The CHART Exchange April-May 2017

IN THIS ISSUE 4

CHART EXCHANGE CONFERENCE 2017 COMING IN OCTOBER! We want YOU to be the next CHART success story!

Join us at the Third Annual Coverholders and Risk Takers (CHART) Exchange Meeting on October 8-11!

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CHART MARKETS EXCHANGE In this issue, we’d like to discuss a new offering called CHART Markets.

CHART Markets is an online shopping mall.

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ANOTHER CHART SUCCESS STORY! CHART’s Vendor Partners can offer producers the benefit of their unique expertise in a wide variety of disciplines.

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THE CHART DEFENDER INNOVATIVE E&O FOR COVERHOLDERS The CHART Exchange announces another new initiative being launched for the benefit of agencies doing business with Lloyd’s – the CHART Defender.

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MANAGING MEDICAL ONLY TO LOST-TIME CLAIMS What may seem like a simple sprain or cut can sometimes turn into a large lost time claim with a substantial amount of medical dollars being spent.

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By heavily promoting CHART Markets Exchange within the independent insurance agency community, we are also raising awareness about Lloyd’s, its capabilities, and reputation within the industry.

20 NY CYBER REGULATIONS FOR FINANCIAL INSTITUTIONS

HOW MGAS & COVERHOLDERS CAN LEVERAGE TECH TO DIFFERENTIATE IN THE MARKETPLACE

The New York State DFS recently promulgated cyber regulations for financial institutions that are likely to increase the risks to D&Os resulting in an increase in claims.

Meeting the demands of the market by launching new programs or by making innovative changes to existing ones have become top priorities for MGAs.

LLOYD’S INDIA BRANCH OFFICIALLY OPENS Lloyd’s, the world’s specialist insurance and reinsurance market, commenced operations in India today and welcomed MS Amlin as the first syndicate to join the branch

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M&A: DUE DILIGENCE AND COMMON PITFALLS In any acquisition or divestiture of an insurance distribution firm Wholesale, Retail, or MGA), an important part of the process is due diligence.

Cover Image Credit: Wikimedia Commons

CHART EXCHANGE

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ADD A PROFIT CENTER TO YOUR COMMERCIAL INSURANCE BUSINESS Professionals who work in the commercial insurance business understand what hard work looks like. They must pay be aware of regulations both existing and new, carefully organize digital and physical documents...

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LLOYD’S REPORTS £2.1BN ($2.7BN US) PROFIT FOR 2016 Lloyd’s, the world’s specialist market for insurance and reinsurance, announced a profit of £2.1bn ($2.7bn US) for 2016 despite the combined ratio moving from 90.0% to 97.9%.

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Membership Services Matt Basile Advertising: Matt Basile Managing Editor: Matt Basile Contributing Editor: Frank Huver Layout, Design & Circulation: Ron Manera AdMax Corp., Inc. info@chart-exchange.com 3001 Philadelphia Pike Claymont, Delaware 19703 www.chart-exchange.com 302-765-6001

Lloyd’s, the specialist insurance and reinsurance market, has announced it will be setting up a new European insurance company to be located in Brussels.

www.chart-exchange.com

Publisher: CHART Exchange Glenn W. Clark, CPCU

CHART Exchange

LLOYD’S TO OPEN EU INSURANCE COMPANY IN BRUSSELS

PREFER TO READ IN PDF FORMAT? DOWNLOAD THE PDF VERSION HERE

APRIL-MAY 2017 VOLUME 2 - ISSUE 4

Last Issue:

I’m Matt Basile, Managing Editor. I handle CHART Exchange Advertising. Call me at 302-765-6016 and let’s have a conversation.

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NEVER MISS AN ISSUE OF CHART

EXCHANGE SUBSCRIBE NOW

SUBSCRIBE TO CONTINUE TO RECEIVE THE CHART EXCHANGE

MESSAGE FROM THE EARLIEST ADOPTER

CHART MARKETS EXCHANGE Glenn W. Clark, CPCU Publisher & Earliest Adopter drive traffic to this unique Internet platform. We will utilize media advertisement, direct response mail, broadcast e-mail, and other methods to raise awareness.

SOME OF THE UNIQUE FEATURES OF CHART MARKETS INCLUDE: PRODUCT SEARCH

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017 is shaping up to be an exciting year for the CHART Exchange. We provided a glimpse in last month’s column, when we announced the site of our Third Annual Event. As you’ll recall, it will be held October 8-11 at the Four Seasons Hotel in Baltimore MD. This elegant venue offers spacious meeting facilities, wonderful waterfront views, and convenient location. Every room available in the hotel has been reserved for the event; this step will allow us to provide an intimate

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Functionality. Retail agents will be given the opportunity to search through the portfolios of our storeowners through a unique search portal. Entering keywords related to product or coverage type and CHART-centric setting for our will generate a roster of members attendees. with compatible offerings. Each listing will include highlights, In this issue, we’d like to discuss contact information, and links a new offering called CHART to websites. More importantly, Markets. CHART Markets is an on- the member is notified each time line shopping mall. Much like its an agent views their offerings – “brick-and-mortar” counterpart, allowing them to conduct their the facility provides participating own follow-up. members with virtual storefronts from which their various product CHART MARKETS EXCHANGE and services offerings can be Occasionally, retail agents will promoted. Marketing campaigns inquire about a product that targeting retail insurance agencies is not offered through any of will be implemented in an effort to TABLE OF CONTENTS

www.chart-exchange.com

CHART EXCHANGE MARKETING SUPPORT

There is no doubt that CHART Markets will identify and source new producers for participating members that they never would have encountered on their own.

This new facility can either augment existing distribution channels or establish new ones. our storefront owners. In these situations, the producer will be given the opportunity to post information about the risk on an exchange. Participating members will then have the ability to provide placement assistance on a one-off basis.

Vendor Partners will also have the opportunity to use platform as a way of promoting their areas of specialization to this unique business niche. Services include legal, loss control, M&A, promotional items, consulting services, web-development, systems, compliance, licensing, VENDOR SERVICES fronting, captive management, CHART Markets is not limited marketing assistance, etc to insurance products.

Our

A LONDON-CENTRIC FACILITY

Participating CHART members will not be the only ones benefiting from this newest initiative.

Our organization is dedicated to the growth of the U.S./London Marketplace.

By heavily promoting this platform within the independent insurance agency community, we are also raising awareness about Lloyd’s, its capabilities, and reputation within the industry.

Our goal will be to launch CHART Markets in the third quarter of 2017. Those interested in learning more about this exciting new platform are invited to click here and view a demo version of the site. Additional information can be obtained by e-mailing our team at info@chart-exchange.com.

Glenn W. Clark , CPCU CHART’S Earliest Adopter

www.chart-exchange.com

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CHART - NEWS

ANOTHER

CHART SUCCESS STORY

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he CHART Exchange was established to grow the U.S./ London marketplace by finding and pursuing new business opportunities. The success seen to date is at least partially attributable to the almost collegial environment of support fostered within the organization.

This atmosphere inures to the benefit of all members.

Our London Brokers work with the domestic insurance agents to match program submissions with Syndicates possessing the most compatible risk appetites.

