The CHART Exchange December 2018

TABLE OF CONTENTS

6 Glenn W. Clark, CPCU, Publisher CHART Exchange Earliest Adopter

14

Cyber Failures Can Be Costly - The SEC’s Latest Salvo On Cybersecurity

17

Special Report: Doing Business In South Korea: What You And Your Client Need To Know

20

You Had Me At “I’m Sorry” - The Impact Of Physicians’ Apologies On Medical Malpractice Litigation

22

Lloyd’s Brussels Starts New Chapter For Lloyd’s In Europe

23

IOT Could Unleash More Insurance Innovation

25

Does The SEC’s Cyber Enforcement Action Change The Game For Insurers?

6

Data Integration/ Structured Data Capture By Glenn W. Clark, CPCU

28

9

Merger & Acquisition Services: Case Study Capital Raising

Our Autonomous Future: What Are The New Road Rules?

31

10

Lloyd’s of London News Roundup

Additional $30,000 Raised For Wounded Warrior Project From SIAA

32

Jeff Holmes Promoted To COO Of SIAA

38

Empower Digital Trust With OX Zion - A Blockchain-Enabled BOS

13

Analysis: How Well Do Your Passwords Protect Your Insurance Agency?

Cover: Lloyd’s of London Architecture - Cyber FailutCC0 Creative Commons Photo -

SPECIAL REPORT: PG 17 DOING BUSINESS IN SOUTH KOREA: WHAT YOU AND YOUR CLIENTS NEED TO KNOW

DECEMBER 2018 VOLUME 3 - ISSUE 11

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.

CHART Exchange

info@chart-exchange.com 3001 Philadelphia Pike Claymont, Delaware 19703 www.chart-exchange.com 302-765-6001 Gyeongbokgung Palace, Seoul, South Korea Credit Doug Sun Beams Attribution 2.0 Generic (CC BY 2.0)

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ADVERTISING IN THE CHART EXCHANGE MAKES SENSE: 302.765.6056

Last Issue:

EVERYBODY KNOWS ONE Meet Mr. Inappropriate. He is the King of unfiltered commentary. There is no remark too crass or topic too sensitive for this guy. Worse still, he may be working for one of your clients.

The recent Hollywood scandals and resulting rise of the “#MeToo” Movement has made people more sensitive to the prevalence of harassment and other wrongful acts in the workplace. There was a time when otherwise harmless comments from someone like Mr. Inappropriate would have either been brushed off or ignored. Now they may be interpreted to have a more nefarious meaning. This perception can quickly turn into legal action. The cost of defending against such a lawsuit – even a groundless one – could be financially devastating.

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. Coverage can be further enhanced to protect your client against alleged violations of the Immigration Reform Control Act, Wage & Hour disputes, and Third Party Wrongful Acts.

Visit us at www.rockwoodinsurance.com to learn more

Rockwood Programs, Inc., 3001 Philadelphia Pike, Claymont, DE 19703 p: 800-558-8808 • f: 302-764-5477 • e: sales@rockwoodinsurance.com

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MESSAGE FROM THE EARLIEST

DATA INTEGRATION/ STRUCTURED DATA CAPTURE Glenn W. Clark, CPCU Publisher & Earliest Adopter

The Data Integration (DI) project is designed to facilitate seamless sharing of information through common data standards.

Structured Data Capture (SDC) converts the content of various market documents into consistent, electronic data during the risk placement process.”

6 DECEMBER 2018

O

ver the last couple of CHART Magazine issues, we’ve used this column to familiarize readers with the various aspects of TOM – the Target Operating Model recently launched by the London Market.

This project was undertaken to allow Lloyd’s to function and thrive in today’s dynamic, diverse business landscape. TOM’s ultimate objective is to make the market more accessible and cost effective.

There are a number of facets within the TOM project. In 2016 the Steering Board identified four initiatives that would receive high priority: • • • •

Placing Platform Ltd (PPL) Central Services Refresh Programme (CSRP) Delegated Authority (DA) Data Integration (DI) / Structured Data Capture (SDC)

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Our earlier articles offered overviews on both Delegated Authorities and the Placing Platform. This time, we will focus our attention on Data Integration/Structured Data Capture.

There was a time when major league baseball players did not have names printed on the back of their uniforms. One of the first things you’d experience at the ballpark was a vendor yelling “Programs, Programs… you can’t tell the players without a program.” Now imagine you are running an international business without the benefit of such a guide to help standardize all incoming information. Each market would be providing data based on different criterion. This causes inconsistencies and ambiguities. Worse still, the effort required to rectify these problems takes resources away from other value-added activities.

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facilitates information consistency – improving quality and mitigating the possibility of errors at a future point in time.

Finally, this structure will provide cost savings and improve productivity.

The Data Integration (DI) project is designed to facilitate seamless sharing of information through common data standards. The somewhat obvious goal is to provide “Better Data” - this objective will be accomplished through a number of initiatives, including: •

•

•

Master Business Glossary & Collaboration – this will enable the market to agree, share, and continue improving definitions and rules for the data used; it will drive processing efficiency and make London an easier place with which to do business.

Master Data Management – offers an accurate and upto-date source of information around participants and lists of coding commonly used in the market.

Common Infrastructure Services – introduces key technical standards and support services to foster integration.

The CHART Exchange understands how innovation and automation can both reduce improve productivity and reduce acquisition expenses for domestic insurance agencies with delegated underwriting authorities through Lloyd’s. Our team has recently announced the launch of CHART Markets - an on-line shopping mall dedicated to the promotion of London-centric insurance products.

Much like its “brick-and-mortar” counterpart, the facility provides participating members with virtual storefronts from which their various product and services offerings can be promoted. Marketing campaigns targeting retail insurance agencies will be implemented in an effort to drive traffic to this unique Internet platform. We will utilize media advertisement, direct response mail, broadcast e-mail, and other methods to raise awareness within the retail producer community.

Interested in learning more? Send your inquiries to us via e-mail (info@chart-exchange.com).

Structured Data Capture (SDC) is a related TOM initiative.

This service converts the content of various market documents into consistent, electronic data during the risk placement process. Documentation can be submitted via various methods. There are several benefits associated with SDC. First, the service helps eliminate the need to have data repeatedly re-keyed by multiple carriers. It also

www.chart-exchange.com

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Glenn W. Clark , CPCU CHART’S Earliest Adopter

DECEMBER 2018

7

Merger & Acquisition Services

serving the insurance industry

Merger & Acquisition Services is a

SPECIALIST ADVISORY AND FINANCIAL SERVICES FIRM firm specifically to participants within the insurance industry.

Our mission is to provide

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SOLELY FOCUSED ON THE INSURANCE INDUSTRY. This allows our advisors to obtain critical industry knowledge and subsequently, provide clients with sound advice.

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 broker-dealer registered with the U.S. Securities and Exchange Commission and member of FINRA and SIPC.

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

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

(212) 750-0630 320 East 53rd Street New York - NY - 10022 Copyright 2017 Merger & Acquisition Services, Inc. & Merger & Acquisition Capital Services, LLC. All Rights Reserved.

NEW YORK, NY - ATLANTA, GA - MYSTIC, CT - CAYMAN ISLANDS

within the insurance industry by assisting firms with their corporate development and acquisition/divestiture objectives.

M&A Services is

CASE STUDY - M&A SERVICES

MERGER & ACQUISITION SERVICES INC.

CASE STUDY – CAPITAL RAISING

By Jason C. Murgio

W A

bout the author: Mr. Jason C. Murgio, Principal & CEO has twenty years of insurance, M&A advisory and business development experience, totaling nearly $4 billion in deal value. He has worked for numerous multibillion dollar insurance carriers, including assignments for such companies as Allstate, AIG, Allianz, Progressive, Morgan Stanley and White Mountains. Mr. Murgio has assisted international companies (UK, Netherlands, Bermuda and throughout Latin America), private equity startup operations, and regional insurance carriers. In addition he has worked with various State Departments of Insurance helping companies in rehabilitation and liquidation.

www.chart-exchange.com

ith 20 years of operational experience, Merger & Acquisition Services has developed a time-tested process which our advisors employ when called upon to assist our clients in executing their business development and corporate finance projects.

Through our registered brokerdealer, Merger & Acquisition Capital Services, LLC., we provide capital raising services for our clients. Our advisors have experience in positioning equity, mezzanine financing and senior and subordinated debt. We customize solutions for our clients to minimize dilution and optimize their capital structure. These solutions could potentially involve a hybrid of debt and equity. Whether you are looking for capital to fund internal growth or a merger / acquisition, Merger & Acquisition Capital Services, LLC. is uniquely positioned to assist you in this process.

