The CHART Exchange September 2017 by The CHART Exchange

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Are Employees Increasing Your Agency’s Risk For A Cyber Attack? Cyber attacks are becoming increasingly common. The source of many of these attacks? Employees.

How To Successfully Place A Program Critical insights into the program placement process offered by an expert: Paul Surdel

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

“This recognition by Forbes and, more importantly, our employees, identifying York as a great place to work is a tremendous honor.”

CHART’S THIRD ANNUAL EVENT: BALTIMORE, MD OCTOBER 8-11 2017 The 2017 Event will be held October 8-11 at the Four Seasons Hotel in Baltimore MD. This elegant venue serves to reinforce the notion that we are an exclusive organization.

How To Recruit and Keep Millennials Four key steps to pave the way to bring this key demographic into the insurance industry.

York Named One of America’s Best Midsize Employers By Forbes

Hurricane Harvey Cost Could Top $100 Billion Harvey may well be one of the most expensive storms in U.S. history with costs topping $100 billion.

Mass. High Court: Insurers Not Obligated To Prosecute Counterclaims Policies As a practical matter, insurers often will authorize defense counsel to prosecute counterclaims that are intertwined with the defense and could limit or reduce their insureds’ liability...

Cover Image Credit: Photographed by Adrian Pingstone in June 2005 and released to the public domain.sa/2.5)] via Wikimedia Commons

CHART EXCHANGE

Three Examples of MGAs Who Launched New Programs in Weeks ValueMomentum demonstrates how it doesn’t always have to be a protracted process.

Dept. of Labor Signals Move To Limit Definition of Employment U.S. Secretary of Labor Alexander Acosta announced the immediate withdrawal of the U.S. Department of Labor’s (DOL’s) 2015 and 2016 Administrative Interpretations regarding joint employment and independent contractors.

3 Ways To Improve Premium Financing Customer Loyalty Through Automation Automation can sometimes get a bad rap, but with the proper upfront due diligence when onboarding new clients and when applied to the right processes, it can be the perfect way to provide premium customer service to your commercial clients seeking premium financing services.

SEPTEMBER 2017 VOLUME 2 - ISSUE 8 Publisher: CHART Exchange Glenn W. Clark, CPCU Membership Services Kate Boyle Advertising: Kate Boyle 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

CHART’S THIRD ANNUAL EVENT: BALTIMORE, MD OCTOBER 8-11 2017 Glenn W. Clark, CPCU Publisher & Earliest Adopter

Plan On It!

he 2017 Event will be held October 8-11 at the Four Seasons Hotel in Baltimore MD. This elegant venue serves to reinforce the notion that we are an exclusive organization.

The hotel’s Cobalt Ballroom will house the Vendor Exhibit Hall. Spectacular views of Baltimore’s Inner-Harbor are available from almost every vantage point. The Ballroom will also serve as the venue for the Event’s nightly cocktail receptions and networking functions. Our meeting agenda will provide a number of workshops and forums that address issues of interest for the attendees. These breakout sessions will be moderated by

SEPTEMBER 2017

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CHART EXCHANGE

recognized leaders in the topic to be discussed. The 2017 meeting will also feature the Risk Taker lounge – an event feature that provides a forum through which insurance agents can submit new program ideas to London Syndicates. The

place and so we can get to work on your behalf well in advance to fill your sessions with meaningful connections. The first three CHART Exchange events have been held in October. This will change beginning in 2018, when the annual meeting will

The agenda will also include time for the participants to get together and discuss the CHART Exchange and the state of the U.S./London marketplace. These general sessions will include keynote addresses delivered by leading industry experts.

schedule for this facility will be controlled to minimize conflict with the workshops and other networking activities.

he Four Seasons Hotel has a total of 246 guest rooms. CHART has reserved EVERY ONE OF THEM for the three-day Event. We invite you to join us in Baltimore. Registration opened on April 28, 2017. We encourage early sign up so that you are assured your

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move to April. This rescheduling – prompted by feedback from the group membership – reduces the possibility of conflicting with religious holidays or other industry events.

Glenn W. Clark , CPCU CHART’S Earliest Adopter

SEPTEMBER 2017

Simplify your workflow! Give your team a clear path to winning new policies!

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SEPTEMBER 2017

ANALYSIS

HOW TO RECRUIT AND KEEP MILLENNIALS By Rob Zuzula, Director Marketing & Product Services, NetRate Systems

Image Credit: Creative Commons

e’ve all heard about the brain drain underway in insurance and other industries as Baby Boomers retire, but we’ve spent less time focused on the opportunity before us: to recruit, train and let Millennials lead us into the future. We say opportunity, because that’s what it is.

Here are some things those of us in job. With technology that allows the industry can do to attract and remote working, consider flexible keep this young talent: hours or office schedules. SHOW THEM THAT INSURANCE ISN’T BORING.

MENTOR THEM.

This generation craves feedback While traditional underwriting and personal connections, so might not be the sexiest task why not make a mentor program around, mechanized underwriting part of the training and on-going will require the latest technical skills development for your workforce? and artificial intelligence solutions. New product development DON’T GENERALIZE! will reward out-of-the-box, (Yes, we see the irony in a blog Have you considered these facts entrepreneurial thinking. about the Millennial generation.) about most Millennials? Everyone — but perhaps most of all LET THEM HAVE THE LIFE-WORK this younger generation — wants • They are the most educated BALANCE THEY DEMAND. to be treated as an individual, with generation ever, and they began learning computer coding and Millennials don’t buy into the skills, talents, and motivations all other technical skills in elementary paradigm that demands utter his or her own. devotion to the job and only the school. • They love collaboration. • They are motivated by more than money, which broadens your ability to attract and keep them. • They are more diverse than earlier generations, which means they are more reflective of your market. • Millennials (those born from the early 1980s through the late 1990s) now comprise a bigger share of the labor force than any other generation. They edged out Gen Xers in 2015, according to the Pew Research Center. By 2020, they’ll be 46 percent of the workforce! Millenials Will Make Up 46% of the Workforce by 2020 www.chart-exchange.com

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SEPTEMBER 2017

ANALYSIS

ARE EMPLOYEES INCREASING YOUR AGENCY’S RISK FOR A CYBER ATTACK?

