constantly remind our clients – and ourselves – that insurance is more than a piece of paper. It’s about supporting people through some of their most challenging moments. In fact, we’re at an advantage because our products have a truly emotional purpose: protection and peace of mind. This is powerful now, because people want to see businesses taking on the initiatives that our industry is naturally a part of. We’re already making a difference, but we need to adapt our mentality to better show-
products that connect with your clients on a human level, such as social media or e-marketing. This means embracing digital processes that give your clients the fast responses they now expect. This means talking about your job in a way that isn’t purely transactional. Insurance truly has the ability to become a ‘super industry’ that people hanker to be part of. What we need is buy-in. I don’t know who changed the conversation about kale, but I do know who can change an outsider’s view of insurance. It starts with us. Bri Burkhart is an integrated marketing specialist at Glatfelter Insurance Group who uses content marketing across channels to build relationships and promote the success of niche insurance programs.
UPFRONT
OPINION
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UPFRONT
NEWS ANALYSIS
The next insurance model Industry experts say parametric insurance – a specialised form of insurance or reinsurance tied to a defined trigger – could be set to take off in the commercial sector
AS AN INSURANCE model that uses predefined trigger and payout mechanisms, parametrics promises speedy, no-nonsense claims resolution that could help policyholders with cash flow and minimise insurance disputes. According to a new report produced by risk management association Airmic in collaboration with insurance giants Marsh and Swiss Re, parametric insurance could soon become more mainstream in the commercial sector and help clients address some of the limitations of traditional insurance. But how does it work in practice, and where does the parametrics market stand today? IBUK spoke to
be in terms of the trigger of the insurance, the payout or both, Harry adds: “Broadly, it’s an insurance program that is triggered and/ or paid very simply using an index rather than words.” Under a parametric model, underwriters and buyers agree in advance that a claim will be automatically triggered by an agreedupon occurrence or a movement in an index, removing the need to investigate the precise extent or cause of damage. As a result, parametric solutions allow clients to insure risks that are difficult or even impossible to insure in the mass market. And while a complex
“Broadly, it’s an insurance program that is triggered and/or paid very simply using an index rather than words” Steve Harry, Marsh several industry experts to find out. “Parametric insurance works using a clearly defined parameter – i.e. a metric or an index that is easy to determine,” says Steve Harry, risk finance consultant in Marsh’s Financial Solutions Group. That can
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insurance claim on a traditional policy can take a long time to adjust and be paid out, the clarity around parametric policies allows claims to be resolved much faster and without disagreement over exclusions and complex policy wordings.
“The way we would express it is that it improves liquidity,” Harry says. “Really what we are looking to do is mitigate the liquidity risk of a traditional insurance contract in these complex areas.” Currently, parametrics is mostly used in catastrophe bonds, but there are moves being made to apply the concept in the travel, retail and agricultural sectors – and the insurance industry has its eyes set on a much wider application in the future. While there have been very few direct parametric policies placed by insurers, Harry says that could be about to change. “We have definitely seen more inquiries over the last year,” he says. “The data and modelling is now so much better that it’s a real reason to be optimistic that some of these deals might take off.” According to Airmic chair Paul Goulding, while “parametrics is still work in progress … I can see it becoming mainstream in the
FAST FACTS: PARAMETRIC INSURANCE
Parametric insurance was developed in the catastrophe bond market in the 1980s and early ’90s
The world’s first multi-country risk pool, CCRIF SPC, was formed in 2007 to provide parametric catastrophe insurance coverage in the Caribbean
Haiti received a $20m payout under a parametric catastrophe policy following Hurricane Matthew in 2016
future, because it offers certainty of timing and hassle-free payment.” Airmic technical director and deputy CEO Julia Graham adds that there has already been some growth in the commercial market. “We are starting to see some businesses begin to take this cover seriously, and we’ve
in their coverage. Those who want speedy adjustment and an easy-to-work-out scale of payment might find parametrics appealing. However, Harry points out, “Some people like the uncertainty [a traditional policy] gives them, in that they can always argue about a policy contract.”