WE WILL UNDERTAKE PRIVATE OFFERINGS TO BENEFIT: • •

Companies who wish to raise capital while remaining private Early stage companies who wish to raise growth capital but are not yet ready to be public entities TABLE OF CONTENTS

•

Public companies who wish to issue private securities

OUR PROCESS AND SERVICES INCLUDE: PLANNING STAGE • • •

•

Assist in determining short and long term financing needs Provide advice on capital structure Create and author Executive Memoranda and/or Private Placement Memoranda, including pro forma financials and capitalization tables Prepare investor presentations

MARKETING STAGE •

• •

Identify and contact potential capital providers; including venture capitalists, private equity, hedge funds, investment banks, commercial lenders and insurance companies Management meetings with investors Prepare investor presentations

FUNDING STAGE •

•

Assist in evaluating and providing advice as it relates to financing offers and terms Assist in due diligence preparation and management, through the use of our proprietary secure electronic data room See M&S Services Case Study Page 43 DECEMBER 2018

9

NEWS - LLOYD’S OF LONDON

LLOYDS NEWS ROUNDUP – London Market Group to Offer Faster Solution for Coverholder Approval

T

he London Market Group (LMG) announced that a contract has been signed with Sequel to deliver a faster and more efficient solution for approving and registering coverholders, and a new integrated tool for generating delegated authority binder contracts.

This is a core part of the London Market Target Operating Model (LM TOM)* and will replace the existing Atlas (the Lloyd’s Coverholder Approvals and Compliance system) and the Binding Authority Registration (BAR) system.

LMG said authorized users will benefit from: •

•

•

a single modern and intuitive workflow system to streamline all the processes, reducing the time taken and making it easier for coverholders to do business in London, a more intelligent process of approvals that will take a more risk-based approach, saving time and effort, only having to enter data once – speeding up processes, removing the opportunity for error, increasing the quality of data held and managed in the market, and

10 DECEMBER 2018

•

a ‘golden source’ for entity and contract data which can be effectively consumed by other LM TOM initiatives and market systems.

“This is the next stage of our strategy to automate and simplify our processes for coverholders,” commented Ian Fantozzi, COO at Beazley and market sponsor for the delegated authority solution. “Our ambition is to save time and remove duplication at every stage – replacing separate tools with one platform that eliminates manual processes,” he said.

“But most importantly, it allows data to flow seamlessly so that it can be made available in other parts of the value chain including DA SATS and other solutions.”

“We are delighted to be working with the LM TOM to adapt our workflow and product builder tools to provide enhanced functionality and make the process for delegated authority approval, compliance and binder registration faster and more efficient,” said Ian Summers, CEO of Sequel.

“Everyone in the market should benefit. With brokers being able to produce binders electronically or be loaded from existing market contract builders, underwriters will have accurate and timely data and coverholders should find the compliance process much less onerous,” Summers added.

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The LMG is a market-wide body, bringing together the specialist commercial re/insurance broking and underwriting communities in London.

It is supported by the International Underwriting Association of London (IUA), Lloyd’s of London, the Lloyd’s Market Association (LMA) and the London & International Insurance Brokers’ Association (LIIBA). * The London Market Target Operating Model (TOM) is a program that aims to modernize the market and make it easier to do business in and with the London market-wide.

SOURCE: Insurance Journal 10/22/18 https://www. insurancejournal.com/news/ international/2018/10/22/505206.htm

The advent of the Internet of Things (IOT) has the potential to increase complexity and amplify risk, but it could also enable more innovation throughout the entire insurance value chain, including the way claims are settled in future, according to new research from Lloyd’s.

“Networked World: Risks and Opportunities in the Internet of See Lloyd’s News Roundup Page 40 www.chart-exchange.com

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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ANALYSIS - COST FINANCIAL

HOW WELL DO YOUR PASSWORDS PROTECT YOUR INSURANCE AGENCY? Password Management

H

ow well do your passwords protect you and your agency?

Probably not as well as you think. In one recent test by a security firm, more than half of 625,000 passwords were easily breached by using common guessing techniques. The most common passwords used “123456″ followed by “Hello123″ and, not to be outdone, “password”. Hackers also are able to detect passwords by searching words that can be found in everyday language and conversation.

www.chart-exchange.com

When was the last time you changed your passwords? If you’re due for an update, here are some ways to create a better and more secure password.

Use a different password for each account. Never use the same password for multiple accounts.

If one is breached, someone can easily get into your other accounts.

Mix it up. Include a mix of uppercase letters, lowercase letters, numbers and special characters.

Remember, it’s always a good idea to have a different password for each account and to store your passwords in a secure location (such as a safe) away from your computer. And don’t forget to change your passwords several times each year.

Make it memorable. Using a phrase can help make the password memorable. Just don’t forget to use a mix of uppercase and lowercase letters, numbers and characters.

An example might be to turn “take me down to the river” into T@ kemeDOWN2rvr.

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Check out these other ways you can protect your agency from cyber crime.

DECEMBER 2018

13

ANALYSIS - KROLL

CYBER FAILURES CAN BE COSTLY—THE SEC’S LATEST SALVO ON CYBERSECURITY

By Alan Brill

I

f the Security and Exchange Commission’s February 2018 guidance on cybersecurity represented a wake up call, the Sept.26th enforcement settlement involving a one million dollar penalty for failure to have appropriate cybersecurity measures in place should be a very loud alarm bell of warning to both executives and boards of directors.

message associated with this settlement and penalty. The SEC expects companies to not only have in place commercially reasonable standards, policies and procedures for cyber security, but to implement them along with compliance and audit procedures to assure that they are working as intended.

The SEC’s guidance is based on the very real fact that an organization’s financial, operational and technology systems are intertwined, and that protecting the integrity of both a company’s books and sensitive customer information are inextricably linked to cyber security.

There is also an expectation that management and boards understand that cyber security is not a “one and done” proposition. As an organization’s business evolves and technology changes, the policies and procedures, along with their associated compliance measures must also change. Cyber security must be just as dynamic as the risks to the systems. System monitoring is becoming a recognized (and expected) best practice.

There is no lack of clarity in the

It is also clear that an organization

cannot limit its concern about cyber security to its own cyber-operations.

Those who can access your systems – independent contractors, partner organizations, supply chain partners, vendors or others – and those with whom you share nonpublic data must also be considered. How are they authenticated? The settlement announced on Sept. 26th involved attackers who were able to establish or take over -- through social engineering -- independent contractor accounts and used those to commit crimes through the company’s systems. How are they limited in what they can see and do? What alarm mechanisms are in place to provide real-time monitoring of user accounts for unusual activities?

See Cyber Failures Costly Page 30

About the Author: Alan Brill is a Senior Managing Director with Kroll’s Cyber Security and Investigations practice, based in the Secaucus office. As the founder of Kroll’s global high-tech investigations practice, Alan has led engagements that range from large-scale reviews of information security and cyber incidents for multibillion-dollar corporations to criminal investigations of computer intrusions. He has worked on many of Kroll’s major international projects. Alan serves as both a consulting and testifying expert in major cases where his ability to explain complex technology concepts provides counsel with a valuable litigation resource.

14 DECEMBER 2018

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www.chart-exchange.com

Be Cyber Resilient From cyber risk assessments and penetration testing to incident response and investigations, Kroll's global cyber experts are ready to help you and your insureds along the path to cyber resilience.

kroll.com/cyber

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

For close to 40 years, Wilson Elser has helped organizations to better navigate challenging markets and realize improved combined ratios. We provide London- and Europe-based insurers with ready access to more than 60 discrete legal services delivered by nearly 800 attorneys in 34 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 Š 2017 Wilson Elser. All rights reserved. 567-17

SPECIAL REPORT - WILSON ELSER

DOING BUSINESS IN SOUTH KOREA: WHAT YOU AND YOUR CLIENT NEED TO KNOW

By Sun Ah (Michelle) Park, Esq. Wilson Elser

of the current legal and regulatory landscape in South Korea. In the past year, a number of political and economic changes introduced by President Moon’s administration resulted in significant changes to laws and regulations in South Korea that foreign investors need to be

New York (KALAGNY) co-sponsored a conference for South Korean attorneys and U.S. attorneys in pproximately 16,000 Korea to share their insights in foreign companies are the recent legal developments in doing business in Korea South Korea. The panel featured in various industries prominent South Korean attorneys including finance, technology, John (JungKyum) Kim, Bryan automobiles and and William In South Korea, trials are conducted Hopkins automotive parts, (Woo Jong) Kim and medical devices. through a hearing process, and all from Lee & Ko2 . All More than 200 of questions of law and fact are argued before speakers had served these companies are as in-house counsel the court with questions by the judicial Fortune 500 Global for multinational panel. There is no discovery in South Korea, companies before Enterprises. In 2017, the direct foreign which means that the life of an action is they joined Lee & Ko. investment into approximately six months on average in the South Korean markets trial court and approximately four months in This program reached $22.94 Billion provided an overview U.S. dollars. appellate courts although litigations involving of some of the key

A

a foreign litigant tend to last longer.”

