The CHART Exchange Dec-Jan 2016-17 by The CHART Exchange

IN THIS ISSUE 6

WHEN DOES SMALLER ACTUALLY BECOME BETTER? We’ve all been to events that are just too big to absorb. There are so many competing agendas (programs, exhibits, vendors, meals, speakers, group meetings, etc.) that it becomes difficult to prioritize your time.

PAUL LAVENHAR INTERVIEWS DUNCAN DALE CHART was refreshing because we are having lots of conversations with people that have an interest in finding ways to trade with the Lloyd’s market and learn more about it. It has been quite dynamic.”

CHART’S MARKET FINDER FACILITY RESULTS IN DOZENS OF NEW PROGRAMS OPPORTUNITIES During our inaugural Event – the “Declaration of Interdependence” meeting held at the PA Convention Center – CHART introduced its exclusive Market Finder Facility.

6 13

ROCKWOOD FIREARM LIABILITY PROGRAM DEMONSTRATES HOW CHART EXCHANGE CAN SERVE AS A CATALYST FOR NEW BUSINESS It is the only Firearm Liability product that can be marketed via the independent agency system...

VICTIMS OF SOCIAL ENGINEERING FRAUD: A TREND YOU DO NOT WANT TO FOLLOW The emergence of a worrisome trend involving email hacking is plaguing law firms that find themselves involved with wire transfers of client funds.

ULTRA RISK ADVISOR’S COVERHOLDER STORY The CHART Exchange became the vehicle for Ultra Risk Advisors learn more about the benefits of doing business with the London Market.

Our team has a lot of collective experience in making sure new business is a core component of our events.” - Glenn C. Clark

CHALLENGES FACING CYBER-SECURITY INSURANCE Given the large number of exclusions and the dynamic nature of cyber risk, there is uncertainty about what a cyber policy actually covers.

CYBER ATTACK TAKES $31 MILLION FROM RUSSIAN BANK Cyber hackers stole more than $31 million dollars from the Russian central bank after they posed as clients and faked their way into the system.

Cover Image Credit: Fotolia

CHART EXCHANGE

APPLE TO JOIN DRIVERLESS CAR RACE Apple seems to be joining the efforts of Google, Ford, VW, AG, Daimler AG, Tesla Motors Inc., and General Motors Co. in the race to develop and put an autonomous vehicle on the road.

INTERVIEW: F. SCOTT ADDIS “There is a great momentum in CHART. And, momentum leads to excitement, trust and confidence. And confidence leads to action. I give Glenn Clark tremendous credit for his vision and leadership. CHART is getting stronger… it is going to be a dominant organization.”

LLOYDS TO BE MORE SELECTIVE IN COMING YEAR In the Lloyds of London annual year-end email, the insurer addressed the premium losses they have had in 2016 by committing to be more selective in their risks and cut subscription rates.

NEW COVERHOLDERS: ARE YOU SYSTEM READY? New Coverholders will experience an application approval process required to enter into contracts of insurance under what is known as a “registered binding authority.”

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DEC-JAN 2016-2017 VOLUME 1 - ISSUE 10

Publisher: CHART Exchange Glenn W. Clark, CPCU Membership Services Matt Basile

VALUING AN INSURANCE CARRIER While valuing an insurance company is a complex process—there are two broad categories an acquirer considers, the qualitative and quantitative metrics.

Advertising: Tyler Cichewicz Managing Editor: Tyler Cichewicz

14 The Rockwood Firearm Liability Program - A Successful CHART Exchange Demonstration PREFER TO READ IN PDF FORMAT? DOWNLOAD THE PDF VERSION HERE

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Contributing Editor: Frank Huver Subscriptions: Tyler Cichewicz Layout, Design & Circulation: Ron Manera AdMax Corp., Inc. CHART Exchange

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MESSAGE FROM THE EARLIEST ADOPTER

WHEN DOES SMALLER ACTUALLY BECOME BETTER?

ou may or may not recall an article in last month’s CHART-Exchange Magazine titled “What Did We Learn From CHART’S 2016 Summit” Click here to view.

(programs, exhibits, vendors, meals, speakers, group meetings, etc.) that it becomes difficult to prioritize your time. Each of us attends these events in an effort to do more commerce.

The first line reads “Venue preference. Smaller gatherings develop greater intimacy and ultimately more commerce. Our 300 person limit and 420 face-toface pre-arranged meetings have surfaced over twenty immediate programs and a huge pipeline for the future”.

Despite our best intentions, often more time is spent catching up with old friends, connecting with previous contacts, social endeavors, etc. When we return home we realize that our pre-event goal of creating new business more often than not has gone unfulfilled.

Our team has We’ve all been to events that are experience in just too big to absorb. There are business is a so many competing agendas of our events.

a lot of collective making sure new core component We have birthed

Glenn W. Clark, CPCU Publisher & Earliest Adopter

Attendees Enjoying Networking Opportunities During October Conference

6 March 2016

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CHART EXCHANGE two organizations dedicated to specialty program business. The first one was a lot of fun and we did a lot of “experimenting” to ensure that all of our audiences had their own forum to be heard (vendor partners, program administrators, carriers, and potential program administrators). Our newest launch – CHART – is a niche within a niche within a niche. We have broken down some barriers and have created face-toface dialogue between London Syndicates and U.S. producers (both existing and potential Coverholders). As stated previously, 420 private new business meetings were pre-arranged for our October Summit. These sessions were supplemented with forty Vendor Partner workshops, forums to show off various agency network models, and networking events. A core objective for 2017 is to further develop the “smaller actually becoming better” model that has worked so well between Coverholders and Risk Takers to include two other audiences. A.

VENDOR PARTNERS – CLIENTS

We will work closely with our duespaying Vendor Partners in a threetiered strategy: 1. Granting them the ability to tell their stories directly from the

mouths of the agencies and clients they have helped. The BEST way to advertise your services is via a satisfied customer!

“to do more commerce between the U.S. and London”.

1. Mentoring. Matching smaller specialists with expert 2. Work in tandem with our mentors who are already Partners to personally invite the Coverholders. prospects they are trying to convert into clients. CHART has a robust 2. Coverholder Lounge. Offer referral system where we diligently a forum at our event for existing follow-up on all leads. Coverholders to present their programs. 3. Establishing private meetings in advance of our 3. CHART Mart. Our team is events so that everyone’s time is building a “virtual shopping mall” maximized. for our member’s programs Our intention is to advertise nationally under the best practices brand of B. COVERHOLDERS MARKET “CHART Exchange” to drive new There are hundreds (if not commerce in a more efficient thousands) of specialty agents manner. that would like to be Coverholders someday. Obtaining Delegated Underwriting Authorities from Lloyd’s is no simple task. Again, a three-tiered strategy has been designed to support the core value Glenn W. Clark , CPCU

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DECEMBER-JANUARY 2016-17

INTERVIEW

But, I wanted to do my own thing. So, I left in September 2012 on good terms, and I started talking to Lloyd’s in March of 2013 about forming a new syndicate. There has been a lot of talk here at CHART about people going through the challenges of going through the cover holder approval process. PAUL: Can you give us an overview The new syndicate application process is also challenging, but of your company? we were approved in principle Duncan Dale: We are a Lloyd’s at the September 2013 Franchise syndicate and started business Board meeting. in 2014. I've been in the market for 34 years prior to setting up the syndicate and worked for one of the largest syndicates in Lloyd’s, which was a great experience with a good underwriting culture, very bottom line focused, and a great Our experience applying to be a syndicate was very good. We team of people. had very good endorsement from aul Lavenhar of PL Communications, a CHART Vendor Partner, had the opportunity to speak with Duncan Dale, Chief Executive of Dale Underwriting Partners after the 2nd Annual CHART Summit in October.