“I can see it becoming mainstream in the future, because it offers certainty of timing and hassle-free payment” Paul Goulding, Airmic heard of some big buys in the aviation sector, for example,” she says. “Organisations have started to buy this. We think it’s bubbling.” As for whether a client should choose a parametric policy over a traditional one, that all depends on what they’re looking for
Airmic warns that commercial insurance buyers eyeing parametric solutions face a number of challenges and may need to acquire new skills. Buyers should have a good understanding of their organisation’s business model and risk landscape, and may
A single parametric policy was written to protect 22,000 Spanish olive farmers from extreme weather temperatures in 2018 Sources: CCRIF SPC, Meteo Protect
need to get early buy-in from senior colleagues such as the chief financial officer. Ultimately, though, parametric insurance can help businesses strengthen their financial protection by reducing the uncertainties around cover and cash flow that traditional policies can cause. “Concerns about large, complex risks directly related to business operations are on the rise – it’s about protecting revenues,” says Christian Wertli, head of innovative risk solutions at Swiss Re Corporate Solutions. “Parametric solutions can be used as a business tool to provide certainty and speedy access to liquidity when most needed.”
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PEOPLE
INDUSTRY ICON
FROM THE GROUND UP Beazley Group’s Mark Bernacki joined the company during a critical moment in its worldwide expansion. He tells IBUK how his early experience in the London market helped shape his career
DESPITE HIS 20-plus years of experience as a property underwriter, Mark Bernacki has only two companies listed on his résumé. Bernacki kicked off his insurance career in 1993 as a property special risk underwriter for Wausau Insurance; in 2005, after eight months of pursuit by a head-hunter, he joined Beazley, where he’s been ever since. In that time, Bernacki has racked up a variety of experiences that have given him the expertise and skill set needed for his current role as head of Beazley’s property team. “One could actually argue that either I’m an extremely dedicated employee or just a horrible interviewer who only got it right two times,” he jokes. Bernacki’s initial push to enter the world of insurance came from his father, who oversaw commercial lines for Sentry Insurance in Wisconsin. Bernacki had a degree in finance and management, but the thought of spending all day working on spreadsheets in a cubicle wasn’t exactly enticing. “[Insurance] was a great way to balance both analytical skills and engaging with people,” he says. Bernacki got a handle on the property underwriting business while working for Wausau in Los Angeles, and then moved across the country to become the regional manager for the mid-Atlantic region of
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Wausau’s property operation. His roles and responsibilities expanded as he helped drive business production in New York and Philadelphia. Finally, after criss-crossing the US for years, Bernacki relocated to London, becoming Wausau’s only international employee. “I was managing director of a company called Wausau UK Limited, which was a wholly owned subsidiary of Wausau,” he says.
with giving him a better understanding of the global insurance market. “The turning point in my career that unleashed greater opportunities was that first stint in London in 1999,” he says. “I think the fact that it gave me an understanding of different ways that insurance worked within and outside the US, and it gave me additional international experience and Lloyd’s experience – that was probably
“After eight months of solicitation, I finally said yes to Beazley because I saw an opportunity to put my own fingerprints on an operation, rather than just driving a ship that somebody else had built for me” “In that role, I was essentially responsible for writing our US clients that were moving offshore and garnering their policies in the EU, and also writing all of their cover outside the US through fronting arrangements and through affiliate companies that I had aligned and created.”
Planting the seeds In London, Bernacki was also exposed for the first time to Lloyd’s, which he credits
the pivotal turning point that opened up new and future opportunities for me.” The call from Beazley came when the company was in the midst of expanding its Lloyd’s presence in the US. “After eight months of solicitation,” Bernacki says, “I finally said yes to Beazley because I saw an opportunity to put my own fingerprints on an operation, rather than just driving a ship that somebody else had built for me.” When Bernacki moved over to Beazley,
PROFILE Name: Mark Bernacki Title: Head of property Company: Beazley Based in: Chicago Years in the industry: 25 Career highlight: Working in London for Wausau and gaining Lloyd’s experience
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PEOPLE
INDUSTRY ICON
the company’s US outpost had less than 25 people and a blank book of business. “We had a dream and a vision for what our US operation could become,” he says. “I spent the first four years at Beazley here in Chicago helping to build and develop our US property operations both from an admitted and a non-admitted perspective, and also from a commercial lines and a personal lines perspective.” A move back to London in 2010 led Bernacki to his current position. Today, he runs global property and sits on Beazley’s
and insurance saturation in some of those areas is so insignificant compared to what we have here in North America.”
