The CHART Exchange July 2017 by The CHART Exchange

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Lloyd’s Warns Companies May Under-Estimate Cyber Risk Costs Beyond The Immediate Tech Losses And Costs, Long-Term Damages May Be Even Greater...

Insuring Cannabis Industry Risks California’s Insurance Commissioner Encourages Admitted Carriers to Insure Cannabis Risks

19 Glenn W. Clark, CPCU, Publisher CHART Exchange Founder & Earliest Adopter

Strategies For A Productive, Successful CHART Conference Glenn Clark Shares His Concepts

A Recent Unanimous Decision By The U.S. Supreme Court Will Curtail Abusive Venue Shopping By Patent Trolls...

How You Can Best Leverage CHART’S 3rd Annual Conference Maximize Your Return on Investment

Components Of A Good Offer How To Structure Your A Proper Letter of Intent

U.S. Supreme Court Shuts Down Patent Troll Venue Shopping

Maximize ISO, NCCI And Rating For Other Bureaus With Modern Tools Automating Bureau Updates Enhances Your Ability To Compete

Don’t Let Your Clients Pay The Price For Workplace Bullying! Investigate Rockwood’s Employment Practices Liability Insurance Products

Cover Image Credit: By phogel from germany - lloyd’s of london, CC BY-SA 2.0, https://commons.wikimedia.org/w/index.php?curid=4167829

CHART EXCHANGE 26

Fortegra Shows A Simpler Path To Admitted Success The Benefits Of An Admitted Market Without The Hassle

Bruce Carnegie-Brown Starts As Lloydâ&#x20AC;&#x2122;s Chairman Bruce Carnegie-Brown Replaces John Nelson At The Helm

JULY 2017 VOLUME 2 - ISSUE 6 Publisher: CHART Exchange Glenn W. Clark, CPCU Membership Services Kate Boyle Advertising: Kate Boyle

SPECIAL REPORT: INSURING CANNABIS RISKS PAGE 16

Managing Editor: Kate Boyle Contributing Editor: Frank Huver Layout, Design & Circulation: Ron Manera AdMax Corp., Inc.

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MESSAGE FROM THE EARLIEST ADOPTER

STRATEGIES FOR A SUCCESSFUL CHART CONFERENCE

ver the last several issues, we have been using this column as a forum for introducing new initiatives designed to provide valueadded benefit to both the CHART Exchange membership and annual meeting attendees. We Our strategy is to had previously invite retail agents touched on from the Middle Atlantic such topics as the meeting region of the country to participate in the inaugural venue for our upcoming Third session. If this yearâ&#x20AC;&#x2122;s Annual Event meeting results prove (Four Seasons Hotel, Baltimore encouraging enough, MD), and CHART will look into the CHART Markets possibility of expanding the (a virtual shopping mall concept and host similar events in other areas of the for insurance p r o d u c t s country throughout 2018.â&#x20AC;? and vendor services).

Glenn W. Clark, CPCU Publisher & Earliest Adopter

festive gatherings. Events such as these often included booths where participants could exhibit crafts, baked goods, and other fruits of their labors. In 2017, the CHART Exchange will test the concept of hosting a London-centric Product Fair on the behalf of its members. The organization will invite retail insurance agencies from across the region to attend the last day of our Third Annual Meeting in Baltimore (October 11). Member firms wishing to participate will be given the opportunity to showcase their latest products and services to this group. Separate meeting space will be made available to accommodate those who wish to have more in-depth discussions with the agency attendees.

Summer can be a very nostalgic time. For many of us, the season invokes memories of block We see several benefits to the parties, county fairs, and other Product Fair concept, including:

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www.chart-exchange.com

CHART EXCHANGE portfolio available through the world’s oldest insurance brand. It makes sense to include the Product Fair as part of our annual meeting. The cost of hosting the event on Wednesday is minimal, as we have already reserved the venue. Member firms most likely to exhibit will already be in Participants have the opportunity attendance. to offset all of their meeting expenses (registration, hotel, Our strategy is to invite retail transportation, etc.) by finding agents from the Middle new production sources for their Atlantic region of the country products. to participate in the inaugural session. If this year’s meeting • Offers Coverholders and results prove encouraging Vendor Partners with the enough, CHART will look into potential to augment existing the possibility of expanding the distribution channels for concept and host similar events their offerings or identify new in other areas of the country prospective clients. throughout 2018. • Provides a ready-made focus group of producers to test Interested in learning more? Feel the market viability of new free to send any questions you products and services. may have to us at info@chart• Allows for interaction with exchange.com. entities responsible for the distribution of insurance products. This offers a great opportunity to gather competitive intelligence, learn first-hand about evolving business trends, and identify new markets. • Educates retail agents about Lloyd’s of London and gives us Glenn W. Clark , CPCU the ability to raise awareness CHART’S Earliest Adopter about the diverse product

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CHART - NEWS

HOW TO BEST LEVERAGE CHART’S 3RD ANNUAL CONFERENCE By Glenn W. Clark, CPCU Publisher & Earliest Adopter

ur team has decades of experience hosting and running large agency group meetings. Along the way we’ve learned a few things on how to maximize the experience of our participants who give up valuable time and expense to attend. These individuals expect to return to their offices with new contacts, ideas, etc. that can be beneficial to their enterprise.