uncan Dale is a highly experienced underwriter in the London/ Lloyd’s market. He started his career in 1982 and entered Lloyd’s in 1989. Following a long career at the Amlin Syndicate, where his last position was the Managing Director of Amlin London, he left in order to establish his own Syndicate. The new Syndicate, known as Dale Underwriting Partners commenced underwriting for the 2014 year of account. Duncan is an Associate of the Chartered Insurance Institute, the past Chairman of the Lloyd’s Market Association’s Casualty Reinsurance Business Panel and its Non-Marine Committee and is a current member of the Board of Directors of NRRA

DECEMBER-JANUARY 2016-17

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INTERVIEW Lloyd’s at a senior level. Part of the reason we think there was a good endorsement was that we have a spread of capital behind the syndicate. Our plan was to create something with a spread of capital behind it, and be something that is Lloyds centric – with a Lloyd’s broker distribution channel. We've had great support from Lloyd’s, from the broker community and from clients. For this year we will write about $150 million of direct written premium. We focus our business into three areas. We’ve got a property reinsurance team, a property insurance team and a casualty team. Just under half of what we write is through some form of delegation of authority. So the coverholder model is important to our business - critical to our business. PAUL: What made you decide to be a part of CHART? Duncan Dale: The first year we were nervous being a new business that is fully committed to the Lloyd’s broker distribution channel. All of our business comes through the Lloyds broker distribution channel. We were nervous that there was a limitation on the brokers being here, and that there was a possibility that some of the clients that we would see here are already clients of other brokers who are not represented here.

We didn’t want any perception as a new business that we were in any way undermining some of the relationships that already exist. We became comfortable that that wasn’t going to be the case, and we are very prepared to work hard to develop new business for the market.

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PAUL: What are you hoping to accomplish while you are here? Duncan Dale: We started out to look at this as a forum that is quite refreshing. We go to a lot of conferences, and a lot of those we go to are geared towards education or networking for the clients. Whereas CHART was refreshing because we are having lots of conversations with people that have an interest in finding ways to trade with the Lloyd’s market and learn more about it. It has been quite dynamic. I think having been here for the best part of two days, there were things that obviously can be improved, but overall we've had a good experience of it. Meeting a good number of new people is the focus of the conference and that has been very good.

CONTACT DUNCAN DALE:

Dale Underwriting Partners Duncan Dale Camomile Court, 23 Camomile Street, London EC3A 7LL (203) 307-1423 brendaparsons@daleuw.com

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NEWS

CHART’S MARKET FINDER FACILITY RESULTS IN DOZENS OF NEW PROGRAM OPPORTUNITIES By Glenn W. Clark, Publisher

uring our inaugural Event – the “Declaration of Interdependence” meeting held at the Pennsylvania Convention Center in October 2015 – CHART introduced its exclusive Market Finder Facility. This initiative was designed to match program proposals submitted by domestic insurance agents with the risk appetites of the London Syndicates. MARKET FINDER A PROVEN CONCEPT

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The Market Finder concept was so well received last year that we decided to offer the service again during the Second Annual Event in Baltimore. The result was again successful; 420 pre-set appointments generating over two dozen new program opportunities for the London marketplace. With the 2016 meeting now behind us, our team has begun the planning process for the upcoming year. Any new concept or idea we come up with must pass a twotiered litmus test. First, it must be a value-added benefit for our members. Just as importantly, it must also help us achieve CHART’s primary objective: to expand the www.chart-exchange.com

CHART provides Coverholders with the opportunity to augment their current distribution networks with new business sources.

U.S./London marketplace through the identification and pursuit of new business production.

How will the new facility function? First, participating Coverholders would be asked to complete a What One viable new initiative detailed questionnaire. products and/or services are scheduled for launch on 2017 will be a Market Finder-type facility being offered? Are there any specially tailored for existing unique coverage features or areas Lloyd’s Coverholders. As you may of differentiation? What are the already know, Coverholders are eligibility parameters? domestic program administrators who have been delegated the The next phase will be to raise necessary underwriting authorities awareness of these product to transact business on behalf of offerings to the independent retail London. These entities are recognized industry leaders within their unique product niche. See Market Finder Facility Pg 29 TABLE OF CONTENTS

DECEMBER-JANUARY 2016-17

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Get an edge on your competitors and keep more clients. You can offer your client something other brokers don’t – risk management services with a 24-hour helpline – to help when there’s a HIPAA violation or other regulatory problem – your renewal retention increases because your clients won’t want to give it up.

Get the faster service you’ve been missing. Our retail brokers tell us they really appreciate the responsiveness, pro-active communications and expertise they get from Ultra to help them meet their clients’ needs.

For a complete list of classes visit: UltraRiskAdvisors.com Our membership in CHART has really helped us in becoming involved in the London Market. SEND YOUR SUBMISSIONS TO: Michele Tran, Production Underwriter HealthExpress@ultrariskadvisors.com

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COVERHOLDER SPOTLIGHT

ULTRA RISK ADVISOR’S COVERHOLDER STORY By Tyler Cichewicz

them. The problem was that Ultra Risk Advisors had not dealt with ltra Risk Advisor’s the London Market in years. relationship with CHART began in 2015. Chris “We felt a little lost, fumbling Randall, CEO of Ultra Risk Advisors through meetings with different - a healthcare professional brokers while attempting to liability program manager- began make a guess at who might be a receiving phone calls and e-mails good match for us,” Randall says. from the group’s Earliest Adopter, Glenn Clark. The purpose of The CHART Exchange became these communications was to the vehicle for Ultra Risk Advisors introduce Randall to the learn more about the benefits of CHART Exchange. This doing business with the London new concept was being Market. launched to serve as the catalyst for expanding the After learning more about U.S./London marketplace the CHART concept, Elizabeth by identifying new business Babington - Ultra Risk Advisor’s opportunities. One of leader of Program Development CHART’s unique features boarded a flight for Philadelphia is to provide a forum to attend the group’s inaugural for personal interaction meeting in October 2015. The trip between Lloyd’s Risk Takers proved successful as Ultra Risk and domestic insurance Advisors made many valuable agencies. connections, including one with Chris Randall, CEO of Ulta Risk Advisors a London broker that helped At the time, Randall and facilitate their goal of achieving his team at Ultra Risk Advisors Coverholder status. The agency were in the midst of developing was able to obtain their delegating programs in healthcare market underwriting authorities within segments that include medical months of starting the process. facilities, physicians and senior Their experience serves as living, a road they are still on both an example of the benefit today. However, the timing of CHART provide to the London Clark’s call came when Randall and his team knew the value Coverholder status would bring See Ultra Risk Story Pg 34

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DECEMBER-JANUARY 2016-17

NEWS

ROCKWOOD FIREARM LIABILITY PROGRAM DEMONSTRATES HOW CHART EXCHANGE CAN SERVE AS A CATALYST FOR NEW BUSINESS GROWTH “I love it when a plan comes together.” John “Hannibal” Smith

product – Firearm Liability. Like the “A-Team”, the CHART Exchange brought together a group of firms with diverse areas of specialization to bring By Frank Huver, SVP this unique coverage offering to the marketplace. Our cast of ou may or may not be a characters: fan of the 1980’s TV series “The “A-Team” (maybe - Rockwood Programs. An not even born yet), but most of existing London Coverholder you probably have heard the with experience in risk evaluation, famous catchphrase from the administration, and marketing show captioned above. Over the on a national scale. The agency is course of five seasons, Colonel also licensed to conduct business John “Hannibal” Smith – played on a non-admitted basis in every by George Peppard – led a group state. of mercenaries in one improbable mission after another. The - Ark Underwriting. A Colonel’s plans to deal with the Lloyd’s Syndicate with the problems the team encountered appetite and expertise required tended to be unorthodox but to appropriately underwrite the effective. risks.