Only the beginning Despite being at Beazley for 13 years now, Bernacki insists he’s just getting started. “That’s not [to say] that we haven’t accomplished a lot,” he says. “We’re a fastgrowing and developing specialist insurer, and there’s always something to do. I’ve been quite lucky at Beazley that I keep getting new opportunities and new roles.”
“I’m a big believer that ultimately every client or broker takes the path of least resistance to get to the same means, and I believe that if we’ve got more access points and more specialist insurance hubs, we’re easier to do business with” UK managing agency board, executive committee and all of Beazley’s legal entity boards in the US. He also had the opportunity to lead Beazley’s Asia Pacific strategic initiative. Accordingly, his advice for up-andcoming insurance professionals looking for new opportunities is to mirror his own experiences working around the world. “Every day, the insurance space becomes smaller as the globe becomes smaller,” he says. “Most of the large insurance entities are all global in nature. When you look at insurance in developed markets, the only way that you can win is to steal business from others. When you look at insurance outside of the US and western Europe – when you look at insurance in Southeast Asia or Africa or Latin America – there’s just much greater developmental opportunity that everybody can win because the size of the pie is growing,
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BEAZLEY GROUP BY THE NUMBERS
The progress the company has made in expanding its global footprint stands out to Bernacki, who jumped on the Beazley bandwagon during a critical moment in its history. “As I sit here today and I look at my team now, we operate out of five specialist hubs,” he says. “We can access business all around the globe and truly have a multinational specialist insurance business.” And, he adds, Beazley’s worldwide reach has benefits for all of its partners, no matter what side of the globe – or the transaction – they’re on. “I’m a big believer that ultimately every client or broker takes the path of least resistance to get to the same means,” he says, “and I believe that if we’ve got more access points and more specialist insurance hubs, we’re easier to do business with.”
1986
Year the company was founded as Beazley, Furlonge & Hiscox before being bought out by Andrew Beazley and Nicholas Furlonge in 1992
1,327
Number of Beazley employees globally as of December 2017
65+
Number of territories worldwide where Beazley is licensed to trade surplus lines insurance and reinsurance
US$2.34bn
Gross written premium reported by Beazley in 2017
35
Number of industry awards Beazley has won since 2011
SPECIAL REPORT
TOP SPECIALIST BROKERS
TOP SPECIALIST BROKERS 2018 Meet 10 brokers who have taken their business to the next level by focusing on unique, hard-to-place and specialized industries
THESE LEADING insurance brokers have all found success in providing advice and insurance solutions to specific sectors. At the top of their game and armed with years of experience, these specialists possess a thorough knowledge of their respective industry segments that few can match. On the following pages, they provide their valuable insight into some of the most important and complex insurance sectors in today’s market.
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SPECIAL REPORT
TOP SPECIALIST BROKERS THIRD-SECTOR ORGANISATIONS
RICHARD TALBOTJONES Broking director Talbot Jones Risk Solutions
Insuring the third sector – i.e. charities and non-profits – comes with a unique set of challenges and opportunities. Richard Talbot-Jones was first introduced to the sector when he was recruited into an insurance brokerage and helped build that firm’s book of charity clients. Now as broking director at Talbot Jones Risk Solutions, he focuses on supporting the third sector by working directly with non-profits. IBUK: What are the major challenges in insuring charities and non-profits? Richard Talbot-Jones: Third-sector organisations operate in a vastly varied range of sectors, with operations that can mirror the private sector, as well as include activities more traditionally associated with charities. There’s a wide range of commercial and specialist insurers covering these activities, so one challenge is dealing with such a breadth of risks. The main challenge is not, however, covering the activities of the organisation. The key issue is to understand the structure of the organisation, something that differs significantly to the private sector. Understanding the relationship between the directors or trustees and the staff within third-sector organisations is key to ensuring that the organisation, its people, operations and property are adequately protected. In organisations where there may be boards, executive teams, staff and volunteers, it’s important to understand who the decision-makers are, who has control over different aspects of the organisation, what policies and procedures are in place, and if they are being implemented effectively.