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Anyone who knows our team understands that we like to talk in “tens”. Perhaps this mindset has been influenced by David Letterman, the Ten Commandments, or Top Ten lists to illustrate a concept or trend. The following ten points are a combination of “environmental” factors engineered to create interaction and behavior/actions we advise participants to do in order to prepare them to maximize

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While bigname speakers can be a draw, we have found that the folks they attract are not necessarily the new business generators of their respective companies. We prefer speakers who challenge conventional thinking.”

www.chart-exchange.com

CHART - NEWS individual results. Each person is encouraged to attend with the expectation that they must “give” in order to “get”. Remember CHART’s core action value is found in the definition of the word Exchange: “to give something of value in order to obtain something of greater value.” 1. THEME

Between The U.S. And London. 2. SPEAKERS

While big-name speakers can be a draw, we have found that the folks they attract are not necessarily the new business generators of their respective companies. We prefer speakers who challenge conventional thinking. In our first year we were challenged to “Color Outside the Lines” by Jeff Tobe. In year two we heard the success story of Jim Masiello’s SIAA network that grew from humble beginnings to over $6 billion in premiums today. For 2017 we have engaged John Davis to explain

Stick to a central theme and ensure all invitees are aware of what your Glenn Clark shares his vision during the objective is. When you 2nd Annual CHART Exchange Conference gather hundreds of like-minded people – each with “How To Be A Chart Action the same objective – fireworks Hero.” follow. The theme of our summit is simple: ...To Generate More New

Business Insurance Commerce

See Leverage CHART Conference Pg 11

Baltimore Inner Harbor Panaramic: Photo Credit Jawed Karim License Creative Commons Attribution-Share Alike 3.0 Unported www.chart-exchange.com

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NEWS Continued From Page 9

HOW TO BEST LEVERAGE THE OCTOBER CHART CONFERENCE 3. SIZE AND VENUE

Everyone in our target audience has attended industry meetings that are almost impossible to navigate or absorb. We have even been guilty in our own past experience of getting so big that we lost our ability to guide collective results.

Will Have A Vendor Partner Reception On October 9th And 10th. We Are Seeking Sponsors For Both! 5. PRE-SET MEETINGS

Our Market Finder service separates CHART from other industry groups. In 2016 we facilitated over 400 prequalified appointments between Preferred Vendor Partners, U.S. Agencies seeking programs Qualified U.S. Agencies And and Syndicate member partners London Syndicates Who Lead with the most compatible risk The U.S. Binding Authority appetites. While not every meeting Space. generated immediate business, the results were still extraordinary: 4. NETWORKING

When you gather 300 like-minded • Twelve First-Time Covpeople together it is not hard to erholders Qualified And prime the pump. Our primary Sheparded Through Tribustrategies center on cocktail nalization (More To Come receptions (held in our Vendor • Tens Of Millions Of Po-

Too many or competing vendor partners can become a distraction and reduce outcomes for all. Large group meetings have a purpose but no real The CHART Exchange business is done in private deliberately runs a appointments, smaller smaller event engineered breakout sessions, or themed workshops. The CHART specifically to achieve our Exchange deliberately runs theme of more new business. a smaller event engineered We know we cannot meet specifically to achieve our everyone’s expectation but theme of more new business. We know we cannot meet we can exceed the results of everyone’s expectation but other industry gatherings if we can exceed the results of other industry gatherings attendees practice the concept of “Exchange.” if attendees practice the concept of “Exchange”. The October 2017 meeting will be held at the Four Seasons Hotel in Baltimore, MD. We Have

Partner mart), meals, and themed workshops/panels.

Wilson Elser And C J Coleman Reserved All 246 Rooms For Will Host A Welcome RecepOur Unique And Exclusive tion On Sunday 10/8 And We Event. Target Participants Are www.chart-exchange.com

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tential Premium Production Presented To London Markets • A Healthy Pipeline For Future Growth. Agencies should us the CHART Program Questionnaire to present an idea. 6. BE PROACTIVE

Generate your own opportunities to meet people you would not otherwise encounter. We give each of our vendor partners and Syndicate members the chance to launch their own“offense”. Moderate workshops or participate in panels to extol what makes you unique. See Leverage CHART Conference Pg 25 JULY 2017

Proud Sponsor of

NEWS

Merger & Acquisition Services

serving the insurance industry Merger & Acquisition Services is a

specialist advisory and financial services

firm specifically to participants within the insurance industry. Our mission is to provide

concierge-level services and expertise

within the insurance industry by assisting firms with their corporate development and acquisition/divestiture objectives. M&A Services is

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

http://maservices.com info@maservices.com

(212) 750-0630 320 East 53rd Street New York NY 10022

M&A Services has closed

more than 100 transactions in 10 years and has earned continuous placement within the "Top 5 Financial Advisors in Insurance Underwriting" according to SNL Financial. . 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.

ANALYSIS - M&A SERVICES

IN THE MARKET TO BUY? COMPONENTS OF A GOOD OFFER: By Christopher M. Hughes

hether you are evaluating an offer to sell your firm, or preparing an offer to buy another company, the basic offer will come in a written Letter of Intent or LOI. This article will describe the basic components of a LOI, and offer guidance on how to best utilize the LOI to create reach acceptance of the offer, as well as to minimize legal execution risk once the offer is signed. First, a LOI should be a specific written offer signed and dated

by both the buyer and seller, and have a definitive time expiration that defines how long the LOI is valid. Generally speaking, most LOI’s have an expiration date that is good for 5 to 10 business days from the time the Offer is delivered to the other party. It is important to have both parties execute and date the LOI to ensure that the offer is valid and that both parties have agreed to the terms and are duly authorized to enter into the transaction. The substantive components of a good LOI include: 1. What is being Purchased;

