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July 5, 2021 • Vol. 99 No. 13

Contents

Idea Exchange

Special Report

News & Markets

Allstate CEO Strategy: More Independent Agents But No More ‘Human Modems’

12 Employers See Employee

Spotlight: Content Creators at Risk

Closer Look: Why Flood Should be a Covered Cause of Loss in Property Insurance

Mental Health as Major Concern

Spotlight: Earthquake Activity Increasing in U.S. Oil Regions, Study Says

Like ‘Terminator,’ High-Tech Cyber Crime to ‘Keep Coming’

Housing Market Boosts Personal Lines Shopping But Auto Still Lags

Special Report: 2021 Super Regional P/C Insurers™ Revealed

Specialization Versus Fragmentation: A Coordinated, Cohesive Approach to the Specialty Market

Tech Talk: The Cybercrime Challenge for Agents

Is It Covered?: Coinsurance… Even WE Don’t Understand It

Be Ready to Take on New Challenges By Building Hybrid Teams

The Future of Agency Work

Top 5 Contractual Disability Obligations That Can Crush Ultra-Successful Clients

Closing Quote: A Message from a Cybersecurity Expert

Departments 6 Opening Note 4 | INSURANCE JOURNAL | JULY 5, 2021

10 Figures

11 Declarations

22 Business Moves

24 People

49 My New Markets

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Opening Note Write the Editor: awells@insurancejournal.com

Publisher Mark Wells | mwells@wellsmedia.com Chief Executive Officer Joshua Carlson | jcarlson@insurancejournal.com

ADMINISTRATION / CIRCULATION

Insurance Awareness Day, Every Day

ational Insurance Awareness Day was held on June 28 as a reminder for individuals, families and businesses to review their insurance policies and take steps to prevent being underinsured. But shouldn’t we all think about this topic every day, or at least prior to our insurance policies renewing? Insurance review should include windstorm and flood insurance coverages, according to the American Property Casualty Insurance Association (APCIA). Flood insurance in particular is an area that many property owners who do not live or work in flood zones fail to consider. Underinsurance is also an important consideration for property owners. Many properties are insured for market value, which is what it can be sold for, instead of the cost to repair or replace the structure, which can often be higher than market value. “The issue of underinsurance can arise after a major catastrophe when building costs skyrocket and consumers find they do not have enough coverage to rebuild,” said Jeff Brewer, vice president of public affairs for APCIA. “A national shortage of construction materials, including lumber and computer chips used in smart appliances, could result in delays and higher costs, making recovery and rebuilding more challenging if widespread losses occur.” Brewer urged policyholders to create home inventories to help make sure they are fully covered. AmTrust Financial recognized the day as a timely reminder for nonprofits in particular as July 1 is one of the biggest days on the calendar year for nonprofit and human service businesses to renew their insurance policies. The “awareness” day was also a time to consider insurance careers. According to the U.S. Chamber of Commerce, over the next 15 years, 50% of the current insurance workforce will retire, opening up more than 400,000 positions, in an industry where less than 25% of the workforce is under the age of 35. “As the business of assessing risk, underwriting, and selling insurance becomes more dependent on technology, insurers must find ways to attract tech-savvy talent across all departments, not just for historically back-office I.T. roles,” the Chamber said in a workforce report. The Tennessee Department of Commerce and Insurance (TDCI) used this year’s Insurance Awareness Day to highlight consumer claims mediation efforts that have resulted in $4,027,014 in denied claims being overturned in favor of policyholders so far in 2021. Mediation is a process where TDCI insurance investigators intercede between insurance companies and policyholders to get wrongfully denied claims paid for policyholders. More than $10.2 million was returned in all of 2020. While the National Insurance Awareness Day has been observed for several years, one of the earliest references appeared in an insurance agency post in 2013, it is truly a day that should be recognized every day.

‘But shouldn’t we all think about this topic every day, or at least prior to our insurance policies renewing?’

Andrea Wells Editor-in-Chief

6 | INSURANCE JOURNAL | JULY 5, 2021

Chief Financial Officer Mark Wooster | mwooster@wellsmedia.com Circulation Manager Elizabeth Duffy | eduffy@wellsmedia.com Staff Accountant Sarah Kersbergen | skersbergen@wellsmedia.com

EDITORIAL

Chief Content Officer Andrew Simpson | asimpson@insurancejournal.com Editor-in-Chief Andrea Wells | awells@insurancejournal.com East Editor Elizabeth Blosfield | eblosfield@insurancejournal.com Southeast Editor/MyNewMarkets Ezra Amacher | eamacher@insurancejournal.com South Central Editor/Midwest Editor Stephanie K. Jones | sjones@insurancejournal.com West Editor Don Jergler | djergler@insurancejournal.com International Editor L.S. Howard | lhoward@insurancejournal.com Columnists & Contributors

Columnists: Tom Wetzel, Bill Wilson Contributors: Tony Caldwell, Barry J. Koestler II, Sean McNiff, Bryan Salvatore, Pete Sfoglia, Brittni Smith

SALES / MARKETING

Chief Marketing Officer Julie Tinney | jtinney@insurancejournal.com West Sales Dena Kaplan | dkaplan@insurancejournal.com Romeo Valdez | rvaldez@insurancejournal.com South Central Sales Mindy Trammell | mtrammell@insurancejournal.com Southeast and East Sales (except for NY, PA, CT) Howard Simkin | hsimkin@insurancejournal.com Midwest Sales Lisa Whalen | (800) 897-9965 x180 East Sales (NY, PA and CT only) Dave Molchan | (800) 897-9965 x145 Advertising Coordinator Erin Burns | eburns@insurancejournal.com Insurance Markets Manager Kristine Honey | khoney@insurancejournal.com Senior Strategist Pam Simpson | psimpson@insurancejournal.com Social Media Manager Ly Short | Lshort@insurancejournal.com Marketing Administrator Gayle Wells | gwells@insurancejournal.com Marketing Director Derence Walk | dwalk@insurancejournal.com

DESIGN / WEB / VIDEO

V.P. of Design Guy Boccia | gboccia@insurancejournal.com Ad Ops Specialist Jeff Cardrant | jcardrant@insurancejournal.com Web Developer Terrance Woest | twoest@wellsmedia.com Web Developer Ryan Kleshinski | rkleshinski@wellsmedia.com New Media Producer Bobbie Dodge | bdodge@insurancejournal.com

ACADEMY OF INSURANCE

Director Patrick Wraight | pwraight@ijacademy.com Online Training Coordinator George Jack | gjack@ijacademy.com

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News & Markets Allstate CEO Strategy: More Independent Agents But No More ‘Human Modems’

By Alwyn Scott

llstate Corp. wants to buy more independent insurance agencies this year to build the business it acquired with its purchase of National General, Allstate Chief Executive Tom Wilson told Reuters last month. But the agents will be there to talk to customers in depth, not punch data into a computer to get a quote, Wilson said at the Reuters Future of Insurance U.S.A. 2021 conference. “There’s no future in that — no need for a human modem anymore,” Wilson said. Allstate’s strategy is to supply agents with customer data via computer to enable “a real conversation,” he said. “‘What about your 16-year-old? Is your son or daughter at college actually driving the car?’ You can have a different kind of conversation.

8 | INSURANCE JOURNAL | JULY 5, 2021

That’s what we’re trying to do.” Allstate’s strategy stands out after a year in which many insurance companies sped up their “digital transformation” in response to the world working from home during the pandemic, and are relying more heavily on website and mobile apps to interact with customers. Earlier this year, Allstate sold its life and annuity businesses and bought National General Holdings Corp., greatly expanding its network of agents who sell products from a variety of companies, even as Allstate’s Web and telephone sales are showing substantial growth. On the issue of climate change, Wilson said the U.S. government should, over a period of years, get out of the money-losing flood insurance program and shift coverage to the private sector. This would help risk to be better-priced

and avoid rate decisions being “embedded in some political process where some local congressperson fights against getting their rates raised because they want another 150 votes,” Wilson said. The National Flood Insurance Program, which is $20.5 billion in debt, is being partly overhauled this year. However, Wilson said government can play a role in insuring big climate risks — those in which it is going to pay anyway. If a Force 5 hurricane hits Dade County, Fla., for example, the state and insurers will need help. “The federal government is going to have to come and figure out how to build the infrastructure, help people rebuild their houses,” Wilson said. “The federal government should think about that in advance, as opposed to waiting for it to happen.”

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Figures

$19.7 Million

The amount Citgo Petroleum Corp. of Houston will pay to settle state and federal environmental damage claims from a 2.2-million-gallon spill at its Lake Charles, La., refinery’s wastewater treatment facility in 2006. The payment is in addition to $97 million in earlier penalties and fines. The spill polluted about 150 miles of shoreline, killed birds and fish, contaminated habitats, closed the ship channel, and disrupted recreational uses of the river and lakes.

36 Million

Million

The amount Harnett County Sheriff’s Office in North Carolina agreed to pay to settle a lawsuit in which six families claimed the department had a pattern of allowing the use of excessive force by deputies who allegedly referred to themselves as the “KKK.” A Raleigh-based attorney for the families, Robert Zaytoun, said the department’s insurer will pay the settlement. The families sued four deputies, Sheriff Wayne Coats and former Sheriff Larry Rollins in November 2016. The suit outlined 43 causes of action against the defendants, who denied a pattern of excessive force and argued that other plaintiffs similarly provoked deputies on separate occasions.

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The dollar amount for which Six Flags Great America has settled a class-action lawsuit over the use of fingerprint scanners at its Gurnee, Ill., theme park. Texas-based Six Flags was accused of violating a state law that requires companies to get permission before using certain technologies to identify customers. Six Flags refused to comment on the settlement. The Illinois Supreme Court in 2019 allowed the class-action case to continue, saying the biometric privacy law doesn’t require someone to show an actual injury such as identify theft.

$1.5 Million A former Bank of America manager who pleaded guilty to embezzling this amount from a company that did business with the bank and using some of the money to buy a luxury Porsche SUV has been sentenced to a year in prison, federal prosecutors said. Waqas Ali, of Abington, Mass., was also sentenced to two years of probation, including a year in home confinement, and ordered to pay $600,000 in restitution.

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Declarations No Guarantees

“Can you guarantee the people who buy your house that that water is going to stay out of there? I don’t think you can.”

— Matthew Jewell, chair of Louisiana’s Iberville Parish Council, addressing property developers at a June 15 meeting at which the parish council approved a one-year moratorium on new development in part of its jurisdiction to address concerns about drainage following severe flash flooding in May. Despite the objections of developers, the council unanimously voted to halt the construction of high-density subdivisions within unincorporated areas east of the Mississippi River.

To Pay or Not

“It is our policy, it is our guidance, from the FBI, that companies should not pay the ransom for a number of reasons.”

— Testifying in June before Congress, FBI Director Christopher Wray said top U.S. law enforcement officials urge companies not to meet ransomware demands. The Associated Press reported, however, that tax experts say companies paying ransomware demands directly are within their rights to claim a deduction for the payment as it can be categorized as an “ordinary and necessary expense.” Officials say payments lead to more ransomware attacks.

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School Bullying

“The defendants strongly believe that neither CPS, its employees, nor the school nurse were responsible for the tragic death of Gabriel Taye. … CPS embraces the goal of eliminating bullying within schools, as well as continuing to refine and improve reporting, management, and training processes related to incidents of bullying.”

— Attorney Aaron Herzig, a partner at the Taft law firm, who represented Cincinnati Public Schools (CPS), comments after the parents of Gabriel Taye, an 8-year-old boy who killed himself after being bullied repeatedly at school, reached a tentative $3 million settlement with the district in a wrongful death suit. CPS agreed to develop a plan to prevent a repeat of such bullying and submit to two years of oversight of its anti-bullying plan.

Embarrassing Accusations

“It was hard, and it’s still hard to go out and socialize without someone bringing it up and it being the center of the topic of conversation. … It’s embarrassing.”