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IBUK: How has GDPR affected charities and non-profits and how they’re insured? RTJ: GDPR has had a dramatic impact on the third sector and how it buys cyber liability insurance. As well as facing the same issues as their commercial counterparts, dealing with director, employee and service user data, third-sector organisations often have the additional concern of managing donor data. This may often result in inconsistencies – for example, managing different databases for each of these groups of people, using different programmes and relying on different parts of the organisation to implement
data security. Our third-sector clients are likely to have donors’ financial information, as well as special categories of sensitive personal data relating to young people, ethnicity, disabilities, criminal records and medical conditions. The great thing about GDPR coming into force is that third-sector organisations are now more aware of the different types of data that they’re holding. This can make them more riskaware, prudent and active in data security. Whether they buy cyber insurance or not, most of the organisations we work with are adopting more risk management strategies to protect their data and digital assets. We think this is really positive for everyone.
PROFESSIONAL INDEMNITY
GRAHAM HEARSEY Chairman Professional Insurance Agents
As chairman of Professional Insurance Agents [PIA], Graham Hearsey leads one of the first companies to build and launch online multi-quote-and-buy solutions for brokers and underwriters across the globe with the aim of providing the tools they need to compete against direct writers, aggregators and networks with similar trajectories. Hearsey and his partners set up PIA at a time when general insurance was not as heavily regulated. The company expanded its services to offer coverage for most professional classes following increasing demand from professional groups and regulators for a professional indemnity policy to become part of standard compliance requirements. Currently, PIA offers an online wholesale broker service that provides more than many other organisations, extending covers from six PII providers and three D&O insurers, in addition to a free quote-and-buy/bind facility and a plug-and-play platform for websites. IBUK: Is there a profession that you find to be more underinsured than others when it comes to PI coverage? Graham Hearsey: There are some professions that clearly look to obtain the lowest level of indemnity when purchasing their covers, and some don’t bother at all; however, many professions have to buy at least the minimum levels set by their authorising bodies. It has therefore been argued that all the authorising bodies for various professions should increase their minimum to at least £1m. As legal costs and awards are going out of control, a small indemnity level of £100,000 to £250,000 for whatever business or size you are is just not appropriate nowadays.
“Why do we need PII? To sleep easy and protect the very business you have worked so hard to build” IBUK: What are the biggest risks facing professionals, and why do they need PI cover? GH: The real danger to businesses and professions nowadays is the increasing regulations we face at a corporate level: cyber attacks, GDPR and the increasingly litigious mentality/environment. Although for professionals, their main protection will be their professional insurance policy,
unless it incorporates covers such as cyber and D&O, they will also need to consider adding these covers. That said, the main financial risk is the cost of defending a claim, whether it’s the business’s fault or not, and, in the event that the error/ omission is proved to be their fault, the cost of any damages awarded. Why do we need PII? To sleep easy and protect the very business you have worked so hard to build.
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SPECIAL REPORT
TOP SPECIALIST BROKERS JEWELLERY TRADE
NEIL McFARLANE CEO T.H. March & Co.