Image Credit: Creative Commons

yber attacks are becoming increasingly common. The source of many of these attacks? Employees. In many instances, employees unknowingly grant hackers access to their company’s system. That’s why it’s so important to make sure your agency’s employees understand their responsibilities to help keep your computer system safe and secure. Start the process by:

Train your employees to not click on links or open attachments to e-mails they are not expecting. This is one of the most common ways hackers gain access to a company’s computers. Well-trained employees are the first line of defense against a cyber attack. USING STRONG PASSWORDS.

Long and strong passwords with a mix of uppercase and lowercase letters, numbers and symbols are Helping them understand the ideal. Set a specific timeline — risk. It’s estimated that 60 percent such as every three months — for of small businesses fail within six changing company passwords. months of a cyber attack. Studies also show that nearly 90 percent of all cyber attacks could have been easily prevented. For most companies, the problem is malware. That’s malicious software designed to gain access to a network, find sensitive data and possibly steal that data. There are various types of malware, including spyware, viruses, worms, or any type of malicious code that infiltrates a computer. Once malware is installed, it can allow hackers to extract private and sensitive data from your customers.

AVOIDING PERSONAL USE OF COMPANY COMPUTERS.

Consider requiring employees to refrain from checking their personal e-mail accounts and social media channels using company computers and devices. PROHIBITING INSTALLING OUTSIDE PROGRAMS ON WORK COMPUTERS.

If a computer contains company information, you’ll want employees to avoid downloading any programs or apps on it. Contributed By Cost Financial Group, Inc.

PROVIDING TRAINING.

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SEPTEMBER 2017

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ANALYSIS - M&A SERVICES

HOW TO SUCCESSFULLY PLACE A PROGRAM By Paul Surdel Director, Insurance Programs Merger & Acquisition Services

situation that only applied to this particular carrier. I suspect that it is a common theme for most, if not all, the program carriers that currently recently met with a Chief delegate underwriting authority to Underwriting Officer for one a third party. of the largest MGA Program writers in the United States. Our The CUO quickly offered that discussion centered on the quality many of the programs were of program opportunities that were declined immediately because currently in the marketplace. As they should not have been sent the conversation progressed, I was to them in the first place. He informed that this particular carrier cited an example where they had reviewed over 100 program still receive mono-line workers opportunities in 2016. I was then compensation opportunities when asked to give an educated guess as they have made it very clear that to how many were actually brought it is a line of coverage that they choose not to write. Many other to fruition. programs were declined because Having an understanding of the of class of business or the historical marketplace, I took a stab and performance of the overall book. guessed that they successfully The CUO elaborated by sharing bound five new programs. The a quick story of how he received answered turned out to be a phone call from a program zero. I was mildly surprised but administrator stating their need I understood that this was not a to find a new insurance partner

because their existing carrier was going to impose a 7% rate increase on the book of business going forward. The CUO offered that he quickly replied with an expected response along the lines of “what makes you think we wouldn’t need the same rate increase”. I do not share this anecdote for bemusement or humor. It is to make the point that many existing program administrators or individuals researching the possibility of forming a managing general agency are not always at their best in promoting themselves or their business. Therefore, this article will attempt to highlight some of the critical items that program administrators need to focus on when approaching a carrier seeking underwriting authority. See How To Place A Program Pg 14

About the author: Mr. Paul Surdel serves as Director of Program Insurance for Merger & Acquisition Services, specializing in the placement of insurance program business and creating underwriting partnerships between carriers and Managing General Agents (MGAs). He has 32 years of insurance and reinsurance experience, working with carriers and MGAs. Mr. Surdel began his career as a National Accounts underwriter with Travelers Insurance Companies and launched his reinsurance career two years later when he joined RFC Intermediaries. He remained with RFC for five years working with National Accounts underwriters assisting them with their facultative reinsurance placements.

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ANALYSIS - M&A SERVICES Continued From Page 13

HOW TO PLACE A SUCCESSFUL PROGRAM DATA IS KEY

Data is key may sound simplistic and straightforward but it is essentially the single most critical component in placing a program. Every program carrier will have their actuaries analyze the historical performance of an existing program. Programs will not proceed if an actuary is unable to determine a projected loss ratio. Therefore, a program administrator will need to be able to provide a minimum of five years of historical data that outline the following items. 1) Total incurred losses with a recent valuation date. Submitting losses that are valued more than one year prior to the proposed effective date of the program will usually be insufficient. Insurance carriers are fully aware that losses can develop quickly and deem it critical that they receive information with a current valuation date. 2) Status of the claims. Are they open or closed? 14

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3) Breakdown of the claim. How much is indemnity and how much is expense? 4) Corresponding historical exposures whether it be sales, payroll, #of units etc. The exposure information is just as critical as the loss information for the actuary to determine a loss ratio. 5) Rate increases or decreases during the history of the book of business. This is another key component for an actuary in determining whether the rate needs to be amended on a go forward basis. Data is the main reason why startup programs are very rarely placed. There is obviously no historical data to analyze. Therefore, it will be heavily dependent on the prospective program carrier to research and uncover as much industry data as they can to support their case. There are many individuals that approach carriers with outstanding concepts but are unable to support their opportunity with corresponding data. The key point to remember is that a program carrier will NOT sign off on a program without actuarial consent.

with a number of different carriers that have different reserving practices. There are cases where retailers or wholesalers are able to secure historical data but the information is jumbled with some carriers forwarding data by policy period and others by calendar year. Consequently, it becomes challenging to assign claims to a particular timeframe. The point is not to discourage or dissuade retailers or wholesalers from exploring new opportunities but they do need to understand the challenges that will be presented. It is difficult to compile data when somebody is reliant on a third party. The successful retailer or wholesaler should consider investing in a system where they retain the ability to maintain their own information . WHY IS THE PROGRAM BEING SHOPPED

If there is one key thing that I have learned in this business is that it is essential that a program administrator have a â&#x20AC;&#x153;good storyâ&#x20AC;? when shopping a program. Program administrators will not be successful in pitching that they need a change from their existing carrier or that they are not receiving good service. A lot more explanation is going to be required in these scenarios.