— Gayla White, an Alabama woman who was cleared of theft charges after a former employer, Eddie Donaldson, accused her of stealing from his wedding venue business. She is now suing her one-time boss for $4 million. The suit accuses Donaldson of defamation, slander, libel, malicious prosecution and abuse of process. White said she’d often stay at home because of the humiliating accusations, and her family felt isolated because of the experience.

Pay Gap

“This suit focused on several individual female employees and not the whole department. Still, we have undertaken a study of our salary structure to identify and address any broader pay disparities.”

— New Mexico State Chief Public Defender Bennett Baur said a 2018 study did not find widespread pay inequities as alleged in a lawsuit against his department, while he noted that efforts are underway to identify any broader pay disparities.

Cybersecurity Best Practices

“Ultimately, there is an expectation that regulated entities are responsible for knowing what the law is and what protected information they have, what information their third-party service providers have access to, how their systems are set up, how their systems and physical plants are protected from intrusion, what the current best practices in cybersecurity are and what cyberthreats are developing.”

— Maine Bureau of Insurance Superintendent Eric Cioppa regarding the Maine Insurance Data Security Act, his state’s version of the National Association of Insurance Commissioners' (NAIC) model data security law. JULY 5, 2021 INSURANCE JOURNAL | 11

News & Markets Employers See Employee Mental Health as Major Concern

mployee mental health has become a serious issue in the workplace and employers are increasingly likely to recognize not only the costs but also how the stigma surrounding mental illness is an obstacle to treatment. A study from The Hartford found that 70% of U.S. employers now recognize that employee mental health is a significant workplace issue, up from 59% in June 2020. In addition, 31% said the strain on employee mental health is having a severe or significant financial impact on their company—an 11-point increase from March 2020 However, 72% of employers said the stigma associated with mental illness prevents workers from seeking help, according to The Hartford’s 2021 Future of Benefits Study, which polled U.S. workers and human resource benefit decision-makers. Among the study’s findings:

• 52% of employers said they are experiencing significant or severe workplace issues due to substance misuse or addiction among employees, up from 36% in March 2020. • 27% of employees said they struggle with depression or anxiety most days or a few times a week, up from 20% in March 2020. • 72% of U.S. employers said burnout is a significant issue at their workplace. • 61% of employees have privacy concerns about sharing mental health information with their employer/co-workers. • 79% of employers believe they have

an open and inclusive environment that encourages a dialogue about mental health, but only 52% of workers agree. 80% of employers said their company culture has been more accepting of mental health challenges in the past year, but only 59% of workers agree.

Like ‘Terminator,’ High-Tech Cyber Crime to ‘Keep Coming’ By Alwyn Scott

usinesses worldwide are fighting sophisticated data scientists as they battle to protect their data-rich computers from cyber crime – and the costly attacks are not going to stop, an expert at insurer Sompo Holdings Inc said. “It’s like the Terminator: They’re just going to keep coming at you” because it is profitable, Brad Gow, global cyber product leader at Sompo International, said on a panel at the Reuters Future of Insurance USA conference, referring to the dystopian movies. Criminals are “extracting hundreds of millions from Western insurance companies and other Western companies,” he said. “I don’t see that relenting until the money flow stops.” Companies are facing more attacks and the cost of each is rising. Ransomware criminals charged about $350 per attack in 2017 and 2018 and targeted companies

with revenue up to about $1 billion, Gow said. Now they target bigger firms and “we’re seeing demands of $30, $40, $50 million with some regularity,” Gow said. “It has really shocked the insurance market.” Beyond ransom, costs include computer network and data restoration, business interruption and liability, said Meredith Schnur, U.S. & Canada cyber brokerage leader at Marsh USA Inc, a unit of Marsh & McLennan Companies Inc. Some companies are finding insurers are unable to write coverage, Schnur said, meaning this is a “hard market” – a term she resisted using until this year. In response, companies are strengthening defenses, and insurers are raising

the cost of coverage, trends expected to continue. Companies also want data on how each protective control will help, and by how much, Schnur said. “We can’t stop these things from happening,” she said. “We can be more prepared.” Success is driving cyber crime, along with “outsourcing” of hacking technology. Sophisticated groups write powerful hacking tools, then sell “ransomware kits” or “software as a service,” enabling small criminal gangs to launch attacks. “It might be that one guy, the rogue guy in the apartment,” said Allyn Lynd, managing principal at Lodestone, a cyber security unit of insurer Beazley Plc, who spent more than two decades at the FBI. Companies that pay ransom risk violating the U.S. ban on funding terrorist groups, but at the moment, FBI agents “are not going to come back a second time and victimize the organization,” Lynd said.

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Spotlight: Errors & Omissions Content Creators at Risk: How Evolving Copyright Law Is Opening New Doors for Litigation

By Andrea Wells

There has been a substantial uptick in litigation involving copyright infringement in the music industry thanks a groundbreaking decision involving the 1977 hit “Got to Give It Up.” The dispute involved Marvin Gaye’s “Got to Give It Up” and the 2013 pop hit “Blurred Lines” by recording stars Robin Thicke and Pharrell Williams. The “Blurred Lines” decision by federal jury in Los Angeles found that parts of Gaye’s 1977 hit “Got to Give it Up” were copied by Thicke and Williams and a jury awarded the Gaye estate $7.4 million in damages and profits. In appeal, the judgment was cut to $3.2 million in actual damages, and the award of profits from Williams’s share reduced from $1.6 million to $357,000.

That decision created a national spotlight that “shall we say inspired a lot of creative plaintiff's lawyers to be more aggressive in pursuing claims that in the past might otherwise have been rejected as being too speculative,” according to Robert Jacobs, a litigation partner in the Los Angeles office of Manatt and the leader of the firm’s entertainment litigation practice. Another reason for the uptick – an evolution of copyright law in general, including changes to the statute of limitations, he added. “The United States Supreme Court probably five, six years ago issued a decision in a lawsuit involving the rights to the motion picture of Raging Bull that recognized that somebody who is aware of a copyright infringement is not barred by the statute of limitations

14 | INSURANCE JOURNAL | JULY 5, 2021

to pursue the claim even if the person has been aware of it [infringement] for more than the three years, which is provided in the Copyright Act,” according to Jacobs. The Supreme Court ruling in Petrella v. MGM eliminated a long available defense called laches used to defend against purportedly stale claims. The decision opened the door to a new era of copyright infringement cases, including another lawsuit over Led Zeppelin’s “Stairway to Heaven.” In Skidmore v. Led Zeppelin, a federal appeals court restored a jury verdict that found Led Zeppelin did not steal “Stairway to Heaven.” The estate of Randy Wolfe of the band Spirit claimed that the 1971 mega-hit “Stairway to Heaven” violated the copyright of the 1968 song “Taurus.” However, the 9th U.S. Circuit

Court of Appeals in San Francisco handed the major win in March 2020 to guitarist Jimmy Page and singer Robert Plant. The ruling, which can be appealed to the U.S. Supreme Court, is a potentially precedent-setting win for musical acts accused of plagiarism, and comes in a period when many well-known songwriters have lost high-profile cases. That case ended up being a loss for the plaintiffs, Jacobs says, but in another era of copyright law a laches defense would have been available. “There was a lot of evidence that the plaintiff’s estate was aware of the claim [the claim accrued in the late 1960s] and plaintiffs allowed continued exploitation of the song 'Stairway To Heaven' and result in prejudice,” Jacobs says. “People can always file suit,

continued on page 16

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Spotlight: Errors & Omissions continued from page 14 but they can only get damages going back three years,” Jacobs said. But the Petrella v. MGM decision eliminated the laches defense and opened up a bit of a flood gate in the 9th U.S. Circuit Court of Appeals for cases getting filed. Jacobs says all media is at risk, not just he music industry, too. “It really is across the board,” he said. “And the other reality is that as content has proliferated in the last several years with easier access to streaming, so to have lawsuits targeting content creators.”

Line of Defense

An important line of defense for content creators today is media liability errors and omissions coverage, which protects creative professionals from legal challenges to their intellectual property. Anderson Benson, a Nashville-based independent insurance and risk management broker, was recently appointed as a coverholder by Lloyd’s of London for a worldwide media liability E&O program that is specialized for the music industry but also

Robin Thicke

targets film, television, streaming media, songwriters, composers, artists, music libraries, producers, music labels and publishers. “Anybody that’s releasing content, even YouTube content,” says Brent Daughrity, a partner at Anderson Benson. The coverage that Anderson Benson offers as a Lloyd’s coverholder can protect more creators, says Daughrity, including social media content. Social media content, including work delivered through “social influencers” can be viewed as intellectual property as it is original content that is filmed, produced, and released. “With Lloyd’s, we are able to expand the definitions and customize the policy to address new exposures like regulatory fines and non-fungible tokens (NFTs) for social influencers,” said Daughrity. Coverage can also provide protection from regulatory fines when a social media post does not disclose that the post is a paid advertising agreement, he added. When it comes to the music industry, E&O coverage is basically for defense costs. That means legal costs and other defense related costs for experts such as paying for the cost of a musicologist, which is one of the first things that happens in one of these cases to identify the similarities of a song, he added. Other areas of

16 | INSURANCE JOURNAL | JULY 5, 2021

coverage might include triggers for libel, slander, copyright trademark claims, even emotional distress arising from music content in some cases. Today’s evolving legal landscape is moving toward very specialized media liability policies for content creators, individual content creators, Daughrity added. “The NFT [non-fungible token] world is very prevalent right now and so both in the art world and the music world there is a big need for coverage that really hasn’t been there,” he said. A non-fungible token is essentially a digital certificate of certain rights associated with an asset — typically, a digital one — that is stored on blockchains, the decentralized computer networks that underpin most cryptocurrencies. “Nonfungible” simply means that each token is unique, to contrast it with other blockchain tokens — such as cryptocurrencies — that are “fungible.” The importance of NFTs is that even though digital works can be quickly and easily replicated, the NFT owner can claim rights in the “original” of that work. NFTs can also be associated with

music, art and other content creations. While intellectual property exposures for content creators are a concern worldwide, the U.S. litigation climate is where the largest exposures and risks come to bear, Jacob says. “The payday that is available in U.S. courts continues to drive the appetite for litigation in a disparate way that you do not see in other countries,” Jacobs said. “It’s just a completely different set of economics.” The potential for big paydays in the United States is really the driver. “And, the 'Blurred Lines' case, with a $7 million jury verdict more or less, set a pretty high bar in people’s minds.” Daughrity said the need for flexible insurance coverage options for content creations will continue to evolve. Working with Beazley and as a Lloyd’s coverholder is allowing Anderson Benson to create policies that will fit the changing needs of this market, he said. “It gives us a lot of freedom to really create what that individual creator needs,” whether that is for songwriters, film makers, social influencers or with NFTs. There are so many different facets of creations. “We are able to weave the policy to what that individual needs to be covered.” INSURANCEJOURNAL.COM

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Closer Look: Flood Why Flood Should be a Covered Cause of Loss in Property Insurance

here’s something fun about contemplating flood insurance while

the ground outside the office is so saturated that it’s like walkBy Patrick Wraight ing on sponges. No. We aren’t having a flood event and even if we were, there’s a good chance that most property policies around us would exclude it and an even better chance that no one near me has a flood policy on their property.

That last thought is exactly why property insurers (whether commercial property or homeowners) should include flood as a covered cause of loss. If you were to look at the ISO HO 00 03 05 11 Homeowners 3 – Special Form, or the ISO CP 10 30 09 17 Causes of Loss – Special Form, you would see this exclusion. (This isn’t all of it, and they’re not identical but really close, so let’s work with it.)

Water - This means: Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water, or spray from any of these,

18 | INSURANCE JOURNAL | JULY 5, 2021

all whether or not driven by wind, including storm surge;… I would recommend that some carrier, especially a well-capitalized Florida carrier, get brave enough to modify their water exclusion to make flood a covered cause of loss. I’m not suggesting that a carrier should make it an available option. Add it to the policy. Cover flood similar to the way other causes of loss are covered.