CHART’s Vendor Partners can offer producers the benefit of their unique expertise in a wide variety of disciplines. The recent business arrangement between Cost Financial and Associated Services in Insurance (ASI) is one such success story; it serves as a practical example of the “iron sharpening iron” dynamic in action.

Cost Financial is a CHART Vendor Partner. COST manages and operates premium finance companies that are owned by the agents themselves. By possessing their own entity, the agent is creating a separate profit center that will generate revenue in excess of any commission or rebate program offered by traditional finance companies. Additionally, this ownership structure provides

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the agent with control over the rates and terms offered to their insureds.

It enables them to proactively respond to their individual clients instead of reacting to the dictates of the marketplace.

life and health insurance. Brad said, “Curiosity and the potential of what it had to offer from the London perspective” is what initially attracted him to the CHART Exchange, according to Brad. He attended the Second Annual Event Working with COST enables the in Baltimore after receiving an agent to earn all of the profit from the invitation from Glenn Clark. premium financing they arrange W o r k i n g CHART’s and to enjoy the together since Vendor flexibility of being their initial in control of the meeting at Partners can offer finance process, CHART producers the benefit the all without any Conference, of their unique additional staffing, ASI and Cost equipment, or Financial have expertise in a wide software.

COST able variety of disciplines. been does it all, from the to develop a The recent business daily operations meaningful of the finance arrangement between b u s i n e s s companies we relationship Cost Financial and manage for that will Associated Services our clients to continue to be accounting, profitable to in Insurance (ASI) l i c e n s i n g , both entities is one such success collections, and year after year. story.” technology management.

Brad says ASI wants to work with Cost Financial While at the CHART Exchange because of, “Accessibility, service conference in Baltimore this past and the transparency of their October Chris Gebhardt of Cost organization. They have a drive to Financial was able to be meet make you successful and in turn it with Brad Burditt of ASI. ASI is an makes them more successful. It is a independent insurance agency win-win for both parties.” licensed in most states, and specializes in property, casualty, Chris offered this assessment

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CHART - NEWS

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of how Cost Financial would be working with ASI: “COST will be managing and operating a premium finance company owned

by ASI. COST will provide all of the backroom operations for their new finance entity, enabling ASI to remain focused on selling their core insurance and financial services products while COST handles all of the work for their new premium finance company.”

The CHART Exchange asked both companies what it is that they do that they consider critical to their success.

Brad Burditt of ASI says, “It is a little cliché but being able to continue to service our clients better than our competition and to be innovative in the products that we can bring them.” Any advice you can bestow to other agencies? “ You have to be able to continue to partner with folks that have your same values. When that goes astray it can become a weak link in the chain and then everyone suffers.” www.chart-exchange.com

Chris Gebhert of Cost Financial says, “Critical to our success is the interaction and close relationships we have with our clients. By understanding their needs and by working every day with our clients, we can ensure that our procedures fit seamlessly into their daily operations and minimize any additional work necessary on behalf of the agency.

Now entering our 28th year in business and with a nationwide client base, we understand that no two clients are alike and can adapt to best serve each client’s needs. One piece of advice that we tend to give any agent that is looking for a way to significantly boost their bottom line is to take a look at the finance charges on the premium financing they already arrange with traditional finance companies... that is profit they are simply giving away! With COST, they can recoup that lost profit and gain control of the premium finance process.”

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NEWS

CHART DEFENDER

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Innovative E&O Product Addresses Unique Exposures That Coverholders Face

he CHART Exchange announces another new initiative being launched for the benefit of agencies doing business with Lloyd’s – the CHART Defender. This innovative Errors and Omissions (E&O) product is underwritten by Certain Underwriters at Lloyd’s and was designed by Rockwood Programs, a Lloyd’s Coverholder and CHART Exchange member, to address the unique professional liability exposures that Coverholders face.

Mark Lann, EVP of Rockwood Programs and Program Manager for CHART Defender

Coverholders alike, it proves the basic concept of the CHART Exchange. “We wanted to use the CHART Exchange platform and resources to develop, market and complete a new facility in Lloyds for the US Coverholder community.” said Mark Lann, EVP of Rockwood Programs and Program Manager for CHART Defender.

“We worked with our CHARTassigned broker to develop a program from the ground-up, then utilized CHART member Wilson Elser Moskowitz Edelman & Dicker, LLP for loss control and claims management. We are also providing a substantial discount to agencies using Net Rate’s (a CHART Preferred Vendor) agency management software.

This new facility shows the ability of CHART’s Members, Brokers and Vendor partners ability to work together to get the job done.”

SOME OF THE UNIQUE FEATURES OF THIS NEW PRODUCT OFFERING:

• Defense costs in addition to Not only is this program beneficial the limits of liability to existing and potential • First Dollar Defense (loss-only www.chart-exchange.com

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• •

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•

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deductible) Aggregate deductible Coverage for unintentional breach of underwriting authorities No insolvency exclusion Broad definition of “Professional Services” to include Lloyd’s Coverholder activities, notary services, premium financing, and risk management/loss control activities.

Automatic coverage for Independent Contractors Punitive damages (where allowable by law) 50% reduction of deductible if claim resolved through mediation Additional coverages included outside of the policy limit (separate sub-limits apply): defense costs for regulatory proceedings, litigation expense reimbursement, and subpoena expense reimbursement.

Pre-claims hotline available to all policy holders

See CHART Defender Page 13

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Proud Sponsor of

NEWS

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serving the insurance industry Merger & Acquisition Services is a

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firm specifically to participants within the insurance industry.

Our mission is to provide

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solely focused on the insurance industry.

This allows our advisors to obtain critical industry knowledge and subsequently, provide clients with sound advice.

Our Services Agency M&A Transactions Carrier M&A Transactions Agency Financing Capital Raising Strategic Advisory Valuation Services Program Business Renewal Rights Fronting

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Copyright 2016 Merger & Acquisition Services, Inc. & Merger & Acquisition Capital Services, LLC. All Rights Reserved.

NEWS Continued From Page 11

CHART DEFENDER • Discount for using Net Rate’s policy management software The product has been called the CHART Defender to underscore the most important differentiating factor of this E&O offering: policyholders will know in advance who will serve as their advocate in the event of a loss.

in establishing sound business practices within their firm. A proprietary risk mitigation hotline will be available to our policyholders. This facility will be staffed by legal experts who can provide assistance on potential problems before they become claims. This hotline feature is free to our insureds.

Policyholders will know in advance who will serve as their advocate in the event of a loss. CHART Defender’s claims administrator is Wilson Elser, a nationally recognized “Top 50” law firm with over 800 attorneys in 31 offices across the United States and in London.”

CHART Defender’s claims administrator is Wilson Elser, a nationally recognized “Top 50” law firm with over 800 attorneys in 31 offices across the United States and in London. Wilson Elser has exceptional experience in aggressively and professionally handling litigation and other proceedings so that our insureds get the most effective defense possible.

Agencies securing their E&O coverage through the CHART Defender will also have access to Wilson Elser to assist them www.chart-exchange.com

The CHART Defender E&O program is open for business now. The product is being administered by Rockwood Brokerage – a division of Rockwood Programs. Firms interested in learning more about CHART Defender, the process of getting a program completed in Lloyd’s and becoming a Lloyd’s Coverholder or membership in the Chart Exchange can contact Mark Lann at 305-2489495, via e-mail at chart.eo@ rockwoodinsurance.com or on Rockwood Brokerage’s website – www.rockwoodbrokerage.com/ chartdefender.html TABLE OF CONTENTS

CHART DEFENDER COVERHOLDER E&O AVAILABLE NOW!