2. Purchase price components (i.e. earn-out, promissory note, stock, cash); 3. Offer Conditions; 4. Exclusivity (“No Shop”) Clause; 5. Standard Provisions (Binding/ Non-Binding Provisions, Expiration Date). The first part of a LOI describes in detail what is actually being purchased. Most insurance distribution firm transactions are structured as a purchase of assets, rather than the purchase of the firm’s stock. In some instances, there may be assets that are See: A Well-Drafted LOI Pg 14

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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ANALYSIS - M&A SERVICES Continued From Page 13

A WELL DRAFTED LOI excluded from the transaction, and those will be defined in this section as well. The Consideration or Purchase Price component of a LOI spells out the exact purchase price being paid and all of its components. Most transactions have the following: (1)

Cash at closing;

(2) Earn-Out Payments that are contingent on future performance; a. Hold Back Consideration – there may be a 10 – 20% “hold back” of the total purchase price, contingent upon the business maintaining a minimum Revenue or EBITDA amount; b. Performance Based EarnOuts are additional Consideration that will be paid in future years, the amount of which will vary depending on the performance of the business. (3)

Stock of the Buyer;

(4)

Assumption of Liabilities;

(5) Promissory Notes (“Seller Financing”). 14

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The next part of the LOI will spell out the Conditions of the Offer. Common conditions include that the offer is contingent upon the Buyer completing legal, financial and operational due diligence, completion of appropriate and employment Almost all performance-based purchase agreements, and approval of earn-outs are measured on either all relevant Revenue or A well written 3rd parties EBITDA, and are (Carriers, LOI should be measured over a Lienholders, period of 1 to 5 a clear and concise etc…). years depending offer that (1) defines on the needs of exactly what is being In addition to the Buyer and purchased and for the common Seller, and have what consideration, conditions a clear definition (2) spells out all listed above, of EBITDA or the conditions Revenue. relevant definitions, section can be terms and conditions used to spell In defining the in plain language, (3) out other legal Earn-out terms, it minimizes execution and financial is important for risk with exclusivity, issues that are the LOI to spell reps/warranties, and likely to arise out exactly what is in the drafting being measured, other conditions, and of the Asset or whether it is (4) is time constrained Stock Purchase Gross Revenue in both the validity of Agreement. (either including the offer as well as the The LOI may or excluding exclusivity period.” spell out contingent or the terms profit sharing commissions), Net Revenue (after of the Representations and Broker Commissions expenses Warranties, how long they have been paid), or EBITDA. If will last, the maximum and the metric is EBITDA, it is very minimum liabilities, and define important to spell out the exact any Reps/Warranties that may definition of EBITDA and how it last indefinitely (i.e. title to the will be calculated (will it include assets, taxes, authorization). By any corporate allocations from the having basic parameters for Reps, Warranties and Indemnities buyer). The Earn-Out section should be very clear in defining (1) the time period the Earn-Out will be measured, (2) the metric that will be measured, and (3) the definitions of how the metric will be calculated.

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ANALYSIS - M&A SERVICES spelled out in the LOI, it minimizes the Buyer time to conduct due legal issues that are likely to arise diligence and for the attorneys later. to draft and negotiate asset purchase agreement and Other matters that can be ancillary documents necessary addressed in the Conditions to close the transaction. section include, employment terms of key employees (and Lastly, there are provisions that Non-Compete/Non-Solicit should be included in every clauses), requirement LOI. There should always to purchase tail E&O be an expiration date for insurance, and any Working the LOI stating that the Capital requirement to Offer is good until a remain in the firm. certain date and must be executed and The LOI may also include dated by both Conditions that the parties prior to Buyer will agree to the expiration. including: (1) that There is a they have the available section that Capital to consummate states that the the transaction or that the LOI is nondeal is Contingent upon binding, except for obtaining financing, (2) certain sections of the that the Buyer has the LOI. Binding sections authorization and ability of the LOI would to consummate the include the Exclusivity transaction, and (3) to a Clause, Confidentiality Section, much lesser extent, a “Break Up” and Choice of Law/Venue. Fee in the event that Buyer is unable or unwilling to complete A well written LOI should be the transaction. a clear and concise offer that (1) defines exactly what is EXCLUSIVITY being purchased and for what Most LOIs have a binding consideration, (2) spells out all exclusivity time period of 60 to relevant definitions, terms and 120 days. This provision states conditions in plain language, (3) that once the Buyer and Seller minimizes execution risk with reps/warranties, have signed the LOI that the exclusivity, Seller will not discuss, negotiate, and other conditions, and (4) or engage with any other Party. is time constrained in both the This is commonly called the “No validity of the offer as well as the Shop” provision and it gives exclusivity period. www.chart-exchange.com

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LLOYD’S WARNS BUSINESS MAY UNDERESTIMATE CYBER RISK

ondon - The CEO of Lloyd’s of London, Inga Beale, spoke directly to the threat of “reputational risk” faced by business as a consequence of a cyber breach. “The reputational fallout from a cyber breach is what kills modern businesses. And in a world where the threat from cyber-crime is when, not if, the idea of simply hoping it won’t happen to you, isn’t tenable,” Beale advised. “To protect themselves businesses should spend time understanding what specific threats they may be exposed to and speak to experts who can help handle a breach, minimise reputational harm and arrange cyber insurance to ensure that the risks are adequately covered. By reacting swiftly to mitigate the impact of a cyber breach once it has occurred, companies will be able to minimise the immediate costs and their exposure to subsequent slow burn costs.” See Cyber Risk Page 33 JULY 2017