This iconic quote came to mind recently as we were reviewing the launch of Rockwood’s newest

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Another unique feature of the Rockwood offering: it is the only Firearm Liability product that can be marketed via the independent agency system.”

- Wilson Elser. An internationally recognized law

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NEWS

firm with nearly 800 attorneys. They are experienced litigation specialists, insurance claims administrators, and adjudicators. - Strategic Insurance Agents Alliance (SIAA). A 3,000+ member agency network that writes in excess of $5 billion annually. - PL Communications. An active Vendor Partner of CHART, this firm provides marketing/creative and website development support.

Image Credit: Creative Commons

- C J Coleman. The London Broker who served as the intermediary between Rockwood and Ark during the product development phase. The rationale behind this new product is simple. It is estimated that at 70-80 million Americans own at least one firearm. Recent polls indicate that concern over personal safety is the most common reason given for owning a gun.

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But what happens if a lawabiding citizen is actually forced to use a gun to protect him/her self, a loved one, or their personal property? There will be an investigation – and potentially a criminal trial. Even an eventual acquittal provides no guarantee that the “victim” or his/her family members won’t sue in civil court. Many homeowner policies specifically exclude firearm use – even in self defense – as a covered exposure, deeming it to be an intentional act. That leaves the gun owner personally liable for legal expenses, bail bond costs, and any judgments awarded through a civil action. The Firearm Liability product was designed to address this underserved need. The policy includes legal defense and indemnity coverage for civil suits,

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defense cost reimbursement provisions for criminal actions, and firearm theft civil liability protection. Wilson Elser serves as the claims administrator for the product, guaranteeing an advocacy defense on civil matters for our policyholders. The law firm also provides a hotline staffed by legal professionals.

See Rockwood Firearm Prog. Pg 35

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ANALYSIS

VICTIMS OF SOCIAL ENGINEERING FRAUD: A TREND YOU DO NOT WANT TO FOLLOW By, Scott R. Schaffer, Esq., Antonella G. Dessi, Esq., and, Rebecca F. Rose, Esq , Wilson Elser LLP

intended recipient of the funds never receives the money, these “social engineering” schemes, as they are known, open the law firm up to claims from clients, banks and various other parties. The following reallife scenarios convey some important lessons from attorneys who have fallen victim to social engineering fraud.

he emergence of a worrisome trend involving email hacking is plaguing law firms that find themselves involved with wire transfers of client funds. While the examples articulated below are legal services-centric, the issue of social engineering fraud SCENARIO 1 has ramifications across a broad Law Firm represented Client, a spectrum of business segments – seller, at a real estate closing. In including the insurance industry. fact, Law Firm had represented Client on numerous occasions in Primarily, these schemes tend similar engagements. Client was to target real estate attorneys, to receive a wire transaction of although we have seen sporadic $100,000, representing the sale application of these frauds in other proceeds. Unbeknownst to Law practice areas. Typically, the email Firm, however, its paralegal’s hacking is carried out at or about email was hacked prior to closing the time of a real estate closing and the hacker sent a series of and almost always involves the emails, purpo11ing to be from transmission of fraudulent wire Client, instructing Law Firm to transfer information to the law firm. wire funds to an account at Bank. This causes the firm to unknowingly Law Firm wired the sale proceeds wire transfer monies into a bank to the account provided in the account that can be accessed by emails, only to learn later that the the hacker. instructions were fraudulent.

demanded the amount of the wire transaction, plus additional funds to compensate Client for the costs of taking out a loan to keep his business running. It remains unknown whether Bank will be able to recover any of the funds wired to the fraudulent account. While Law Firm was a victim of social engineering fraud, the erroneous transfer might have been avoided. The fraudulent emails were sent by a “dummy” account that was created to look almost identical to Client’s real email account. The emails purportedly sent from Client, whose email display name would typically appear as “john doe [doej5000@gmail.com],” appeared as “john doe [doej5000@mail.com].” With only the “g” from the “gmail” account omitted from the address, the email name change was easily overlooked by Law Firm.

As a takeaway, lawyers should meticulously review emails containing sensitive information such as wire transfer instructions and bank account numbers to More often than not, the funds The fraud was discovered ensure that they were sent by the are unrecoverable, as the hacker after Client called Law Firm to appropriate party. In today’s age withdraws the money before inquire about the funds, which of electronic communication, a the fraud is detected. As the true had not been received. Client simple telephone call to Client for 16

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ANALYSIS

confirmation purposes would have immediately alerted Law Firm to the fraudulent nature of the emails and the wire transfer of funds to the improper bank account would have been avoided.

measures could have been taken telephone call should be made for to avoid the fraudulent transfer. verbal confirmation. The email purporting to be from Client’s real estate agent contained SCENARIO 3 the following language: “Due to Law Firm represented Client in connection Typically, the email hacking with a stock purchase SCENARIO 2 is carried out at or about agreement for the sale of In another matter the time of a real estate closing Client’s business. As part involving a real estate of the sale, $1 million was and almost always involves the transaction, Law Firm transferred to an escrow transmission of fraudulent wire represented Client, a account with Bank and transfer information to the law firm. seller, at a closing. Client was to be released on a was to receive the sale This causes the firm to unknowingly certain date once specific proceeds of $200,000 conditions were met. Buyer wire transfer monies into a bank via wire transfer to her was to pay an additional account that can be accessed by the account with Bank. To $200,000 if various other hacker.“ this end, Client provided conditions were met. The Law Firm with a voided required conditions were check from her bank account tech issues with the seller’s account met, and Buyer became obligated containing the appropriate routing seller wants proceeds wired to her to transfer funds totaling $1.2 personal company’s account pleeze million to Client. Seller provided and account numbers. send me the info you need to initiate Law Firm with wiring instructions Prior to the wire transfer, however, the wire.” In this instance, noting the via email and Law Firm was to Law Firm received an email, improper gram mar and spelling, provide the wiring instructions to purportedly from Client’s real Law Firm might have paused Bank and Buyer. Before this could estate agent, indicating that Client before proceeding with the wire be accomplished, however, Law wanted the funds wired to another transfer. In this regard, attorneys Firm’s email was intercepted by a account due to technical issues. should always be suspicious of fraudulent third party. Different language in wiring Following the wire transfer, it was unsophisticated discovered that the email was a emails, pai1icularly when there are fraudulent result of a breach of the prior communications from the Instructions were provided to real estate agent’s email systems. alleged sender that can be used Bank and Buyer via phony email Client demanded the sale proceeds as a reference. As a general rule, a change in wiring instructions from Law Firm. to a different account should See Social Engineering Fraud Pg 32 Here, too, certain preventative always raise red flags and, again, a www.chart-exchange.com

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ANALYSIS

EXPERTISE MAKES THE DIFFERENCE: THE RESTAURANT INDUSTRY

ith over 1 million restaurants nationwide serving up a projected 780 billion dollars in sales this year, food service is an industry that’s bound to see its fair share of insurance liability claims. A contributing factor is the breadth of this market; restaurants and food service establishments face unique liability exposures that most industries don’t have to contend with.

everywhere for someone to commit a fraudulent type of claim, from lying about trip and falls to making up stories about objects in their food. Throughout the years, many of these cases have received widespread media attention and restaurants have become ‘easy marks’ for anyone claims that happen in restaurants betting that a company will rush and you’ve got to be prepared to to settle in order to minimize the handle them all”, says Jessica Sorkin, unwanted attention and expense a Vice President Casualty Claims at trial would bring. York Risk Services Group. “When your customers are public invitees, LIQUOR LIABILITY BRINGS UNIQUE RISKS you see everything from broken teeth to serious, even fatal injuries. But it’s in establishments where Food service can be a very risky liquor is served – whether a restaurant, catering establishment, business.” adult entertainment or nightclub, What types of exposures do food that the risk can rise to an entirely service establishments have? In new level.