Mark Lann Phone:

305-248-9495 Email: chart.eo@rockwoodinsurance.com

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ANALYSIS

MEDICAL ONLY TO LOST TIME CLAIMS Successfully Managing Claims that Shift from Medical-Only to Lost Time

by JJ Schmidt, SVP, Managed Care

York turned to TeamComp, which is our approach to managing workers’ ometimes things that seem compensation claims. TeamComp simple at the start can end combines sophisticated, up becoming much more proprietary analytics, medical complicated. When we take the and claim expertise, and adaptive “some assembly required” product technology to review and analyze out of the box, those 10 or 12 parts years of claims and bill review data. suddenly become an all afternoon That analysis allows us to identify project. That same concept can triggers – specific characteristics apply to medical-only workers’ of claims that can signal the compensation claims. What may likelihood that a seemingly simple seem like a simple sprain or cut and straightforward claim has can sometimes turn into a large the potential to escalate into lost time claim with a substantial something much more complex – amount of medical dollars being and much more costly. spent. How does this happen – and how can risk managers prevent it Early identification of those claims from occurring in the future? provides adjusters and, where

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To help us understand what drives the shift from a medical only claim to one with lost time, and more importantly, understand how to proactively identify those claims and manage the associated costs,

appropriate case managers, the opportunity to get involved in these files before the claims incur high costs or extensive lost time.

Data from our latest TeamComp study shows the significant impact

of using predictive analytics specifically to target and proactively manage these files: WITH TEAMCOMP:

• • •

The average medical costs were 59% less, The average total paid was 71% lower, and The average lost days declined 73%.

A TYPICAL APPROACH TO MANAGING MEDICAL-ONLY CLAIMS

Medical-only claims make up the majority of workers’ compensation claims. According to an NCCI study, medical only claims account for 78% of the claims, but only 6% of the loss dollars. As a result,

See Med to Lost Time Claims Pg 22

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Image Credit: Creative Commons

bout The Author: Mr. Schmidt has spent nearly 20 years in the P&C Insurance domain working in a variety of positions. His experience has covered a number of different areas including managed care, information technology, project management, operations management and sales. In addition, he has developed specific expertise in the area of offshoring and outsourcing for both insurance organizations as well as managed care organizations while helping organizations identify processes for migration to vendors, as well as successfully migrated and managed those processes to offshore vendors. He is available to consult and advise organizations wishing to pursue these sorts of strategies to maximize process efficiencies, as well as improve bottom line results.

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www.chart-exchange.com

NEWS

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housands of product liability lawsuits are filed each year against businesses large and small in state and federal courts all across the nation.

in overall production, distribution proper use, limitations, and known hazards so not to misrepresent or and marketing efforts. misguide a potential customer.

Make sure that all product Awareness of this potential • literature, instructions and manuals exposure is important, since a business might unknowingly are complete and provide thorough They involve claims by consumers perform an action in the course of warnings. Courts have deemed that for injury or damage resulting from everyday commerce for which they companies have a ‘Duty to Warn’ the use of a defective product – could be held liable or negligent in when a product may pose a danger and what a jury or the courts can the event of a product liability suit. beyond how the average consumer decide constitutes “defective” can might be expected to use it. surprise you. Awards can include ACTIONS THAT CAN CAUSE CLAIMS OF • A company in the stream of medical and legal costs, as well as LIABILITY OR NEGLIGENCE commerce, while not the original compensatory, economic and even Although the original manufacturer manufacturer, had knowledge of a punitive damages. Product liability is often the first to defect that caused harm. damages can be substantial enough come under scrutiny in a product • If a company installs the to ruin a company’s reputation and liability matter (especially in cases product and harm resulted from even drive them out of business. involving obvious manufacturing the installation, there’s potential for YorkinRisk Services Group, Inc. is honored to be a Preferred Simply being named a product liability. Vendor or design defect), there are many Partner the CHART Exchange. We are a premier provider of TPA or altering safety, liability suit can be costly of in terms • Removing other situations where a businessClaim Services, Specialized Loss Adjusting, Customized Solutions, of legal defense. assembly or & other informational could be found liable or negligent.

Risk Control Services for Lloyd’s of London & the London company tags or instructions from the product. market.

We offer: Many businesses underestimate SOME COMMON EXPOSURES INCLUDE: • Retailers who sell the their product liability exposure product beyond the manufacturer’s Binding AdjustingorTeam • Authority Distributors retailers expiration date. with the mistaken Dedicated belief that altering or modifying the design ADEQUATE COVERAGE AND PROACTIVE because they did not Dedicated manufacture E&S/Specialty Lines Open Market Adjusters the product, they can’t be held of the product, its packaging or its PLANNING ARE IMPORTANT office teaminstructions/ for banking,warnings bordereau production, MI reporting in any way. liable or negligent ifBack something MGAs, PAs and other risk • A distributor or (Risk retailer may goes wrong. But thatCustomized assumptionPhysical Risk Assessments Control) management professionals can prove costly; companies be held liable if they participated in understand the importance of Virtual Risk Evaluation Services can be held responsible if they any way in the design of a product adequate product liability coverage participated anywhere along the deemed defective. for clients participating in the path of marketing learn• more,Exaggerated contact Aubrey Fountain, at path of delivering a productTo to the 850.650.2380 Aubrey.Fountain@yorkrsg.com. claims or that misrepresent a product production, distribution or marketing end consumer.

– if a consumer relies on the a product. While the level of product liability protection a business needs Case law has established that any statements or facts stated anywhere depends on many variables, at a business in the‘stream of commerce’ in the marketing or advertising of minimum, product liability coverage can be held accountable for harm a product and harm occurs, those would protect against the significant caused by defects in a product. This companies responsible can be held cost of mounting a strong legal can include manufacturers, product liable.

Likewise with sales and defense. designers, material suppliers, • trademark licensors, distributors, service personnel who speak directly re-sellers, retailers, advertisers with consumers. They should be and other entities that play a part sufficiently trained on the product’s See Inga Beal Page 15 www. YORKRSG .co m

www.chart-exchange.com

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ANALYSIS - WILSON ELSER

NY CYBER REGULATIONS FOR FINANCIAL INSTITUTIONS should continue to keep abreast of such regulations to avoid the possibility of a violation and litigation.

New York Cyber Regulations Likely to Result in Increased Claims

The New York State Department of Financial Services (NYDFS) recently

by Richard Reiter promulgated cyber regulations for financial institutions that are likely t is generally thought that to increase the risks to directors regulations such as those & officers (D&Os), resulting in an promulgated by the New York increase in claims.

State Department of Financial Services to ensure that data is The NYDFS regulations create new properly managed and secured by obligations for financial institutions, financial institutions may be the including adopting written policies first of many steps taken by states. and procedures, designating a Financial institutions and insurers

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chief information security officer (CISO) and conducting routine risk assessments of security. D&Os will be responsible for overseeing compliance with these rules. Failure to comply could result in fines and penalties, as well as litigation.