Flood can be underwritten against. In 1968 when the National Flood Insurance Program was created, there

was data that helped the new agency to assess the flood risk for areas around the country, but that data was limited in scope, accuracy and detail. Over 50 years later, there are terabytes of data available to assess the risk of flooding in any given location. Today, we can look up the Special Hazard Flood Zone (SHFZ) for any location in the United States (except for those communities that don’t participate). FEMA has loaded its FIRMs (Flood Insurance Rate Maps) to its site, and anyone can look up an address to determine its location in

continued on page 20 INSURANCEJOURNAL.COM

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Closer Look: Flood continued from page 18

relation to any flood zones. That’s not enough information to really underwrite a location for its flood potential. If one looks at the DFIRM (Digital FIRM), there’s more to see than just the flood zones. That map can be compared with other aerial imagery. This comparison would allow the underwriter to determine how close a location is to a body of water and would show the underwriter what kind of building has been going on in the area. New building, whether it’s putting up more buildings or making paved surfaces, changes the dynamics of where the water will go next. There’s another map that can be considered, and that’s the topographical map. The more vertical distance there is between an insured location and a body of water, the less likely it will be that the water will rise enough to impact the building. There is also more than 50 years of weather data to consider. We can find out how much rain a location gets and how many times that location might have flooded in some way over the years. This sounds like a lot of information to try to gather, but this is a time when gathering data and making it tell a story is big business. You don’t honestly believe that there is no one out there that isn’t using all of this data to tell a flood story, do you?

By-peril rating provides a way to rate for flood. More

carriers today in more states are filing by-peril rating for property in both the homeowners and commercial property

markets. By peril rating allows the carrier to split up the premium by certain named perils, such as fire, wind, flood, etc. By using a by-peril rating system, the insured can accurately price the flood peril and note the impact on the insured’s final premium. How would it work? Take the replacement cost of what’s actually at risk of flooding, which is to say that if you have a commercial building that is 20 stories tall, only the first floor or two is likely to flood. The entire building might be at risk, but that’s not the situation here. Now, use the fire rate (or wind if you like) for that building, multiply it by a modifier based on the true flood risk for the location. The true flood risk of that location includes the Special Hazard Flood Zone (SHFZ), the number of flood events that have occurred in the last 10 years to 20 years, the distance to any body of water, the size of that body of water, the altitude difference between the location and that body of water, and probably something else that I’m not thinking about. This is a good place to remind you that I’m not an actuary, but I do have an idea or two about what should go into a rate modifier and what makes for a sound rate. By using several data points, a reasonable rate for flood can be created for every location, which then should generate the appropriate premium for the risk. Yes, that means that those who have a higher risk will pay more, but isn’t that one of the principles on which insurance operates?

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Someone already knows how to write it into a policy. In

a perfect world, you could simply amend the water exclusions to remove references to flood, but it’s not that simple. It’s a good thing ISO and insurance companies have been writing their own flood endorsements for a few years.

‘It’s time for flood to be a covered cause of loss in most cases.’ One solution could be to amend the water exclusion to provide coverage for a flood. This could be done by removing words, such as flood, surface water or overflow of any body of water. Another option might be to add an exception to the exclusion for defined floods. While we are looking at potential policy considerations, this is a good place for a carrier to use a different deductible. They could add a flood deductible if the location is in a higher risk area. The deductible could be similar to the hurricane deductible in Florida, which is often written with a percentage of the replacement cost of the property.

Catastrophic risks are already being insured. The

ideally insurable risk is a risk where there are a large number of similar exposure units. This allows us to predict the actual potential loss costs of an individual risk. The loss must be accidental, unintentional, measurable and calculable. The ideally insurable risk also shouldn’t be catastrophic. This means that the risk must not be subject to a partic-

ular loss where a large number of similar risks are subjected to the same loss. That’s like saying that we shouldn’t insure against a hurricane because an entire city might be subjected to the same hurricane. As you already know, we do insure against hurricane and other catastrophic losses. Flood is no different. This is possible in part because not every location is at risk of every possible catastrophic event. A company might have some locations that are at risk while the rest are not. Several insurance companies wrote the buildings that were impacted by Hurricane Michael, and not all of the buildings that were written by any of those companies were impacted. The same is true of flood. A carrier that chooses to add flood as a covered cause of loss for all of its policies is doing something that is perfectly sound in the insurance world. It is spreading the risk to a large enough group of buildings so the risk for any one is relatively small, even if flood has the potential to be a catastrophic event. Flood was a covered cause of loss before insurance companies decided that it was too risky after some flood events in the early 20th century. It’s 100 years later, and it’s time for flood to be a covered cause of loss in most cases. We will allow for some companies that write the extremely risky location to exclude flood, but only if there is a robust residual market in that state. Wraight, CIC, CRM, AU, is director of Insurance Journal’s Academy of Insurance. Email: pwraight@ijacademy. com. INSURANCEJOURNAL.COM

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Business Moves Hub International Limited, Ion Insurance Corporation

National

Bamboo Insurance, First American

Bamboo Insurance has acquired certain of the assets of First American Property and Casualty Insurance Agency of Santa Ana, Calif. from parent company title insurer, First American Financial Corp., which is exiting the property/casualty business. The assets acquired by the insurtech Bamboo include more than $22 million in premium in personal and commercial lines underwritten by third-party carriers. Utahbased managing general agency Bamboo said FAPCIA’s staff will join the company. Bamboo Insurance has been offering homeowners, dwelling fire and ancillary products in California. Now with its new agency it will begin offering auto, renters, condominium, commercial lines, and other insurance coverages alongside its existing products across the nation. First American announced in October 2020 that it intends to exit the property/ casualty business and maintain focus on its core business. It expects to complete the transfer its property/casualty policies by the end of the third quarter of 2022.

Midwest

Hub International, Trisura Specialty Insurance

Chicago-based Hub International Limited and Trisura Specialty Insurance have teamed up on a transportation excess liability/umbrella proprietary product helps clients reduce risks and protect them 22 | INSURANCE JOURNAL | JULY 5, 2021

from potentially large losses. The Hub Drive Excess Liability Shield is an excess liability/umbrella insurance product designed for transportation clients – from general freight, moving and storage, and last mile to auto/truck dealers, public auto and rail – to broaden coverage and protect them from potential major losses from nuclear verdicts. Hub Drive Excess Liability Shield will provide broad excess liability/umbrella coverage with limits of up to $5 million or a component of a transportation industry excess tower through Trisura Specialty, and will be offered in all states except New York.

East

Alera Group, Lamb Insurance Services

Alera Group, an independent, national insurance and wealth management firm, has acquired the employee benefits division of Lamb Insurance Services, an insurance broker exclusively dedicated to nonprofit and social service organizations. Headquartered in Philadelphia, Pennsylvania, Lamb Insurance Services’ employee benefits division offers strategic consulting, compliance strategies, technology solutions, administration and claim analytics. Corey Heller is the former leader of Lamb Insurance Services’ employee benefits division and is now a senior partner at Alera. The Lamb Insurance Services benefits team joins Alera Group through the firm’s Philadelphia location and will be known as Alera Group.

Hub International Limited, a global insurance brokerage, has acquired the assets of Ion Insurance Corporation. Headquartered in Cheshire, Connecticut, Ion Insurance is a full service, independent insurance agency providing personal and business insurance solutions throughout the region. David Drescher, managing director of Southern New England, and the rest of the Ion Insurance team will join Hub New England and help to spearhead and execute on Hub’s strategy in Connecticut. Customers of Ion Insurance will see no change in their accounts as a result of the sale, according to Drescher. Ion Bank President and CEO David Rotatori stated in a press release that the sale will provide additional capital for the financial institution, allowing the bank to reinvest into the communities that Ion serves and to continue with its expansion into other towns and cities in Connecticut. In addition, a portion of the proceeds from the sale have been donated to the Ion Bank Foundation. Established in 1998, the foundation has grown from an initial $2 million contribution by the bank to more than $12.5 million in assets, through earnings and additional contributions. Since its inception in 1998, cumulative grants for purposes ranging from improving social services to enhancing the arts have exceeded $9 million. Hub International Limited aims to grow organically and through acquisitions to expand its geographic footprint and strengthen industry and product expertise. Headquartered in Chicago, Illinois, it provides risk management, insurance, employee benefits, retirement and wealth management products and services.

Kaplansky Insurance, John P. Riley Insurance

Kaplansky Insurance has acquired its third independent agency of 2021, John P. Riley Insurance. The purchase of the Dorchester, Massachusetts-based business marks Kaplansky’s 37th acquisition overall. John P. Riley opened his insurance agency in 1938 while also working in the INSURANCEJOURNAL.COM

real estate business. His son, James H. Riley, began working in his father’s office in 1975. The agency was always a two-person operation, and James purchased the agency from his father on April 1, 1980. On the same day, 41 years later, James sold his agency to Ely Kaplansky, joining forces with the New England agency. The combined agency now provides a broader selection of insurance companies. Under the terms of the acquisition, the Dorchester location will be closing its doors, and a team member from John P. Riley Insurance will be relocating to Kaplansky’s Randolph office. Founded in 1974 and headquartered in Needham, Massachusetts, with 16 locations throughout Massachusetts, Kaplansky Insurance is an independent insurance agency offering a suite of insurance solutions including auto, home, business and life insurance.

South Central Towerstone, PLUS

Towerstone, the Dallas-based wholesale insurance division of IMA Financial Group, has acquired Professional Lines Underwriting Specialists Inc., an Austinbased wholesale insurance brokerage specializing in management and professional liability. The partnership opens new markets for Towerstone and PLUS, and provides Towerstone with expertise to address new products sought by commercial insurance brokers such as cyber coverage, directors and officers insurance, professional and employment practices liability. PLUS will operate as a specialty division of Towerstone. Its eight team members will continue to operate out of the company’s office in Austin.

Davies, IAS Claims Services

UK-based Davies, a specialist professional services and technology business serving insurance and highly regulated markets, is acquiring San Antonio-based IAS Claim Services (IAS). IAS provides a range of tech-enabled claims solutions including desk adjusting, field adjusting and third-party administraINSURANCEJOURNAL.COM

tion services to the insurance market. It specializes in daily property, commercial, catastrophe and large loss claims and has a nationwide network of independent adjusters serving all 50 states. IAS will form part of Davies’ existing US-based claims solutions business led by CEO Matt Button. Walter Leddy, IAS’ CEO and the existing management team will continue to lead the day-to day-operations and the wider team will continue in their roles within Davies. TAGA, Main Street America Insurance Cedar Park, Texas-based Tejas American General Agency has formed an exclusive partnership with Main Street America Insurance, a member of the American Family Insurance group, to distribute its farm and ranch products in Texas. Main Street’s farm and ranch products, which offer broad coverages and financial strength, will be distributed exclusively through independent agents, TAGA said. Coverages are admitted, direct bill and written on A XV paper.

Southeast

Burns & Wilcox Burns & Wilcox announced the purchase

of an office building located in Morehead City, North Carolina at 800 Arendell. The newly acquired building is already the home of the company’s Morehead Citybased team. Formerly owned by Wells Fargo Bank, the two-story building will undergo significant renovations over the next six months. After renovations are complete, Burns & Wilcox will occupy the second floor, while the first floor will be leased to new tenants. The strategic purchase represents a significant upgrade in terms of office space, accommodating the company’s desire to attract top talent and support its growth expectations. Burns & Wilcox is a specialty insurance broker based in Farmington Hills, Michigan. The North and South Carolina offices are known for their specializations in commercial, professional and personal specialty insurance, and their expertise in coastal and flood business. Wells Fargo Bank was the owner and

seller of the property. The deal was conducted by Kaufman Real Estate Management.