As both a strategic and commercial alliance, the close relationship between the United States and South Korea depends on the ability of each country’s market participants to successfully conduct business within each jurisdiction.

For this success to continue, U.S. businesses and their advisors need to possess a clear understanding

www.chart-exchange.com

aware of in order to update their strategies, comply with the current South Korean laws and regulations, and avoid the serious consequences of noncompliance and violations.

On November 7, 2018, Wilson Elser1 and the Korean American Lawyers Association of Greater

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commercial and legal considerations for attorneys representing current and potential as well as those with an existing commercial presence in South Korea. The highlights of the program were the multiple changes in South Korean employment

See Doing Business in S. Korea Page 18

DECEMBER 2018

17

SPECIAL REPORT - WILSON ELSER Continued From Page 17

DOING BUSINESS IN SOUTH KOREA

improving working conditions, reducing weekly work hours, and increasing the minimum wage to 10,000 Korean.

The changes in employment law also led to a number of other legislative changes in South Korea.

For example: •

law and anti-trust law and the differences in litigation procedures between the two countries.

EMPLOYMENT LAW There were a number of Amendments to South Korean employment law as President Moon’s administration promised to aggressively tackle the high rate of unemployment in South Korea by creating more than 130,000 jobs,

•

Effective July 1, 2018, businesses with 300 or more employees are required to keep the 52 maximum working hours in 7 business days as compared with the 68 hours in 5 business days requirement South Korea used in the past.

The minimum wage increased by 16.3% from 2017 to 2018. Also, there is a growing trend toward recognizing temporaryworkers as full-time employees.On July 20, 2017, the South Korean government announced a new initiative of “Zero TemporaryWorkers in the Public Sector.” To accomplish the administration’s policy goals, it started changes

•

inthe public sector. For example, as a result of this initiative, Incheon International Airport in 2017 was forced to absorb approximately 9,000 outsourced workers as direct employees almost overnight.

The initiative also expanded to the private sector. To illustrate, Paris Baguette Korea, one of South Korea’s most well-known bakery chains with more than 3,000 stores inside the country and hundreds more in the United States, China, Vietnam, Singapore and France, had to absorb as full-time employees approximately 5,000 outsourced bakers, who previously worked for franchisees.

It may come as a surprise at first glance that these swift changes in employment law and regulations are not always welcomed by subcontractors and employees that are poised to benefit from the changes. Since the companies are not taking preventive measures

About the author: Sun Ah (Michelle) Park is a bilingual attorney representing international and national commercial clients in product liability, general liability and complex reinsurance matters in state, federal appellate courts.

She is an experienced litigator who has handled a wide range of civil matters from complex commercial contracts to employment and labor, trademark, real estate transactions and immigration. Ms. Park excels in assisting multinational clients with their legal challenges. In particular, in her role as a national counsel in collaboration with several senior Wilson Elser partners, she is responsible for coordinating product liability defenses for clients in the United States and in Canada. Ms. Park was selected as a 2018 Super Lawyers Rising Star in the New York Metro region, and was awarded a prestigious scholarship by the New York City Bar Association Diversity Scholarship for mediation in 2017.

18 DECEMBER 2018

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www.chart-exchange.com

SPECIAL REPORT - WILSON ELSER

The KFTC launched the Competition Law Enforcement Reform Task Force in August 2017, and in six months released its report on antitrust enforcement reform measures.

In March 2018, the KFTC launched the Competition Law Amendment Special Committee, and the Gyeongbokgung Palace, Seoul, South Korea Credit Doug Sun Beams Attribution 2.0 Generic (CC BY 2.0) National Assembly to avoid creating any negative In anti-trust and competition law, approved proposed precedent, subcontractors often the Korea Fair Trade Commission amendments for adoption of a find themselves without workers (KFTC), an independent, ministrypunitive damages system. Also, the and are essentially forced out of level central administrative KFTC enhanced its monitoring of business. The increased minimum agency with quasi-judicial and intellectual property rights’ abuses wage also is forcing small and quasi-legislative functions, shows in fields where standard essential mid-size companies to hire fewer enforcement trends under the technologies are used, such as employees and the employees who Moon Administration. KFTC’s next-generation semiconductors relied on overtime allowances find new chairman, Dr. Sang-Jo Kim, and wireless communications their overall salaries significantly is known as a “Conglomerate industries. decreased. Therefore, employees (Chaebol) Sniper”. Under his and unions are requesting leadership, KFTC focuses on abuse In addition, there is increased companies not to enforce the 52 of superior bargaining positions in criminal prosecution of individuals work-hour limit during the 6-month the distribution, franchise, agency involved in cartel violations, grace period. transaction and subcontracting increased criminal sanctions in sectors, chaebol reform and prison terms from three to five ANTI-TRUST AND revision of the competition law.

See Doing Business in S. Korea Page 33 COMPETITION LAW 1

Some 800 attorneys strong, Wilson Elser serves clients of all sizes, across multiple industries and around the world. Wilson Elser has 37 strategically

located offices in the United States and another in London. This depth and scale has made us one of the nation’s most influential law firms, ranked in the Am Law 200 and top 53 in the National Law Journal 500.Since our founding in 1978, Wilson Elser has forged a reputation as a formidable player in insurance coverage and defense. Our experience in this tightly regulated, cost-conscious industry has shaped a firm culture of accomplished professionalism and cost efficiency that delivers demonstrable value to clients. Please visit the homepage of Wilson Elser for more information at www. wilsonelser.com.

2

Lee & Ko is a leading full-services law firm based in Seoul, South Korea that was established in 1977. The firm and its various practice groups have a long

history and deep experience which are ranked as Tier 1 and Band 1 among leading legal publications such as Chambers & Partners and the Legal 500.

Please visit the homepage of Lee & Ko for more information at www.leeko.com.

www.chart-exchange.com

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DECEMBER 2018

19

ANALYSIS - WILSON ELSER

YOU HAD ME AT “I’M SORRY”: THE IMPACT OF PHYSICIANS’ APOLOGIES ON MEDICAL MALPRACTICE LITIGATION

By Bonnie G. Ackerman, Esq.

P

hysicians typically recall, with stunning clarity, the moment a patient’s treatment went wrong.

Following an adverse event, physicians often are tormented by competing desires to apologize and instincts to forge ahead without acknowledgement. A patient’s decision to file a malpractice action may be triggered by the physician’s response to a problem − or lack thereof.

The Washington Post highlighted contrasting tales of medical errors

in which two patients suffered devastating consequences during surgery. Frustrated by a “white wall of silence” preventing her health care providers from articulating more than “’things didn’t go well,’” the first patient desperately committed to finding truth at all costs. In stark contrast, following his surgeon’s immediate explanation and apology for an error that rendered the second patient quadriplegic, the patient engaged in productive discussions with risk managers. The patient’s needs were met and his attorneys negotiated a confidential settlement without litigation.

BENEFITS OF APOLOGIES Apologies may decrease feelings of frustration and anger that drive some plaintiffs to file lawsuits. A study published in the Journal of Patient Safety and Risk Management found that hospital staff and doctors willing to discuss, apologize for and resolve adverse medical events through a “collaborative communication resolution program” experienced a significant decrease in the filing of legal claims, defense costs, liability costs and time required to close cases.

In 65% of the reported adverse events, no medical errors occurred. Events with medical errors were resolved by

B

onnie G. Ackerman practices in the areas of medical malpractice, health care, nursing home liability, general liability and product liability. During an earlier tenure at Wilson Elser, she served as supervisory counsel for product liability matters pending nationwide and handled litigation for general liability matters pending in New York. Bonnie’s experience also includes formulation of strategies; preparation of complex motions and memoranda of law; innovative research in the areas of medical malpractice, product liability and general liability; depositions, extensive discovery, investigatory planning and settlement negotiations; comprehensive analysis of depositions and trial transcripts; and creation of periodic reports for clients. Bonnie has taught at the undergraduate and law school levels, and she is a certified online educator and author of numerous manuscripts for West’s American Jurisprudence Trials. In addition, she has provided litigation support to other law firms and various companies.

20 DECEMBER 2018

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apology alone in 43% of the cases.

Similar programs have cut the number of malpractice lawsuits and yielded dramatic litigation cost savings. In November 2017, consistent with studies demonstrating that resolution programs provide “an effective way to learn from medical errors and near misses, enhance patient safety, and improve the liability system,” the American Medical Association expressed support for this prelitigation option.

The practice of defensive medicine may create a perception of indifference as patients grapple with the impact of adverse outcomes.