SPECIAL REPORT - WILSON ELSER

INSURING CANNABIS INDUSTRY RISKS California’s Insurance Commissioner Encourages Admitted Carriers to Insure Cannabis Risks By Ian Stewart and Dean Rocco

n May 22, 2017, California Insurance Commissioner Dave Jones led a teleconference with 63 insurance industry stakeholders to discuss insurance requirements set forth in California’s proposed cannabis regulations. He stated: “The department has an important role to play as new industries emerge and the market adapts to meet the

changing needs of all insurance consumers.”

rideshare and autonomous vehicle industries. “The department has an important role to play as new Members of Wilson Elser’s industries emerge and the market Cannabis Law practice attended adapts to meet the changing a teleconference led by California needs of all insurance consumers,” Insurance Commissioner Dave he said. Jones with 63 insurance industry stakeholders on May 22, 2017, to The current proposed Bureau discuss insurance requirements of Medical Cannabis Regulation set forth -in California’s (BMCR) insurance provisions proposed cannabis regulations. state that a licensee “shall … Commissioner Jones stated that his maintain commercial general goal is to make sure all Californians, liability insurance and commercial including emerging cannabis umbrella insurance for bodily injury businesses, have insurance and property damage arising out of protection. By way of analogy, licensed activities,” with coverage he compared the challenges of for bodily injury, property damage the emerging cannabis insurance and personal injury with limits of market to those confronted by the not less than $1 million.

Co-author Dean Rocco is co-chair of Wilson Elser’s national Employment & Labor practice. He represents employers of all types and sizes across the country as well as executives and members of management. He advises clients on issues such as managing employees with disabilities and medical leave rights, building sound personnel policies and complying with workplace regulations. Dean maintains a significant practice defending employers from lawsuits alleging workplace harassment, denials of disability or medical leave rights, unlawful termination of employment, and wage and hour violations.

Co-author Ian Stewart is co-chair of the firm’s Cybersecurity & Data Privacy practice and co-chair of the Cannabis Law practice team. He is a member of the Information Governance Leadership Committee and a Certified Information Privacy Professional (CIPP/US). Ian has defended complex litigation in state and federal courts for the past 20 years. His practice focuses on product liability, complex general casualty, transportation and marine claims, data privacy and security, and intellectual property litigation.

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The proposed regulation also states that the licensee “shall maintain the insurance required … from an insurance company authorized to do business in California by the Secretary of State.” As written, the BMCR regulation

Image Credit: Creative Commons 2.0 License Here

causes concern with surplus lines carriers that are currently writing coverage. Following the public comment period, which runs through mid-June 2017, it is expected that the proposed language will be amended substantially. However, Commissioner Jones made clear that the Department of Insurance encourages insurance carriers admitted in the state of California to offer product lines required by the new regulations: “Cannabis businesses need to insure property,

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crops, vehicles and employees, just like any other business. They have the same insurance needs.” PRODUCT LIABILITY COVERAGE

One significant concern raised by insurance industry stakeholders is the lack of product liability (PL) coverage required by the proposed regulations. The production, distribution and sale of an ingestible product that has psychoactive effects – accompanied by a wide range of anticipated labeling and marketing representations – will certainly result in robust PL litigation. Product recalls and consumer class actions often follow allegations of poor quality control, contamination or misleading product claims. For example, the number of cannabisrelated product recalls mandated by the state of Colorado since September 2015 is significant. Between September 8, 2015, and April 26, 2017, Colorado authorities reported 66 cannabis recalls. A mature cannabis market in California is anticipated to be at See Insuring Cannabis Page 17

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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 worldâ&#x20AC;&#x2122;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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ANALYSIS - WILSON ELSER

U.S. SUPREME COURT SHUTS DOWN PATENT TROLL VENUE SHOPPING

n May 22, 2017, the U.S. Supreme Court issued its unanimous decision in TC Heartland LLC v. Kraft Foods Group Brands LLC , No. 16-341, S.Ct. 2017, and drastically changed the politics of venue selection in patent cases. The decision requires patent owners to bring infringement lawsuits in the state where the alleged infringer is incorporated, pursuant to the venue provision of the U.S. Patent Act. This infringement suit was filed in Delaware because TC Heartland allegedly shipped infringing products to that state. TC Heartland moved to transfer the venue of the lawsuit to Indiana, the state where it is incorporated and headquartered. The motion was denied under the 27-yearold precedent established by the Federal Circuit in VE Holding

v. Johnson Gas Appliance, 917 F. 2d 1574, Court of Appeals, Federal Circuit, 1990, in which the Court held that venue could be established by the general venue provisions set forth in 28 USC 1391(c). The Federal Circuit denied TC Heartlandâ&#x20AC;&#x2122;s petition for writ of mandamus.

A recent unanimous decision by the U.S. Supreme Court will curtail abusive venue shopping by patent trolls, companies that misuse patents as a business strategy. The decision is particularly beneficial for small companies, which often lack the resources to litigate expensive out-of-state infringement actions.â&#x20AC;?

About the author: Amy Baker focuses her practice on product liability, medical device and pharmaceuticals litigation, and professional malpractice. She has experience in defending and prosecuting intellectual property litigation, including copyright, patent and trademark infringement along with related causes of action under state law. Amy has argued before state courts of appeal in Florida and California and has achieved several successful appellate results for her clients.

www.chart-exchange.com

The Supreme Court reversed this decision, holding that the only applicable patent venue statute is 28 USC 1400(b). That statute limits venue in a patent infringement action to the state where the defendant company is incorporated or where there has been an act of infringement and the defendant has a regular and established place of business.