It is imperative that D&Os take reasonable steps to ensure that their financial institutions are in compliance with the NYDFS regulations, including active assessment of security policies and procedures. Exercises such as tabletops should be conducted to identify vulnerabilities so that

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bout the author: Richard Reiter represents client interests in complex business disputes, intellectual property, cyber, real estate, and insurance coverage. A member of the firm’s Information Governance Leadership Committee, Rich advises on business interruption, threats to a client’s reputation, notification obligations, data management and the Internet of Things. In addition, he assists with e-commerce and technology errors and omissions. Rich counsels clients on the protection of IP assets and represents individuals and businesses accused of infringement and computer technology implementation failures. Rich also advises and represents highprofile U.S. and global clients on trademark, copyright, patent, cyber liability, false advertising, trade secrets and unfair competition issues. He serves a range of clients from large hedge funds to top insurance companies and lending institutions to high-net-worth individuals, as well as businesses in other industries that have integrated technology into their operations.

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ANALYSIS - WILSON ELSER

corrective actions may be taken to secure data.

the risk, insurers should update D&O applications to confirm that the financial institutions and other industries they are underwriting are It is generally thought that regulations in compliance with the such as those instituted by the NYDFS regulations so that the risk may be rated accordingly. the first of many steps taken by states to

may be ensure that data is properly managed and secured by financial institutions. Unlike New York, other states may enforce more stringent regulations that impose stricter requirements on financial institutions, further increasing the possibility of a violation and litigation.�

Plaintiffs’law firms have aggressively pursued businesses by filing class action lawsuits arising out of data breaches. To date, plaintiffs have not obtained widespread support for such claims. However, the new NYDFS regulations may provide a potentially viable foundation for plaintiffs to have standing against D&Os for failing to have their financial institution in compliance.

Insurers should be aware of the additional risk to D&Os created by the NYDFS regulations and the impact they could have on losses. In an effort to mitigate

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Further, it is generally thought that regulations such as those instituted by the NYDFS may be the first of many steps taken by states to ensure that data is properly managed and secured by financial institutions. Unlike New York, other states may enforce more stringent regulations that impose stricter requirements on financial institutions, further increasing the possibility of a violation and litigation. Financial institutions and insurers should continue to keep abreast of such regulations to ensure that the appropriate measures have been implemented to mitigate such exposures.

Wilson Elser’s Cybersecurity & Data Privacy practice attorneys are available to further explain the new regulations.

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Bringing U.S. Entrepreneurship to the London Market The CHART/Wilson Elser strategic partnership combines the innovative underwriting philosophy of the world’s oldest insurance brand with the entrepreneurial mindset of U.S. agencies.

For close to 40 years, Wilson Elser has helped organizations to better navigate challenging markets and realize improved combined ratios. We provide London- and Europebased insurers with ready access to more than 60 discrete legal services delivered by nearly 800 attorneys in 31 strategic locations throughout the United States.

Guided by a proprietary, systematic legal project management program, we help clients define strategies and achieve outcomes that align with agreed business requirements.

We also implement dedicated Program Claim/Litigation Management services, creating value and driving efficiencies with respect to legal spend and indemnity.

Wilson Elser is especially proud of its strategic partnership with CHART Exchange and our shared commitment to strengthening relationships between cover holders and risk takers on either side of the Atlantic.

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NEWS

LLOYD’S INDIA BRANCH OFFICIALLY OPENS

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loyd’s, the world’s specialist insurance and reinsurance market, commenced operations in India today and welcomed MS Amlin as the first syndicate to join the branch and begin underwriting, effective from April 1st.

increase the resilience of the Indian economy to catastrophic events and boost Britain’s ties with one of the world’s most exciting economies, underlining our status as a truly global, trading nation.”

John Nelson, Chairman of Lloyd’s, said: “I am delighted that Lloyd’s The signing of a ceremonial Lloyd’s operations in India are now open.

India policy was witnessed by the This is a true milestone in Lloyd’s 328-year history. We UK Chancellor Philip have long hoped to Hammond and Lloyd’s be able to increase our Chairman John Nelson, as support for the Indian part of a trade delegation market and now we to boost ties between the are on the doorstep UK and India. of our clients and trading partners in Lloyd’s India will Mumbai and we look act as a domestic forward to working reinsurance branch with them to develop of Lloyd’s, providing John Nelson the types of innovative capacity and expertise to Lloyd’s Chairman risk solutions that support India’s growing Lloyd’s is world famous for. economy with a particular focus on infrastructure, agriculture and disaster management. Shankar “Lloyd’s will help to strengthen and Garigiparthy will lead Lloyd's India diversify the Indian reinsurance operations as Country Manager and market, increasing the capacity, products and choice available to CEO. Indian insurers. This will, in turn, Commenting on the event, the UK help to create a more vibrant Chancellor, Rt Hon Philip Hammond insurance market and increase the MP, said: “Lloyd’s decision to expand level of protection across the Indian into India is a perfect example of the economy.” role Britain’s world-leading financial services sector plays in supporting Hugo Bashall, CEO of MS Amlin India, said: “We have a long-standing growth both at home and abroad. relationship with the Indian “It will help Indian insurance firms insurance market, having played a www.chart-exchange.com

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lead role in providing reinsurance to local cedents for many years. We look forward to making a positive contribution to the development of reinsurance onshore and providing a high-quality local service experience.”

MS Amlin is the first Lloyd’s insurer to join the reinsurance branch and their specialist underwriting team will offer a range of reinsurance products to Indian cedants. Further Lloyd’s insurers are expected to join in time.

The growth of India’s insurance market has not kept pace with the country’s rapid economic development, leaving many sections of the economy vulnerable in the face of significant natural catastrophe exposures.

The introduction of foreign reinsurers will help to close this underinsurance gap and develop India as a centre for insurance, reinsurance and associated services.

Recently, Lloyd’s published a report Future Cities: Building Infrastructure Resilience to improve urban resilience. In addition, eight Lloyd’s syndicates recently committed capacity of US$400m towards solutions that tackle underinsurance and improve resilience against the economic impact of natural catastrophes in emerging and developing economies.

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Analysis

HOW MGAS & COVERHOLDERS CAN LEVERAGE TECHNOLOGY TO DIFFERENTIATE IN THE MARKETPLACE

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eeting the demands of the market by launching new programs or by making innovative changes to existing ones have become top priorities for MGAs. Growthoriented and market-share oriented initiatives must streamline, automate and accelerate product development to meet producer and policyholder demands.

once, on any device. Internally, underwriters need a faster, more effective way to rate, quote and bind policies.

of robust and proven agency systems available to MGAs. Leading agency systems will provide you an integrated policy, accounting, claims, and Assembling these capabilities document management system can often take significant time – with automated business process which results in opportunity cost, workflows, and a host of related lost market share or both! features that are designed to make you productive.