Many wholesalers and retailers have entertained the idea of becoming a program administrator. The attempts usually fail because they are unsuccessful in securing the historical exposure and loss information from the carriers where they place the business or the data Keep in mind that a program they are able to retrieve is placed insurer fully comprehends the TABLE OF CONTENTS

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NEWS what a carrier can do from year to challenges of locating quality year with management changes programs. A program carrier will or being subjected to reinsurance do everything feasibly possible to contracts. Therefore, I want to find retain a profitable book of business. a second carrier where I could roll Therefore, a carrier will initially my entire book if I receive a notice be guarded when an existing of cancellation from the other program is being shopped. They carrier.” This is sound judgment will suspect that the book could where a program possibly be running administrator “hot” and that Data is was being the MGA is being key may proactive. Of asked to impose a course, you need rate increase that sound simplistic they fear will chase and straightforward to have volume to split a book (at away much of their but it is essentially least $5,000,000) business to their and you have the single most competitors. Worse yet, a program critical component in to figure out a means of administrator could placing a program. splitting the be under a notice Programs will book where of cancellation both carriers and they are not not proceed if an are satisfied disclosing that fact. actuary is unable but it can be Unfortunately, this to determine a achieved. I have is not an uncommon situation. Therefore, projected loss ratio.” witnessed one situation where it is incumbent a MGA found a upon the MGA to second carrier for their program have a solid rationale as to why a and insisted that both carriers program is being marketed. reinsure each other on a 50/50 basis. In this structure, both Examples of this could be as carriers receive the same amount follows: of premium acting as a carrier and as a reinsurer. Both carriers 1) The MGA is concerned also would share any loss on a that they have all their business 50/50 basis. Neither carrier is placed with one carrier and would placed in an adverse position in like to have a second carrier for this situation. peace of mind. The president of a successful managing general 2) Another example of a “good agency once said to me. “I am not story” is a program administrator worried at all about our operation that is being restrained from or what we can control”. He added, growing their business. The “What keeps me up at night is my program is profitable but the MGA carrier. The unpredictability of www.chart-exchange.com

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can’t expand into other states because their existing carrier has other contracts that prevent them from doing so. In this instance, a program administrator reviewing the submission as a new business opportunity will react favorably to this type of presentation. They will like the fact that the MGA has a profitable track record with one carrier and that their growth is being stunted by elements out of their control. BE PREPARED FOR A COMPLETE PACKAGE REQUEST

There will be an extensive list of questions and requests from the carrier. This is not being stated to discourage anybody from engaging in the process. It is being mentioned so that a program administrator is not caught off guard with the amount of work that securing the pen from a carrier will entail. One has to remember that asking a carrier to delegate underwriting authority to a third party is a major request. The due diligence required is comparable to the investigative work that a carrier would perform in researching the opening of a satellite office. Much information gathering would be enacted before a final decision was made. This is the main reason that MGA programs can take 6 to 9 months on average to place. Listed below are some of the key requests that a carrier will make in the due diligence process. These See How To Place A Program Pg 32 SEPTEMBER 2017

NEWS SPECIAL REPORT - WILSON ELSER

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.

www. YORKRSG .co m

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YORK NAMED ONE OF AMERICA’S BEST MIDSIZE EMPLOYERS BY FORBES MAGAZINE

ork Risk Services Group (York), a premier provider of claims management, managed care, specialized loss adjusting, alternative risk programs, pool administration and other insurance services, announces the company was recently named to the “2017 America’s Best Midsize Employer” list by Forbes magazine. “America’s Best Midsize Employers 2017” were chosen based on a survey conducted by Statista, one of the world’s largest statistics portals, from a vast sample of 30,000 US-based workers

currently employed by large or midsize companies with 1,000 or more employees. The willingness to recommend one’s own employer was used as the most important metric of assessment, where workers were required to rate their employer on a scale from 0 to 10.

to work is a tremendous honor,” said Rick Taketa, President and CEO of York. “Our culture of positive collaboration empowers employees to make a meaningful difference in the lives we touch through the claims process. York is a leader in using technology and data to manage claims more effectively, but we never lose sight of the fact that it is the human component that truly makes a difference in claims management. Our employees “This recognition by Forbes and, help us create a company and more importantly, our employees, a workplace of which we are all identifying York as a great place proud.”