And, in a highly competitive industry that routinely operates on paper-thin margins, a single liability claim can be a devastating event, causing irreparable damage to brand reputation and the financial viability of a business. addition to slip, trip and falls, there is a high frequency of claims related THE KNOWLEDGE TO HANDLE MANY to allergic reactions, food poisoning TYPES OF CLAIMS and dental issues. Also, restaurants When the stakes are this high, the are busy operations with workers first and best line of defense is a coming onsite every day making claims team with the knowledge deliveries, carrying inventory up and and experience to handle a wide down stairs and through kitchens variety of claims, uncover the with wet floors. necessary facts and quickly move Fraud is another problem for the process toward resolution. an industry that operates in the “There are many different types of public sector. Opportunities are

Dram shop claims often involve serious, sometimes fatal injuries. Fights, brawls and auto accidents involving patrons and bystanders can be common occurrences depending on the type of establishment. Incidents such as these can easily attract media attention, often turn into criminal investigations, and cause significant damage to a company’s brand reputation. See Restaurant Risks Page 20

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Analysis

York Risk Services Group, Inc. is honored to be a Preferred Vendor Partner of the CHART Exchange. We are a premier provider of TPA Services, Specialized Loss Adjusting, Customized Claim Solutions, & Risk Control Services for Lloydâ&#x20AC;&#x2122;s of London & the London company market. We offer:

Dedicated Binding Authority Adjusting Team Dedicated E&S/Specialty Lines Open Market Adjusters Back office team for banking, bordereau production, MI reporting Customized Physical Risk Assessments (Risk Control) Virtual Risk Evaluation Services To learn more, contact Aubrey Fountain, at 850.650.2380 or Aubrey.Fountain@yorkrsg.com.

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ANALYSIS

RESTAURANT RISKS HOW EXPERTISE CAN MAKE THE DIFFERENCE The key factor in a successful outcome in a restaurant claim is the investigation – the experience to know what to look for and the ability to dig deep and find it. York’s nationwide team of restaurant claims professionals knows what they’re doing when it comes to the food service industry. With years of experience managing these types of losses, they know where to look for the facts and what questions to ask. They’re confident enough to push back on plaintiff’s attorney, and understand how important a quick resolution is to a client. But how does ‘expertise’ translate to results for a business that relies on their insurer to deliver the best possible outcome in the event of a loss? What does an experienced adjuster ‘see’ in a claim that someone less knowledgeable might not? EXPERIENCED CLAIMS TEAMS KNOW THAT TIME MATTERS As with any claim, the value generally increases as time passes and the claim remains open, so it’s critical to act immediately. This is important in the restaurant industry, where employee turnover is high. Those involved in a claim may have been terminated, no longer available to assist in the investigation or have become a hostile

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witness. It can be challenging to chase people down. And with losses involving serious injury, media focus can mean loss of brand reputation and business. The claim team must get in quickly

Often in alcoholrelated auto accidents, plaintiff’s attorney will sue every establishment that serves alcohol in the general vicinity of where the offending party had been drinking in order to cover all bases and not miss out on a potential pocket to pick.” and bring the matter to resolution to minimize damage. EXPERTISE MEANS A THOROUGH INVESTIGATION An experienced, knowledgeable claims professional will conduct a thorough investigation, a key ingredient to a successful outcome. A good example is a broken tooth claim, one of the most frequent types of restaurant claims. A less experienced adjuster might take a loss like this at face value and assume that if someone’s tooth was cracked biting down on their food, it’s nothing out of the ordinary. But an expert will dig deeper. TABLE OF CONTENTS

Was the person over 40 years of age where teeth are not as healthy to begin with, or did the claimant possibly have prior dental issues? Was the preexisting condition on the exact same tooth number? An expert will look carefully at the damages aspect of a claim. The totality of claims paid for broken teeth is significant, and having an expert in charge of the investigation could make a meaningful difference in overall claims paid or whether a claim is denied. Similarly, an allergic reaction claimed to have originated at a restaurant could very well be caused by an unrelated event. An experienced adjuster will know to ask if the waiter/waitress was informed of a food allergy and will create a timeline to determine if the reaction was the result of food eaten at the restaurant or ingested prior to visiting it. SPECIAL EXPERTISE IN DRAM SHOP CLAIMS Liquor liability claims perhaps represent the greatest potential exposure for a restaurant or food service establishment. These claims often involve critical injuries, criminal investigations and could quickly escalate to a point that threatens business continuity. Depending on the type of establishment, alcohol-related fights and brawls can be common occurrences and can result in claims being presented against the establishment. Claimants often allege the restaurant or bar did not provide the proper security to prevent the fight or someone was served too much alcohol by the bartender, etc. www.chart-exchange.com

Image Credit: Creative Commons

Continued From Page 18

ANALYSIS the amount recoverable on a dram shop claim is limited and that’s key to understand. Two-thirds of states have statutory provisions that allow licensed establishments such as restaurants, bars, and liquor stores to be held liable for selling or serving alcohol to individuals who cause injuries or death as a result of their intoxication.

But it’s important to explore further and take a look at the liability components of the claim. Many of these claims can and should be defended as unforeseeable acts, and a claims team that conducts a thorough investigation can often successfully deny these types of losses. An important component of any liquor liability claim is a good understanding of the insured’s policy and potential limitations. There are many Liquor Liability endorsements that have lowered limits with general aggregates that are eroded by both indemnity and expense dollars. “Often in alcohol-related auto accidents, plaintiff’s attorney will sue every establishment that serves alcohol in the general vicinity of where the offending party had been drinking in order to cover all bases and not miss out on a potential pocket to pick”, says Sorkin. “It’s a matter of going after the ‘deepest pockets’ and if you have not www.chart-exchange.com

But many of these states statutorily limit the liability to cases where the establishment sold or served alcohol to an obviously intoxicated individual or a person under the legal drinking age. Knowing the law can make been diligent with the investigation, a a difference in how the claim is client could end up paying significantly.” handled and ultimately, resolved. Dram shop claims are complicated, and you need adjusters who are exceptionally analytical. They must be able to establish a timeline and analyze the toxicology reports. The adjuster must also have an understanding of how the alcohol burns in the system over time and then be able to relate that information to the claim report. Often times, it can be determined that alcohol consumed at a client’s restaurant could not possibly be the cause of the loss. KNOWLEDGE OF THE REGULATORY LANDSCAPE An experienced claims professional also understands the applicable state regulations and laws, especially as they apply to negligence in liquor liability cases. For instance, in some jurisdictions, TABLE OF CONTENTS

KNOWING WHEN TO INCLUDE 3RD PARTY EXPERTS York’s claim professionals don’t hesitate to bring expert 3rd party vendors into the investigation when needed, like medical experts in a specific field or an engineering firm. A recent case where a patron sustained fatal injuries walking down a flight of stairs to a lower level ladies room required the expert evaluation of an engineering firm. Were there any structural issues with the stairs, was the staircase area up to code or were there any additional concerns that could have caused the accident? Clients need to know they can rely on having the very best team to provide a thorough investigation of the facts. DECEMBER-JANUARY 2016-17

NEWS

CHALLENGES FACING CYBER-SECURITY INSURANCE Given the large number of exclusions and the dynamic nature of cyber risk, there is uncertainty about what a cyber policy actually covers.