This article is written for program administrators and for other What’s most important for you market players that have a to know today is if the agency With digital business and mobility specialty book of business, and management system you are demands increasing in the are considering their automation evaluating has a robust web marketplace, current generation options to launch the new services or well defined APIs. systems deployed by MGAs have program or upgrade an existing Today, agents, customers and become insufficient for meeting one. employees – expect to conduct agent and operational demands. business anytime, anywhere Agents and brokers desire the AGENCY MANAGEMENT SYSTEMS and from any device. So if an ability to capture information Agency systems are a key imperative and there are plenty

See Leverage Technology Page 24

ABOUT THE AUTHOR: Abhijeet Jhaveri is Chief Marketing Officer at ValueMomentum and leads ValueMomentum’s software-as-a-service business targeted at the MGA, Program Administrator and Coverholder markets. Abhijeet and his team works with MGAs, Program Administrators and Coverholders to deploy ValueMomentum’s iFoundry rating software with support for ISO, NCCI, AAIS and proprietary rate plans and extend these to agents, customers and employees with ValueMomentum’s BizDynamics Digital Experience Solution and App2Data ACORD forms processing Solution.

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ANALYSIS - CLAIMS COSTS Continued From Page 14

MED ONLY TO LOST TIME CLAIMS

simply authorizing or approving medicals on the claim (e.g., for physical therapy, office visits, medications or medical equipment and supplies).

The files are reviewed less frequently, and often only at specific time intervals or when something needs approval. This sets up an opportunity for a claim to go on cruise control and stay under the most organizations – both claim radar, all the while racking up high administrators and employers – dollars in categories that include focus their energies and efforts on the medical spend, and indirect the lost time claims because this is costs associated with extended where the majority of dollars are time on restricted duty. spent.

FEW CLAIMS, BUT SIGNIFICANT COSTS

In many claims management organizations, this means that medical-only files are managed by newer adjusters with less experience. These files are viewed as a “training ground” to gain more experience to handle the more complex, and seemingly more important, lost time claims. In addition, medical-only adjusters often have higher caseloads because these claims are generally less complex, and adjusters are

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Most medical-only files remain just that – medical-only. They are opened and closed without incident, and costs remain consistent with the nature of the claim as it is initially reported.

Data shows that there is a 90-day window after the initial injury during which medical-only claims typically develop or display issues which can transform them into lost time claims.

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At 90 days after the initial injury, 95% of claims that are still medical-only claims will remain in that category.

That means that fewer than 5% of those claims will become lost time claims.

That 5% may not seem like a large number – until you consider that medical-only claims that become a lost time claim will cost on average 40 times more than those claims that remain medical-only.

PROACTIVELY MANAGING MEDICALONLY CLAIMS SO THEY DON’T BECOME LOST TIME CLAIMS

One obvious warning during the run up to a change in classification is an increase in incurred dollars associated with the claim. A claim that is incurring increasingly large costs is more likely to shift to lost time claim. That seems intuitively obvious, but because there is no lost time status on the claim, it can continue to fly under the radar and attention of supervisors and clients.

And less experienced adjusters can easily lose track of the overall scope or size of a claim despite the ongoing and additional dollars

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ANALYSIS - CLAIMS COSTS being spent. Other triggers for a costs during that time frame are change in claim status that can be increasing and the greater chance even harder for adjusters to spot that the claim will be litigated. include certain specific conditions, comorbidities and psycho-social TeamComp’s factors. sophisticated TeamComp’s sophisticated predictive analytics can recognize data patterns and characteristics associated with medical-only claims that are likely to become lost time claims -- and spot those claims while there is still time to intervene and proactively manage the claim to a better outcome. This can mean guiding the injured worker (where applicable) to a more appropriate and effective treatment, redirecting the course of treatment to avoid unproductive treatment, ensuring that the timing of treatment will yield the best results, and working with the employer, injured worker and providers to keep everyone focused on getting the employee back to work.

predictive analytics can recognize data patterns and characteristics associated with medical-only claims that are likely to become lost time claims -- and spot those claims while there is still time to intervene and proactively manage the claim to a better outcome.”

But employee absence is expensive Our study of almost two years for other reasons, including of data from claims opened and interruptions to or reductions in closed within that period show productivity as work is transferred, the significant impact TeamComp supervisors take on additional work can have on managing the costs or oversight responsibilities for new associated with claims that change workers, and replacement workers status. The 59% reduction in are trained. According to a study medical-only costs and the 71% by the Society for Human Resource reduction in total paid on the claims Management, the average total in the study offer direct benefits to cost of productivity loss due to employers. The 73% reduction in employee absence as a percentage lost time days also yields important of payroll was 6.2%. benefits. First, it directly correlates to indemnity payments and By effectively identifying and medical payments – the longer an managing claims that may or employee is out on disability, the do move from medical-only to greater the likelihood that medical lost time, TeamComp can reduce www.chart-exchange.com

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employers’ indirect as well as direct costs.

CONCLUSION

The nature of workplace injuries means that there will always be injuries that are more complex than it first appears and claims that will convert from medical-only to lost time. The key to controlling claims costs and the total cost of risk is to minimize the number of such claims by proactively managing claims before their status changes, and to decrease the escalation of those claims to reduce the medical and indemnity payments that will follow. York’s TeamComp solution incorporates sophisticated analytics, claims and medical expertise and delivers proven results to help our clients effectively manage their total cost of risk.

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ANALYSIS Continued From Page 20

LEVERAGE TECHNOLOGY agent wishes to access policy information, your agency management system should be able to expose the data via APIs or web services to – in this instance – your agent portal.

This is extremely important because the number and nature of distribution channels is changing rapidly. Today, MGAs can distribute via retail agencies, wholesalers, brokers – the traditional channels – but new ones are emerging rapidly, including digital agencies (e.g.

Insureon) and wholesale agencies (e.g. Insurance Noodle).

Image Credit: Creative Commons

RATING ENGINE

and others, as well as custom rating options. This can give you options if you want to modify the program or launch adjacent coverages.

How MGAs develop, market, distribute and service their programs or products has already undergone a significant evolution with a faster pace of change emerging on the horizon.

Carefully assembling your technology capabilities with a focus on speed to market, is key to success today and in the future.”

Another key component for automation is rating. There are many different ways to accomplish rating – the most common being using spreadsheets, online rating or building custom rating engines. Further, you may have developed the rating parameters as a proprietary system using historical loss data or you may consider using a bureau such as ISO, NCCI, AAIS or others.

NCCI, be sure to inquire if they support ISO Electronic Rating Content – an offering from ISO that allows vended rating engine to consume ISO advisory loss costs, algorithms, rules that govern which forms to attach – electronically. This provides significant speed to market with both – launching new programs – and also keeping them up to date with ISO & NCCI changes and importantly, avail of ISO content “interpreted by ISO” rather than manual interpretations by vendor staff.

DIGITAL

ENGAGEMENT

(AGENT

PORTAL)

Agents, brokers and even customers, today, have heightened expectations of how they want to engage with their insurers.

MGAs and coverholders require to meet these expectations or be prepared to have the business be placed with someone who does.

Nearly a third of the agent and broker workforce today comprises of digital natives – millennials and Gen X – who expect that insurance products are available to them in any channel or device and that they provide a truly omni-channel experience – that is seamless across devices and channels.

Another parameter to consider is the ability to enable online rating. As discussed earlier, the competitive landscape necessitates such an option. Even if you write mid-market or large accounts, you must consider enabling online rating to ensure you keep your options open for the low premium, high volume business you may want to write in For example, an agent may be the future.