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The TC Heartland decision has enormous significance in the patent world, where approximately 35 percent of infringement lawsuits are brought in the Eastern District of Texas because it is perceived to be patent-owner friendly. Other states have drawn a disproportionate share of patent litigation as well; for example, Delaware and New Jersey have a concentration of generic pharmaceutical patent litigation.

This decision could substantially reduce the flurry of lawsuits filed by patent trolls in patent-owner-friendly jurisdictions such as the Eastern District of Texas. The decision is particularly beneficial for small companies, which often lack the resources to litigate expensive out-of-state infringement actions.

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ANALYSIS - VALUE MOMENTUM

MAXIMIZE ISO, NCCI AND RATING FOR OTHER BUREAUS WITH MODERN TOOLS Automating bureau updates enhances your ability to compete

manual processes have numerous pitfalls. For one, this involves a manual process associated with accessing, interpreting, assessing the impact and implementing by Abhijeet Jhaveri each ISO circular. Implementation itself involves making changes ike many MGAs, coverholders to administration systems, rating and program administrators, systems and also the systems of your firm likely stays engagement with such products competitive by constantly – used by agents, customers and scanning the horizon for new niche employees. segments and capitalizes on them to become markets of choice for In response, several years ago ISO your producer partners. Naturally, developed the ISO Electronic Rating to profitably design, package and Content (ERC), which delivers launch products targeted at these ISO and NCCI (via a partnership niches, it’s imperative to correctly with NCCI) content digitally. price policies for developing Unsurprisingly, the trick for your favorable loss ratios and to control firm is implementing a digital rating operational expenses. solution compatible with ingesting these electronic files quickly and Frequently, firms like yours leverage efficiently and manifesting the ISO, and other bureaus, for rates, content across systems – portals, rules and forms to stay current with rating and administration systems. the loss cost trends, new product forms and regulatory changes As with any technology, you can required for pricing policies. either develop a rating system However, the traditional processes yourself or purchase a purposefor implementing and maintaining build solution from a technology such content have been manual, vendor. But how to decide? tedious and time-consuming. This article examines the key considerations for evaluating In an era where customers, agents rating solutions to ensure your firm and employees are demanding makes the best choice. digital products, processes and engagement, such traditional See Maximize Bureau Utility Pg 22

L A

BOUT THE AUTHOR: Abhijeet Jhaveri is Chief Marketing Officer at ValueMomentum and leads ValueMomentum’s softwareas-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 - VALUE MOMENTUM Continued From Page 20

current more efficiently and costeffectively than doing so manually.

and business-friendly management tools enables product managers to make configuration changes on the In addition, it’s vital to have the fly. capability to fully absorb new content releases as-is. This includes For example, a few years ago ISO changes, interpretations and introduced changes to the limit specifications. of insurance (LOI) curves. Rating solutions that required IT developers Remember, any manual effort to align with the changes forced BREADTH, DEPTH AND AGILITY not only defeats the purpose their firms to resort to slow, costly Whether developed in-house or of electronic updates, but also manual processes until developers by a vendor, your solution should potentially re-introduces risk could catch up. However, flexible provide the breadth and depth of associated with human error, which, solutions provided the agility adapt capabilities you need today plus in turn, drives up costs. to ISO’s changes immediately, the agility to adapt to new needs conferring competitive benefits. as your lines of business, territories and other factors Modern solutions also No matter what rating change. This includes the include self-service solution you use, as option to mix and match capabilities for adjusting a specialty insurer the key is ISO, NCCI and content from bureau content within the other bureaus, along with staying focused on your core quoting system as well. This proprietary products and ensures the appropriate business competencies. That’s rate plans, to create the data capture and validations why it’s critical to evaluate and appropriate packages for against supplied bureau choose a modern rating solution your target segments. content.

MAXIMIZE BUREAU UTILITY

A good way to measure adaptability is by asking for estimates of how long adding new business lines or territories will take. Longer time estimates typically indicate less flexible solutions and can even signal architectural insufficiencies.

for automating and streamlining bureau content updates. Giving your business users a robust and flexible solution, with intuitive management tools, is key to having the agility your firm needs to stay ahead of the rest.”

IMPACT ANALYSIS

VISIBILITY

By nature, bureaus produce a deluge of information to reflect the myriad changes in the market. This means your rating solution must go beyond simply automating of bureau content ingestion to include business INTUITIVE BUSINESS workflows for assessing new bureau Timely & Complete Update Ingestion USER CONTROLS content and correctly applying Not only should your solution changes to your business. Timely access to electronic updates permit timely updates, but it should is another attribute to consider, as also do so with minimal intervention At minimum, your solution should the whole point of ingesting bureau by software developers. A solution include the visibility to determine updates electronically is to stay with a flexible, modern architecture the following: 22

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ANALYSIS - VALUE MOMENTUM • •

What has changed from one release to another? What is the impact of the change on our business strategy and book of business? What is the impact on our proprietary rating and quoting variations?