However, the GA goes on to say that cyber risk insurance is being hindered by coverage limits. Policies usually only cover losses from $10 is stunting the market’s growth. to $500 million, while having a large Regardless, D’Hustler and others number of exclusions, including at Geneva Association fully believe those for self-inflicted losses such as that the cyber risk insurance market accessing unsecure websites. is, ‘an important goal for the further development of society.’ WHAT’S COVERED?

Losses are difficult to measure due to a lack of data. “Moreover, even if there ecently, the world’s leading are data available, it is questionable think thank of the insurance whether or not historical data are a industry, The Geneva meaningful indicator for the future, Association, published a report due to the dynamic nature of cyber detailing the challenges facing risks and thus the risk of change,” the cyber-security insurance. report says.

Image Credit: Creative Commons

The report,“Ten Key Questions on Cyber Risk and Cyber Risk Insurance,” starts with a review of known research, but delves into the challenges and suggests what must be done to provide better cybersecurity coverage. Challenges for insuring cyber risks include ‘the lack of data, risk of change, accumulation risk, loss sizes, availability of risk capital and potential moral Adverse selection is another hazard problems.’ challenge facing this segment of the industry. The report goes on to state Anna Maria D’Hulster, secretary that companies are more likely to general for the Geneva Association seeks out cyber insurance, after they says that in addition to the have already fallen victim. To add insurability challenges, there is further complication, moral hazard also a demand for products that 22

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occurs when companies with cyber insurance fail to invest in protective measures and thus relax into their coverage.

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“Given the large number of exclusions and the dynamic nature of cyber risk, there is uncertainty about what the cyber policy actually covers. Worse yet, the policies in the market have no agreed-upon terminology, which makes the offerings very difficult to compare,” the GA report says. In addition to encouraging standardized terms and good practice standards within cyber risk insurance, the GA advocates for anonymous data pools and development of re/insurance pools, while revising and developing new policies. Since cyber security has no borders, the GA suggests governments open conversations about cyber security and also establish a public-private partnership with the government as a failsafe for extreme situations. View the entire Geneva Report, here. www.chart-exchange.com

NEWS

CYBER ATTACK TAKES $31 MILLION FROM RUSSIAN BANK

risks by reviewing training program as needed.

• Manage User PrivilegesLimit the number of privileged accounts. Monitor user activity and control access to activity and audit logins. Create a process for attaining yber hackers stole more than attacks in the first six months of 2016 a privileged account authority. $31 million dollars from the opposed to 43 in the entire 2015 year. Russian central bank after • Incident Managementthey posed as clients and faked their Beazley’s report also saw that the Create a plan for any incident way into the system. majority of the cyber attacks on response and disaster recovery financial institutions were on banks capability. Provide training for The theft falls in line with an and credit unions with less than staff then produce and test plan. increasing trend of cyber attacks on $35 million in annual revenue. Report criminal incidents to the law financial institutions. These particular Showing that cyber criminals are enforcement. criminals were thwarted before just, if not more likely, to target they could steal their desired sum, smaller banks that may not take the • Secure Configuration- Apply which authorities say was more than same cautionary steps as a larger security patches and ensure that double what they stole. However, no institution. the secure configuration of all ICT arrests have been made. (Information and communications Financial technology) systems is maintained. institutions Since February 2016, when cyber Create a system inventory and define criminals stole $81 million from a baseline build for all ICT devices. faced 86 Bangladesh’s central bank, financial ransomware attacks regulators have urged banks around • Network Security- Protect in the first six the world to increase their cyber network against external and months of 2016 security systems. internal attack. Monitor the network’s perimeter and filer out unauthorized opposed to 43 in the Cyber hacks, like the one on the access and malicious content. entire 2015 year.” Russian central bank, show how Continually monitor and test security damaging and powerless institutions controls. are to cyber crimes despite cyber What follows are five simple steps security programs in place and that, according to cyberessential. As it stands today, there is no full law enforcement across the globe org, can help secure information in a proof security option that defends searching for perpetrators. business. against any and all cyber security threat. However, the five steps In line with this trend, Beazley, a • Education- Establish a staff featured will help you recognize and provider of data breach response training program that outlines user deal with a security breach, should it insurance, found in a recently security policies covering acceptable occur, and deter cyber criminals from published report that financial use of the organization’s systems. targeting you. institutions faced 86 ransomware Maintain user awareness of cyber

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www.chart-exchange.com

NEWS

APPLE TO JOIN DRIVERLESS CAR RACE

pple Inc. seems to be joining the efforts of Google, Ford Motor Co., Volkswagen AG, Daimler AG, Tesla Motors Inc., and General Motors Co. in the race to develop and put an autonomous vehicle on the road.

“The company [Apple Inc] is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation,” Kenner wrote.

Steve Kenner, Apple’s director of product integrity, wrote a letter to the National Highway Traffic Safety Administration (NHTSA) urging them to limit regulations that inhibit testing driverless cars. Kenner’s letter is as close as Apple has come to publicly announcing their interest in this field.

THE FUTURE

The Obama administration has attempted to bolster the innovation of autonomous cars by developing a 15-point safety assessment and asking automakers to volunteer the details of their systems to regulators for the purposes of allowing safety organizations to view technology that will be responsible for driver’s lives.

Some predict that the majority of cars on the road will be TRUMP ASKED TO autonomous by 2030. In line REVIEW POLICIES with this prediction is that millions of jobs like truck, President-elect Donald Trump has taxi, and Uber drivers will be been asked by auto trade groups replaced by self-driving cars. to review all policies since Sept. 1, the Obama administration has enacted, as some automakers feel the Obama’s administration has asked for too much. Apple’s letter to the NHTSA comes after their investment in machine learning and autonomous systems. They want to use the technology in many fields, including transportation, and want to work with the NHTSA to help define the best methods.

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ANALYSIS

VALUING AN INSURANCE CARRIER considers, the qualitative and quantitative metrics. The qualitative metrics will include some of the factors mentioned above and will influence the ultimate valuation of the firm. For example, a carrier with a robust, updated technology platform would be viewed more favorably and thus garner a higher valuation multiple than one that is struggling to upgrade.