West

Cornerstone, CLIC

Cornerstone Risk Solutions LLC, a Denver, Colo.-based subsidiary of IMA Inc., has acquired CLIC Management NV LLC, a managing general agent of group-based insurance programs for the legal cannabis industry. CLIC Management has offices in San Diego, Calif., and serves as the managing general agency for CLIC Risk Retention Group Inc., a cannabis-industry-owned insurance carrier. CLIC founder Chris Payne said that by joining forces with Cornerstone, they are “creating the first risk retention group owned by licensed cannabis companies, with risk management and loss control services that meet their specialized needs.” IMA Vice President and National Cannabis Practice Leader Michael Hennessey said the deal “will move the needle for all cannabis-related organizations, particularly those generating more than $50 million in revenue, and furthers our expertise and offerings in cannabis risk management.”

OLI Insurance Services, Valley General

OLI Insurance Services Inc., a subsidiary of Heffernan Insurance Brokers has acquired San Jose, Calif.-based Valley General Insurance Services. Valley General will continue to be led by its president David Tuckness, and will operate autonomously as a subsidiary agency. Valley General, formerly part of Archway Insurance Brokers LLC, was established in 1975 and focuses on commercial lines and personal insurance products. Tuckness joined Valley General in 1989 with a focus on the construction industry, became a partner and, later, the sole shareholder. OLI Insurance Services Inc. helps small independent agencies grow by providing market access, new business fulfillment, back office support and technology. JULY 5, 2021 INSURANCE JOURNAL | 23

People National

Global insurance brokerage HUB International continues to strengthen its cannabis insurance capabilities with the appointment of Bradley Rutt as U.S. Cannabis Specialty leader. Rutt will work alongside Jay Virdi, chief sales officer of Cannabis Specialty, in supporting the practice strategy nationally. Rutt specializes in cannabis executive liability. He has worked with several large public and private management services organizations in designing tailored insurance programs and risk management programs. Before joining HUB, he was vice president and partner at Elkins Jones Insurance Agency in Los Angeles. Elkins Jones was acquired by Hub in 2017.

Safety National has hired Tim O’Grady as

vice president for underwriting in the Tim O’Grady company’s large casualty division, which is responsible for large deductible workers’ compensation, commercial auto and commercial general liability coverage distribution. With nearly 30 years of industry experience, O’Grady brings a large account underwriting background to Safety National. He is a former regional senior vice president with AIG Risk Management out of Georgia. In his new capacity with Safety National, O’Grady will be responsible for leading large casualty underwriting for the southwest region and Colorado through oversight of Safety

National’s Dallas, Texas, office. In addition, he will directly manage Safety National’s large casualty presence in Florida, Alabama and Mississippi. O’Grady will be based out of Safety National’s Alpharetta, Georgia, office.

East

Greene & Associates Inc.,

based in East Aurora, New York, has hired Phil Rapini as its new chief financial officer. Rapini will be responsible for overseeing the financial operations of the specialty insurance brokerage firm, as well as developing future revenue models for the company. He previously served as CFO at LoVullo Associates Inc. for 17 years. Rapini created and managed Superior Payment Plan LLC, a specialty insurance premium finance lending company. His appointment comes as long-time CFO Terry Greene will be retiring later this year.

Merchants Insurance Group has

promoted

Scott Behrent

Scott Behrent to vice president of National Distribution. He will be working out of his residence in Pittsfield, Massachusetts. Behrent joined Merchants in 2015 as its regional vice president for the company’s New England regional office in Bedford, New Hampshire. He has more than 30 years of property/casualty insurance claims, operations and underwriting experience. In this new position, he will be responsible for managing and developing strategic relationships with key

24 | INSURANCE JOURNAL | JULY 5, 2021

agency partners who represent Merchants across multiple operating territories. Behrent will work closely with Merchants’ regional offices to develop and coordinate the execution of strategic business plans and will oversee agency contracts and licensing, as well as agency mergers and acquisitions. Maryland Insurance Commissioner Kathleen A. Birrane has named

Bradley Boban

Bradley B. Boban as chief actuary for the Maryland Insurance Administration (MIA). Boban has served as senior actuary for the MIA since 2017. He has nearly two decades of experience in actuarial science. He will lead the 10-person Office of the Chief Actuary. The primary responsibilities of the office include reviewing rate requests and appropriate supporting data for compliance with Maryland laws and regulations governing health insurance, which includes long-term care, major medical and disability coverage. He will also be responsible for the annual valuation and certification of the reserves held by life insurance companies domiciled in Maryland to pay future benefits, as well as tracking and analyzing various industry trends. Prior to joining the MIA, Boban was assistant actuary at CareFirst BlueCross BlueShield, where he managed a three-person team in charge of pricing the individual health insurance marketplace in three states. He began his career at CareFirst in 2002 as an actuarial analyst.

Southeast

McGriff has hired Dain Jorgenson as

a senior vice president and producer in its Dain Jorgensen Birmingham, Alabamabased energy practice. Jorgenson joins McGriff from Insurance Risk Partners, where he served as senior vice president and was responsible for developing new opportunities and solving complex risk transfer and project development problems in the renewables, power, oil and gas, infrastructure and heavy chemical manufacturing industries. He previously served as vice president of business development at Hayes Companies in the firm’s Power and Utility Division. He has been an active member of the Iowa Wind Energy Association for more than eight years, four of which he served as president of the board of directors. Jorgenson will work to provide additional resources to McGriff clients in the energy industry and help drive growth in McGriff’s renewables practice.

Allianz Global Corporate & Specialty’s (AGCS) North

American Aviation team has promoted two executives and hired a new underwriting specialist, effective immediately. Lamont Rosemond has been promoted to regional head of Aviation Programs and Product Development in North America. He reports to Dave Warfel, regional head of Aviation in North America. Based in Alpharetta, Georgia, Rosemond supports and implements product development INSURANCEJOURNAL.COM

and growth initiatives. He is also responsible for managing programs, as well as developing and maintaining broker and client relationships within the aviation line of business. Rosemond joined AGCS in 2014 and has 15 years of aviation underwriting experience. Joshua Ray has been promoted to general aviation team leader for the Eastern region. He reports to Dave Watkins, regional aviation product leader. Based in Alpharetta, Ray handles underwriting placements and strategies within the Eastern region. He joined AGCS in 2008 and has more than 23 years of aviation insurance industry experience as an underwriter and broker from general aviation to major products manufacturers’ risks. Ray has been an active pilot since 1989. Peter Falcone has joined AGCS as an underwriting specialist, reporting to Ray. Falcone joins from AIG Aviation in Atlanta where he was a senior underwriter primarily serving the southeastern U.S. Previously, he was a broker at Willis Towers Watson as well as a senior client services manager with Arthur J. Gallagher & Co.

South Central

After 22 years as president and CEO of Texas-based Anco Insurance and 47 years in the insurance industry, Kathy Gregory is retiring. Sid Cauthorn, CEO of the Bank & Trust of Del Rio and president and chairman of the board of Westex Bancorp Inc., will assume the role of president and CEO of Anco Insurance upon Gregory’s retirement, effective July 1, 2021. Cauthorn also serves as INSURANCEJOURNAL.COM

chairman of the board of directors of Anco. Gregory will remain with Anco Insurance as a member of the board of directors. She joined Anco Insurance in 1984 after gaining a decade of experience in the insurance industry. Cauthorn has worked in the banking industry since 1987. Cauthorn is also a member of the board of directors of First Financial Bank in Bryan, Texas. Dallas-based Upland Capital Group, the excess and surplus (E&S) casualty, property and specialty insurance provider that launched earlier this year, hired Mark Jones to be its chief risk officer, chief actuary and head of analytics. He will manage the enterprise risk of the organization as it continues to implement its strategies for steady, long-term growth. Jones brings with him 25 years of industry experience, most recently as the director of advanced analytics, technology and actuarial at PwC and an earlier term as vice president and senior actuary at Hallmark Financial Services Limited.

Midwest

Columbus, Ohio-based Assurex Global has appointed Dean Hildebrandt as CEO, replacing Jim Hackbarth, who is retiring after nearly 18 years with the organization. Hildebrandt, who has served as Assurex Global president since September 2019, is the latest in a series of strategic management changes implemented to position the firm for future growth. Hildebrandt, who joined Assurex Global in March 2019 as executive vice president,

has more than 25 years in the business, including as CEO of Associated Benefits and Risk Consulting, a national, multiline insurance agency. He also led the former Assurex Global partner, Ahmann-Martin — a provider of risk management, employee benefits, and financial services — before its acquisition by Associated Banc-Corp. in 2015. He also served on the Assurex Global board of directors from 2014 to 2015.

He joined National Interstate in 2006, holding management positions in several divisions. From 2011 to 2015, he was director of business development at the Vanliner Division, where he was instrumental in the formation and growth of several captive insurance programs for the moving and storage industry. Most recently, Keenan served as assistant vice president in the specialty division.

National Interstate Insurance Co. has promoted Christopher (Chris) E. Mikolay

CAC Specialty in Colorado has named Erin Lynch as pres-

to senior vice president, Specialty Division and Daniel (Dan) M. Keenan to vice president of national accounts. Mikolay assumes leadership responsibility for National Interstate’s specialty division and Hawaii office. The Specialty Division consists of insurance programs in industries including waste operations, fleet towing and recovery, heavy haul and crane, ambulance, energy and environmental and rental car. Mikolay joined National Interstate in 2007 as a product manager and has held various positions of increasing responsibility. After leading and launching several captive programs within the Alternative Products division, he held the position of director of sales and marketing for National Interstate. Mikolay has been instrumental in the formation, management and growth of the National Accounts division and managed the Truck Captive programs and Business Development team. Keenan now leads the National Accounts division.

West

ident of its natural resources division and co-leader of its power, utility and renewables vertical. Lynch most recently led the global energy practice at Beecher Carlson during her 14-year tenure. CAC Specialty is a specialty insurance brokerage business focused on providing expertise and placement capabilities across the spectrum of insurance and alternative capital markets.

Allied American Underwriters,

Eugene Manioukov

a division of

USG Insurance Services Inc.,

has named Eugene Manioukov as a producer/broker specializing in workers’ compensation in the Irvine, California, branch. Manioukov has four years of experience in the industry, most recently with Reata Holdings. AAU is a program manager that offers programs for commercial lines to USG retail agents and other distribution channels.

JULY 5, 2021 INSURANCE JOURNAL | 25

Spotlight: Earthquakes Earthquake Activity Increasing in U.S. Oil Regions, Study Says

he number of noticeable earthquakes has been increasing year after year since 2017 in the key oil producing regions of the U.S., according to an analysis by an independent energy research firm. The analysis of seismic activity by Rystad Energy reveals that tremors of above the magnitude of 2 on the Richter scale quadrupled in 2020 and are on track to increase even further in frequency in 2021 if oil and gas activity sticks to its current drilling methods at the same pace. The oil and gas industry is contributing to the increased seismic activity through its practice the saltwater disposal through underground injection, Rystad reports. The research, which examined data from Oklahoma, Texas, Louisiana and New Mexico, showed that earthquakes of above the given magnitude accumulated to a count of 242 in 2017, growing to 491 in 2018, 686 in 2019 and 938 in 2020. Around 570 such

tremors have been recorded through the first five months of 2021, meaning we may see a new record this year. The trend appears to be moving not only to more frequent, but also larger events, the report says. So far this year, analysts said there have already been 11 individual seismic events of magnitude 3.5 or greater, which can be felt but may not cause any damage. They said this is a “worrying sign” compared to just six such events annually in 2018 and 2019, and 14 events in 2020. Rystad said the biggest oil and gas industry contributor to seismic activity is by far the saltwater disposal through underground injection, according to the report, and the volume of disposed water climbed sharply from 2011 through 2019. It then tapered off a little in 2020 due to lower activity from the pandemic. While the U.S. onshore sector’s water disposal in 2011 was limited to 7.7 billion barrels, the volumes quickly built up over the next years to around