Regardless of your rating at the point of sale capturing parameters, you should consider Finally, when considering rating details about a business, and may a rating engine that supports the seek to submit directly to the bureaus such as ISO, NCCI, AAIS engines with support for ISO & 24

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ANALYSIS

Technology: An Opportunity For MGA’s & Coverholders to Differentiate in the Marketplace

that support high volume low MGA of choice or convenience. premium business and (iii) Or the agent may seek to email customers for those classes of an ACORD application and may business that can directly be choose to place the business with sold to end customers (small those who turnaround a quote businesses and individuals). faster than others.

The agency’s employees must • That the portal supports all devices – mobile, tablet and then have ready access to the desktops, while presenting submission without having to the experience best suited for rekey the data – and today’s that device. technologies easily allow extracting the data from ACORD • If you will be able to build a rich, intuitive, guided experience submissions into electronic forms for your users. Users expect that can prefill the rate-quoteto be guided through the bind systems for faster turnaround rate-quote-bind process – of quotes. Agent portals or in such that marketing content, the case of the modern MGA – and related information digital engagement systems – are associated with insurance a key component of the MGAs’ concepts can be surfaced technology arsenal. during the process and not be available in a separate static WHEN SELECTING AN AGENT PORTAL, website with brochures. They BE SURE TO INQUIRE: may want to check appetite • If they can support multiple upfront, understand what channels and their unique coverages are ideal for a risk preferences – (i) retail agents, type, get recommendations digital agencies, online for coverages and limits, and wholesalers, affinity groups so on. such as associations, (ii) CSRs www.chart-exchange.com

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• That they support the automatic preparation of quotes and sending these quotes electronically in the channel they want, with a mechanism for them to share with their customer to electronically sign a proposal.

CONCLUSION

The technology landscape is rapidly evolving and the expectations of agents, customers and employees are increasing. There are numerous new technology capabilities available today – but that is just the tip of the iceberg and many new capabilities are becoming available imminently. How MGAs develop, market, distribute and service their programs or products has already undergone a significant evolution with a faster pace of change emerging on the horizon. Carefully assembling your technology capabilities with a focus on speed to market, is key to success today and in the future.

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Live Oak Bank and M&A Services are pleased to announce a 6-part webinar series. Through this series you'll continue to gain knowledge on everything from valuing an agency, to due diligence and contracts, to various strategies for monetizing your agency.

Join Our Next Webinar:

Due Diligence & Contracts May 17, 2017 | 1 p.m. ET

Live Q&A immediately following presentation

Click Here to Register

In this webinar Chris Hughes will cover the process and timing used by professional investment bankers in successful M&A transactions. Step by step, Chris will break down the preparation, marketing and transaction stages of M&A transactions, and explain how to maximize the value of your firm and minimize execution risk.

Future webinars include: Due Diligence & Contracts May 17, 2017 | 1 p.m. ET Book Roll Strategy: How to monetize your agency without selling it June 14, 2017 | 1 p.m. ET Recasting and Financing for Agency Owners July 12, 2017 | 1 p.m. ET

www.maservices.com info@maservices.com (212) 750-0630

The Leveraged Buy-Out August 9, 2017 | 1 p.m. ET Merger & Acquisition Services, Inc. is a specialist advisory and financial services firm specifically to participants within the insurance industry. For over 10 years, Merger & Acquisition Services has been helping our clients achieve their strategic and financial goals Live Oak Bank’s insurance industry division focuses on agents, MGAs, wholesalers and program administrators. We provide loans for acquisition, perpetuation, refinance, working capital, and more.

Visit liveoakbank.com/insurance to learn more.

Any information provided herein is indicative only, subject to change without notice, and does not constitute an offer to purchase or sell. Principals retain the exclusive right to negotiate and evaluate any transactions, and advisors of Merger & Acquisition Services, Inc. and Merger & Acquisition Capital Services, LLC. have no authority to do so. Merger & Acquisition Services, Inc. does not underwrite securities, nor advise on, nor effect transactions in securities for the account of others. * Investment banking services and securities transactions are provided through and completed by Merger & Acquisition Capital Services, LLC., a brokerdealer registered with the U.S. Securities and Exchange Commission and member of FINRA and SIPC.

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Copyright 2017 Merger & Acquisition Services, Inc. & Merger & Acquisition Capital Services, LLC. All Rights Reserved.

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ANALYSIS - M&A SERVICES

DUE DILIGENCE: COMMON PITFALLS

By Christopher M. Hughes

Intent (LOI) has been signed and agreed to. For example, Buyer has agreed to buy the assets of Seller’s agency for $10MM and both have signed a non-binding LOI and agreed to close within 60 days. During the course of Due Diligence, Seller’s largest client representing 25% of the agency’s revenue is acquired by another firm and cancels all of its insurance policies with Seller.

Now Seller’s revenue and EBITDA have been drastically impacted and Buyer is no longer able or willing to pay $10MM, and now “Reprices” or changes the offer to $6MM. Seller is unhappy with the change in the price, and Buyer is unhappy in the change in the business.

I

n any acquisition or divestiture of an insurance distribution firm (Wholesale, Retail, or MGA), an important part of the process is due diligence. The purpose of the Due Diligence process is for the buyer to request and examine detailed information on the financial, operational, and corporate/legal aspects of the business being acquired. During the Due Diligence process there are some common pitfalls that the buyer and seller can address to minimize execution risk and get to an efficient and effective deal closing. This article will describe some of the most common pitfalls and ways to mitigate the risk.

The above example is a common occurrence, in that within the 60 days between signing a LOI and the REPRICING Closing, there is a material financial change to the The most material issue that arises in the due diligence process is the repricing of the deal after the Letter of

See Due Diligence Page 33

A

bout the author: Christopher M. Hughes serves as Managing Director of Insurance Distribution for Merger & Acquisition Services, specializing on insurance agencies, MGAs, MGUs, E&S agencies, wholesalers, and ancillary insurance businesses. Mr. Hughes comes to Merger & Acquisition Services, Inc. with over 10 years of insurance and legal experience, working on engagements with Property / Casualty and Life / Health insurance distribution businesses. He previously served as an advisor for a boutique firm in CT where his exclusive focus was on insurance distribution companies. In addition, Mr. Hughes spent 7 years as a senior product manager for Hartford Financial Services Group (“HIG”) with full P&L accountability for specialty products, and as director of HIG’s internal retained asset and structured settlement departments. Prior to The Hartford, Mr. Hughes practiced commercial litigation in Boca Raton, Florida.

Mr. Hughes was honorably discharged from active duty in the United States Marine Corps (USMC) in 1992, after serving with E Company, 2nd Battalion, 8th Marines, 2nd Marine Division. While in the USMC, he served as an infantryman in the 1991 Northern Iraq operations: Provide Comfort, Encourage Hope, and Force Hope. Mr. Hughes has earned a J.D. degree from Northern Illinois University, a M.B.A. from the University of Connecticut, and a B.A. from the University of West Florida. www.chart-exchange.com

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NEWS

ADD A PROFIT CENTER TO YOUR COMMERCIAL INSURANCE BUSINESS

P

rofessionals who work in the commercial insurance business understand what hard work looks like. They must pay be aware of regulations both existing and new, carefully organize digital and physical documents, and work well with their teams and clients to ensure communication is clear and open.