HARVEY COST COULD TOP $100B

ouston, TX - As damage reports continue to filter in, with at least one forecaster, David Havens of Imperial Capital in New York, predicting that Hurricane Harvey may well be one of the most expensive storms in U.S. history with costs topping $100 billion as a result of the location, severity, the catastrophic flooding and the slowmoving nature of the storm. www.chart-exchange.com

Lloyd’s of London is expected to have a substantial participation in the storm losses. The firms Lancashire, Beazley and Hiscox are expected to be the worst-hit UK insurers with a reliable estimate of at least £100m in losses each. A spokesperson for London said, “In terms of Lloyd’s exposure, which in Texas includes the construction,

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energy, marine and hospitality industries, we’ll likely play a key role in the restoration of damaged businesses and communities. In the last five years, the Lloyd’s market has paid out $6.3bn in catastrophe claims payments in North America, so this is an area where we have deep experience.” See Lloyd’s Stake in Harvey Page 36 SEPTEMBER 2017

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.

wilsonelser.com 18

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NEWS

MASSACHUSETTS HIGH COURT: INSURERS NOT OBLIGATED TO PROSECUTE COUNTERCLAIMS POLICIES By Kara Thorvaldsen, Stacy Fogarty

whether the definition of “defense costs” includes the prosecution of a n June 22, 2017, the counterclaim; and (3) if the insurer Massachusetts Supreme must prosecute counterclaims, Judicial Court (SJC) in whether a conflict of interest arises Mount Vernon Fire Insurance Co. in the prosecution of counterclaims v. Visionaid, Inc. (No. SJC-12142) requiring the appointment of considered three questions independent counsel. certified by the First Circuit Court of Appeals addressing the limits In brief, the Court determined that of an insurer’s defense obligation: an insurer does not have a duty (1) whether the policy and/or the to prosecute counterclaims under broad duty-to-defend approach the plain meaning of the policy or of “in for one, in for all” followed in the “in for one, in for all” doctrine, Massachusetts requires an insurer nor does the definition of “defense to prosecute counterclaims; (2)

costs” require an insurer to pay costs to prosecute a counterclaim. In view of the answers to the first two questions, the Court did not need to reach the third question concerning conflicts of interest. BACKGROUND

Mount Vernon Fire Insurance Company issued to Visionaid, Inc. an employment practices liability policy that stated Mount Vernon had the “right and duty See Insurers Not Obligated Page 26

Co-author Kara Thorvaldsen practices in the areas of appellate work, professional liability, intellectual property, class action defense, and insurance and reinsurance defense. She has a track record of success in defending professionals, including attorneys, real estate agents and brokers, and insurance agents and brokers. In many cases, Kara has been able to obtain summary judgment or voluntary dismissals for her clients. Kara has defended trademark, copyright, and unfair competition claims in the federal courts of Massachusetts and Rhode Island, including claims brought by a fortune 500 company against a small business, and an international trademark and copyright dispute. Kara achieved a dismissal of claims brought against an Internet security company that it had damaged a consumer’s home computer, defusing the threat of a consumer class action. Co-author Stacy Fogarty focuses her practice on insurance law, intellectual property and civil litigation defense. Stacy has vast knowledge of insurance coverage and is experienced in specialty claims in a variety of segments and lines, including but not limited to property, general and commercial liability; multiple lines of professional liability; errors and omissions; directors and officers liability; and fidelity coverages. She is particularly knowledgeable in proof-of-loss and financial documentation assessments, best practices in the area of claims, and consumer protection and deceptive trade practice issues. Stacy also has worked extensively with technology services companies and has handled intellectual property and technical commercial litigation, including provision of services and contractual disputes, copyright and trademark infringement, and website governance and accessibility.

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SEPTEMBER 2017

ANALYSIS - VALUE MOMENTUM

THREE EXAMPLES OF MGAS WHO LAUNCHED NEW PROGRAMS IN WEEKS By Abhijeet Jhaveri

G 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.

SEPTEMBER 2017

rowth has taken the top spot amongst business issues driving investments in 2017, according to a Celent survey. To achieve growth, a key lever for MGAs, program administrators and cover holders is product innovation. In our interactions with insurers, we are constantly hearing their need for refreshing legacy products, tailoring products to attractive niche segments and developing new products to meet the needs of growing markets. According to a Celent research report titled “North American Rating Engines”, “insurers are looking to grow, differentiate themselves, navigate the regulatory environment, and do all of this efficiently.” Product Innovation & Management Refreshing legacy products is similar to your favorite smartphone company adding new features to their existing phones. Apple did this with iPhone 7 when it added Portrait mode to apply a depth-offield effect for beautiful pictures. Similarly, insurers are constantly adding new coverages like an Employment Practices Liability (EPL) for small businesses as part of TABLE OF CONTENTS

a BOP product. Tailoring products to attractive niche segments is another popular method to achieve growth. Here, as a niche writer, an MGA or Program Administrator may identify an underserved growing segment such as addiction treatment clinics that are growing in response to the opioid epidemic. Similarly, MGA s are also developing new products and the underwriting expertise to meet the needs of new risks like Cyber Liability and Drone coverage, Product development, implementation in IT systems and the role of bureaus such as ISO. However, launching or refreshing new products or programs is no simple task. There are several activities to be considered across the value chain. While each of the activities in the value chain have their own challenges – developing, designing products and underwriting guidelines and implementing these in MGA rating systems – in a timely manner can make all the difference in achieving the business objectives. Insurers, often adopt bureau based products such as those from ISO to serve as a starting point. This is to ensure that they are accessing See Programs in Weeks Page 22 www.chart-exchange.com

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SEPTEMBER 2017

ANALYSIS - VALUE MOMENTUM Continued From Page 20

NEW PROGRAMS IN WEEKS

such that eventually if the MGA syndicate and a fronting carrier, desires to distribute the products the MGA sought to launch the new via an agent portal, the process is program rapidly. fairly automated. SOLUTION