26 | INSURANCE JOURNAL | JULY 5, 2021

10 billion barrels between 2014 and 2017. In 2018 disposed volumes reached 11.5 billion barrels and in 2019 about 12.4 billion barrels, before retreating to 11.3 billion barrels in 2020. Ryan Hassler, shale analyst at Rystad, said that the cost of maintaining water disposal at 2020 levels and offsetting its coming growth could be more than $1 billion annually for oil and gas producers, although the cost will vary by region. Hassler added that earthquakes are not the only environmental issue caused by water disposal. “Fresh water sourcing in arid regions of West Texas and New Mexico threaten the water supply of local communities and essential agriculture activities, while environmental concerns surrounding the chemical composition of produced water serve only to fan the flames of public antipathy,” he said. The real driver to increase water recycling adoption is cost. Midstream companies continue to build out pipeline infrastructure to allow

operators cheaper access to produced water, while also expanding existing recycling facilities or building new ones. Rystad Energy estimates that by the end of 2022, the Permian Basin (western Texas and southeastern New Mexico) — including both the Delaware and Midland sub-basins — could be able to meet between 40% and 43% of frac water demand from recycled produced water. Hassler said there are ways to alleviate the growing pains of the recycling infrastructure and the disposal seismic problem. While there are several avenues in which produced water can be reused from an agriculture, irrigation or wildlife standpoint, not all states are currently taking advantage of them. Texas is now allowing the Texas Commission on Environmental Quality to take responsibility for the permitting of produced water surface discharge for beneficial reuse. Rystad says this change should allow for a more streamlined permitting process, enabling operators to discharge produced water volumes into surface water to be beneficially reused for agriculture or wildlife. However, Rystad reports, this does not appear to be the case, as the Texas commission has yet to administer a single permit since taking over responsibilities. Currently, only Wyoming takes advantage of surface water discharge for beneficial reuse under law, providing an additional market for water reuse. California, on the other hand, uses produced water for crop irrigation. INSURANCEJOURNAL.COM

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News & Markets Ex-Principal Suing Oregon School District for Discrimination

former South Albany High School principal is suing Greater Albany Public Schools, claiming the district racially discriminated against him and created a hostile work environment. Nain “Nate” Munoz filed the suit in late May in U.S. District Court in Eugene. Munoz was interim principal and then principal of South Albany from July 2018 to June 2020. The case is linked to two separate complaints Munoz filed with the Oregon Bureau of Labor and Industries last year accusing the district of employment discrimination and retaliation. The state agency co-filed the complaints with the Equal Employment Opportunities Commission. Both issued Munoz a “right to sue” letter earlier this year in connection with both complaints. Munoz is identified in the lawsuit as being of Mexican American descent. He

contends the district discriminated and retaliated against him based on his race and national origin and for engaging in whistleblowing. Barrett Mersereau, who is representing Greater Albany Public Schools, said he could not discuss the case. Munoz’s attorney, Dan Snyder, also declined to comment. “While the District cannot comment on pending litigation, GAPS is dedicated to providing a safe and inclusive environment for all students and employees,” District Superintendent Melissa Goff said in an email. In the lawsuit Munoz alleges numerous instances in which he said he either did

not receive requested support from the school district, was held to a higher or different standard than other staffers or was reprimanded for matters outside his knowledge or control. He claims he was terminated because he filed complaints about the issues. Copyright 2021 Associated Press.

City in New Mexico Suing Companies Over Lighting on Problem-Plagued Bus Route

ew Mexico’s largest city has sued companies involved in the design and construction of a rapid transit system over light fixtures that have fallen or weren’t secured. The Albuquerque Rapid Transit bus system has been plagued with problems that include electrical charging, wheelchair access on platforms, mirrors hitting canopies and crashes on the bus routes that run along Central Avenue, a major city corridor. Albuquerque is seeking at least $2.5 million in compensatory damages and another $10 million in punitive damages as part of a lawsuit it filed last week regarding the light fixtures. At least 46 streetlights either have fallen to the ground or had to be removed because they were being held in place by W2 | INSURANCE JOURNAL | JULY 5, 2021

only electrical wiring, endangering the public, the lawsuit contends. Some of the 25-pound lights have fallen up to 25 feet onto the street, according to the lawsuit. Ill-fitting screws and other parts provided by the manufacturer caused the lights to loosen from light poles, according to a reported prepared for the city. The company that manufactured the lights, California-based Environmental Lighting for Architecture Inc., told the Albuquerque Journal that the firm has reached out to the city in hopes “a swift and amicable solution can be found.” The firm’s president, Scott Jones, said the lighting fixtures had been modified by an outside source against its recommendations.

The general contractor for the bus system, Bradbury Stamm Construction, and Massachusetts-based Dalkia Energy Solutions, which was hired to convert the city’s streetlights to LED lighting, did not respond to the newspaper’s requests for comment. Another defendant, New Mexico-based architectural firm Dekker/Perich/Sabatini, said it had no part in the selection or installation of the streetlights and should not have been named in the lawsuit. The city of Albuquerque said it spent about $494,000 to secure, retrofit and replace streetlights on the bus route. The city began service on the route in November 2019 using diesel-powered buses after it rejected electric buses that had insufficient battery life and other problems. Former Mayor Richard Berry had proposed the bus system as a way to transform Central Avenue. Some businesses argued it restrict access for customers and lead to more traffic problems. Copyright 2021 Associated Press. INSURANCEJOURNAL.COM

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News & Markets $1M Settlement Reached in Washington Dairy Worker Overtime Suit

akima County Superior Court has approved a $1 million settlement that provides retroactive overtime pay for workers at a Lower Yakima Valley dairy. The settlement wraps up a class-action lawsuit filed in 2016 by Jose MartinezCuevas and Patricia Aguilar on behalf of nearly 300 workers of DeRuyter Brothers Dairy of Outlook. Martinez-Cuevas and Aguilar alleged that they worked nine to 12 hours a day, six hours a week without rest breaks, meal pay or overtime pay. Most of the wage claims were resolved in a $600,000 settlement approved in 2017. That settlement left unresolved a challenge

to state law that exempted the workers from overtime pay. The case went to the Washington Supreme Court, which ruled last fall that the overtime exemption for the dairy workers was unconstitutional. However, the question of whether the DeRuyter workers were entitled to retroactive overtime pay went back to Yakima County Superior Court.

The case was set for a hearing, but a settlement was reached, said Andrea Schmitt, an attorney for Columbia Legal Services, which represented the workers. Former owners Jacobus and Geneva DeRuyter sold the dairy but will still fulfill the settlement terms. The DeRuyter’s lawyer said the original complaint challenged state law on overtime, but didn’t claim DeRuyter violated the law as written at the time. Copyright 2021 Associated Press.

Hawaii Boosting Peer-to-Peer Car Rental Oversight

he Hawaii Department of Taxation has been boosting its monitoring of peer-to-peer car rentals. The industry operates with the help of apps like Turo, which people can use to rent their personal cars to others. Department Director Isaac Choy said residents should do research before doing so. One thing to know, he said, is that Hawaii law requires taxes and a rental car surcharge to be collected on every vehicle. “I think it’s along the lines of vacation rentals and everything. Everybody’s trying to make a little extra money,” Choy said. “Peer-to-peer cars, I don’t know if it’s going

W4 | INSURANCE JOURNAL | JULY 5, 2021

to be the next big thing, but it’s going to be a thing and we just want to make sure that if you’re renting your car that you’re being really, really fair with any commercial car rental operation.’” The state requires Turo to pay rental car taxes, he said. The person who owns the car must pay a half-a-percent wholesale rate. Lou Bertuca, the head of government relations for Turo, told The Associated Press rental car companies don’t pay sales taxes on vehicles they purchase in most states, creating what he called a “front-end sales-tax loophole.” In Hawaii, Bertuca said the companies must pay a 0.5% tax on vehicle purchases, which is significantly less than the more than 4% general excise tax plus paid by Hawaii retail car buyers. Choy said owners should also check with their insurance agent or attorney before posting their

vehicle on Turo because it’s important to know what their liability would be if a renter damages the vehicle or private property. Some residents have complained to officials after seeing their streets become parking lots for vehicles. The issue emerged at a Waialae-Kahala neighborhood board meeting in June. Tax department investigators recently checked out a site in Kahala and took pictures of more than a dozen cars offered on Turo that were parked on public streets. The Honolulu Department of Planning and Permitting has received complaints from Kahala as well as Ewa, Kalihi and Salt Lake. Turo wants people to reach out to the company to let them know if a host is not being a good neighbor, Bertuca said. “We want hosts to be good community members and citizens,” he said. Hawaii airport officials have ticketed operators in Honolulu and Maui. They said they are monitoring the situation closely and considering changing some administrative rules. Turo is trying to obtain parking permits from airports around the country, Bertuca said. It already has such arrangements with airports in Denver and Tampa, he said. Copyright 2021 Associated Press. INSURANCEJOURNAL.COM

News & Markets Grim California Wildfire Outlook Has Insurers Forking Over Big Bucks for Modeling By Don Jergler

evere drought and searing temperatures are not the only proof that Californians should be worried about wildfires this year. A glaring piece of evidence that there’s ample cause for concern is this: those who will be on the hook for paying for losses from fires are increasingly forking over sizable sums of money for better fire modeling to try and cut losses. California last year saw 4.2 million acres burned, roughly 10,000 structures destroyed or damaged, and 31 fatalities. Economic loss from wildfires in 2020 was roughly $19 billion, according to Aon’s

W6 | INSURANCE JOURNAL | JULY 5, 2021

2021 Weather, Climate and Catastrophe report, which shows that five Western fires each accounted for more than $1 billion in losses. Insurers have responded in several ways. Getting smarter is one way. Sales of two fire models have been going up noticeably for CoreLogic, an Irvine, Calif.-based provider of data and analytics. And it’s not just more insurers buying the models. Reinsurers have increasingly been purchasing CoreLogic’s wildfire models, the company says. Sales of both their Wildfire Risk Score and the U.S. Wildfire Model are up markedly, according to Shelley Yerkes, product manager for CoreLogic’s wildfire models.

Insurance rates being charged haven’t been commensurate with the growing risk, so the losses insurers have incurred in the past few years have bled into the reinsurance ranks, forcing reinsurers to react, Yerkes explained. “Huge losses have penetrated deep into the insurance layers,” she said. “And now reinsurers are seeing that they're paying out a lot in that additional coverage. They need pricing tools.” California regulators have approved a plan by Farmers Insurance to assess wildfire risk by using a tool that combines artificial intelligence with high-resolution aerial photography. The carrier said the

continued on page W8

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News & Markets continued from page W6

Z-Fire risk scoring model developed by Zesty.ai is expected to make standard coverage available to an additional 30,000 homeowners. Modeling is expensive, so it says something that insurers are beefing up in this area. Depending on the size of an insurer’s book, Yerkes said the cost for the CoreLogic models could be in the millions-of-dollars over multiple years of licensing. The CoreLogic Wildfire Risk Score is a deterministic wildfire model that evaluates the risk of a property by returning a 5 to 100 score. The model considers elements like slope, vegetation/fuel and proximity to higher risk areas. The probabilistic CoreLogic U.S. Wildfire Model combines agents of damage including ignition sources, spread and suppression with structural vulnerability. Burn and smoke damage is accounted for, and the model accounts for weather conditions. Once damage ratios are calculated, the model applies insurance conditions to determine financial loss. Beside working to better model their risk, insurers have also began to pull back and write less in wildfire prone areas. Homeowners in California’s high-risk areas are finding it difficult to obtain property insurance outside of the California FAIR plan. The number of California homeowner policies that insurers declined to renew rose 31% to 235,250 in 2019 from 179,458 in 2018, while the number of policies issued through the FAIR plan rose to 190,196 from 140,138, according to a report by the California Department of Insurance. California Insurance Commissioner Ricardo Lara in May called for property insurers in the state to step up and do more to help residents and businesses deal with wildfires. The surplus lines market has also been taking up the slack where the admitted market has left off. According to the Surplus Line Association of California, surplus lines premiums in 2020 in California grew 22.7%, while the surplus lines item count grew 8%, with wildfires driving some of those increases. W8 | INSURANCE JOURNAL | JULY 5, 2021