ONLINE RATING & QUOTING CAPABILITIES

Finally, it’s not enough for your rating solution to automate and streamline processes for applying • electronic bureau updates. For your CSRs, underwriters and others to effectively leverage updated content, your solution In short, a robust rating solution must support the ability to enable can help you efficiently identify, your quoting system to reflect the analyze and manage changes and, changes as well. in the case of your propriety needs, determine whether the changes Just as tools for modifying the are relevant to your product line. impacts of bureau content should be available at a business user level – rather than requiring software It’s common for specialty firms development resources – so like yours to apply proprietary too should bureau content flow variations to bureau-supplied smoothly and instantly into your content to reflect the needs of your quoting systems. The same holds target customers and accurately true for any resulting changes to manage the associated risks with your proprietary variations. Further, insuring them. accessing bureau content and proprietary variations should be Broadly speaking, your rating device-agnostic, as this empowers solution must include tools that users regardless which desktop or permit business users at your firm, mobile device they prefer. or the companies you represent, to easily adjust bureau content to A COMPREHENSIVE address proprietary needs such SOLUTION FOR SUCCESS as loss cost modifiers, custom No matter what rating solution coverages, algorithms and rules. you use, as a specialty insurer the

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Management tools must provide granular visibility into the differences between baseline bureau content and your proprietary variations. Further, they must permit easily retaining, modifying and applying your proprietary variations to each new bureau release.

www.chart-exchange.com

key is staying focused on your core business competencies. That’s why it’s critical to evaluate and choose a modern rating solution for automating and streamlining bureau content updates. Giving your business users a robust and flexible solution, with intuitive management tools, is key to having the agility your firm needs to stay ahead of the rest. TABLE OF CONTENTS

Mark Lann Phone:

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

JULY 2017

Don’t let your clients pay the price for

WORKPLACE BULLYING!

The notion of Workplace Bullying is getting increased attention from national media outlets. The term refers to patterns of behaviors that harm, intimidate, offends, degrades, or humiliates an employee — usually in front of their colleagues, clients, or customers. Studies relating to this phenomenon reveal some disturbing trends; workplace bullying has been found to be 4 times more prevalent than illegal harassment. Many employers may not even be aware that this type of disturbing behavior occurs within the workplace. Unfortunately, the companies could ultimately suffer the consequences if the victim decides to take legal action. The cost of defending against such a lawsuit — even a groundless one — could be financially devastating. This is especially true for smaller firms. Let Rockwood Programs help protect your clients. Our Employment Practices Liability Insurance (EPLI) product protects companies from allegations of discrimination, wrongful termination, harassment, and workplace bullying brought by their employees.

Visit us at www.rockwoodinsurance.com to learn more

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CHART-NEWS Continued From Page 11

HOW TO BEST LEVERAGE THE OCTOBER CHART CONFERENCE

The CHART Staff can be engaged to customize the meeting and discreetly “hustle” on your behalf:

• Invite your clients for success stories and to reduce your travel expenses in the future. • Bring prospects you seek for future business • Target friends and peers who would benefit from attending As Iron Sharpens Iron - So the CHART event.

Capitalize on the 100,000+ circulation of our e-magazine Does One Person Sharpen by contributing articles that Another (Proverbs 27:17) Utilize This Service And Put demonstrates expertise in your Chart To Work On Your particular field of endeavor. We encourage our vendor and Syndicate partners to bring agencies they have partnered with in the past.

There Is Nothing More Compelling To A U.S. Producer Than A Success Story Told By A Peer. 7. LEARN NEW SKILLS

The vast majority of our attendees are life-long learners. Being with their peer group is a rare opportunity to talk one hundred miles an hour in an environment where they are fully understood. Program Specialists are a unique class. Their language, metrics, compensation plans, targets, systems, etc. have commonalities only they understand. Our workshops and panels are designed specifically to challenge and grow Program Administrators. www.chart-exchange.com

We encourage our vendor and Syndicate partners to bring agencies they have partnered with in the past. There Is Nothing More Compelling To A U.S. Producer Than A Success Story Told By A Peer.” 8. PREPARE IN ADVANCE

Behalf.

10. POST EVENT

The typical “trophies” a conference attendee returns home with is a handful of business cards, expense receipts, and jet lag. The first thing they face at home is a backed up schedule and the “conference high” soon dissipates. Take a lesson from the folks who do this for a living. Some of the least likely connections you made could generate the best future opportunities.

Develop your event strategy in advance. Do you wish to sponsor an event, moderate a workshop, participate in a panel, purchase Utilize the conference attendee a give-away to promote your lists to enhance your company’s firm, or develop materials that communication databases. highlight your capabilities? Consider the use of periodic newsletters, e-mails, or other The Most Successful Meetmechanism to maintain your ing Attendees Are The Ones visibility within this target niche.

Who Are Prepared To Prosper. 9. STACK THE DECK TABLE OF CONTENTS

While “Harvesting May Help Today, “Farming” Will Feed Your Firm In The Future! JULY 2017

ANALYSIS - FORTEGRA

A SIMPLER PATH TO ADMITTED SUCCESS

he relationship and transparency a Lloyd’s coverholder receives from their London market partners are difficult to replicate. When it comes to admitted markets, the status quo seems to be that the carrier enjoys underwriting profits without sharing additional commissions.

ark Rattner is Executive Vice President, Chief Underwriter and head of product management for Fortegra, a leading specialty insurer and subsidiary of Tiptree Financial Inc. (NASDAQ: TIPT), where he leads the expansion of the company's underwriting programs. He has over 30 years of insurance industry expertise, and previously acted as Senior Vice President of Houston International Insurance Group.