Three examples of MGAs who The MGA evaluated several options launched new programs in weeks: and selected ValueMomentum’s iFoundry Rating Engine along with MGA providing commercial a leading agency management insurance to restaurant fran- system. Within a few weeks, the chisees launches new program BOP product was configured in the rating software along with the the most up to date advisory loss BUSINESS SITUATION requisite loss cost modifiers and costs, rules and forms. This can be Our client, offers commercial made available to underwriters. a means to speed up the product Following this, the system development process and was integrated with the with the right vended Launching or refreshing MGA’s agency management solution that supports new products or programs system such that all the such bureau-based is no simple task. There are rating data flowed back and products out-of-theforth into the admin system. several activities to be considered box, also the technology With this foundation in implementation process. across the value chain. While place, the MGA plans to With this baseline, each of the activities in the value roll out ValueMomentum’s insurers can then analyze chain have their own challenges BizDynamics solution for key elements of risk not – developing, designing products agents to submit business, addressed in the ISO rate access policies and better and underwriting guidelines and plan, review industry serve their franchise statistics for those key implementing these in MGA rating insureds. Eventually, this elements and develop systems – in a timely manner can forward looking MGA also their exceptions from ISO make all the difference in achieving plans to engage the end by adding such elements the business objectives. “ insured with content and and removing those that services for loss prevention. are contradicting industry data. Further, vended solutions that support configuring proprietary rate plans – rates, rules and forms – rapidly in their systems – can assist the rapid launch of programs and support ease of maintenance of these programs. One important distinction is to use rating software rather than excel spreadsheets –

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insurance nationwide to restaurant franchises. Founded by Quick Service Restaurant (QSR) franchisees and insurance leaders, the MGA brought deep specialization in QSR operations to effectively insure franchised restaurants. The MGA sought to launch a businessowners policy insurance offering targeting franchisees of national concepts. Having partnered with a Lloyds TABLE OF CONTENTS

RESULTS

The new rating system enabled the MGA to rapidly launch the program and start issuing policies. As experts in restaurant insurance, the MGA is ready to apply its knowledge of the nuances and caveats of QSR franchisees to write profitably business.

MGA providing equine insurwww.chart-exchange.com

ANALYSIS - VALUE MOMENTUM ance products adds product coverages without disrupting the rating components down to the breadth underwriting workflow in place ZIP-code level. prior to the implementation. This was accomplished via integration with the MGA’s agency management system.

However, the client required a solution that integrated the rating data supplied by ISO ERC. One of our clients is the country’s Also, the client’s lean IT staff had largest providers of coverage for limited resources to conduct the show and pleasure horses, horse Leading Commercial Transneeded deployment integrations farms, equestrian professionals, portation Rental & Leasing and support them with ongoing clubs and shows. This MGA sought Provider Tailors products to maintenance. to add breadth to its successful Niche Segment program by adding a new farm Deployment included integrating property product – based on ISO. BUSINESS SITUATION the client’s proprietary pointSOLUTION An industry leader in truck rental, of-sale system, automated deal The MGA evaluated options fleet management and supply chain analysis, and review to enable and selected ValueMomentum’s solutions for businesses had been sales agents to provide customers iFoundry Rating Engine. Within offering commercial auto liability preliminary rate quotes during a a few weeks, the farm property and physical damage coverage vehicle leasing transaction. product was configured in the waivers to its customers in all 50 rating software along with the U.S. states. This was in addition to The client evaluated and selected requisite loss cost modifiers its core fleet management, supply the iFoundry™ Rating Software and exceptions from ISO and chain and transportation solutions. and its availability as a cloud-based made available to underwriters. For several years, they had relied See Programs in Weeks Page 33 Following this, the system was on a homegrown underwriting integrated with the MGA’s agency tool for pricing commercial auto management system such that all coverages. The client’s legacy the rating data flowed back and system lacked the ability to provide forth into the admin system, which location-based quotes. As a workwas the system the underwriters around, the client priced policies used to develop quotes and issue by using more general regional policies for all the products offered models. Frequently, this rating methodology resulted in two by the MGA. nearby locations having vastly disparate rates. Sales agents were RESULTS increasingly dissatisfied with the The new rating system enabled system. the MGA to add a new product to round out accounts with related SOLUTION coverages for private structures, additional living costs, owner- To find a solution, the client began occupied dwellings, extra expense by contacting ISO and eventually TO CONTINUE coverage for farm barns, buildings, investing in ISO Electronic Rating and structures and scheduled Content™ and ISO Risk Analyzer® TO RECEIVE personal property. The solution for leveraging electronic ISO THE CHART EXCHANGE! enabled the MGA to add these updates and multiple granular BUSINESS SITUATION

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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

Rockwood Programs, Inc., 3001 Philadelphia Pike, Claymont, DE 19703 p: 877-242-2487 • f: 302-762-4200 • e: sales@rockwoodinsurance.com

ANALYSIS

DEPARTMENT OF LABOR SIGNALS MOVE TO LIMIT DEFINITION OF “EMPLOYMENT” By Angela M. Duerden & Elisabeth (Lisa) Shu

entitled. In Fiscal Year 2015, for example, WHD investigations resulted in some $74 million in back wages for more than 102,000 workers, many of which were concentrated in traditionally low-wage industries such as janitorial, temporary help, food service, day care and hospitality. Withdrawal of the Administrative

• THE PRESUMPTION THAT MOST WORKERS ARE EMPLOYEES:

n June 7, 2017, U.S. The withdrawn guidance on Secretary of Labor independent contractors Alexander Acosta stated that “most workers are announced the immediate employees” under the FLSA. withdrawal of the U.S. Department United States Supreme Court of Labor’s (DOL’s) 2015 and 2016 precedent makes clear that Administrative Interpretations there is no single rule or test regarding joint employment for determining whether an and independent contractors. The withdrawn individual is an employee or While this withdrawal signals guidance on an independent contractor the current administration’s for purposes of the FLSA. independent contractors attempt to limit the expansive Thus, even now, the inquiry definition of “employment,” stated that “most workers into independent contractor the DOL made clear that it are employees” under status remains complex and does not relieve companies of fact-intensive. the FLSA. United States their legal obligations under Supreme Court precedent the Fair Labor Standards Act • THE EXPANSION OF (FLSA) and the Migrant and makes clear that there is THE “JOINT EMPLOYER” Seasonal Agricultural Worker no single rule or test for DEFINITION: Protection Act. determining whether an The withdrawn guidance joint employment Many businesses had individual is an employee on distinguished between argued these obligations or an independent “horizontal” joint were unduly burdensome contractor for purposes of employment and “vertical” on employers. For the past joint employment scenarios. the FLSA.” several years, the Wage and Under this guidance, the joint Hour Division (WHD) has employment inquiry focused worked with the IRS and Interpretations may be the first on the “economic realities” of numerous states to combat step to rein in these enforcement the relationship between the employee misclassification and efforts. employee and the potential joint to ensure that workers receive all the wages, benefits and Specifically, the DOL has protections to which they are withdrawn guidance regarding: DOL Definition of Employment Page 29 www.chart-exchange.com