The “‘deny and defend’ model” has raised concerns due to expense, lack of transparency and error perpetuation. Modern programs aim to avoid litigation through prompt error disclosure, apology and compensation. Benefits of disclosure may include increased transparency, medical cultures supportive of clinicians facing adverse events, and enhanced patient safety due to discussions driven by acknowledgement and examination of errors.

“Apology statutes,” enacted in the majority of states, evidence legislative efforts to reduce medical liability, malpractice actions and related litigation expenses. Many states have changed laws “to exclude expressions of sympathy, condolences or apologies from being used against medical professionals in court.” Courts have addressed the admissibility of physicians’ statements, pursuant to “I’m Sorry” statutes, through the www.chart-exchange.com

interpretation of statutory language or a focus on distinctions between “apologies” and “admissions of fault or liability.” See Stewart v. Vivian, 151 Ohio St. 3d 574 (2017); DeBussy v.

Graybeal, 2016 Del. Super. LEXIS 616; Honey v. Bayhealth Med. Ctr., Inc., 2015 Del. Super. LEXIS 28; Strout v.

Cent. Me. Med. Ctr., 2014 ME 77; and Lawrence v. Mountain Star Healthcare, 2014 UT App. 40.

ADVICE OF COUNSEL While physicians may reduce malpractice litigation through improved patient communication, health care providers should seek advice from counsel as to best practices regarding discussions of adverse outcomes before such situations arise. Alternatively, a physician may apologize for the patient’s disappointment with an outcome and commit to investigating in an effort to share and address the patient’s concerns. Of course, any such commitment must be fulfilled to avoid exacerbating the problem and creating further resentment and dissatisfaction.

Studies of communication and resolution programs suggest that the risk of malpractice litigation and related costs may be mitigated by a health care provider’s apology to the patient or the patient’s representative(s) following a medical error or an adverse outcome. Such communications, however, should take into account jurisdictional variations with respect to the existence, language and scope of apology laws.

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CHART DEFENDER COVERHOLDER E&O AVAILABLE NOW!

Mark Lann Phone:

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

DECEMBER 2018

21

NEWS - LLOYD’S OF LONDON

LLOYD’S BRUSSELS STARTS NEW CHAPTER FOR LLOYD’S IN EUROPE

L

loyd’s, the global insurance and reinsurance market, marked an exciting new phase in its history today by opening an insurance company in Belgium.

Lloyd’s Brussels is Lloyd’s first Europe wide operation and will bring Lloyd’s expertise closer to its customers and partners in Europe.

Lloyd’s Chairman, Bruce CarnegieBrown, said: “Lloyd’s is ready for Brexit with Lloyd’s Brussels now officially open for business. Our decision to set up an insurance company in Brussels has provided certainty to our partners and customers throughout Europe, reassuring them that they can continue to benefit from Lloyd’s specialist expertise and financial security postBrexit. We are already working with our partners on 2019 policies, and Lloyd’s Brussels is now placing and processing European risks.

“Now that Lloyd’s Brussels is operational, we are looking forward to the new opportunities that we will have to grow our business with European customers through a locally staffed, locally regulated and locally capitalised insurer. By using electronic

22 DECEMBER 2018

placement and digital data capture, Lloyd’s Brussels offers its partners in Europe the very best that Lloyd’s has to offer in an easily accessible and costeffective way.”

Lloyd’s Brussels (Lloyd’s Insurance Company S.A.) is a subsidiary of Lloyd’s with 19 European branches, working with over 400 coverholders and 40 Lloyd’s brokers spread across Europe.

It was set up to ensure that customers and partners in the EEA continue to have access to Lloyd’s world class services and expertise, while also facilitating continued growth and further digital transformation.

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The company is established and operational, with an executive committee and board and 50 staff based in the Belgian capital as well as 45 other staff across the continent.

The Corporation also recently announced that Lloyd’s underwriters would continue to pay all valid claims regardless of the result of the Brexit negotiations, and that it will be moving all legacy EEA business to Lloyd’s Brussels before the end of 2020, via a Part VII transfer.

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NEWS -LLOYD’S OF LONDON

IOT COULD UNLEASH MORE INSURANCE INNOVATION

N

to come up with new products and Dr Trevor Maynard, Head of Innovation etworked World: Risks and for Lloyd's, said: “Insurers should play Opportunities in the Internet services. The scale and variability of the type of disruption that could occur a role in shaping the IoT landscape of Things”, published in and Lloyd’s has proposed several collaboration with University will affect multiple sectors and lines of business. options from leading on data College London’s (UCL) Department of standardisation Science, Technology, to working with Engineering and The advent of the Internet of Things governments and Public Policy (STEaPP) (IOT) has the potential to increase tech companies. and the PETRAS Insurers should Internet of Things complexity and amplify risk, but it could Research Hub, also enable more innovation throughout the proactively talk with clients to analysed the impact entire insurance value chain, including the review and assess of the IOT on the way claims are settled in future, according all risks associated insurance sector. to new research from Lloyd’s.” with IoT to provide them with advice IoT will lead to on best practice and appropriate data capture and management at an In addition, the range and quality of risk solutions, thereby shaping the unprecedented scale, according to security standards that currently exist development of the IoT ecosystem in the report. This could mean better risk for the IoT will make it hard for insurers which they operate.” assessment and more flexible, bespoke to make risk assessments.

And there and real-time products. It may also are critical blind spots in the regulation Dr Madeline Carr, Director of increase policyholder concerns about and legislation of IoT devices and their STEaPP's Digital Policy Lab, said: the use and accuracy of their data. impacts. These include uncertainties "Any large-scale technological shift surrounding attribution and liability raises challenges to the status quo Meanwhile, interconnectivity will should anything go wrong. and creates opportunities for those create new business models where who see them early on in periods of more is known about insureds, policies To help insurers to understand the transformations. are generated in real-time and are evolution of the adoption of the IoT bespoke, and fraudulent claims are Early adopters, especially in markets, recognised quicker. The ability to create and its potential impacts, the report includes ten extreme scenarios on four are afforded additional benefits, as personalised policies will also enable critical sectors: Infrastructure and Water, they can shape expectations, terms insurers to more accurately predict and Agriculture, Marine and the Smart of engagement, and best practices in mitigate risks.

Home. Each scenario highlights how ways that address their interest. This IoT technologies could generate and report with Lloyd’s provides a timely However, the report also noted that study of not only the challenges but new types of threats will emerge, which exacerbate risks that could cause losses in several lines of business at the same also multiple opportunities that the will increase the demand on insurers time.

IoT will introduce into the sector.” www.chart-exchange.com

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DECEMBER 2018

23

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ANALYSIS - KROLL

DOES THE SEC’S CYBER ENFORCEMENT ACTION CHANGE THE GAME FOR INSURERS?

By Alan Brill, Senior Managing Director, Cyber Risk, Kroll

T About the Author: Alan Brill is a Senior Managing Director with Kroll’s Cyber Security and Investigations practice, based in the Secaucus office. As the founder of Kroll’s global high-tech investigations practice, Alan has led engagements that range from large-scale reviews of information security and cyber incidents for multibillion-dollar corporations to criminal investigations of computer intrusions. He has worked on many of Kroll’s major international projects. Alan serves as both a consulting and testifying expert in major cases where his ability to explain complex technology concepts provides counsel with a valuable litigation resource.

www.chart-exchange.com

he Securities and Exchange Commission (SEC) announced its first enforcement action under the cyber security guidance it released earlier in the year. Under a settlement agreement, a firm agreed to pay a $1 million penalty for failing to operate with appropriate cyber security controls in place.

In a case in which the SEC (or other regulator) finds that an organization’s cyber security is not what it should be, there is a very real risk that an individual lawsuit against the company’s management and board of directors could follow, from shareholders, those with compromised information, or both. Insurers and brokers involved in providing protection against shareholder or customer lawsuits should regard this as a warning shot.

The issue can move quickly from one of cyber security to coverages relating to executives and board members. If

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you don’t have a good understanding of an insured’s cyber security standards, activities and compliance programs, you can’t effectively assess the risk.

The SEC’s guidance is based on the very real fact that an organization’s financial, operational and technology systems are intertwined, and that protecting the integrity of both a company’s books and sensitive customer information are inextricably linked to cyber security.

There is no lack of clarity in the message associated with the announcement of this settlement and penalty. The SEC expects companies to not only have in place commercially reasonable standards, policies and procedures for cyber security, but to implement them along with compliance and audit procedures to assure that they are working as intended.

See Sec’s Cyber Enforcement Page 36

DECEMBER 2018

25

TITLE

26 DECEMBER 2018

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ANALYSIS - FORTEGRA

OUR AUTONOMOUS FUTURE: WHAT ARE THE NEW ROAD RULES?

F

rom integrated smart homes to the introduction of face recognition software in cell phones, technology continues its rapid evolution.