A recent report from the group shows the average premium per commercial transaction for May, the latest data available, rose from $9,000 during the same period in 2018 to $27,000. The average premium per homeowners/residential transaction rose from $2,500 in 2018 to $7,500 in May. “Both markets hardened substantially and trendlines indicate continued hardening into 2022,” the report states. It’s unlikely pressure will be taken off rates anytime soon. The fire forecast for the Western U.S is ugly. More than 25% of the region is under “exceptional drought” conditions, the most severe category used by the U.S. Drought Monitor. And record temperatures are being experienced by several states in the region. A National Weather Service advisory issued in mid-June warned of the personal dangers from the heat: “Very High Heat Risk. Increase in heat-related illnesses, including heat cramps, heat exhaustion, and heat stroke. Heat stroke can lead to death.” California’s fire season, which historically began around September, is starting earlier and lasting longer every year. “What we’ve noticed is that our wildfire seasons has been averaging an extra 75 days, so it’s starting earlier and lasting longer,” said Lynnette Round, information officer at CalFire. Round said fuel moisture levels this year are already down at a level not typically

seen until late July. “Our fuel moistures have dried quite a bit,” she said. “It just ups the chances of wildfire starting and moving quickly.” The state has already been planning for the worst. Gov. Gavin Newsom expedited $536 million for wildfire preparation through Senate Bill 85 in April, including $25 million in funds to assist home-hardening projects. This gave the state an additional 1,400 full-time firefighters, who Round said have already been brought on board and trained. That help is welcome, but Yerkes doesn’t hold out much hope for any assistance from Mother Nature. “In California we are in a very big deficit right now and that’s going to continue through the rest of the year,” Yerkes said. “We are looking at a really potentially big fire season.” Drought alone doesn’t start fires — you still need an ignition. Last year the lightning ignitions were responsible for many of the fires on the West Coast, however most fires tend to be due to humans — roughly 80% of fires are human caused, data shows. With people returning to their normal activities as the pandemic winds down, Yerkes is preaching caution. “With things getting back to more normal, you could expect that people are back to doing what they always did before the pandemic and I would expect 80% human caused ignitions to be likely,” she said. INSURANCEJOURNAL.COM

News & Markets Housing Market Boosts Personal Lines Shopping But Auto Still Lags

hopping for personal lines insurance is showing signs of returning to pre-pandemic levels in the U.S., according to a new TransUnion report. Auto insurance remains a big exception, however. The consulting firm found in its Personal Lines Insurance Shopping Report that the three-week moving average for shopping in this sector rose 24.6 percent the week of March 28, 2021 compared to the previous year. Much of the increase stemmed from the fact that March 2020 marked the beginning of many state lockdowns, but there was at least one other large increase during the 2021 first quarter. Trans Union tracked a 26 percent yearover-year increase during the week of Jan. 3, 2021. The personal lines insurance marketplace rebound was due to a number of factors, TransUnion said, including big growth in mortgage originations and consumers emerging from the pandemic with plenty of money to spend, and a resulting growing need to cover homes and valuable belongings. “Low interest rates, a work from home posture, and a race for space fueled the hot housing market and the likely increase in property insurance shopping,” Mark McElroy, executive vice president and head of TransUnion’s insurance business, said. Auto insurance was a different story. While auto insurance shopping rose 14 percent during the week of March 28, 2021, auto insurance shopping rates have either declined or nudged just slightly higher for much of the 2021 first quarter, according to TransUnion. “Based on our latest data, we expect that positive year-over-year trends will INSURANCEJOURNAL.COM

continue for personal lines insurance shopping as the economy continues to emerge from the pandemic,” McElroy said. “Price continues to be the main driver of auto insurance shoppers. For property insurance shoppers however, better coverage is the main driver, perhaps owing to the fact they are in a better financial position at this point in the recovery.” TransUnion’s results are buttressed by a customer survey of 2,055 U.S. adults in March 2021. That survey results included: • 14% of respondents said they switched auto insurance providers since the beginning of the pandemic. Of that group, 42% said they changed because of a cheaper premium and 32% switched for better coverage. • About 11% of respondents said they switched property insurance providers since the beginning of the pandemic with 36% changing to secure better coverage and 35% doing so for a lower premium. • The percent of auto insurance inquiries

with a mortgage trade opened within the preceding 90 days increased from 1.5% in 2019 to 2.1% in 2020. • The percent of property insurance inquiries with a mortgage trade opened within the preceding 90 days also increased to 2.4% in 2020 compared to 1.6% in 2019. While these percentage changes may seem low, the increase affected tens of thousands of insurance policies across the country, TransUnion said. TransUnion said its Personal Lines Insurance Shopping Report is based on a larger report derived from TransUnion’s database of credit data. It includes information on more than 500 million auto insurance shopping transactions from January 2016 to March 2021. The report excludes data from auto insurance customers in California, Hawaii and Massachusetts, where credit-based insurance scoring information is not used for auto insurance rating or underwriting. JULY 5, 2021 INSURANCE JOURNAL | 27

Special Report: Super Regionals 2021 Super Regional P/C Insurers Demotech Inc. Reveals Leading Multi-State TM

Property/Casualty Insurers

By Barry J. Koestler II

n order to continue the discussion regarding what constitutes a Super Regional P/C Insurer™ and to give definition to this important group of insurers, Demotech Inc. analyzed year-end 2020 data for property/casualty insurance companies. This data was utilized to classify and stratify insurers reporting data to the National Association of Insurance Commissioners. This year marks the 15th year of this effort, as the original criteria

and objective definitions for Super Regional P/C Insurers™ and our other company classifications were established in the February 12, 2007, issue of Insurance Journal.

Demotech Company Classification System

The Demotech Company Classification System categorizes property/casualty insurers, not groups or families of insurers, into one of 11 categories based on an analysis of the data reported by the companies. The 11 categories that comprise

2021 Property/Casualty Insurance Cos. Demotech Company Classifications Direct Premium Written Less than $1 million 3.5% Reinsurers 2.1%

Nationals 2.7% Near Nationals 2.3% Super Regionals 5.7%

Surplus Lines Carriers 8.4% Risk Retention Groups 8.6%

Regionals 7.8%

Strategic Subsidiaries 18.3%

State Specialists 26.1% Coverage Specialists 14.7%

28 | INSURANCE JOURNAL | JULY 5, 2021

the system are Nationals, Near Nationals, Super Regionals, Regionals, State Specialists, Coverage Specialists, Strategic Subsidiaries, Risk Retention Groups, Surplus Lines Carriers, Reinsurers, and companies with less than $1 million in direct premium written. A company cannot be assigned to more than one category. Therefore, a company not designated as a Super Regional is given another classification, perhaps Near National, Regional, or State Specialist.

Super Regional Criteria and Thresholds

To determine the companies for the 2021 Super Regional Property/Casualty Insurer™ list, these specific, objective

qualifying criteria and thresholds evaluated as of December 31, 2020, were used: • Active, individual companies; • Reporting data using the property/casualty annual statement format; • At least $1 million of direct premium written in each of two to 34 states; • Less than 90% of direct premium written in any one state; • Less than 90% of direct premium written in any one line of business; • Policyholders surplus of at least $100 million; • Net premium written of at least $50 million; and • Direct premium written of at least $25 million. INSURANCEJOURNAL.COM

In general terms, a Super Regional is an individual company writing multiple lines of insurance in multiple states. Risk retention groups, surplus lines insurers, and reinsurers are not eligible for the Super Regional category as they are assigned to their own classifications. Prior to the establishment of an industry-wide definition, a number of property/casualty insurers had referred to themselves as Super Regionals. Demotech, the official research partner of Insurance Journal, has compared the data to the criteria and updated the list of Super Regionals for 2021.

The 2021 Super Regional Property/Casualty Insurers™

For 2021, 145 Super Regional Property/Casualty Insurers™ were identified. They are presented in this Insurance Journal Special Report both alphabetically and by size as ranked by direct premium written as of December 31, 2020. For 2021, there are 12 Super 2021 Regional companies that were not classified as Super Regionals in 2020, as well as 15 insurers identified as Super Regionals in 2020 that have been reclassified into another category this year based on year-end 2020 information. Of the 145 Super Regionals for 2021, 65 have been designated as such for all 15 years that the Company Classification System has been applied. Super Regional insurers are critically important to

continued on page 30

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2021 Super Regional Property/Casualty Insurers™ Alphabetical Listing

Acuity, A Mutual Insurance Co. Alaska National Insurance Co. All America Insurance Co. American Commerce Insurance Co. American Family Mutual Insurance Co., S.I. American Hallmark Insurance Co. of Texas American Mercury Insurance Co. American Road Insurance Co. American Select Insurance Co. Amerisure Insurance Co. Amerisure Mutual Insurance Co. AMEX Assurance Co. Arbella Protection Insurance Co. Artisan and Truckers Casualty Co. Ascot Insurance Co. Atlantic States Insurance Co. Auto Club Group Insurance Co. Auto Club Insurance Association Auto-Owners Insurance Co. Bay State Insurance Co. Benchmark Insurance Co. Brethren Mutual Insurance Co. Builders Mutual Insurance Co. California Casualty Indemnity Exchange Cambridge Mutual Fire Insurance Co. Capitol Indemnity Corporation Central Mutual Insurance Co. Cherokee Insurance Co. Citizens Insurance Co. of America Columbia Mutual Insurance Co. Concord General Mutual Insurance Co. Contractors Bonding and Insurance Co. COUNTRY Mutual Insurance Co. Courtesy Insurance Co. Cumberland Mutual Fire Insurance Co. Cypress Insurance Co. DB Insurance Co., Ltd. (US Branch) Donegal Mutual Insurance Co. Electric Insurance Co. Endurance Risk Solutions Assurance Co. Erie Insurance Co. Erie Insurance Exchange Executive Risk Indemnity Inc. Explorer Insurance Co. Farm Bureau Property & Casualty Insurance Co. Farm Family Casualty Insurance Co. Farmers Alliance Mutual Insurance Co. Farmers Automobile Insurance Association Farmers Insurance Co., Inc. Farmers Insurance Exchange Farmers Mutual Insurance Co. of Nebraska Farmington Casualty Co. FCCI Insurance Co. FedNat Insurance Co. Fire Insurance Exchange Frankenmuth Mutual Insurance Co. General Casualty Co. of Wisconsin Goodville Mutual Casualty Co. Grange Insurance Association Grange Insurance Co. Grinnell Mutual Reinsurance Co. Harford Mutual Insurance Co. Hartford Insurance Co. of Illinois Hastings Mutual Insurance Co. Heritage Property & Casualty Insurance Co. Home-Owners Insurance Co. Horace Mann Property & Casualty Insurance Co. Imperium Insurance Co. IMT Insurance Co. Lancer Insurance Co. Lightning Rod Mutual Insurance Co. Lititz Mutual Insurance Co. MemberSelect Insurance Co.