So it’s no wonder many such organizations struggle to find time to look for new revenue channels outside of their day-to-day operations.

businesses are—it is our goal to make your processes and procedures even more manageable. By working with our organization to handle the routine needs of your premium financing program, you can free up time to focus on the broader needs of your commercial insurance company while streamlining this critical profit center.

Delegating this important part of your business is easier than you might think, and it opens new doors

Our company is founded on the notion that you already have many of the resources you need at your fingertips. If you are already offering premium financing—and many commercial insurance

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NEWS

LLOYD’S REPORTS £2.1BN ($2.7BN US) PROFIT FOR 2016 Lloyd’s, the world’s specialist market for insurance and reinsurance, announced a profit of £2.1bn ($2.7bn US) for 2016 despite the combined ratio moving from 90.0% to 97.9%.

motor and UK liability business have been impacted by the recent announcement to change the discount rate to negative 0.75% (the Ogden tables) applying to lump sum liability claims.

will be operational for the January 1st renewal season in 2019.

Chief Executive Inga Beale said the figures underlined the need for the Corporation, the body that oversees the market, to deliver Lloyd’s has continued to enjoy real value for money; to focus on progress across its major global underwriting oversight and reduce markets: securing its position as its cost base. the leading provider in excess and surplus lines in the United States; Commenting on the results, she transferring over half its managing said:, “This has been a year of onditions over the course agents to the Shanghai and Beijing challenge for the insurance sector of the year were extremely platforms; and being granted final with premiums once more under challenging with continued approval to open an onshore office continued downward pressure. It downwards pressure on pricing for reinsurance in Mumbai. is vital that the Corporation does whilst traditional and alternative everything it can to support the capital remained attracted to the market and make the platform • PRE-TAX PROFIT OF £2.1BN insurance industry. attractive, whilst demonstrating (2015: £2.1BN). value for money.

The level of Lloyd’s major claims, • RETURN ON CAPITAL OF 8.1% £2.1bn, was the fifth highest since (2015: 9.1%).

“Our collective focus must be on the turn of the century and above providing customers with the • COMBINED RATIO OF 97.9% the long-term average. This was products they want, embracing (2015: 90.0%). due primarily to Hurricane Matthew innovation and modernisation. The • GROSS WRITTEN PREMIUMS and the Fort McMurray Wildfire in market has shown how well it reacts INCREASE TO £29.9BN (2015: Canada. to the demands of its customers in a

C

£26.7BN).

• MAJOR CLAIMS FOR 2016 WERE The lower underwriting result in £2.1BN (2015: £0.7BN) 2016 was offset by significantly improved investment returns, driven by a downward yield shift in the bond markets, and foreign It was also confirmed that following exchange gains, principally caused the United Kingdom’s decision by sterling depreciation. to leave the European Union, a subsidiary office will be opened in In addition, syndicates writing Brussels with the intention that it motor reinsurance and direct

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rapidly changing risk environment with the considerable increase in cyber coverage throughout 2016 a perfect case in point. It is critical throughout 2017 we continue to demonstrate that Lloyd’s is the home for creativity and expertise.”

Lloyd’s Chairman, John Nelson, said, “The results confirm that we

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NEWS

2016

2015

PROFIT BEFORE TAX

£2.1 BILLION

$2.71 BILLION

£2.1 BILLION

$2.71 BILLION

GROSS PREMIUMS

£29.9 BILLION

$32.61 BILLION

£26.7 BILLION

$34.44 BILLION

COMBINED RATIO

97.9%

90%

UNDERWRITING RESULT

£0.5 BILLION

INVESTMENT RETURN

£1.3 BILLION (2.2%) $1.68 BILLION (2.2%) £.04 BILLION (7%)

RETURN ON CAPITAL

$0.645 BILLION

£2.0 BILLION

8.1%

$2.58 BILLION $.0516 BILLION (7%) 9.1%

must have an unrelenting focus on underwriting discipline through 2017. The challenge for all of us is to reduce the cost of conducting business because within the market this is impacting on already thin underwriting margins.

“This is my final set of annual results as Lloyd’s Chairman, and in the years since we launched our long term strategy Vision 2025, our global reputation and brand has significantly strengthened; we have substantially improved our global market access; our modernisation programme has real momentum; our increased financial strength and overall financial performance is a tribute to the underwriting skills in the Lloyd’s market. All of this puts Lloyd’s in a strong position both to take advantage of the longterm opportunities available to us globally in the specialist insurance market and to face the many challenges we have.” www.chart-exchange.com

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Simplify your workflow!

Give your team a clear path to winning new policies!

For over 18 years the NetRate Systems team has been tailoring insurance processing solutions to meet the unique requirements of each of our MGA, Program Administrator, Carrier, and Lloyd’s clients in the P&C marketplace.

From submission portal through rating to policy issuance, our solutions will help you minimize key strokes, simplify workflow, and reduce systems maintenance.

“Not only do they understand insurance terminology, but they also understand the flow of business.”

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Contact us today to learn how our experienced, U.S. based, insurance-savvy team can help you.

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ANALYSIS - M&A SERVICES Continued From Page 27

DUE DILIGENCE business in which the Buyer may reprice the deal. The most common financial changes are: (1) Loss of material revenue client (usually greater than 5%), (2) Loss of material carrier, product, or program, and (3) Loss of key producer. In any of these losses that happen during the due diligence period, the future financial performance of the Seller’s business may be impacted in a very material way. The Buyer is then in a scenario that he will have to either (a) overpay for the business, or more likely, (b) renegotiate the deal based on the new facts.

The way to minimize this risk is to understand the risk prior to signing the LOI, and negotiating the terms into the LOI. For example, if the deal structured largest client representing 25% of the agency in an earn-out paid over 3 years based on retention of the client, then the risk of losing the client is shared over 3 years before that risk completely becomes the Buyer’s risk. If Key Producers are an issue, a strong Non-Compete and NonSolicitation Agreement put in place prior to the LOI would minimize that risk, or a “golden handcuff” bonus structure for key producers www.chart-exchange.com

over a 2 to 3 year period.

the deal is to bring the Seller’s accountants into the deal before In general, there are several key the LOI is signed to ensure that risks that Buyers and Sellers can the deal is structured in the most anticipate early on, and there are tax efficient manner. In general, various ways to address the risks accountants are useful resources to early on in the LOI. minimize the government’s portion of the deal proceeds in a fair and TAX ISSUES effective manner.

The next most common issue that arise in the Due Diligence process are tax implications that were not understood or addressed prior to signing the LOI. First, in every deal, there are numerous parties that are sitting at the closing table: (1) Buyer, (2) Seller, (3) IRS – Taxman, and (4) 3rd Parties (Lenders, Advisors, etc).

3RD PARTY RELEASE OR ASSIGNMENTS

In most deals, there are 3rd parties that can become significant payees in a deal that must be satisfied at the closing table. Examples of 3rd parties that need to be paid include, lenders, landlords, attorneys, carriers, or even ex-spouses. In general, most of these 3rd parties are identified and the amounts quantified in relative ease, common in most deals.

But in certain circumstances, the 3rd party can use the pressure of a deal to negotiate better terms with the Seller.