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ANALYSIS - WILSON ELSER Continued From Page 19

INSURERS NOT OBLIGATED TO PURSUE COUNTER CLAIMS

Visionaid discovered that one of its employees appeared to have misappropriated several hundred thousand dollars of company funds and terminated him accordingly. The employee filed an action for wrongful termination, claiming that his employment was terminated due to his age. Mount Vernon agreed to defend Visionaid under a reservation of rights, and appointed panel counsel to defend the case.

Vernon withdrew its reservation of rights, but maintained that it was not obligated to pay for the prosecution of the counterclaim as these costs were not “defense costs” as defined by the policy. While the discrimination case was pending, Mount Vernon filed a declaratory judgment action in federal district court seeking a determination that it was not required to prosecute or pay for Visionaid’s counterclaims.

THE COVERAGE DISPUTE

In the course of the litigation, Visionaid responded with its own Visionaid demanded that Mount counterclaim asserting that the to defend any Claim to which this Vernon assert and prosecute duty to defend obligated Visionaid insurance applies” and would “pay counterclaims on its behalf to to prosecute the counterclaim for misappropriation, and one hundred percent that Mount Vernon As a practical matter, insurers (100%) of the Defense was obligated to Costs for the [covered] often will authorize defense pay for independent Claim” until the policy counsel to prosecute counterclaims counsel to that end. limit was reached. The U.S. District Court that are intertwined with the defense “Claim” was defined as Massachusetts “any proceeding initiated and could limit or reduce their insureds’ of that against [Visionaid] liability, as this is in the interest of the concluded Mount Vernon’s … seeking to hold insured and the insurer. Asking the duty to defend [Visionaid] responsible insurer to pay for separate counsel to did not obligate it for a Wrongful Act.” to prosecute the prosecute the counterclaims in this “Defense costs” were for defined as “reasonable case, however, appears to have been a counterclaim misappropriation. and necessary legal fees bridge too far.” Visionaid appealed to and expenses incurred the First Circuit Court by [Mount Vernon], or of Appeals, which certified the any attorney designated by [Mount seek restitution of the funds Vernon] to defend [Visionaid], that the terminated employee three questions noted above to resulting from the investigation, had allegedly misappropriated. the SJC. adjustment, defense, and appeal Visionaid also threatened to exercise its right to select its THE SJC OPINION of a Claim.” own counsel due to the insurer’s The SJC flatly rejected Visionaid’s During the policy period, reservation of rights. Mount argument that Mount Vernon’s 26

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ANALYSIS - WILSON ELSER duty to “defend” Visionaid included the prosecution of counterclaims. Visionaid had argued that the meaning of the word “defend” should include anything a reasonable attorney would do to reduce the insured’s liability.

and whether an award on the counterclaim would be an offset to the indemnity paid. These provisions were absent from the policy and would require courts and potential parties to litigate these factors in any future case.

defining “defense costs” as it did, Mount Vernon equated its duty to pay defense costs with its duty to defend. Of course, Massachusetts already considers the scope of the duty to defend and the duty to pay defense costs to be identical.

The SJC also disagreed with Visionaid’s claim that Massachusetts’s “in for one, in for all” duty to defend rule implicates coverage for counterclaims. The purpose of “in for one, in for all” — in which insurers are obligated to defend the entire suit if even one covered count is present — is to prevent litigation determining the extent of coverage. Although “in for one, in for all” expanded the class of actions that an insurer may be obligated to cover, this class was limited to defensive actions — The SJC also rejected Visionaid’s and did not extend to the kind of contra proferentem argument; affirmative claim at issue here. that is to say, its argument that its interpretation of the word “defend” Requiring coverage for was reasonable and therefore must counterclaims would defeat be favored over Mount Vernon’s the purpose of demanding an interpretation. However, the Court insurer be “in for one, in for all” is not obligated to ignore or read by necessitating the aboveadditional provisions into the mentioned coverage litigation. The policy merely because a facially interpretation sought by Visionaid reasonable alternative exists. also would incentivize insureds to demand at the insurer’s cost Visionaid’s interpretation would prosecution of counterclaims that require the Court and future may have little or no merit. litigants to consider whether compulsory counterclaims are Finally, the SJC considered intertwined with the defense, whether the definition of “defense whether a reasonable attorney costs” required the insurer to would bring the counterclaim, prosecute counterclaims. By

Accordingly, the SJC considered the same analysis it had considered regarding the definition of “defend,” and concluded that the definition of “defense costs” did not obligate the payment of fees to prosecute counterclaims.

In rejecting that view, the SJC held that the plain meaning of the policy only afforded coverage to “defeat a claim that could create liability against the individual being defended.” The court also examined the split among states, citing to cases in (1) New Jersey, Wyoming and the Fifth Circuit (Texas) that agree with the SJC’s analysis, and (2) Illinois, the District of Columbia and Pennsylvania that include coverage of counterclaims in certain circumstances.