A chartered insurance broker and associate of the Chartered Insurance Institute, Neil McFarlane has accumulated more than 30 years of experience in the industry, having been with T.H. March since 1983. He was appointed to sales director in 2005, became managing director in 2012 and recently took the helm as group chief executive. Known for his work with SaferGems, an initiative that serves as a national crime-reporting scheme within the jewellery trade, McFarlane has been listed on Professional Jeweller’s Hot 100, in association with the Company of Master Jewellers. He speaks at events and to various media outlets on the finer details of jewellery and art insurance, and on topics such as dealing with insurance fraud and incorporating the use of emerging technologies in insurance. IBUK: What do you enjoy most about working in this speciality? Neil McFarlane: I enjoy our involvement in a vibrant, fascinating, dynamic and high-profile sector. At T.H. March, we are fortunate to work within a team of dedicated, highly trained, professional staff who are all passionate about our specialisation. This has been built up over a very long time, not overnight, and it has developed to the point that the jewellery trade is in our DNA. IBUK: What are the biggest risks in this sector? NM: Loss and damage or injury arising from criminal activity is clearly going to be top of the list. Typically these are break-ins, robbery to shops, and physical attacks to wholesalers and sales reps; also, postal and transit losses and the
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“Crimes against jewellers are now more sophisticated than ever” risky shipment of high-value goods. T.H. March was instrumental in formulating the term ‘jewellers’ block insurance’, which is now the sector and industry standard. Jewellers’ block policies will include cover for stock, goods in trust and money, and will generally have an in-built increase in cover for the Christmas period. In addition to this, all other contents pertaining to the business premises are covered, including shopfront, glass, exterior clocks and signs, safes, tools, personal effects, computers, documents, etc.
IBUK: What’s the biggest challenge you face when insuring jewellers? NM: The evolution of crime against the jewellery trade – the company works hard to keep apace with it. Crimes against jewellers are now more sophisticated than ever with organised crime, moped gangs, targeting of premium brands, fraudulent transactions – and added to all these is the growing risk of cyber attacks. We are proud to have co-founded, in partnership with the National Association of Jewellers, the highly successful SaferGems anti-crime initiative in 2009.
SPORT AND LEISURE
DOUG KAYE Account executive Mann Broadbent
While working on site underwriting in the 1990s, Doug Kaye came across an opportunity at a broker with a leaning towards sport and leisure risks, which piqued his interest and led him to build a specialisation in leisure business. Kaye joined the Mann Broadbent team in 2015 and now heads its established specialist sport and leisure division, working with groups of varying risk exposures, from outdoor activity providers and equipment hirers to amateur sports clubs. IBUK: What do you enjoy most about working with sport and leisure clients? Doug Kaye: I have always had an interest in sport from a young age. I played rugby, cricket and football at school, throughout my teens and 20s. I am now a keen runner and have completed quite a few half marathons, and have set the target for a full marathon next year. I love swimming and cycling, too, and I volunteer with marshalling duties when I can. Having such a keen interest in a variety of sports helps me to understand and identify with the needs of my clients. I really enjoy working with amateur clubs and event organisers, as it’s something I am actively interested in. I’ve also seen some obscure risks! I arranged insurance for a mass pillow fight once and recently placed an outdoor activity centre for mini tank driving. IBUK: What are some of the most challenging aspects of insuring clients in this sector? DK: Quite often, the clients I deal with have precious little time for insurance. They are volunteers or have other business interests, so it’s important to try to make the process of purchasing
“I’ve seen some obscure risks! I arranged insurance for a mass pillow fight once and recently placed an outdoor activity centre for mini tank driving” insurance as straightforward as possible for them. This isn’t easy, especially given the impact of compliance and regulation on our industry. Deadlines are often tight, as clients tend to leave insurance to the last minute, so there is sometimes a fine balancing act between gathering all of the relevant information, processing it, presenting the quote to the client and putting cover in place for them. IBUK: What are the most common underinsured risks you see? DK: The main areas we find are those where there is a limited understanding of the risks involved, which is where a good
broker can help flag potential gaps. For example, a race director may not consider cyber insurance, despite handling all race enquiries, bookings, updates, etc., online or via email. Similarly, with D&O liability, the general perception is that ‘we’re not a limited company’. Many organisers neglect to think about employer’s liability when their event relies upon volunteers, and this can lead to repercussions when something happens to any of those volunteers. Last but not least is event cancellation insurance – with more extreme weather conditions and unusually heavy rain or snow, unfortunately many clubs and events have been caught out, resulting in financial hardship.