For example, an ex-spouse can require to be paid all amounts due at closing rather than over time, or a bank can use the change of control to The IRS is in almost all circumstances accelerate or even close out a line a party to the deal and will need to of credit. These issues, while they be paid taxes on the proceeds of cannot be avoided, should be well the deal. And, the taxes can vary known in advance of the closing. greatly depending on the structure This will enable the appropriate of the deal, whether it is an asset or party time to acquire the requisite stock purchase, whether a 338(h) signed release forms prior to election has been made, how the closing with all parties satisfied. assets are allocated, and the timing 3rd party releases or assignments and distribution of the proceeds. are always a part of every deal, The way to minimize the risk of TABLE OF CONTENTS

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ANALYSIS - M&A SERVICES Continued From Page 33

DUE DILIGENCE

Representations are accurate, and (3) Indemnify the Buyer if the Representations are not accurate and cause the Buyer a loss.

Seller’s will want to have the Reps and Warranties as minimal as possible, and to have the Indemnity provisions as low as possible. Buyers and if known and addressed very want the opposite. Since there is a early on, there should be much less fairly liquid market for insurance pressure and better outcomes in agency transactions, there are the negotiations and resolution of generally acceptable terms for each each of them. of these. Experienced insurance M&A transaction attorneys will know what acceptable terms are.

LEGAL ISSUES In every deal, there are attorneys that represent the Buyer and those that represent the Seller. In most deals, the attorneys are experienced in insurance a g e n c y transactions and know and understand the market and the key legal and financial issues of an insurance transactions.

Problems arise when there are attorneys involved that are not experienced in insurance M&A transactions, raising issues that are not material, or negotiating terms that are not within generally acceptable terms in today’s market. This can inject uncertainty and risk into a deal that is not needed.”

Problems arise when there are attorneys involved that are not experienced in insurance M&A transactions, raising issues that are not material, or negotiating terms that are not within generally acceptable terms in today’s market.

This can inject uncertainty and risk into a deal that is not needed.

The way to avoid this risk is to hire specialized professionals early on in the deal.

The most common legal issues that arise and can inject uncertainty and execution risk are Representations, CONCLUSION Warranties, and Indemnifications.

Sellers are asked to (1) Represent Due Diligence is a stressful and certain things about the time consuming process for both business, (2) Warrant that these the Buyer and the Seller. Both parties want to minimize execution 34

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risk and reach the deal that was agreed upon before the start of due diligence. In this article, I’ve outlined the most common issues that arise in every transaction.

There are various ways to deal with each issue that arise in a transaction. Being transparent, open, and fair, and addressing known or anticipated issues early on will always serve both parties well.

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ANALYSIS Continued From Page 29

PREMIUM FINANCE PROFIT CENTER

half decades. We typically help our clients generate as much as $40,000 net profit—and sometimes more—per million dollars financed. That value can quickly add upon, depending on the size of your portfolio. Don’t give away revenues to outside sources. Keep them inside your commercial insurance company and reap the benefits.

quoting and management system.

It is intuitive and adaptable to the needs of your company. This added layer of sophistication ensures your business and its premiumfinance division are more flexible and powerful than ever before.

Not only do you and your team deserve outstanding customer care, but also your insureds. We treat the insureds of commercial of opportunity, too.

Another benefit of working with our insurance businesses with respect team is that you retain ownership and concern for their well-being.

HOW OUR TEAM HELPS COMMERCIAL of your premium finance company. That’s why we use an electronic INSURANCE BUSINESSES MANAGE We value customer service more billing platform and offer online PREMIUM FINANCING than anything and want you account management, granting It’s a privilege to help businesses to be completely satisfied with insureds rapid access to their arrangement.

Backroom information. organize and grow their premium the financing division. Why? Because operations are our specialty. We We provide 24/7 phone we’ve seen so many other We typically help our support to ensure their companies thrive simply by sharing the responsibility clients generate as much questions are answered of managing this important as $40,000 net profit— in a timely way. We set up your business so it can business area. and sometimes more—per million accept payments online or Organizations that choose dollars financed. That value can by phone, ensuring faster to work with us have the quickly add upon, depending on service for your insureds and a better experience foresight to recognize that the size of your portfolio. Don’t for your business team. they need to expand in order give away revenues to outside Every step we take is aimed to serve today’s clients and sources. Keep them inside your at making the premium tomorrow’s prospects. They know they must be smart commercial insurance company finance process easy and positive from start to finish. with their time, people and and reap the benefits.” financial resources. They If you are affiliated with a partner with our experts to commercial insurance business ensure the job is done right from work diligently to learn about your business and seamlessly integrate and would like to learn more the start. into your daily operations so about bringing your premium To appreciate the full value of you can be the leader your team finance division to the next level of excellence, we encourage you to premium financing, it’s important expects you to be. contact COST Financial Group. Call to consider some statistics. Our company has been working We don’t go it alone, either. We work us at 800-844-2678 or email our on business structures such as with industry-leading technology team at info@costfinancial.com for these for more than two and a vendors to bring you an online more information.

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NEWS

LLOYD’S TO OPEN EU INSURANCE COMPANY IN BRUSSELS

L

loyd’s, the specialist solution that means business can insurance and reinsurance carry on without interruption market, has announced it when the UK leaves the EU. will be setting up a new European insurance company to be “Brussels met the critical elements located in Brussels. Lloyd’s Chief of providing a robust regulatory Executive, Inga Beale, said that framework in a central European the intention is location, and will for the company enable Lloyd’s It is now to be ready to to continue to crucial write business for provide specialist the 1st January underwriting that the UK 2019 renewal expertise to our Government and season, subject customers.” the European to regulatory Union proceed approval.

“I am excited about to negotiate an the opportunities The company this venture will agreement that will be able to offer the market allows business write risks from by providing to continue to all 27 European that important flow under the Union and European access best possible three European efficiently.”

Economic Area conditions once states after the Whilst the UK the UK formally United Kingdom Government has leaves the EU.” has left the EU, triggered Article providing our 50, it remains a full customers and partners continued member of the European Union access to the innovative solutions for at least two more years and of the Lloyd’s market. therefore, there is no immediate impact on existing policies, Lloyd’s Chief Executive Inga Beale renewals or new policies, said: “It is important that we are including multi-year policies, able to provide the market and written during this period of time. customers with an effective

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Inga Beale, CEO, Lloyd’s of London

Inga Beale said: "It is now crucial that the UK Government and the European Union proceed to negotiate an agreement that allows business to continue to flow under the best possible conditions once the UK formally leaves the EU. I believe it is important not just for the City but also for Europe that we reach a mutually beneficial agreement. We stand ready to help and support the Government as best we can.

APRIL-MAY 2017

37

OUR TEAM IS THERE FROM THE START TO THE FINISH NSM Insurance Group Comprehensive Insurance Coverage for: Social Services I Addiction Treatment I Professional Liability Staffing Firms I Workers' Compensation I Collectible Vehicles Coastal Condo Associations I Breweries and Wineries Sports and Wellness I Specialty Aviation

888-235-3525 www.nsminc.com

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LLOYD’S OF LONDON

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APRIL-MAY 39 Image Credit: Creative2017 Commons