Merchants Mutual Insurance Co. Mercury Casualty Co. Merrimack Mutual Fire Insurance Co. Mid-Continent Casualty Co. Middlesex Insurance Co. Midwest Family Mutual Insurance Co. Milbank Insurance Co. MMG Insurance Co. Motorists Commercial Mutual Insurance Co. Motorists Mutual Insurance Co. Motors Insurance Corporation Mountain West Farm Bureau Mutual Insurance Co. Mutual Benefit Insurance Co. Mutual of Enumclaw Insurance Co. Nationwide Insurance Co. of America Nationwide Mutual Fire Insurance Co. North Star Mutual Insurance Co. Occidental Fire and Casualty Co. of North Carolina Old Republic General Insurance Corporation Owners Insurance Co. Palomar Specialty Insurance Co. Patrons Co-operative Fire Insurance Co. Peerless Insurance Co. Pekin Insurance Co. PEMCO Mutual Insurance Co. Penn National Security Insurance Co. Pennsylvania National Mutual Casualty Insurance Co. Philadelphia Contributionship Insurance Co. Physicians Insurance A Mutual Co. Preferred Mutual Insurance Co. Preferred Professional Insurance Co. Progressive Casualty Insurance Co. Progressive Northern Insurance Co. Progressive Preferred Insurance Co. Progressive Southeastern Insurance Co. Providence Mutual Fire Insurance Co. Quincy Mutual Fire Insurance Co. Redwood Fire and Casualty Insurance Co. SECURA Insurance Co. Selective Insurance Co. of America Selective Insurance Co. of New York Selective Insurance Co. of South Carolina Selective Insurance Co. of the Southeast Selective Way Insurance Co. Shelter Mutual Insurance Co. Society Insurance, a Mutual Co. St. Paul Fire and Marine Insurance Co. StarStone National Insurance Co. State Auto Property & Casualty Insurance Co. State Automobile Mutual Insurance Co. Stillwater Insurance Co. The Automobile Insurance Co. of Hartford, Connecticut The Dentists Insurance Co. The Gray Insurance Co. Toyota Motor Insurance Co. TransGuard Insurance Co. of America Inc. Travelers Commercial Insurance Co. Triton Insurance Co. Truck Insurance Exchange Union Mutual Fire Insurance Co. United Fire & Casualty Co. United Ohio Insurance Co. United Property & Casualty Insurance Co. Utica First Insurance Co. Utica Mutual Insurance Co. Vermont Mutual Insurance Co. West Bend Mutual Insurance Co. Western National Mutual Insurance Co. Western Reserve Mutual Casualty Co. Westfield Insurance Co. Westfield National Insurance Co Zenith Insurance Co.

JULY 5, 2021 INSURANCE JOURNAL | 29

Special Report: Super Regionals continued from page 29

the insurance industry, and of particular importance to their agents, producers, and insureds. These companies are typically strong, stable markets that work hard for their agents, insureds, and their reinsurers. This is why Insurance Journal continues to have Demotech quantify and identify the criteria used to define an insurer as a Super Regional. Insurers and readers are encouraged to review the selection criteria and thresholds used to determine the 2021 Super Regionals. The selection criteria remain quantitative and transparent. Demotech

is focused on setting benchmarks at levels that accurately categorize the industry. The relative consistency of the company distribution over time suggests that the categorizations established are valid and effective in classifying the industry. It is important to reiterate that the Demotech Company Classification System is an objective stratification of the companies that comprise the industry based on their business models. It is not equivalent to or suggestive of ratings of the individual insurers. Inclusion on the list does not imply that a company is superior to companies that were not included.

Future issues will report on the other categories within the Demotech Company Classification System. Koestler II is the chief ratings officer of Demotech Inc., a financial analysis firm specializing in evaluating the financial stability of regional and specialty insurers. Since 1985, Demotech has been providing independent Financial Stability Ratings® of property/casualty insurers, life insurers, and title underwriters. Email: bkoestler@demotech.com. Website: www.demotech.com.

For reprints, badges, plaques and more, call 800-897-9965 ext. 125, or email: reprints@insurancejournal.com.

NEW 2021 Super Regionals Company Name American Road Insurance Co. Artisan and Truckers Casualty Co. Ascot Insurance Co. Heritage Property & Casualty Insurance Co. Horace Mann Property & Casualty Insurance Co. Imperium Insurance Co. Mountain West Farm Bureau Mutual Insurance Co. Nationwide Insurance Co. of America Patrons Co-operative Fire Insurance Co. StarStone National Insurance Co. Travelers Commercial Insurance Co. Truck Insurance Exchange

2021 Demotech Company Classification

2020 Demotech Company Classification

2019 Demotech Company Classification

2018 Demotech Company Classification

2017 Demotech Company Classification

Super Regional Super Regional Super Regional

Near National Regional Regional

Near National Regional Strategic Subsidiary

Super Regional Regional Strategic Subsidiary

Super Regional

State Specialist

Super Regional

Near National

Super Regional

Near National

Super Regional

Regional

Super Regional

Super Regional Super Regional Super Regional Super Regional Super Regional

Strategic Subsidiary Regional Near National Regional Near National

Strategic Subsidiary Regional Near National Regional Super Regional

Strategic Subsidiary Regional Regional Regional Super Regional

RECLASSIFIED 2020 Super Regionals Company Name

American Family Home Insurance Co. American Strategic Insurance Corp. BITCO General Insurance Corp. Columbia Insurance Co. Developers Surety and Indemnity Co. Financial Pacific Insurance Co. General Security National Insurance Co. Great Midwest Insurance Co. Mitsui Sumitomo Insurance Co. of America Nationwide General Insurance Co. Pacific Specialty Insurance Co. Progressive Gulf Insurance Co. St. Paul Mercury Insurance Co. Star Insurance Co. Western Agricultural Insurance Co.

2021 2020 Demotech Demotech Company Company Classification Classification

2019 Demotech Company Classification

2018 Demotech Company Classification

Why Company 2017 Does Not Demotech Qualify as a Company 2021 Super Regional Classification

Regional Near National Near National Strategic Subsidiary Coverage Specialist Regional Regional Regional Near National Near National State Specialist Coverage Specialist Strategic Subsidiary Near National Strategic Subsidiary

Super Regional Near National Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Strategic Subsidiary Super Regional Super Regional Super Regional Super Regional Super Regional

Super Regional Super Regional Super Regional Super Regional Super Regional Regional Super Regional Super Regional Super Regional Strategic Subsidiary Super Regional Regional Super Regional Super Regional Super Regional

Super Regional Super Regional Super Regional Super Regional Strategic Subsidiary Regional Coverage Specialist Super Regional Super Regional Strategic Subsidiary Super Regional Regional Super Regional Super Regional Super Regional

Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional Super Regional

PHS States > 34 States > 34 DPW DPW, LOB > 90% PHS PHS NPW States > 34 States > 34 State > 90% LOB > 90% DPW States > 34 PHS, NPW

LOB = Line of Business; NPW = Net Premium Written; PHS = Policyholders Surplus

30 | INSURANCE JOURNAL | JULY 5, 2021

INSURANCEJOURNAL.COM

2021 Super Regional P/C Insurers™

As developed by Demotech Inc. for Insurance Journal. Ranked by Direct Premium Written as of 12/31/20. Company

12/31/2020 DPW Group OOOs omitted Name

State Of Domicile

Farmers Insurance Exchange

$5,154,338

Farmers Insurance Group

2 3

Erie Insurance Exchange Auto-Owners Insurance Co.

$5,087,147 $4,326,496

Erie Insurance Group Auto Owners Group

PA MI

4 5

American Family Mutual Insurance Co., S.I. Owners Insurance Co.

$3,903,693 $2,367,788

American Family Insurance Group Auto Owners Group

WI OH

6 7 8 9

Progressive Casualty Insurance Co. Progressive Northern Insurance Co. Erie Insurance Co. COUNTRY Mutual Insurance Co.

$2,313,278 $2,261,474 $1,877,048 $1,806,605

OH WI PA IL

Acuity, A Mutual Insurance Co.

$1,780,138

Progressive Group Progressive Group Erie Insurance Group Country Insurance & Financial Services Group N/A

11 12

Shelter Mutual Insurance Co. Fire Insurance Exchange

$1,732,473 $1,507,575

Shelter Insurance Group Farmers Insurance Group

MO CA

Nationwide Insurance Co. of America

$1,489,494

Nationwide Corp Group

14 15 16

$1,453,310 $1,313,763 $1,253,398

N/A Progressive Group Iowa Farm Bureau Group

WI OH IA

17 18

West Bend Mutual Insurance Co. Progressive Preferred Insurance Co. Farm Bureau Property & Casualty Insurance Co. MemberSelect Insurance Co. Truck Insurance Exchange

$1,089,268 $1,087,214

Automobile Club MI Group Farmers Insurance Group

MI CA

19 20

Home-Owners Insurance Co. Westfield Insurance Co.

$1,020,299 $986,607

Auto Owners Group Westfield Group

MI OH

21 22

Farmers Insurance Co. Inc. Nationwide Mutual Fire Insurance Co.

$979,322 $973,250

Farmers Insurance Group Nationwide Corp Group

KS OH

Citizens Insurance Co. of America

$828,169

The Hanover Insurance Group

Travelers Commercial Insurance Co.

$811,012

Travelers Group

State Auto Property & Casualty Insurance Co.

$796,991

State Auto Mutual Group

26 27 28 29

United Property & Casualty Insurance Co. Artisan and Truckers Casualty Co. Progressive Southeastern Insurance Co. Selective Insurance Co. of America

$791,785 $784,683 $765,358 $740,705

United Ins Holdings Group Progressive Group Progressive Group Selective Insurance Group

FL WI IN NJ

30 31

Frankenmuth Mutual Insurance Co. Central Mutual Insurance Co.

$711,407 $706,065

Frankenmuth Group Central Mutual Insurance Co Group

MI OH

Selective Insurance Co. of South Carolina

$692,661

Selective Insurance Group

United Fire & Casualty Co.

$643,799

United Fire & Casualty Group

Selective Insurance Co. of the Southeast

$639,579

Selective Insurance Group

35 36 37

Heritage Property & Casualty Insurance Co. FedNat Insurance Co. State Automobile Mutual Insurance Co.

$633,523 $618,575 $580,030

Heritage Insurance Holdings Group FedNat Holding Co Group State Auto Mutual Group

FL FL OH

Occidental Fire and Casualty Co. of North Carolina SECURA Insurance Co. Courtesy Insurance Co. Pennsylvania National Mutual Casualty Insurance Co. Zenith Insurance Co. The Automobile Insurance Co. of Hartford, Connecticut FCCI Insurance Co. American Select Insurance Co. North Star Mutual Insurance Co. PEMCO Mutual Insurance Co. Benchmark Insurance Co.

$579,716

IAT Reinsurance Co Group

$575,298 $571,530 $569,741

WI FL PA

$546,214 $521,725

Secura Insurance Group N/A Pennsylvania National Insurance Group Fairfax Financial Group Travelers Group

CA CT

$519,467 $494,271 $474,270 $460,858 $457,183

FCCI Mutual Insurance Group Westfield Group North Star Co Group N/A Benchmark Holding Group