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SPECIAL REPORT
TOP SPECIALIST BROKERS CYBER
GRAHAM WEDGBURY Cybersecurity specialist Lycetts
Cyber risk permeates every aspect of businesses today, and it was the increasing ubiquity and severity of hacking cases and the spread of malware that pushed Graham Wedgbury to delve more deeply into this field. Recognising the overwhelming need to bring awareness of cybercrime to the next level, Wedgbury has been rigorously educating himself on all things cyber while building close liaisons with experts in the field. He also does his best to stay several steps ahead in terms of spotting and learning the gaps in coverage and legislation for cybersecurity, which has propelled him to become a leading expert in the industry and a go-to source for the media. IBUK: How will GDPR affect cyber insurance cover? Graham Wedgbury: GDPR, now enforced in law as the Data Protection Act 2018, will have an impact on the offerings insurers provide in terms of coverage. Premiums and rating are bound to be affected in time, depending on the levels of fines and penalties imposed by the Information Commissioner’s Office, and as a result of the potential for fines to rise to as much as 4% of turnover for Data Protection Act breaches. But only time will tell the extent of this. IBUK: Will Brexit impact how clients’ cyber risks are being insured? GW: Brexit should have little or no impact on this. There will be an overlap between leaving the EU and the enactment of the Data Protection Act 2018 [DPA18], and even if this overlap between the UK’s EU membership and the application of the DPA18 in the UK were to be short-lived
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– should EU terms be rescinded – any UK business which trades in the EU will have to comply with the DPA18. GDPR’s many obligations will apply to organisations located anywhere in the world that process EU citizens’ personal data in connection with their offer of goods or services, or carry out ‘monitoring’ activities (defined to pick up many online behavioural marketing activities). Additionally, any UK business that has a group company or staff operating within the EU will have to comply with the DPA18 provisions and also the amendments to the ePrivacy Directive when it is finalised in due course. It follows that any insurance implications that arise from
these changes should have no effect on a business’s decision to insure cybersecurity risks. IBUK: What do you enjoy most about specialising in this sector? GW: What I enjoy most about specialising in cybersecurity insurance is the opportunity to talk authoritatively to clients, insurers and the media about a prevalent and fastevolving risk that is impacting my clients today and is set to impact them in an even greater way in the future. Being able to provide a benefit to them through relevant advice and the placement of insurance policies is fulfilling.
VILLAGE HALLS
MARTYN INGRAM Managing director Norris & Fisher Insurance Brokers
Martyn Ingram’s insurance broking career has spanned more than 40 years. When he joined the industry in 1974, he did so as a cover note clerk, and he stayed with that original company for 23 years. In 1999, he took over the business of Norris & Fisher. IBUK: How did Norris & Fisher get into village hall insurance? Martyn Ingram: Norris & Fisher’s entry into the world of village hall insurance came around 15 years ago when we took over another firm of brokers. They held a small number of village halls, and we identified an opportunity to develop a scheme for those cases. The cover has developed considerably over the period, and we are always looking to extend it further. Last year we added cover to pay for clear-up costs after trespassers camped on the hall grounds. We also provide our clients with quality risk management information, and we offer a free rebuilding cost valuation. Our policy is available on a sub-broked basis, so other brokers can offer their clients a tailored village hall policy at competitive rates. The scheme has been a huge success, and we now insure thousands of village halls from the Shetlands to the Isle of Wight. IBUK: What are the biggest risks for village halls? MI: The biggest risk facing village halls today is the issue of funding. Whilst many well run halls are in the fortunate position of having a large number of regular hirers, some struggle to pay the bills. They are often based in older buildings such as former schools, and the costs of maintaining the structure can be high. Their other major problem is finding
“Village hall insurance is a very rewarding area ... We are dealing with charities, which are a valuable resource in their local community” new blood to serve on the committee. Hall committees are predominantly composed of retired people, who sometimes find it hard to step down owing to a dearth of younger, keener replacements. IBUK: Do you face any particular challenges in this sector? MI: In regard to the challenges in insuring village halls, there aren’t really very many.