One anticipated tech innovation that could bring truly sweeping change: autonomous vehicles. But while major companies continue developing technology suited for vehicles in an autonomous future, there’s a potential major roadblock that could bring it all to a halt: government legislation.

Even as we move closer to driverless cars, the reality is that most auto laws are outdated and could prevent this new technology from taking off. So, how does legislation need to shift to make way for the future? The Society of Automotive Engineers developed five levels of classification for

28 DECEMBER 2018

autonomous vehicles and most require legislative reform. Let’s take a look at these different levels and the necessary changes.

autonomous and, as a result, Level One vehicles have managed to avoid regulation.

LEVEL ONE: DRIVER ASSISTANCE

LEVEL TWO: PARTIAL AUTOMATION WITH DRIVER ASSISTANCE

Believe it or not, autonomous vehicles are already on the road— just in a simpler form. Level One autonomous vehicles integrate innovations like adaptive cruise control, anti-lock braking, lane-

Level Two vehicles offer a step up in technological complexity – think self-parking, lane centering, and even autopilot capabilities that allow the vehicle to take control and assist the human operator.

Since debuting with Tesla in 2014, autopilot systems have traversed testing and navigated regulations before becoming legal in 2017 when the U.S. House of Representatives passed a driverless car bill allowing further Level Two development.

departure warnings, adaptive headlights, and self-acceleration.

Despite their advanced features, these vehicles still need complete human control.

Because of the still-necessary human element, many people don’t understand that these features are considered

But while the government got on board with autopilot in 2017, the legal landscape has shifted in the aftermath of two fatal accidents. These accidents have convinced many lawmakers that they must implement stricter and safer Level Two requirements.

See Our Autonomous Future Pg 45 TABLE OF CONTENTS

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Jaquar Attribution 2.0 Generic (CC BY 2.0)

Companies like Google, Tesla, and BMW are leading the charge on autonomous vehicles— but regulatory concerns may slow them down.

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ANALYSIS - KROLL Continued From Page 14

CYBER FAILURES CAN BE COSTLY THE SEC’S LATEST SALVO ON CYBERSECURITY In a case involving a company that had suffered significant data breaches, analysis showed that they had comprehensive cyber security standards and policies which they eventually described as “aspirational” and not a statement of what they had actually committed to do. The SEC – as well as other regulators and potential class-action plaintiffs – expect that there will be a match between stated standards and the controls that are actually in place. Without periodic and independent evaluations, active monitoring and anomaly identification and evaluation, there is a risk of actual practice deviating from the expectations in a company’s standards.

Assuming that an organization has commercially reasonable standards that comply with legal and regulatory requirements, it is the gap between expectation and reality that leads to problems. Just as hackers look for and exploit vulnerabilities in systems and procedures, expect regulators and investors to be greatly troubled when those gaps should reasonably have been covered by cyber security practices, identified through monitoring procedures, and appropriately investigated and responded to.

Actual problems identified through monitoring, compliance and audit processes represent another input to the continuous improvement process.

The SEC’s action clearly shows that it is serious about this issue, and that it is staffed and ready to conduct enforcement actions relating to cyber security.

How can we help?

30 DECEMBER 2018

Kroll, a division of Duff & Phelps has been helping clients in the cyber security space for over 30 years. We understand that even the best-intentioned cyber security processes can fail or can fail to evolve.

Our experience indicates that the biggest danger faced by managers and directors in considering the SEC’s guidance and enforcement actions is not knowing the actual state of cyber security implemented within their organizations.

Without actual and detailed knowledge, risk can’t be assessed and effective response becomes difficult or impossible.

Kroll has developed methods for working with organizations to efficiently assess cyber security standards and policies, and for determining how effectively a compliance program assures that the standards are actually implemented. Assuring that a company has a well-considered risk assessment, that it understands it’s actual cyber-security posture and that it has identified the gaps is vital.

Where gaps exist, we can help organizations to improve their standards and policies, to mitigate risks and consider opportunities for risk transfer. In appropriate cases, we can provide a professional to act as a Chief Information Security Officer on a dedicated basis until an appropriate candidate is located, or a shared CISO on an ongoing basis.

For organizations subject to the Payment Card Industry Data Security Standard, it is important to know that we are a Qualified Security Assessor under the PCI program.

We also have significant experience helping our clients assure that their cyber incident response programs are ready to implement when a problem arises. Our specialists can create and run customized table top exercises to determine operational readiness.

Given the prior SEC cyber security guidance and the Sept.

26th enforcement announcement, firms cannot simply assume that their cyber security complies with the guidance and best practices. Not knowing is, to put it simply, not acceptable.

We’re here to help.

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www.chart-exchange.com

NEWS - SIAA

ADDITIONAL $30,000 RAISED FOR WOUNDED WARRIOR PROJECT FROM SIAA

N

ovember 14, 2018 – Hampton, NH: In recognition of Veterans Day, SIAA (Strategic Insurance Agency Alliance) has raised over $30,000 in funds for the Wounded Warrior Project. SIAA appealed to its member agencies and master agencies this October and November to meet a $15,000 match contribution to the Wounded Warrior Project by Veterans Day and, once again, met their goal. SIAA has now raised $187,317 for the Wounded Warrior Project since they started supporting the organization two-and-a-half years ago.

“The Wounded Warrior Project is bringing hope and positive change to many lives each day, making a lasting impact for veterans and their families in need,” said Matt Masiello, Chief Executive Officer.

“Together, we exceeded our fundraising goal and are able to help men and women who served our country across the world.”

ABOUT SIAA SIAA is the largest national independent insurance agency alliance dedicated to the creation, retention, growth and continued success of the independent insurance agency distribution system.

SIAA has 48 strategic master agencies across the country, with membership consisting of 13% of the independent agencies in the country. Those member agencies write over $7.4 Billion of in-force premium. For more information on SIAA, visit www.siaa.net.

www.chart-exchange.com

ABOUT WOUNDED WARRIOR PROJECT Since 2003, Wounded Warrior Project® (WWP) has been meeting the growing needs of veterans, their families, and caregivers – helping them achieve their highest ambition.

Wounded Warrior Project is equipped to serve military members with every type of injury – from the physical to the invisible wounds of war. As of December, 2017, they had reached 132,000 veterans and family members.

Proud supporters of CHART

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DECEMBER 2018

31

NEWS - SIAA

JEFF HOLMES PROMOTED TO CHIEF OPERATING OFFICER OF SIAA

H

ampton, N.H. – SIAA Chief of Jeff’s decisions and guidance and Executive Officer, Matt know he will provide a unique insight Masiello, has announced, for integrating SIAA resources to “Jeff Holmes has been help our member agents grow, in promoted to Senior Vice President addition to enhancing our position as and Chief Operating the proven distribution Officer of SIAA, effective channel for our strategic January 1, 2019. Jeff partner companies.” has strengthened our Agency Foundation and According to Masiello, Development Services Holmes will work with nationally, working to executive management build a model for all to ensure that SIAA SIAA master agencies. is positioned to meet I am confident he will the overall needs of Jeff Holmes, SIAA COO bring the same level internal and external of leadership and expertise to our customers - continually evaluating, overall daily operations, with a focus developing and executing plans and on helping our member agencies to projects needed to achieve business succeed.” goals. Working closely with all stakeholders, he In his new role, Holmes will help align staffing and will report directly to strategies for success while Masiello. Holmes started maintaining the quality with SIAA in 2013. and efficiencies of SIAA. “As our alliance has Since joining SIAA and SAN grown significantly Group, Holmes has been in the last several Matt Masiello, SIAA CEO instrumental in the national years, this is a natural rollout of SIAA’s agency transition. We have seen the impact development program, currently

32 DECEMBER 2018

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oversees SAN Group’s AccessPlus operation, and has provided extensive mentoring for agents and staff. He is a senior insurance professional with over 21 years of management, marketing, underwriting, training, sales, claims management and risk evaluation experience.

Holmes and his wife reside in southern New Hampshire.

SIAA is a national alliance consisting of approximately 13 percent of all independent insurance agencies in the United States. Its member agencies generate hundreds of millions of dollars in new premium business annually and represent nearly $8 billion of in-force premium.

SIAA is dedicated to the creation, retention and growth of the independent insurance agency distribution system. To learn more about SIAA, visit siaa.net.

www.chart-exchange.com

SPECIAL REPORT - WILSON ELSER Continued From Page 19

DOING BUSINESS IN SOUTH KOREA years, and fines from 200 million Korean won to 300 million Korean won. The KFTC also doubled the administrative fine rates from 10% to 20% for cartel fines, from 3% to 6% for abuse of dominance and from 2% to 4% in unfair trade practices. There is a movement to introduce a U.S.style litigation system by including injunctive relief as a remedy for private persons in some Acts, treble punitive damages for cartel violations, class actions for private parties and enhanced regulation of information exchange.