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Since the answer to the first two certified questions did not obligate insurers to prosecute counterclaims, the third question concerning conflicts of interest for those counterclaims became moot. PRACTICE POINT

Whether coverage is required for counterclaims varies by jurisdiction. Even states that require coverage for counterclaims vary in the criteria triggering the obligation. Mount Vernon v. Visionaid does an excellent job of explaining these different approaches while clearly setting Massachusetts in the column of states that do not afford de facto coverage to counterclaims. The opinion also is remarkable in that the SJC explicitly chose to See Insurers Not Obligated Page 33 SEPTEMBER 2017

NEWS Continued From Page 25

DOL SIGNALS MOVE TO LIMIT DEFINITION OF “EMPLOYMENT” on personnel matters as well as the defense of employmentrelated litigation. She also handles commercial litigation involving claims of breach of contract, defamation, breach of More is expected from the fiduciary duty and other business Trump Administration and law matters. the courts on the everchanging law surrounding Elisabeth independent contractors and (Lisa) Shu is joint employment. Wilson Elser’s of counsel in Employment & Labor practice Wilson Elser’s attorneys can help you stay Virginia office. abreast of developments and to A litigator, Lisa avoid potential pitfalls. defends her clients against ABOUT THE AUTHORS claims arising out of employment A n g e l a or other business relationships. Duerden is Her practice centers mainly on of counsel in resolving disputes related to Wilson Elser’s discrimination and retaliation O r l a n d o claims before various federal office. She has and state agencies, employment covenants not spent more agreements, to compete, and wrongful than 15 years representing a variety of termination. In addition, Lisa has employers, from small family- broad-based business litigation owned businesses to large experience defending clients international corporations. Her in multimillion-dollar disputes practice includes providing ranging from trade secret matters advice and counsel to her clients to contractual and product liability cases

NEVER MISS AN ISSUE OF CHART EXCHANGE

employer. Its withdrawal signals a shift back to applying joint employer status only when a business has direct control over another business’s workplace.

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ANALYSIS

3 WAYS TO IMPROVE PREMIUM FINANCING CUSTOMER LOYALTY THROUGH AUTOMATION Let’s take a look at some of the benefits of partnering with a s an MGA, ensuring your premium finance provider that commercial customers incorporates automated processes receive the quality service into their customer service delivery. they deserve is a top priority—and premium financing options that 1. AUTOMATED help clients afford the best policies QUOTE INTEGRATION on the market are a great way to Want to add value to your offerings achieve that. The typical premium and boost trust in your relationship finance loan can range from as low with customers? Partner with a as hundreds (yes hundreds!) to in premium financing provider that excess of one hundred thousand automates the policy quoting dollars, freeing up customer process. And don’t settle for capital to be applied toward more integration that only locks you into business-critical needs. their system. When you’re ready to by Sean Jagroop, Fortegra

Unfortunately, the premium financing process is a multi-step affair and can often be drawn out for weeks or even months. But thankfully, there is a way to streamline the process: partnership with a premium financing provider that prioritizes quality services on an accelerated timeline.

automate to enhance the overall customer experience is by granting customers access to an online portal. This allows your customers to follow along with every step of their premium financing journey, anytime they please, from start to finish. 3. AUTOMATED STATEMENTS AND REPORTING

Keeping good records has always been important, but in the age of information it’s more important than ever. Putting policy integrate, do it once, and only once, statements and reporting within by partnering with a premium your customers’ reach is another financing provider that uses an benefit of premium financing integration engine, which allows automation, ensuring transparency your agency management system and the accurate delivery of key to talk to not only theirs, but to any data. premium finance company that is subscribed to that integration Finally, even with all the benefits engine. Not only does this speed of automation, it’s worth noting up a necessary step for everyone that the right premium financing involved, it serves as a great starting provider will also understand point for a conversation around when to leave traditional methods competitive policy rates available alone. Key service offerings like live to your customers—so they can customer care—whether face-toeasily assess which rate and policy face or over the phone—are still works best for them. critical to a successful premium financing partnership.

How can a premium financing provider achieve this delicate balance? They do so by integrating automation into their processes, structuring certain aspects to address customer convenience and freeing up the crucial time you need to keep your company 2. ONLINE CUSTOMER PORTAL Another great way the right moving forward. premium financing provider can See Premium Finance Automation Pg 36 30

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Experience More with Fortegra Your Admitted Market Partner

• Light Commercial & Small Business marketcoverholders capacity and MGAs CHART’s newest vendor partner is helping

access to program premier markets. • Risk participationgain & aggressive management • New revenue opportunities: Warranty & Premium Financing As an admitted market conduit for Lloyd’s coverholders who exceed • Product, marketing, training, & compliance partnershipand support the status quo, Fortegra canlegal deliver the same transparency underwriting involvement found with a binding facility.

Learn how an admitted market partnership with Fortegra can help you Experience More. Visit us at fortegra.com/amp, or email Fortegra at amp@fortegra.com

Fortegra® is the marketing name for the specialty underwriting operations of Fortegra Financial Corporation and its subsidiaries. Specialty underwriting program availability varies by jurisdiction. Where available, the programs are underwritten by admitted insurance companies.

ANALYSIS Continued From Page 15

Eventually, a carrier will also need copies of a program administrator’s insurance licenses and financial statements and copies of the program administrator’s E&O policy and disaster recovery plan.

HOW TO PLACE A SUCCESSFUL PROGRAM

On the surface, the information addressed within this article could appear cumbersome but it is important to note that this process takes a number of weeks and even months to complete and expectations can usually be managed.

are in addition to the data requests which were outlined earlier.