Persuading them to set sensible sums insured can sometimes be an issue, particularly with regard to buildings cover. This is one of the reasons we established a facility to provide them with a free valuation of the rebuilding cost from a firm of surveyors. Village hall insurance is a very rewarding area to work in. We are dealing with charities, which are a valuable resource in their local community.
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SPECIAL REPORT
TOP SPECIALIST BROKERS FINTECH
MARK ROBINSON Client director Finch Insurance Brokers & Employee Benefits
After working closely with a financial risk consultant who later became his mentor, Mark Robinson was introduced to the exciting world of fintech early on in his career. As new technology and finance capabilities have evolved, Robinson’s interest in the sector has continued to grow, and he has branched out into specialist fields. As client director at Finch Insurance Brokers & Employee Benefits, Robinson says he gets “a real buzz” from learning about new fintechs and their applications, as well as working with fintechs and underwriters to develop tailor-made policies to cover risk exposures. IBUK: What are the biggest risks in fintech today? Mark Robinson: Firstly, I think a major security event could still bring the sector to its knees. A major cyber attack leading to loss of confidential data could completely reverse the good PR that is around the fintech space at the moment. We only have to look at what happened to Mt. Gox in 2014 to see that an attack of this scale could seriously undermine the trust and goodwill that the banks and public have in the fintech space. Secondly, and slightly relating to the Mt. Gox loss, I think that one of the biggest risks fintechs face is leadership. These companies tend to be run by incredibly smart tech entrepreneurs who may not necessarily have the correct skill set to run a business competently. My advice to founders of new fintechs is to take off the ‘blinkers’ and pay close attention to the finer – some may say boring – details which may not seem important now, but can cause catastrophic repercussions in the future if not given the correct attention
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early doors. Matters such as cybersecurity, insurance, marketing, HR, etc., should all be of paramount importance. IBUK: What effect do you think Brexit will have on this sector? MR: I guess it’s very much ‘watch this space’ until we know what the details of the Brexit deal are likely to be. Will Brexit make it more difficult for talented EU nationals to apply for fintech jobs in the UK? Time will tell. I think Brexit could potentially make
things more difficult for startups in the UK, as they may not have such an easy time collaborating with other fintechs in the outside world post-Brexit. I do think, however, that Brexit could present opportunities to regulatory technology, or regtech, companies. The uncertainty Brexit is predicted to cause will mean financial institutions will be looking to become compliant with changing regulations, and this is where the regtech companies could start to boom.
CYBER AND DATA PROTECTION
DUNCAN SUTCLIFFE Director Sutcliffe & Co Insurance Brokers
With a passion for protecting businesses, Duncan Sutcliffe has educated hundreds of organisations, as well as governing bodies and law enforcement, on cyber insurance through events, workshops and training, all while working closely with insurers on their products. Sutcliffe decided to join the industry after his father invited him to try out the family business when he was at a crossroad point in the early years of his career. He went on to spearhead Sutcliffe & Co, which became the first broker in the UK to achieve Cyber Essentials [CE] certification in 2014 and has issued more than 3,000 cyber policies to date. IBUK: How did you get to the point of being a cyber insurance specialist? Duncan Sutcliffe: I always keep up to date with new areas of risk for my clients, and I started working with the IASME Consortium to advise them as they were preparing for the Cyber Essentials launch with the government – so right at the beginning. The working relationship with IASME grew, and we now support all SMEs that achieve CE accreditation through them. The risks of a cyber breach are not limited to one sector, one type of business or one size of business, so I have been working hard to spread the word to not just all our clients, but also businesses across the UK. It has got to the point where many businesses know me just for cyber insurance.