JULY 2017

admitted market that can take a non-admitted program and convert it to an admitted one where allowed, may be similar to the likes of Tesla disrupting the auto dealership market. Filings that are compliant with state regulators take time and effort. However, with the right admitted market partner, an MGA can get a program rolled But when profit commissions aren’t out within 120 days. paid, the coverholder or MGA can become, well, frustrated. And with The evolution of the admitted no claims process participation, market stems from non-admitted no access to loss ratios, no insight products eventually reaching on how to improve underwriting saturation, thus requiring admitted results and, ultimately, no profit expertise. Take, for example, commission, this frustration professional liability risks. Up until leads to discontent. It’s these competition intensified and rates circumstances that leave many softened, most of these products coverholders left to focus solely were sold on a non-admitted basis. on their binder facilities and let Eventually the best risks moved to the admitted market operate as admitted markets and left surplus historically allowed. lines to underwrite the nonpreferred risk. Even with this shift, Comparatively, admitted programs many products are still best left carry substantial differences versus to surplus lines paper. However, their non-admitted counterparts. like the professional liability class, Product development and filing most products eventually reach processes can be labor-intensive. saturation and ultimately require a For example, identifying an

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ANALYSIS - FORTEGRA move to admitted capacity.

SLB is a Lloyd’s coverholder, they with Fortegra to offer our product needed a partner with admitted on an admitted basis. This will not So, what’s a coverholder to do paper to bridge the gap. SLB was only help separate us from the rest when they need an admitted working with three non-admitted of the market segment we target, program? The current options are markets, one of which was Lloyd’s. but also solidify us in the industry. one, wholesale the business; two, It provides us with a market and work with a fronting company and In partnership with SLB, Fortegra product alike that has the admitted reinsure 100 percent to domestic assisted with pricing and product qualities that state associations and or Lloyd’s markets; or three, move development on an admitted professional groups prefer, and the the program to a domestic carrier product, much like the existing, transparency we are accustomed without potential reinsurance non-admitted one. Fortegra to on our current products. support or profit commission. assumed 20 percent of the – Dan Ginden, SLB Managing admitted program risk while Director But what if the coverholder has a SLB’s current Lloyd’s binder and fourth option? quota share markets took on the But what if you’re an MGA with remaining 80 percent. In the end, an admitted professional liability A new solution being offered seven syndicates supported the program but need to move the by Fortegra allows coverholders 80 percent quota share slip, five of program due to distribution and MGAs to roll out an admitted which are CHART members. channel conflicts, state availability, program with 75economics, and so to-80 percent on? You could take A new solution being offered reinsurance support advantage of the by Fortegra allows coverholders from their current aforementioned London subscription options, or you could and MGAs to roll out an admitted market. That same move it from one program with 75-to-80 percent transparency and admitted market reinsurance support from their current underwriting to another, while involvement found continuing to work with London subscription market. That with a binding facility the same subscription same transparency and underwriting is now available with market that supports involvement found with a binding a Fortegra admitted you today. By facility is now available with a Fortegra program. transitioning your admitted program to admitted program.” To illustrate, take a Fortegra, your London look at the success subscription partners of Standard Lines Brokerage can enjoy new premiums via a Insurance Group (SLB) in Tamarac, The ability to offer an admitted quota share with Fortegra. Florida. They opened their doors product and still have flexibility in 2000, but just recently began and communication with our What about the reverse? What if looking into providing an admitted carrier partner, as we do with our you’re an MGA who isn’t currently a insurance product to retail agents Lloyd’s markets, was extremely coverholder, but you need surplus who didn’t have ready access to attractive to us at SLB. As the lines capacity for finite risks? Well, premier markets due to agency size, insurance agents’ professional coastal location, company volume liability arena softened, we felt restrictions, and other factors. While that it was necessary to partner See Path To Admitted Success Pg 33 www.chart-exchange.com

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NEWS Continued From Page 17

addition to pollution exclusions. Any such policy provided to a cannabis licensee would result in illusory coverage. To protect cannabis licensees and the public, numerous industry stakeholders recommend that the state licensing authorities consider mandating either a standleast an order of magnitude larger alone PL insurance policy or a CGL than the market in Colorado. Prop 65 policy with Product Completed liability also is of significant concern Operations coverage. Policy for businesses that will manufacture exclusions also must be reviewed or sell cannabis products in carefully to ensure that coverage is in California. place to protect the end consumer.

INSURING CANNABIS

Insurance carriers should be encouraged by the risk management protocols that the cannabis industry is adopting, including rigorous product testing, advanced“track and trace”programs, and the creation of standards by third-party organizations such as the American Society for Testing and Materials (ASTM). Nevertheless, cannabis businesses will continue to be confronted by substantial PL exposure as the market matures. The experience of the nutraceutical industry provides insight into the intensity of litigation that may be expected to arise out of the nascent cannabis industry.

CHART EXCHANGE

Finally, the proposed cannabis regulations also state that cannabis licensees shall obtain a surety bond of no less than $5,000. With up to 100,000 state licenses expected to be issued in California beginning in January 2018 (and additional licenses and possible bond requirements to be issued by local municipalities within the state), a large new bond market will soon exist, bringing a boon for fidelity/surety companies.

In sum, admitted insurance carriers should continue to proceed with caution as they enter the cannabis market, but opportunities are plentiful and carriers appear to have the full support of the California CGL COVERAGE Department of Insurance. This In this new product environment, should come as good news to the standard commercial general insurance and cannabis industries. liability (CGL) insurance coverage is not adequate to protect a cannabis For those interested in assistance policyholder. Standard CGL policies with making public comments to contain common exclusions for the proposed regulations, please Schedule 1 substances, banned contact Ian Stewart (ian.stewart@ substances or other substances wilsonelser.com) or Dean Rocco that constitute a “health hazard,” in (dean.rocco@wilsonelser.com). www.chart-exchange.com

NEVER MISS AN ISSUE OF

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SUBSCRIBE NOW TO CONTINUE TO RECEIVE THE CHART EXCHANGE!