•

•

LITIGATION PROCEDURES There are a number of differences in the litigation procedures between the United States and South Korea.

•

FOR EXAMPLE: •

•

To commence an action, one must give a power of attorney to an attorney admitted before the South Korean Bar. There are stamp taxes of approximately 0.5% of the claim amount as well as security costs www.chart-exchange.com

•

(if the plaintiff has no physical presence in South Korea) which a foreign plaintiff is responsible to pay if it loses the case for both parties.

Court composition is quite different. There is a judicial panel of three judges for cases involving 200 million Korean won or more, and there is an annual rotation in February of each year. Therefore, one may have to present the same case to different judges if the proceeding extends beyond a year.

In South Korea, trials are conducted through a hearing process, and all questions of law and fact are argued before the court with questions by the judicial panel. There is no discovery in South Korea, which means that the life of an action is approximately six months on average in the trial court, called the District Court, and approximately four months in appellate courts, called the High Courts, although litigations involving a foreign litigant tend to last longer.

The High Court has the power of de novo review. Evidence may be submitted by each party to the court and judges determine the value, credibility and authenticity of the evidence.

If one fails to appeal within two weeks, there is no right to appeal.

Therefore, it is important to find a reputable and competent local counsel to handle litigation in South Korean courts.

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DECEMBER 2018

33

FORESTRY WORLDWIDE FORESTRY (RE)INSURANCE FACILITY Pardus was established in 2013 by Keith Thompson, formally CEO of Advent capital Holdings Ltd and Darren Stockman Active Underwriter of Syndicate 780 and Director of Advent Underwriting Ltd. Pardus are an independent Managing General Underwriter, a Lloyd’s approved Coverholder, and an appointed representative of Capita Commercial Insurances Limited.

Cover

Maximum line of USD 8.5M any one risk, any one location. Capacity provided by Lloyd’s of London and “A-” rated company paper. Perils covered mainly Fire and Windstorm, but we can offer additional coverage for hail, ice, snow, frost.

We cannot cover Pest and Disease, although we can offer cover under a small sublimit for Pest and Disease treatment costs.

Sublimits available for fire-fighting costs, aerial photography, debris removal, claims preparation costs etc.

Frost

Hail

Snow & Ice Storm

Flood

PERILS COVERED Rainfall Deficiency

Fire

Malicious Damage

Windstorm

Business Interruption is offered when fruiting trees are destroyed by covered physical damage perils, leading to a loss of yield while the new trees develop •

We have specialist Pardus facilities in place to cover Public Liability (in Europe) and associated forestry Plant and Machinery risks

OUR TAILORED PRODUCTS

Full Value and Value at Risk

Full Value works in the traditional way with insurer retaining any salvageable value from the insured property.

Value at Risk leaves an agreed salvage (based on salvage scales developed by Pardus using age and species data) in the ownership of the client.

Pardus then only insure the non-salvage element meaning the final rate will be applied to a fraction of the TSI generating a lower overall cost to the client.

Target business: •

We are keen to see any enquiry for standing timber commercial planation forestry

• •

Information requirements for quote: •

Perils to be insured against

•

Schedule of forest locations by values, age, species

Forestry risks with accreditation from the Forestry Stewardship

Locational information needs to be provided in either

Council (or similar)

shape file format (.kmz) or the latitude/longitude

Forest Owners comprise:

coordinates of the centre point of each location

-

Individual investors

•

5-10-year ground-up loss experience by peril

-

Commercial Plantation Companies

•

Desired policy structure:

-

Individual Forest Owners

-

Timberland and Investment Management Organisations

-

(TIMO’s)

•

Additional features: -

-

Forest Management Organisations (FMO’s)

-

Real Estate Investment Trusts (REIT’s)

-

Banks loans made to forest owners or fruit tree owners

-

Forest Owner Associations

Deductibles, limit etc Firefighting costs, claims preparation, aerial photography, plantation infrastructure

To download our full forestry questionnaire, please visit our website https://pardusunderwriting.com/products/forestry/

Exclusions

Property

Buildings

Terrorism

Pest and Disease

Drought

Crop

Fruits, Nuts etc

Phil Cottle - Senior Agricultural Underwriter Direct +44 (0)203 735 1608 Mobile +44 (0)7769 895048 phil.cottle@pardusunderwriting.com Dan Longden Cert CII - Underwriting Assistant

Direct +44 (0)203 735 1610 Mobile +44 (0)7756 961500 daniel.longden@pardusunderwriting.com

Pardus Underwriting Ltd. 1st Floor, 3 Lloyd’s Avenue, London, EC3N 3DS www.pardusunderwriting.com

“We have access to a worldwide forestry binding authority covering the physical damage to commercial forestry. There is a maximum line of USD 8,500,000 any one risk, any one location and the covered perils can be found on this flyer. This is written 100% Lloyd’s/company market and Prospect are the Insurance broker”

ANALYSIS - KROLL Continued From Page 25

SEC’S CYBER ENFORCEMENT CHANGING THE GAME There is also an expectation that management and boards understand that cyber security is not a “one and done” proposition. As an organization’s business evolves and technology changes, the policies and procedures, along with their associated compliance measures, must also change. Cyber security must be just as dynamic as the risks to our systems. System monitoring is becoming a recognized (and expected) best practice.

It is also clear that an organization cannot limit its concern about cyber security to its own cyber-operations.

Those who can access your systems – independent contractors, partner organizations, supply chain partners, vendors or others – and those with whom you share nonpublic data must also be considered. How are they authenticated?

The case that was settled involved attackers who were able to establish or take over -- through social engineering -- independent

36 DECEMBER 2018

contractor accounts and used those to commit crimes through the company’s systems. How are they limited in what they can see and do? What alarm mechanisms are in place to provide real-time monitoring of user accounts for unusual activities?

In a separate case involving a company that had suffered significant data breaches, analysis showed that they had comprehensive cyber security standards and policies which they eventually described as “aspirational” and not a statement of what they had actually committed to do.

The SEC – as well as other regulators and potential class-action plaintiffs –expect that there will be a match between stated standards and the controls that are actually in place.

Without periodic and independent evaluations, active monitoring and anomaly identification and evaluation, there is risk of actual practice deviating from the expectations in a company’s standards.

Assuming that an organization has commercially reasonable standards that comply with legal and regulatory requirements, it is the gap between expectation and reality that leads to problems. Just as hackers look for and exploit vulnerabilities in systems and procedures, expect regulators and investors to be greatly troubled when those gaps exist that should have been covered by cyber security practices, identified through monitoring procedures and appropriately investigated and remediated.

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Actual problems identified through monitoring, compliance and audit processes represent another input to the continuous improvement process.

The SEC’s action clearly shows that it is serious about this issue, and that it is staffed and ready to conduct enforcement actions relating to cyber security.

Our experience indicates that the biggest danger faced by brokers and underwriters in considering the SEC’s guidance and enforcement actions is not knowing the actual state of cyber security implemented by an insured.

Without this knowledge, risk can’t be assessed and effective response becomes difficult or impossible.

Tools exist to efficiently assist companies carry out more in-depth self-assessments than many insurers require and to provide more actionable information to underwriters. Consideration must be given to understanding how the SEC’s action may affect far more than cyber insurance if the issue turns from ineffective cyber security to ineffective management.

Given the prior SEC cyber security guidance and their enforcement announcement, insurers cannot simply assume that the cyber security operations of both large and small firms are in compliance.

Not knowing, to put it simply, is not acceptable.

This article was originally published

by PropertyCasualty360 www.chart-exchange.com

www.chart-exchange.com

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DECEMBER 2018

37

ANALYSIS - VANTAGE AGORA

EMPOWER DIGITAL TRUST WITH OX ZION – A BLOCKCHAIN-ENABLED BOS Vantage Agora integrates blockchain technology into their premier Business Operating System (BOS) OX Zion to provide Proof of Existence for all documentation.

C

LEVELAND, OHIO, UNITED STATES — Vantage Agora looks to enhance their mission of providing clients

38 DECEMBER 2018

with Operational Excellence by utilizing their blockchain-enabled BOS, OX Zion. The tamper-proof digital ledger used will change the way you keep record of documents/ agreements by enhancing security and decreasing the likelihood of technology attacks or errors.

Via a distributed ledger, OX Zion provides a comprehensive solution to verify authenticity and uniqueness of agreements/contracts. Documents stored to blockchain acquire a unique ID number that ensures their validation.

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Alterations of a document require a new unique ID to be added to the blockchain, keeping track and creating an immutable record or “chain” of documents. Utilizing the blockchain ledger to send out meta-data provides the necessary authenticity and synchronization of documentation that we all crave. Prior to this technology, there was no way to independently confirm a version of an agreement to be authentic.