By Daniel Baransky

he insurance industry continues to consolidate with average deal volume for P&C companies of 44 per year over the past 5 years. The driving forces behind the acquisition activity are the excess capital in the industry and the lack of opportunities for premium growth both organically or via rate increases. Direct written premium growth for 2015 was 3.9%. Qualitative metrics include such items as the combined ratio, reserve development patterns, A rudimentary measure of capitalization is the premium written premium growth and return on surplus. to surplus ratio. In 2015, the U.S. P&C Industry wrote at However, these items aren’t evaluated without putting 0.75x net written premium to surplus of $690 billion. them into proper context. Written premium growth is Many companies can write north of 1.0x illustrating typically preferable, but did it come at the expense of that there is perhaps hundreds of millions of dollars in adequate rates? And if so, what could that mean for excess capital in the industry. future profitability? Or worse, could it result in adverse reserve development? There are many factors that can render an appealing target including such things as geographic expansion, Furthermore, these metrics are compared to the business line expansion, technology platform, company’s peers and the industry. Deviations from expense synergies, quality of management, quality of the industry or peers are evaluated to gain better the distribution outlets, underwriting profitability, and insights into the company’s operations. even the size of the invested asset portfolio. Once an analysis of the firms operations and financial While valuing an insurance company is a complex process—there are two broad categories an acquirer

See Valuing An Insurance Carrier Page 36

bout the author: Mr. Baransky serves as Vice President of Merger & Acquisition Services. He brings close to 15 years of relevant experience in the areas of insurance analysis and financial modeling. Prior to joining Merger & Acquisition Services, Mr. Baransky was a Vice President at Fox-Pitt, Kelton, serving as an insurance stock analyst. His coverage universe included over 13 insurance companies, including companies such as W.R. Berkley, Markel, RGA, and Platinum Underwriters, with market capitalization totaling over $13 billion. In addition, he worked on the marketing of several IPOs and secondary offerings. Prior to arriving at Fox-Pitt, Kelton he was a Financial Analyst at Cendant Corporation, a Fortune 500 Company.

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NEWS Continued from Page 11

CHART MARKET FINDER FACILITY MATCHING AGENT’S INTERESTS WITH COVERHOLDERS PORTFOLIOS agent community. A number of marketing methods will be utilized to get the message out: broadcast e-communications, media advertisement (both electronic and traditional hardcopy publications), direct response mail, and business-to-business telemarketing. Recipients will be asked to identify the products of interest to them, size of their existing business portfolio, and pertinent contact information. They will also be invited to attend the upcoming CHART Event scheduled for October 8-11, 2017 in Baltimore MD.

have prospered through their relationship with Lloyd’s. Mentoring gives Coverholders the opportunity to pass along their knowledge and expertise. Interested in learning more about this newest member benefit? Send your questions to Glenn Clark at info@chart-exchange.com.

We will then begin the task of matching agent interests with the participating Coverholders possessing the most compatible business portfolios. Appointments will be pre-set to make sure that everyone’s time is optimized. Dedicated space will be set aside at the 2017 Event to help facilitate the meetings in a private setting.

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OPPORTUNITY FOR COVERHOLDERS

The “value proposition” for existing Coverholders is two-fold. First, it provides them with the opportunity to augment their current distribution networks with new business sources. The retail agencies have been pre-vetted during the appointment process, allowing the meetings themselves to be much more productive. Coverholders will also be given the chance to “pay it forward” by mentor insurance agencies new to the London marketplace. Entities with existing delegated underwriting authorities www.chart-exchange.com

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INTERVIEW

INTERVIEW: F. SCOTT ADDIS

HART spoke to Scott Addis, CEO of Beyond Insurance.

What does Beyond Insurance do? Founded in 2007, Beyond Insurance is a coaching and consulting firm that drives top-line revenue growth of insurance organizations through a systematic process of differentiation, innovation and transformation. A unique capability of Beyond Insurance is its ability to enhance sales leadership and sales cultures. Beyond Insurance has also coined the term “The Risk Revolution” -- a mission to lessen the dominance of the insurance bid and enhance industry perception. Core to the teaching of Beyond Insurance is its firm belief in the

There is a great momentum in CHART. And, momentum leads to excitement, trust and confidence. And confidence leads to action. I give Glenn Clark tremendous credit for his vision and leadership. CHART is getting stronger… it is going to be a dominant organization.”

risk management process, a 4-step approach to identify, measure, mitigate, transfer and monitor the risks facing an organization. Supporting its risk management approach are proprietary tools including the Intelligence Quotient for Risk Management (IQRM) – a quantifiable risk assessment tool consisting of a systematic method to better understand the risks facing an organization. The IQRM benchmarks performance against ideal industry standards and facilitates the design of risk control and mitigation strategies. Each module has been crafted by one or more subject matter experts. Beyond Insurance has also created the Certified Risk Architect (CRA) designation, the new breed of insurance agent -- consultative,

F. Scott Addis, CPCU, CRA, CBWA CEO, Beyond Insurance. Scott, who has been recognized as one of the “25 Most Innovative Agents in America” by The National Alliance for Insurance Education and Research and also received The Franklin Award for outstanding achievement and contribution to the insurance industry in the Delaware Valley, serves as the CEO of Beyond Insurance. Founded in 2007, Beyond Insurance is a coaching and consulting firm that drives top-line revenue growth of insurance organizations through a systematic process of differentiation, innovation, and transformation. A unique capability of Beyond Insurance is its ability to enhance sales leadership and sales cultures. Beyond Insurance has also coined the term “The Risk Revolution” — a mission to lessen the dominance of the insurance bid and enhance industry perception. 30

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www.chart-exchange.com

INTERVIEW

diagnostic, results-oriented and focused on managing and mitigating risks rather than selling insurance. The CRA’s disciplined approach, planning process and service standards differ significantly from the traditional insurance agent or broker. He or she has been trained to begin each engagement with a blueprint focused on the identification, evaluation and measurement of risk – a complete enterprise, diagnostic risk management checkup.

having access to the London market is a different strategy. Number two, is the customer experience – the action and results of the Lloyds brokers and syndicates that make each BIGN member feel important, valued, understood and respected. Tell us about the CHART trip to London?

creative flair. The participating BIGN members are confident that the experience will give them a competitive edge. Any surprises this week in terms of things you've learned or interactions you've had? There is a great momentum in CHART. And, momentum leads to excitement, trust and confidence. And confidence leads to action. I give Glenn Clark tremendous credit for his vision and leadership. CHART is getting stronger… it is going to be a dominant organization.

The trip was amazing. While I had expectations about touring Lloyds, meeting the London brokers and syndicates, the experience blew Why are you involved with me away. The innovative qualities of the London marketplace and CHART? its positive response to those of us Beyond Insurance has put together from the US was most appreciated. What are you hoping the future a network of enlightened agents for CHART will be? & brokers – the Beyond Insurance And what do you hope to Global Network (BIGN). Its accomplish this week? CHART is about enlightenment; members support each other letting US agents and brokers in achieving market leadership, I am joined in Baltimore with a truly understand the power of the organic growth and profitability handful of Beyond Insurance Global London market and vice versa. goals through advanced processes, Network members. We are actively decision support capabilities and interacting with the London Beyond Insurance S c o t t best practices. BIGN members are brokers and syndicates with goal Addis, CPCU, CRA, CBWA 2200 involved with CHART for a number of building mutually beneficial Renaissance Blvd, Suite 175, King of reasons. One is differentiation. relationships. We love London’s of Prussia, PA 19046 (484) 704-9501 The members understand that broad underwriting appetite and saddis@beyondinsurance.com www.chart-exchange.com