Hopefully, the more important takeaway for the reader is that this article could serve to be a template A) History of the MGA. (How long in existence, or guideline of what will be expected of an existing ownership structure, key personnel, other lines of or prospective managing general agency/ program administrator when they approach an insurance insurance written). B) Bios on the key staff. It can’t be stressed enough carrier seeking underwriting authority. that an insurance carrier will need to feel that the underwriters handling the program have a full and complete understanding of the business that they are writing. The resumes of the key underwriters are critical. The insurance carrier needs to feel that the MGA can underwrite the business better than anybody they have on their own staff. C) Premium estimates for existing or future states. Proud supporters of CHART D) Limits Profile if different sets of policy limits are offered. E) ILF’s F) Rates ( including base rates, deductible Serving coverholders’ factors, credit/debit ranges, experience factors) needs since the 1930s G) Details of Financial/Management controls … and into the future i.e. process and controls in place for handling Bespoke solutions transactional items, daily and monthly workflows. Packaged lines Systems used for billing and invoicing, claims Enhanced commissions Web-based platforms checks and general ledger. System controls in US domiciled marketing office place and reconciliation process. Access us through 170 Lloyd’s brokers H) Details of Business and Processing systems. Applications for policy management, rating, policy issuance, claims, billing and accounting. In house built/supported or 3rd party? Fully AtriumUw www.atrium-uw.com integrated? Atrium Underwriters Ltd

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ANALYSIS Continued From Page 27

INSURERS NOT OBLIGATED TO PURSUE COUNTER CLAIMS corral the “in for one, in for all” rule. The opinion certainly simplifies and clarifies an insurer’s obligation in somewhat murky waters. In view of this, as other courts around the country confront this issue, we anticipate that they will certainly consider Visionaid and, may in fact, embrace its rationale and conclusion. As a practical matter, insurers often will authorize defense counsel to prosecute counterclaims that are intertwined with the defense and could limit or reduce their insureds’ liability, as this is in the interest of the insured and the insurer. Asking the insurer to pay for separate counsel to prosecute the counterclaims in this case, however, appears to have been a bridge too far. Of course, like any decision on a www.chart-exchange.com

controversial subject, Visionaid leaves a number of questions unanswered, one of which is: The policy in Visionaid defined the term “defense costs.” What if the term “defense costs” had been undefined? Would the outcome have been different? Might the insured in that event have been able to argue that, at a minimum, the undefined term is ambiguous, and given that and the breadth of the duty to defend, would the insurer have been required to pay the costs of the insured’s affirmative claim?

Continued From Page 23

NEW PROGRAMS IN WEEKS

subscription. ISO’s commercial auto program, available out-ofthe-box via an integration with ISO Electronic Rating ContentTM, was provisioned and configured Undoubtedly, this issue — and to meet the specific classes of other open questions — will be the business and coverages required subject of future decisions as courts by this client – for all US states grapple with the implications of and territories. Visionaid. RESULTS

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Today, nearly 500 sales representatives of the company quickly and easily provide their customers with competitive coverage quotes. Overall, the client’s profitability has improved, and risk exposure has been reduced. Offering customers competitively priced insurance coverage is a major program for the client, and helping ensure that its policies are adequately rated has had a significant positive impact on the bottom line. The client has also availed of ISO circular updates and Risk Analyzer for Commercial Auto updates, via ISO ERC releases. SEPTEMBER 2017

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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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ANALYSIS Continued From Page 30

PREMIUM FINANCE AUTOMATION Automation can sometimes get a bad rap, but with the proper upfront due diligence when onboarding new clients and when applied to the right processes, it can be the perfect way to provide premium customer service to your commercial clients seeking premium financing services. Make sure to partner with a premium financing provider that shares these values and prioritizes you and your customers’ success.

ABOUT SEAN JAGROOP

Sean Jagroop is Director of Premium Financing for Fortegra Financial Corporation. Fortegra® premium financing programs are offered by its licensed premium finance company, South Bay Acceptance Corporation (SBAC), wherein Sean is also the Director of Sales. He has been with Fortegra for over nine years and is currently focused on expanding Fortegra’s premium finance programs through South Bay. Sean has a MBA in Finance and has worked in the industry for over 16 years.

ABOUT FORTEGRA

Fortegra® premium financing programs are offered by its licensed premium finance company, South Bay Acceptance Corporation (SBAC). Fortegra and its subsidiaries comprise a single-source insurance services provider that offers a range of consumer protection options including warranty solutions, credit insurance, and specialty underwriting inclusive of admitted market partnerships. Delivering multifaceted coverage with an unmatched service experience for both partners and their customers across the globe, Fortegra solves immediate, everyday needs, empowering consumers to worry less and Experience More. 36

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Continued From Page 17

LLOYD’S TO HAVE LARGE STAKE IN HARVEY LOSSES

3.6% on Tuesday, while Hiscox saw a 3.8% decline. Shares in Beazley suffered a smaller decrease of 2%. One analyst from Morgan Stanley claimed Harvey will be the 4th worst storm to hit the U.S., following Katrina, Sandy and Andrew. The analyst blamed the large losses primarily on extensive flooding causing more moss than wind. It is estimated that there is substantially more flood damage from Harvey than wind damage and much of the flood damage will be uninsured losses. Only 1 of 10 homeowners in the Houston area have Federal Flood insurance and those lacking the coverage may not even be eligible for U.S. FEMA assistance. Andreas van Embden, a Peel Hunt analyst noted, “The main uncertainty is around commercial property and business interruption claims, particularly now the Houston metropolitan area is being affected.” Among U.S. domestic insurers, Allstate and State Farm are expected to absorb the bulk of the loss claims. State Farm owns 21.5% of the homeowner’s market share will Allstate claims 12.7% followed by Farmers at 10.9%.

In the commercial property sector, Lloyd’s has already seen significant Hartford and Travelers share about movement in share prices by the 55% of the market and both end of August as it was reported experienced sharp stock price that Lancashire’s shares dropped drops by the end of August. TABLE OF CONTENTS

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LLOYDâ&#x20AC;&#x2122;S OF LONDON

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