See Empower Digital Trust Page 47

www.chart-exchange.com

EMPOWER DIGITAL TRUST WITH

ox zion

A BLOCKCHAIN-ENABLED BUSINESS OPERATING SYSTEM (BOS)

READ THE COMPLIMENTARY

GARTNER ARTICLE

UNDERSTANDING THE GARTNER BLOCKCHAIN SPECTRUM AND THE EVOLUTION TECHNOLOGY SOLUTIONS

vantage agora is proud to partner with

1. Gartner, Understanding the Gartner Blockchain Spectrum and the Evolution Technology Solutions, Davind Furloger, Rajesh Kandaswamy, 26 October 2018.

2. Gartner Logo - GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally, and is used herein with permission. All rights reserved.

3. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner's research organization and should not be construed as statements of fact. Gartnerdisclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.

www.chart-exchange.com

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DECEMBER 2018

39

NEWS - LLOYD’S OF LONDON Continued From Page 10

LLOYD’S NEWS ROUNDUP Things”, published in collaboration with University College London’s (UCL) Department of Science, Technology, Engineering and Public Policy (STEaPP) and the PETRAS Internet of Things Research Hub, analysed the impact of the IOT on the insurance sector.

IoT will lead to data capture and management at an unprecedented scale, according to the report. This could mean better risk assessment and more flexible, bespoke and realtime products. It may also increase policyholder concerns about the use and accuracy of their data.

Meanwhile, interconnectivity will create new business models where more is known about insureds, policies are generated in real-time and are bespoke, and fraudulent claims are recognised quicker. The ability to create personalised policies will also enable insurers to more accurately predict and mitigate risks.

However, the report also noted that new types of threats will emerge, which will increase the demand

40 DECEMBER 2018

on insurers to come up with new products and services. The scale and variability of the type of disruption that could occur will affect multiple sectors and lines of business.

In addition, the range and quality of security standards that currently exist for the IoT will make it hard for insurers to make risk assessments.

And there are critical blind spots in the regulation and legislation of IoT devices and their impacts. These include uncertainties surrounding attribution and liability should anything go wrong.

To help insurers to understand the evolution of the adoption of the IoT and its potential impacts, the report includes ten extreme scenarios on four critical sectors: Infrastructure and Water, Agriculture, Marine and the Smart Home. Each scenario highlights how IoT technologies could generate and exacerbate risks that could cause losses in several lines of business at the same time.

Dr Trevor Maynard, Head of Innovation for Lloyd’s, said: “Insurers should play a role in shaping the IoT landscape and Lloyd’s has proposed several options from leading on data standardisation to working with governments and tech companies.

Insurers should proactively talk with clients to review and assess all risks associated with IoT to provide them with advice on best practice and appropriate risk solutions, thereby shaping the development of the IoT ecosystem in which they operate.”

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Dr Madeline Carr, Director of STEaPP’s Digital Policy Lab, said: “Any large-scale technological shift raises challenges to the status quo and creates opportunities for those who see them early on in periods of transformations. Early adopters, especially in markets, are afforded additional benefits, as they can shape expectations, terms of engagement, and best practices in ways that address their interest. This report with Lloyd’s provides a timely study of not only the challenges but also multiple opportunities that the IoT will introduce into the sector.”

Lloyd’s Market Association launches new claims expert platform 29th November 2018 - Author: Matt Sheehan The Lloyd’s Market Association (LMA) has launched its new claims expert management solution and platform for Lloyd’s carriers this week, called Gemini.

The platform was developed by the LMA in partnership with Advent Insurance Management Limited, and will be driven by claims professionals from the Lloyd’s market.

Gemini will offer Lloyd’s carriers insights into their true spend on claims experts, as well as managing the relationships and monitoring their performance, the LMA explained.

The LMA also claimed that the solution would help carriers to achieve management efficiencies, www.chart-exchange.com

NEWS - LLOYD’S OF LONDON reduce claims costs, and improve the performance of experts.

“This platform enables a greater understanding of expert spend and will allow Lloyd’s carriers to make informed decisions around that spend,” said Tim Bowling, Senior Executive at the LMA. “The development of a searchable database of regularly used experts, supported by the onboarding process and performance oversight, will allow carriers to manage effectively the delivery of claims services for the benefit of carriers and policyholders alike,” Bowling added.

Over 500 experts have been preregistered for access to Gemini with the support of Lloyd’s carriers.

The total claims expert spend in the Lloyd’s market is around £500 million a year, according to estimates from the LMA.

By better utilising data and technology, and by implementing TOM, Lloyd’s is attempting to reduce its market expenses by £145 million cumulatively by 2020.

Khoury-Haq said in September that the implementation of key parts of the TOM, as well as Lloyd’s electronic trading platform, Placing Platform Ltd (PPL), was not happening quickly enough.

“I would like to take this opportunity to personally thank Shirine for the role she has taken in delivering real change to the way the Lloyd’s market does business over the last five years,” commented John Neal, Chief Executive Officer at Lloyds.

“Having created the vision for the TOM, she built the consensus and momentum needed to deliver on its promise so that market firms are now seeing genuine benefits.”

Source: Reinsurance News 11/28/18

Lloyd’s announces departure of COO Shirine Khoury-Haq 21st November 2018 - Author: Charlie Wood Lloyd’s of London Chief Operating Officer, Shirine Khoury-Haq, is to depart after nearly five years at the organisation.

Khoury-Haq has been the driving force behind Lloyd’s recent digital integration efforts, which included the introduction of its Target Operating Model (TOM).

www.chart-exchange.com

“In my short time at Lloyd’s I have very much enjoyed working with Shirine, and value the support she has given me.”

“Shirine will continue as COO and a fully committed member of the ExCo until she leaves during the first half of 2019, with our sincere thanks and best wishes for the future.”

Commenting on her departure, Khoury-Haq stated, “The last five years have been incredibly rewarding, working with colleagues in Lloyd’s and across the industry to deliver real digital change for the first time in decades.”

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“Solutions have been designed and built that are transforming the way insurance is conducted in London.

I’m delighted that the experiences I brought from effecting profitable and complex change in insurance and other industries have been helpful in delivering what we promised for London.”

“I have also been very lucky to work with two great CEOs, Inga Beale and John Neal, who have backed me both professionally and personally.

“We have made considerable progress in Operations within Lloyd’s and the London Market TOM has been well adopted. So now, with Lloyd’s full support, this feels like the right time to look for the next challenge.”

The CEO of the London Market Group, Clare Lebecq, added, “Shirine has done a tremendous job in leading the modernisation workstream for the London Market Group and I would like to say thank you, on behalf of all our members, for her huge personal commitment to the challenge.”

“Making change happen is very tough and the fact that so many solutions are now coming on stream has much to do with her vision and tenacity in driving forward the work to make London an easier place to do business.”

See Lloyd’s News Roundup Page 44 DECEMBER 2018

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NOW HERE’S A REAL SHOCK… The first firearm liability product that can be sold by independent insurance agents!

It is estimated that nearly 80 million Americans own at least one firearm. But what happens if a law-abiding citizen is actually forced to use that weapon to protect themselves, a loved one, or their personal property? Many homeowner policies specifically exclude firearm use — even in self defense — as a covered exposure, deeming it to be an intentional act. That leaves the gun owner personally liable for legal expenses, bail bond costs, and any judgments awarded through a civil action.

As an insurance agent, you are in the best position to explain the significant personal liability exposure faced by your gun-owning clients. Unfortunately, you haven’t been able to help your clients by offering a product to address this need — until now.

Rockwood Programs now offers a firearm liability policy designed to protect insureds against civil or criminal actions resulting from the use of a gun in self-defense. It is the only one available in the industry that can be sold through insurance agents. A wide variety of limit options are available, ranging from $50,000 to $5 million. Annual premiums start at just $135.

Best of all, we make it easy for you to present the firearm liability product to your clients. An inventory of customizable sales aids is available, including marketing brochures, simplified self-rating applications, and more. Our team can even help provide product-specific content for your website!

Visit us at www.rockwoodinsurance.com to learn more We can also accommodate group accounts (police, security, gun clubs, etc.).

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CASE STUDY - M&A SERVICES Continued From Page 9 OUR PROCESS

M&A SERVICES CASE STUDY: CAPITAL RAISING •

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Assist in due diligence preparation, including the use of our proprietary Electronic Date Room Ongoing advice as it relates to additional funding needs and growth planning Continued relationships, representing the company and assisting in the possible sale or divestitures

To better understand Our Process and to see how Merger & Acquisition Services has successfully assisted our clients in achieving their business objectives, here is a select case study on Capital Raise.