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NEWS Continued From Page 17

at closing had not been voided but was actually cashed by Seller’s counsel. While this particular social engineering fraud did not result in a loss to a third party, the wire transfer from Law Firm’s attorney-client trust account caused a recognizable, On the same date, Law Firm received albeit unrealized, loss to one or more two emails, purportedly from Seller’s of Law Firm’s other clients that had counsel, requesting that. Law Firm funds in the trust account at the time. instead transfer the proceeds into Seller’s counsel’s trust account. A There are several valuable lessons to few days later, Law Firm received a be learned here as well. This scenario follow-up email, again purportedly again demonstrates the importance of being wary of a sudden change in instructions, and the need to follow up with verbal confirmation. Here, there was no confirmation directly with Seller’s counsel regarding the change in instructions or verification that the previously issued check had been voided. Although it would appear to go without saying, attorneys should carefully oversee the from Seller’s counsel, indicating that counsel had destroyed the $250,000 actions of their paralegals, assistants check and wanted the proceeds and staff particularly where client wired to Bank that day. On the same monies are concerned. date, and without confirming that the check had, in fact, been voided, CONCLUSION Law Firm’s paralegal wired the These scenarios are actual examples $250,000 sale proceeds to Bank. of the recent and growing trend of social engineering fraud that is Several days later, Bank’s fraud risk victimizing law firms. By following manager advised Law Firm that the simple recommendations, law the wire transfer was part of an firms may be able to avoid exposure email hacking fraud. Law Firm then and protect client relationships from discovered that the check provided risk.

BEWARE SOCIAL ENGINEERING FRAUD purporting to be from Law Firm. As a result, Bank and Buyer transferred funds to the incorrect bank account. In this scenario, various other emails exchanged among the pa11ies were also intercepted, such that it is unclear which party’s email system was breached. This example demonstrates the incredible sophistication of some of these schemes. Attorneys should be extra cautious when emails containing sensitive information are exchanged among multiple parties, as this creates more opportunities for a security breach. Once again, the simple extra step of reaching out to all involved parties by telephone for verbal confirmation of the wiring instructions would have gone a long way toward preventing fraud. SCENARIO 4

Law Firm represented Client in connection with the purchase of real estate for $250,000. At closing, Law Firm provided a $250,000 check from its escrow account to Seller’s counsel.

DECEMBER-JANUARY 2016-17

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COVERHOLDER SPOTLIGHT Continued From Page 13

Randall says.

ULTRA RISK STORY

The ‘pre-screening’ Randall refers to is something that makes CHART’s services unique. The organization’s “Market Finder Facility” was designed to match domestic insurance agent program/product submissions with Syndicates possessing the marketplace and a testament to most compatible risk appetites. Ultra Risk Advisor’s own focused Details regarding these new effort. proposals are secured through the use of questionnaires. Agents “The Lloyds Coverholder process who take advantage of the is comprehensive and takes some Market Finder Facility will be able work,” Randall says of the little more than six months it took Ultra Risk Advisors to complete the task. “It should be noted that includes preparation while working on other facets of the facility being put together. It is not overwhelming, but it should not be taken lightly.”

As a member of CHART, my sense was that doors were opened faster and wider than without. There is a certain prescreening that is enjoyed by members.”

The program Ultra Risk Advisors launched is for numerous segments within the classes of outpatient facilities and staffing organizations. Ultra Risk distributes its programs through retail brokers/agents throughout the U.S. and is always looking for brokers that are well served by efficient turn-around service with specialty coverage approaches to their medical liability accounts. to attend pre-set appointments with Syndicate decision-makers “As a member of CHART, my sense interested in their new business was that doors were opened submission. faster and wider than without. There is a certain pre-screening For Ultra Risk, as with other that is enjoyed by members,” agencies pursuing Coverholder 34

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status, the approach is twofold. One side of it is the program itself, this is where an agency meets with a Lloyd’s syndicate and a decision whether a partnership is profitable is discussed. “These conversations with the individual syndicates are fairly straightforward with good questions and input in terms of underwriting guidelines and construction of the program in total,” Randall says. The other side of the approach, is the tribunalization process, which is a thorough screening conducted by Lloyds and required for any agency seeking Coverholder status. The procedure can be both unfamiliar and daunting; many agencies feel powerless during this step. CHART helps facilitate this process, as experts within the association provide counsel and mentorship. “Some of the areas that are reviewed include a profile of the business segment and detailed business plan. Profile of key staff, in underwriting, finance and operations including past experience,” Randall adds. Pleased to be a part of the CHART Exchange, Randall believes that getting involved brought a positive level of urgency from London brokers and Lloyd’s syndicates to his agency. He sees the London Market, facilitated by CHART, providing www.chart-exchange.com

SPOTLIGHT specialized terms to specific Continued From Page 15 program managers, which aids dramatically with channel conflict that exists when domestic carriers attempt to standardize terms and conditions with all distribution sources. Furthermore, Randall believes that the London Brokers associated with CHART tend to be better at facilitating supporting program development efforts. This is true, once an agency like Ultra Risk Advisors attains Coverholder status, getting additional programs becomes easier as they have already completed the lengthy tribunalization process.

ROCKWOOD FIREARM PROGRAM

Another unique feature of the Rockwood offering: it is the only Firearm Liability product that can be marketed via the independent agency system. We have teamed with SIAA to sell the coverage on a national scale through their member producers. In exchange, the network will be our exclusive Randall says, “Being associated distributor for a period of one NOTE: This exclusivity with CHART, although not a year. requirement probably does bring does not extend to group plan more positive reception from submissions brought to us by Lloyd’s Risk Takers. You are part agents outside of the network. of a group that can communicate both positive and negative SIAA agents have been provided experiences to each other rapidly. with several tools to help them I believe everyone wants to market the product: deliver more positive results and benefit CHART members who are - Branded brochures. A triin touch with others.” fold marketing piece has been created for the Firearm Liability Ultra Risk Advisors’ Coverholder offering. The outside panels approval makes them a CHART provide a coverage overview; success story. Randall looks the inside sections contain forward to future CHART events the simplified application. and the new connections and The promotional brochures opportunities that come with are tailored to the individual them. Any agent/agency that agencies through the inclusion is interested in becoming a of their logos and contact producer for Ultra Risk Advisors, information. please inquire through their website. - Micro-site. A dedicated www.chart-exchange.com

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product webpage is available for the product as well. It contains links to coverage highlights, answers to frequently asked questions, and applications. Like the brochures, the sites are customized to each producer. The micro-site is designed to “bolt on” to an agent’s existing internet platform. - On-line application. Agents can direct their clients to a web-based version of the application. From here, prospective insureds can make a submission, receive a quote, bind coverage, and pay the premium. Rockwood’s experience with its Firearm Liability product serves as a practical demonstration of how CHART can serve as the catalyst for new business growth within the U.S./London marketplace. Face-to-face interaction between Risk Takers and agencies, support from various Vendor Partners, and the efforts of our London Broker all combined to bring the plan together. To paraphrase another “A-Team” catchphrase: we pity the fool who doesn’t at least consider becoming a part of the CHART Exchange! For more information about Rockwood’s Firearm Liability product, contact Frank Huver at frank.huver@ rockwoodinsurance.com. DECEMBER-JANUARY 2016-17

ANALYSIS Continued From Page 27

A buyer could build into that can be chosen. These multiples earnings model benefits, will come from comparable such as expense savings transactions and publicly traded and revenue enhancements companies. For example, if one or detractors like expenses were evaluating a middle of the related to infrastructure road personal automobile writer improvements. As the most it would be tough to make the recent earnings are utilized case that it should command the to form the projection it’s same multiples as a company like important to use the proper Progressive (PGR-$35.60), which baseline. For instance, if the currently trades at 2.6 book value results are concluded a valuation can be performed. There are most current year was impacted by per share. The ultimate values will various methods that can be items such as catastrophe losses, also be checked against metrics utilized to value insurance carriers reserve development, the shedding such as Return on Investment (ROI). of unprofitable books of business, including discounted cash flow then these can all influence forward If comparable transactions point to (“DCF”), regression analysis, priceprojections. a 10x P/E ratio but that results in an to-earnings ratio (“P/E”), price-toROI of just two percent book value (“P/B”), then a case can be made For example, if one were and sum of the parts. evaluating a middle of the road that the valuation is The most prevalent too high. Also, P/E and metrics and the personal automobile writer it P/B will be referenced ones quoted in press would be tough to make the case that to each other to ensure releases are P/E and it should command the same multiples that the valuation makes P/B. sense. Again let’s take

VALUING AN INSURANCE CARRIER

as a company like Progressive (PGR$35.60), which currently trades at 2.6 book value per share.”