JULY 2017

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

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NEWS

BRUCE CARNEGIE-BROWN STARTS AS LLOYD'S CHAIRMAN

ruce Carnegie-Brown officially started as Lloyd’s new Chairman today, taking up the role following the retirement of John Nelson. Bruce, whose appointment was announced in February, has over thirtyfive years of experience Bruce Crnegie-Brown across financial services. Currently Chairman of Moneysupermarket Group, he has also been Vice-Chairman of Banco Santander since February 2015. He previously worked at JP Morgan for 18 years in a number of senior roles, ran 3i Group plc's Quoted Private Equity Division from 2007.

and a vice-Chairman of Banco Santander. He was Chief Executive for Marsh UK and Europe between 2003 and 2006, Senior Independent Director at the Catlin Group Ltd from 2010-2014, Non-Executive Chairman of Aon UK Ltd from 2012 to 2015 and has been a NonExecutive Director of JLT Group plc since 2016. He previously worked at JP Morgan for 18 years across a number of senior roles, ran 3i Group plc's Quoted Private Equity Division from 2007 and was a Senior Independent Director at Close Brothers Group plc from 2006-2014.

He was Chief Executive for Marsh UK and Europe between 2003 and 2006, Non-Executive Chairman of Aon UK Ltd from 2012 to 2015 and was also Senior Independent Non-Executive Director at the Catlin Group Ltd between 2010 and 2014. He is stepping down as a Non-Executive Director at JLT Group plc to take up his role at Lloyd's. Bruce Carnegie-Brown said: “I am very excited to get started. In the months since my appointment was announced, I have been meeting with people in the Lloyd's market to hear from them about the challenges they face and what we as a Corporation can do. I am grateful to everyone who has given me so much of their time in recent weeks.

Proud supporters of CHART

Serving coverholders’ needs since the 1930s … and into the future Bespoke solutions Packaged lines Enhanced commissions Web-based platforms US domiciled marketing office Access us through 170 Lloyd’s brokers

BIOGRAPHY

Bruce Carnegie-Brown was confirmed as the Chairman of Lloyd’s by the Council of Lloyd’s in February 2017. He has over thirty-five years of experience across the financial services and is currently Chairman of Moneysupermarket Group www.chart-exchange.com

AtriumUw

www.atrium-uw.com

Atrium Underwriters Ltd

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JULY 2017

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.

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JULY 2017

NEWS-ANALYSIS Continued From Page 27

PATH TO ADMITTED SUCCESS since Fortegra supports a quota share with Lloyd’s, an admitted program will allow you to enjoy Lloyd’s quota share participation and convert you to a coverholder for your non-admitted risks. What was one domestic program would become two programs supported by both Fortegra and Lloyd’s.

I have always thought the Lloyd’s Continued From Page 15 underwriters and the coverholders would welcome this type of arrangement. We are extremely pleased to have received such strong support from our partners, and we look forward to many more successes. – Mark E. Rattner, Fortegra EVP, Matthew Martindale, Director in Chief Underwriter & Product KPMG’s cyber security practice Management also warned, “Cyber risk has moved up in the business agenda and ABOUT FORTEGRA businesses are taking measures to In Business Since the ‘70s prepare themselves. However, they $1 Billion in Gross Annual Sales are failing to factor in the long-term Over 10 Million Consumers damage that a breach can cause and Protected the cost implications of it. Dealing Over 7500 Reseller Partners with things like reputational issues Jacksonville, FL | Novi, MI | Palm and litigation in the aftermath of a Springs, CA breach, can add substantial costs Products and Obligor to the overall loss. Businesses really Services Across 50 States need to start thinking about the 7 In-house Insurance Co. cyber risk holistically rather than A.M. Best Financial one that is currently very short Strength Rating: Asighted.” A Tiptree Inc. Company (NASDAQ: TIPT) It is not the immediate technology

CYBER RISK

The entire Fortegra program model allows coverholders and MGAs to sell an admitted product, and it provides them with active involvement in underwriting development and revision, influence over loss control practices, claims committee attendance, Fortegra Financial Corporation reinsurance marketing, and much (a Tiptree Inc. company) and its more. subsidiaries comprise a singlesource insurance services The London market is a place like provider that offers a range of no other on earth. MGAs enjoy consumer protection options the relationship and transparency including warranty solutions, they receive from their syndicate credit insurance, and specialty partners thanks to advantages like underwriting programs. Delivering an aligned approach to rate making, multifaceted coverage with an strong underwriting performance, unmatched service experience for and claims collaboration, just to both partners and their customers, name a few. Now, CHART’s newest Fortegra solves immediate, vendor partner—Fortegra—can everyday needs, empowering help you do the same and simplify consumers to worry less and your path to success. Experience More. www.chart-exchange.com

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losses and costs, but the longterm contingent losses that many business analysts seem to underestimate, such as loss of credibility, trust and confidence among customers that could impact a business for years to come. “Whilst the immediate business impact of a breach could be significant for any organization, it may only be the tip of the iceberg when it comes to dealing with the legal consequences.” - Hans Allnutt, Partner, Head of Cyber & Data Risk at DAC Beachcroft,

JULY 2017

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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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LLOYDâ&#x20AC;&#x2122;S OF LONDON

JULY 2017

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