CAPITAL RAISING CASE STUDY Client: Health Insurance Innovations, a private program manager established in 2009, which provides limited & short term medical, AD&D and life products.

Objective: Assist the founding shareholder in completing a buyout of his existing equity partners within a 60 day period. www.chart-exchange.com

Led by a senior advisor, M&A Services worked directly with the CEO in developing a Private Placement Memorandum to facilitate senior financing of the buyout including financial pro-forma modeling.

Next, M&A Services identified qualified financing partners with in-depth expertise in the insurance sector. Also, M&A Services worked with a number of traditional and alternative lending facilities on the terms and structure of the transaction.

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Lastly, M&A Services assisted in negotiating the final terms of the deal; resulting in the execution of a senior secured financing loan.

As a result, client received over $5MM of debt capital from Sun Trust facilitating the buyout of all remaining shareholders within 90 days. A couple of years after the buyout, Health Insurance Innovations CEO filed for an initial public offering (IPO) and listed on the NASDAQ Stock Exchange with the ticker (HIIQ) in February 2013.

Merger & Acquisition Capital Services, LLC. is designed to assist our clients in identifying and structuring corporate finance solutions that are custom fit to their particular needs. Visit our website www.maservices.com for more information. In addition, our team is available to discuss the process and all other services we provide. Contact our advisors today to start a strictly confidential conversation about the future of your business.

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Mark Lann Phone:

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

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LLOYD’S NEWS ROUNDUP Continued From Page 41

LLOYD’S NEWS ROUNDUP Lloyd’s “absolutely” wants to grow into the future: Carnegie-Brown 4th November 2018 - Author: Luke Gallin Chasing loss making business out of the specialist Lloyd’s of London insurance and reinsurance marketplace might be tough and lead to pain for some, but it is “absolutely right” that the market becomes sustainably competitive for the future, according to Lloyd’s Chairman, Bruce CarnegieBrown.

Addressing an audience today in the Old Library at the Lloyd’s of London headquarters, Carnegie-Brown discussed the future of Lloyd’s, against the backdrop of challenges such as Brexit, high expenses, the rise of advanced technology, and also the growing influence of non-traditional capacity.

During the soft reinsurance market cycle, Lloyd’s saw its performance struggle as competition intensified while the cost of doing business at the marketplace remained high, leading

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to stress across the market reflected in underwriting losses.

In response to a need to modernise and adjust to the changing risk landscape, Lloyd’s has targeted loss making business in recent times, and CarnegieBrown underlined that despite actions such as this leading to job losses and other pains, discipline across the marketplace is incredibly important.

“I regret that, but I think it is absolutely

But while chasing loss making business out of the market suggest a smaller Lloyd’s, which is expected in 2019 due to lower stamp capacity across many syndicates, the market’s Chairman stressed that Lloyd’s always has been and remains open to all forms of capital and innovative ideas, and a smaller market isn’t the agenda for Lloyd’s.” right that we try to make this market sustainably competitive for the future, and that’s the only way to preserve the opportunities for those who remain in the market and indeed, begin to grow the market again.

“And, I think the fundamentals of discipline in everything we do are incredibly important,” said CarnegieBrown.

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Lloyd’s is the oldest insurance market in the world and remains a global hub for insurance and reinsurance business, but with costs so high and competition from other parts of the world growing, the market has started to attempt to tackle the issues it faces.

But while chasing loss making business out of the market suggest a smaller Lloyd’s, which is expected in 2019 due to lower stamp capacity across many syndicates, the market’s Chairman stressed that Lloyd’s always has been and remains open to all forms of capital and innovative ideas, and a smaller market isn’t the agenda for Lloyd’s.

“But I have to say it is not the strategy at Lloyd’s to be shrinking into the future, we absolutely want to be growing into the future,” said Carnegie-Brown.

“I think the future is actually pretty exciting, we just have to seize it and be enthusiastic about it,” he concluded.

At the same time as Lloyd’s is chasing out loss making business, a number of market players have pulled back from certain parts of the market in recent times in light of returns failing to meet the risk being assumed.

The need to cut costs is very important for Lloyd’s as well, and this was something noted by CarnegieBrown, who underlined the rise of technology as the industry’s friend when looking to improve efficiency. www.chart-exchange.com

ANALYSIS - FORTEGRA Continued From Page 28

While this system has the ability to reduce accidents, the U.S. won’t permit their introduction. The reason?

There’s currently no federal law allowing this level of automation, so regulations would need to be passed on a state-by-state basis.

Additionally, items like signage, lane markings, and road configurations vary across the U.S., which could cause dangerous processing issues for an AI system.

OUR AUTONOMOUS FUTURE LEVEL THREE: VEHICLECONTROLLED, SAFETY-CRITICAL DECISIONS

LEVEL FOUR: HIGH-LEVEL AUTOMATION

At Level Three, autonomous vehicles decide when to take control and when to shift responsibility back to the driver. Here’s where things go full science fiction. At Level Four, automated Despite access to this feature, many manufacturers haven’t quite developed vehicles can complete an entire trip with no driver a taste for it yet and have kept Level While most of intervention or Three vehicles off us have already control except in very specific the market. In one experienced some situations like example, Google emergency-level version of vehicle had a Level Three weather conditions. vehicle all the way autonomy, a truly As yet, no Level back in 2012, but the driverless ride is likely Four vehicles have company realized still years away.

From been brought to that human drivers were too trusting and regulatory concerns market because slow to react when to insurance liabilities, the technology is so advanced. their vehicle put the risks associated Additionally, control back in the with autonomous from a regulatory driver’s hands. perspective, the vehicles are real.” government is To date, only one struggling to manufacturer is figure out how to handle this level striving to release a Level Three vehicle anytime soon. Audi has developed their of technology, with their primary concerns including liability questions, newest R8 model which incorporates cybersecurity, and personal privacy. a feature called AI Traffic Jam Pilot. www.chart-exchange.com

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LEVEL FIVE: TOTAL AUTOMATION Imagine riding in your vehicle with your feet kicked up playing video games on your tablet. Level Five autonomous vehicles turn this dream into a reality requiring no human control whatsoever. That’s right: they’re driverless. But again, this level of technology creates concerns for lawmakers, manufacturers, and passengers. For example, will driver licenses be necessary? If so, what do those look like? To get those answers, we’ll have to wait until at least 2021 when Audi claims their self-operating model will be ready to go.

While most of us have already experienced some version of vehicle autonomy, a truly driverless ride is likely still years away. From regulatory concerns to insurance liabilities, the risks associated with autonomous vehicles are real. And while the U.S. is currently leading the way in autonomous vehicle development, they may want to look to Europe for a safety-first approach. Despite strides toward the future, the world still has a long way to go before every passenger can sit back, relax, and enjoy the automated experience.

Looking for more insight into the future of the auto industry? Take a look at how telematics is changing the landscape for drivers and insurers alike.

Fortegra® is the brand name for the insurance, specialty underwriting and warranty solution operations of Fortegra Financial Corporation and its subsidiaries.

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ANALYSIS - VANTAGE AGORA Continued from Page 38

EMPOWER DIGITAL TRUST WITH OX ZION

record, store and manage sensitive documents,” says Mehul Kenia, Vantage Agora Product Architect.

Vantage Agora is ramping up their blockchain efforts in preparation and support of the Blockland Cleveland initiative, seeking to establish Cleveland as a significant tech hub and leader in blockchain solutions. The Blockland Conference at Huntington Convention Center is one of the first blockchain education Through the proof of concept conferences to provide experiential integration of OX Zion with blockchain learning through hands-on coding technology, validity of important and real-world problem solving with documents can now be easily verified. a focus on solutions for business Even a minor change and government like removing a space applications. The would constitute a Blockchain conference will be document to receive held December 1-4, has the a new checksum power to transform 2018. and blockchain ID -therefore, no longer the society we live in ABOUT VANTAGE being a true match to today. It’s innovative AGORA: its previous version. and on the cutting Vantage Agora, edge of technology founded in 2004, Vantage Agora is headquartered CEO & Co-Founder, – a true, secure in Beachwood, Sudhir Achar states, source for digital Ohio. They are a “Blockchain has the Gartner-recognized, trust.” — Sudhir power to transform global provider the society we live in Achar, Vantage of customized today. It’s innovative Agora CEO & Co- technology and on the cutting solutions on OX Founder.” edge of technology – Zion, an industrya true, secure source leading Business Operating System for digital trust.” that creates powerful Data Analytics for business leaders. Because of “By providing validation, key insights that OX Zion offers, documentation, metadata and Vantage Agora was recently named status updates, it becomes simple to a CIO Applications Top 10 Broker manage and track documents to their Management Solution Provider and true source. Empower digital trust Top 25 Insurance Technology using OX Zion to change the way you Company. www.chart-exchange.com

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