While these appear simplistic enough in that a multiple is applied to the corresponding value, earnings or book value / stockholders equity, some evaluation takes place beforehand to decide what the appropriate value to utilize is.

Deciding upon the proper earnings and book value to use can include making several adjustments. On the earnings front a forward projection, often 3 years forward is calculated, to provide a view on how the company will perform post acquisition. 36

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the 10x P/E from before but that results in a 4.0x P/B. It is not typical to pay 4.0x P/B, which is quite high, so that could argue for From a balance sheet perspective a lower P/E multiple. one could adjust for items like removing goodwill. Importantly, an In conclusion there are many analysis of the company’s reserves factors that go into the valuing of must be conducted to ascertain an insurance carrier. The process whether they are redundant, takes gathering an in depth deficient, or adequate. The understanding of the company, determination on the company’s its operations and how that reserves can result in a change in the relates to its peers and industry. closing balance sheet, adjustments However, the act of doing this in to the acquisition price, or both. depth analysis does not mean that buyers and sellers will have the Now that the earnings have been same viewpoint on the value of the normalized and forecasted and book entity and that can be the biggest value adjusted, a valuation multiple impediment to deals overall. TABLE OF CONTENTS

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ANALYSIS

NEW COVERHOLDERS: ARE YOU SYSTEM READY? By Mark Stroop

ew Coverholders will experience an application approval process required to enter into contracts of insurance under what is known as a “registered binding authority.” Certain sections of the Coverholder application are completed by 1) the applicant, 2) the applicant’s sponsor, and 3) the Lloyd’s managing agent who is intending to delegate its authority to the applicant under the binding authority. The managing agent can also serve as the sponsor.

bout the author: Mark Stroop, Sales Executive at NetRate has helped MGA’s, carriers and agencies with technology solutions that streamline the process of generating new and renewal business for 20+ years.

• Claims and Complaintsprocedures for the handling and settlement of claims and pursuit of recoveries, in addition to complaints or proceedings. • Reporting, Records and Aggregate Exposures- including Risks Written Bordereau/ Reporting and Aggregate Exposures, Accounting Bordereau/Reporting and Settlements and Records, Statistical Information and Audit/Inspection Information. An effective production and management system at the Coverholder should essentially be “custom tailored” to ensure the proper controls are in place for compliance. For example:

The final details of the Coverholder’s authority and responsibility to perform is outlined in the binding authority agreement. Once approved and signed by all parties, the Coverholder may enter into contracts of insurance and issue the pertinent insurance documents as proof that contracts of insurance have been accepted. There are many sections of the new Coverholder application that span a broad range of topics, including the all-important section of “Systems and Controls.”

and monitor the following areas of business operation should not be During the marketing and understated. Key areas of impact • sales experience the system will include: help maintain that submissions • Scope of Authority- outlines are complete and in compliance the authorized and unauthorized from an underwriting and rating classes of business and coverages; perspective before they are bound. territorial limitations, financial Once a policy is bound, data information (premiums, • deductibles, maximum limits, etc.) should seamlessly flow from the underwriting/rating component to • Documentation for the documentation section where Boundincludes The importance of the “Systems Insurance and Controls” in place to facilitate application and proposal forms and See Coverholder Systems Page 39 contract documentation forms. www.chart-exchange.com

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For More Information, Contact NetRate Systems at 517.347.4900 38

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ANALYSIS Continued From Page 37

COVERHOLDER SYSTEMS business rules are automatically invoked to ensure the proper contract documentation is assimilated and produced. The same concept applies down the line for endorsements, cancellations, reinstatements and the renewal cycle.

met to satisfy the binding authority requirements. Data to support business reporting and audits is automatically accumulated and aggregated in real time during the natural course of businessnot assimilated later from nonintegrated or manual systems.

• Whether claims are handled in-house by the Coverholder or outsourced to a TPA (Third Party Administrator) it is critical the claims process is administered, recorded and reported in compliance with the terms of the agreement.

ABOUT NETRATE:

• Reporting, Records and Aggregate Exposures are really the “pulse” of the business relationship. Accurate data needs to be accessible in a timely fashion so stakeholders can monitor performance and adjust in a timely fashion when needed. Coverholders, Brokers, Syndicates and Managing Agents need to continually measure their performance to meet expectations and to ensure compliance to the binding authority agreement. The most effective Coverholder systems maintain this status on the fly, i.e. the policy is not issued unless all conditions have been www.chart-exchange.com

NetRate Systems, Inc. solutions include cloud-based portal, high performance submission, underwriting, rating, easy quote and policy document generation, data analytics and integration with 3rd parties for the Property and Casualty insurance marketplace, primarily in the MGA, Program Administrator, Coverholder and small/medium carrier environment. NetRate products include nationwide rating of ISO® General Liability, Property, Business Auto, Crime, Inland Marine, BOP, as well as NCCI Workers Comp. NetRate also offers custom programming of all lines of business, including Professional Liability. For more information, go to www.netrate.com. TABLE OF CONTENTS

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LLOYDS TO BE MORE SELECTIVE IN COMING YEAR by Tyler Cichewicz

n the Lloyds of London annual year-end email, the insurer addressed the premium losses they have had in 2016 by committing to be more selective in their risks and cut subscription rates.

for retaining some form of the passporting rights that make trading with the European Union convenient for the insurer. Though, Lloyds has a contingency plan in place that could involve setting up branches in the EU’s jurisdiction.

“This is designed to ensure that the Lloyd’s market will be able to Lloyds Syndicates will review continue to trade with the EUtheir business plans for 2017 and albeit with a different structure,” uphold the disciplined approach Nelson and Beale said. that has made them the world’s LLOYD’S CAN WITHSTAND ADVERSITY oldest insurance market. Despite the mild turbulence “Current year underwriting is not Lloyds is experiencing, it is profitable in aggregate at the important to note, as Nelson has moment,” Lloyd’s Chairman, John pointed out previously, Lloyds has Nelson, and Chief Executive, Inga been in business for over 300 years Beale, said in the email before and has proved it can withstand adding, “this is a matter of great adversity. concern to us.” In the meantime, the cuts Lloyds Due to competition over the last will be undergoing in the next few years, Lloyds has changed year may serve to inhibit some of its premium rate structure to cut the program ideas U.S. insurance costs. Lloyds will continue along agents and agencies may want to this trend by lowering 2017 market write. The CHART Exchange can subscriptions by 10 percent. give U.S. insurance professionals some priority by getting them faceFurthermore, Lloyd’s continues to to-face with Lloyds Syndicates so appeal to the British government, that ideas can be pitched with in regards to Brexit, and push control and efficiency.

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