“The risks of a cyber breach are not limited to one sector, one type of business or one size of business, so I have been working hard to spread the word to ... businesses across the UK”
IBUK: How has GDPR affected cyber insurance cover? DS: GDPR has helped raise awareness of data protection enormously, which is a good thing. It has brought the need
for data protection insurance – aka cyber insurance – to the masses, and insurers are responding with more product offerings and being more competitive with the premiums.
This continues to tie in with Cyber Essentials, as that demonstrates a business’s commitment to cyber hygiene, which is looked on favourably by the ICO and insurers.
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SPECIAL REPORT
TOP SPECIALIST BROKERS
EQUINE
ANTHONY BURNETT Senior schemes developer SEIB Insurance Brokers
Anthony Burnett has worked on SEIB Insurance Brokers’ equine team for 15 years. Involved with all aspects of the firm’s specialist horse insurance scheme, Burnett’s responsibilities include drafting policy wordings, writing and amending underwriting guides, liaising with partner insurers, and more. In addition, he is involved in enhancing and refreshing the e-trade variant of the horse insurance scheme. In the equine market, it is essential
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for insurance advisors to understand and identify with clients should the worst happen to the client’s horse, something Burnett achieves with his caring and empathic approach. IBUK: How did you get into the equine insurance space? Anthony Burnett: I, like a lot of people who work in insurance, fell into it quite by accident. I started at SEIB Insurance Brokers in the summer of 2003 as a holiday job when I was in between my second and third years at Writtle College studying for a degree in equine studies; 15 years later, I’m still here. I love specialising in this area, as it relates to what I’m interested in and means that I get to do a job that I really enjoy.
IBUK: What are the main challenges in this market? AB: Keeping a horse is an expensive hobby, so horse owners will generally do their best to keep the costs of owning a horse to a minimum. However, when it comes to insuring the horse, cheapest doesn’t always mean the best cover. It can therefore be challenging to make equine clients aware of this and that opting for the cheapest policy may not be the most costeffective decision in the long term. IBUK: What are the biggest risks facing equine clients? AB: These would be the liability associated with a horse causing damage or bodily injury to a third party and the everincreasing cost of vet bills.
CHURCHES
EMMA CHRISTIAN Business development executive Bridges Insurance Brokers
Emma Christian’s entry into insurance was slightly different from most. After writing a letter to Bridges Insurance Brokers’ managing director, whom she knew from church, Christian landed a summer job while attending university. After graduating, she worked for a Lloyd’s insurer and a large reinsurer for 10 years before returning to Bridges Insurance Brokers. Armed with knowledge about churches and a churchgoer herself, Christian found church insurance to be a natural fit. IBUK: Are there any trends affecting how churches are insured? Emma Christian: The trend we’ve picked up on is that there has been a decrease in business that is written on long-term agreement. A long-term agreement means that the insured is fixing their rate for a defined period of time, usually three or five years. Sometimes churches don’t realise that they were tied in for such a long period of time and have had to wait to move to a policy without one. This is an advantage because it offers peace of mind for the insured, because it means that their insurance cost won’t go up – other than index linking on the sums insured – even if they have a claim in that time. The disadvantage is that they can’t take advantage of increased competition and decreasing rates in the market because they are tied in for that time. IBUK: What are the key factors you consider when arranging insurance for churches? EC: It is the church or charity’s activities, particularly unusual fundraising or community activities, that need to be declared to the insurer, so we need to
get a good understanding of them. In the past, we have said to a client: “Unless you are doing something dangerous, such as canoeing or rock climbing ...” It turned out they were doing rock climbing and abseiling with children, which would have been an exclusion on the policy and needs to be specifically declared to the insurer to get coverage. Also, when arranging cover for churches and charities, it is important to use an insurer that has experience in this type of business. We use the major carriers that understand churches, charities and the
work that they do, which means that they can access a better rate than in the general commercial market and an understanding claims service. IBUK: How have church and charity risks evolved over the years? EC: In the last 10 years, we have seen a rise in homelessness and an increase in the number of food banks in the UK. The church and charity sector has stepped in to help with providing food and shelter, and the insurance industry has had to step up to provide cover for these risks.
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