FL OH MN WA KS

39 40 41 42 43 44 45 46 47 48

INSURANCEJOURNAL.COM

Number/States Greater than $1 Million DPW as of 12/31/2020

34 - AL,AZ,AR,CA,CO,FL,GA,ID,IL,IN,IA,KS,MD,MI,MN,MO,MT,NE,NV,NJ, NM,ND,OH,OK,OR,PA,SD,TN,TX,UT,VA,WA,WI,WY 12 - DC,IL,IN,KY,MD,NC,OH,PA,TN,VA,WV,WI 26 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MI,MN,MO,NE,NC,ND,OH,PA, SC,SD,TN,UT,VA,WI 18 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,NE,NV,ND,OH,OR,SD,UT,WA,WI 25 - AL,AZ,AR,CO,FL,GA,ID,IL,IN,IA,KS,KY,MN,MO,NE,NC,ND,OH,PA,SC, SD,TN,UT,VA,WI 17 - AR,CA,CO,CT,DC,HI,KY,MD,MA,MO,NY,OH,PA,RI,TN,TX,WA 19 - DE,IL,IA,KY,ME,NE,NV,NH,NM,NY,OK,PA,RI,SC,SD,VT,VA,WI,WY 13 - DC,IL,IN,KY,MD,NY,NC,OH,PA,TN,VA,WV,WI 32 - AL,AK,AZ,AR,CO,CT,GA,ID,IL,IN,IA,KS,KY,MA,MI,MN,MO,NV,NH, NJ,NY,ND,OH,OK,OR,PA,TN,UT,VT,VA,WA,WI 28 - AZ,CO,ID,IL,IN,IA,KS,KY,ME,MI,MN,MO,MT,NE,NV,NH,NM,ND,OH,PA, SD,TN,TX,UT,VT,VA,WI,WY 15 - AR,CO,IL,IN,IA,KS,KY,LA,MS,MO,NE,NV,OH,OK,TN 22 - AL,AZ,CA,CO,IL,IA,MI,MN,MO,MT,NE,NV,ND,OK,OR,SD,TN, TX,UT,WA,WI,WY 32 - AZ,CA,CO,CT,FL,ID,IL,IN,KS,KY,MD,MN,MS,MO,MT,NE,NV ,NM,NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA,WV,WI,WY 14 - IL,IN,IA,KS,KY,MI,MN,MO,NE,NC,OH,TN,VA,WI 10 - AZ,CO,GA,HI,MN,MO,NM,OH,PA,UT 8 - AZ,IA,KS,MN,NE,NM,SD,UT 10 - GA,IL,IN,IA,MI,MN,NE,ND,OH,TN 34 - AL,AZ,AR,CA,CO,CT,FL,GA,ID,IL,IN,IA,KS,MI,MN,MO,MT,NE,NV,NJ, NM,NY,OH,OK,OR,PA,SD,TN,TX,UT,VA,WA,WI,WY 6 - GA,IL,MI,OH,UT,VA 27 - AL,AZ,AR,CO,CT,DE,FL,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO, NM,NC,OH,PA,SC,TN,TX,VA,WV,WI 5 - AR,IA,KS,MO,OK 25 - AL,AR,CT,DE,DC,GA,IL,IN,KY,ME,MD,MI,MS,NH,NY,NC,OH,PA,RI,SC, TN,TX,VT,VA,WV 31 - AL,AZ,CA,CO,CT,DE,GA,IL,IN,KS,ME,MD,MA,MI,MN,MO,NV,NH, NJ,NY,NC,OH,PA,RI,SC,TX,UT,VT,VA,WA,WI 24 - AL,AZ,AR,CA,CO,DE,FL,GA,IL,IA,KY,ME,MD,MA,MN,NE,NY,OK,OR,SC, TN,TX,VA,WA 31 - AL,AZ,AR,CO,CT,FL,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS,MO,NC,ND,OH, OK,PA,SC,SD,TN,TX,UT,VA,WV,WI 11 - CT,FL,GA,LA,MA,NJ,NY,NC,RI,SC,TX 5 - CO,IL,OR,WI,WY 3 - GA,IN,NC 31 - AZ,CA,CO,CT,DE,DC,GA,HI,IL,IN,IA,KY,MD,MA,MI,MN,MO,NH,NJ, NM,NY,NC,OH,PA,RI,SC,TN,UT,VA,WA,WI 16 - AL,FL,GA,IL,IN,KY,ME,MA,MI,NH,NC,OH,SC,TN,VT,WI 24 - AZ,CO,CT,GA,ID,IL,IN,KY,MD,MA,MI,NV,NH,NM,NY,NC,OH,OK,SC,TN, TX,UT,VA,WI 26 - AZ,CO,CT,DE,GA,IL,IN,IA,KY,MD,MA,MI,MN,MO,NH,NJ,NY,NC,OH,PA,RI,SC,TN,UT,VA,WI 32 - AL,AZ,AR,CA,CO,FL,ID,IL,IN,IA,KS,KY,LA,MI,MN,MS,MO,MT,NE,NJ, NM,ND,OH,OK,OR,PA,SD,TN,TX,UT,WI,WY 31 - AL,AZ,CO,CT,DE,DC,FL,GA,IL,IN,IA,KY,LA,MD,MA,MI,MN,MS,MO,NH, NM,NY,NC,OH,PA,RI,SC,TN,TX,VA,WI 5 - AL,FL,GA,NC,SC 5 - AL,FL,LA,SC,TX 30 - AL,AZ,AR,CO,CT,GA,IL,IN,IA,KS,KY,MD,MA,MI,MN,MS,MO,NC,ND,OH,OK, PA,SC,SD,TN,TX,UT,VA,WV,WI 34 - AL,AK,AZ,AR,CA,CO,CT,FL,GA,IL,IN,KY,LA,MD,MA,MI,MN,MS,MO,NV, NJ,NM,NY,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WA 12 - AZ,CO,IL,IN,IA,KS,KY,MI,MN,MO,ND,WI 18 - AL,AR,CA,CO,FL,GA,IL,MD,MA,NJ,NC,OH,PA,SC,TN,TX,VA,WI 11 - AL,DE,MD,NJ,NC,OH,PA,SC,TN,TX,VA 14 - AZ,CA,FL,GA,IL,IN,KS,MD,MO,NJ,NM,OK,PA,TX 32 - AL,AZ,AR,CO,CT,DC,GA,ID,IL,IN,KS,KY,ME,MD,MA,MN,MS,MO,MT, NV,NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA,WI 18 - AL,AR,FL,GA,IL,IN,KY,LA,MD,MI,MS,MO,NC,OH,SC,TN,TX,VA 18 - AZ,CO,GA,IL,IN,IA,KY,MD,MI,MN,NM,NC,OH,PA,SC,TN,VA,WV 8 - IA,KS,MN,NE,ND,OK,SD,WI 2 - OR,WA 33 - AL,AZ,CA,CO,CT,DE,FL,GA,ID,IL,IN,KY,LA,MD,MA,MI,MN,MS,NV,NH, NJ,NM,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WI

JULY 5, 2021 INSURANCE JOURNAL | 31

Special Report: Super Regionals Company

12/31/2020 DPW Group OOOs omitted Name

State Of Domicile

49 50 51 52 53 54 55 56 57 58 59 60

Grange Insurance Co. Farmers Mutual Insurance Co. of Nebraska Vermont Mutual Insurance Co. Western National Mutual Insurance Co. Motorists Commercial Mutual Insurance Co. Pekin Insurance Co. Farm Family Casualty Insurance Co. Mutual of Enumclaw Insurance Co. Hastings Mutual Insurance Co. Merrimack Mutual Fire Insurance Co. Grinnell Mutual Reinsurance Co. American Road Insurance Co.

$435,878 $426,450 $425,498 $424,942 $412,902 $390,854 $387,937 $378,073 $374,169 $374,133 $373,578 $366,069

Grange Mutual Casualty Group N/A Vermont Mutual Group Western National Mutual Group Encova Mutual Insurance Group Pekin Insurance Group American National Financial Group Mutual of Enumclaw Group N/A Andover Group Grinnell Mutual Group N/A

OH NE VT MN OH IL NY OR MI MA IA MI

Amerisure Mutual Insurance Co.

$365,939

Amerisure Co Group

62 63

Auto Club Group Insurance Co. Redwood Fire and Casualty Insurance Co.

$358,973 $347,450

Automobile Club MI Group Berkshire Hathaway Group

MI NE

64 65

Donegal Mutual Insurance Co. Amerisure Insurance Co.

$342,215 $342,162

Donegal Group Amerisure Co Group

PA MI

66 67 68 69 70 71 72

Builders Mutual Insurance Co. Atlantic States Insurance Co. Westfield National Insurance Co. Preferred Mutual Insurance Co. Selective Way Insurance Co. Palomar Specialty Insurance Co. California Casualty Indemnity Exchange

$321,265 $311,660 $310,173 $305,696 $299,571 $297,763 $297,236

NC PA OH NY NJ OR CA

Motors Insurance Corp.

$287,231

Builders Group Donegal Group Westfield Group N/A Selective Insurance Group Palomar Holdings Group California Casualty Management Group Ally Insurance Holdings Group

St. Paul Fire and Marine Insurance Co.

$286,108

Travelers Group

StarStone National Insurance Co.

$279,010

Utica Mutual Insurance Co.

$272,179

Core Specialty Insurance Holdings Group Utica Group

77 78 79

Cypress Insurance Co. Milbank Insurance Co. Middlesex Insurance Co.

$259,079 $257,407 $257,047

Berkshire Hathaway Group State Auto Mutual Group Sentry Insurance Group

CA IA WI

80 81 82

Alaska National Insurance Co. Merchants Mutual Insurance Co. Imperium Insurance Co.

$256,242 $252,794 $252,653

AK NY TX

83 84 85 86 87 88

Cherokee Insurance Co. Arbella Protection Insurance Co. Farmers Automobile Insurance Association Endurance Risk Solutions Assurance Co. Quincy Mutual Fire Insurance Co. Electric Insurance Co.

$248,449 $241,771 $241,148 $238,612 $224,387 $219,929

Copperpoint Group Merchants Mutual Group Houston International Insurance Group N/A Arbella Insurance Group Pekin Insurance Group Sompo Group Quincy Mutual Group General Electric Group

MI MA IL DE MA MA

89 90

MMG Insurance Co. General Casualty Co. of Wisconsin

$219,837 $217,206

N/A QBE Insurance Group

ME WI

91 92 93

Midwest Family Mutual Insurance Co. Auto Club Insurance Association American Hallmark Insurance Co. of Texas

$214,047 $213,541 $212,635

Midwest Family Group Automobile Club MI Group Hallmark Financial Services Group

IA MI TX

$212,070

Mountain West Farm Group

$211,106 $209,021

N/A Horace Mann Group

NY IL

$201,342 $199,969 $199,778 $193,737

WT Holdings Group Dongbu Insurance Group N/A Mercury General Group

CA HI WI CA

Mountain West Farm Bureau Mutual Insurance Co. 95 Utica First Insurance Co. 96 Horace Mann Property & Casualty Insurance Co. 97 Stillwater Insurance Co. 98 DB Insurance Co., Ltd. (US Branch) 99 Society Insurance, a Mutual Co. 100 Mercury Casualty Co. 94

32 | INSURANCE JOURNAL | JULY 5, 2021

Number/States Greater than $1 Million DPW as of 12/31/2020

8 - GA,IL,IN,KY,OH,PA,TN,VA 2 - NE,SD 7 - CT,ME,MA,NH,NY,RI,VT 14 - AZ,CA,ID,IL,IA,MN,MT,NV,ND,OR,SD,UT,WA,WI 18 - IL,IN,IA,KY,ME,MA,MI,MN,NE,NH,OH,PA,RI,SC,TN,VA,WV,WI 6 - AZ,IL,IN,IA,OH,WI 12 - CT,DE,ME,MA,NH,NJ,NY,PA,RI,VT,VA,WV 6 - AZ,ID,MT,OR,UT,WA 6 - IL,IN,IA,MI,OH,WI 8 - CT,IL,ME,MA,NH,NJ,NY,RI 12 - IL,IN,IA,MN,MO,NE,ND,OH,OK,PA,SD,WI 33 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,KY,LA,MD,MA,MI,MN,MS,MO,NE, NJ,NM,NY,NC,OH,OK,PA,SC,TN,TX,VA,WI 32 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NE,NV,NJ, NM,NY,NC,OK,PA,SC,TN,TX,UT,VA,WI 6 - IN,IA,MI,NE,ND,WI 30 - AZ,CA,CO,CT,DE,DC,GA,ID,IL,IN,IA,KS,MD,MA,MI,MN,MS,MO,NV,NJ, NM,NY,NC,PA,SC,TN,TX,VT,VA,WI 19 - AL,CO,DE,GA,IL,IN,IA,MD,MI,NE,NM,NC,OH,PA,TN,TX,UT,VA,WI 26 - AL,AZ,AR,CO,FL,GA,IL,IN,IA,KS,KY,LA,MD,MI,MN,MS,MO,NE,NC,PA,SC, TN,TX,UT,VA,WI 9 - DC,FL,GA,MD,MS,NC,SC,TN,VA 15 - DE,GA,IL,IN,IA,MD,MI,NE,NC,OH,PA,SD,TN,VA,WI 19 - AZ,CO,GA,IL,IN,IA,KY,MD,MI,MN,NM,NC,OH,PA,SC,TN,VA,WV,WI 4 - MA,NH,NJ,NY 14 - AZ,CO,DE,DC,GA,MD,MI,NJ,NM,NY,PA,SC,UT,VA 15 - AL,CA,GA,HI,LA,MS,MO,NC,OK,OR,SC,TN,TX,UT,WA 18 - AL,AZ,CA,CO,CT,DE,GA,IN,KS,MD,MN,MT,NV,NM,PA,TN,TX,VA 28 - AL,AZ,AR,CA,CO,FL,GA,IL,IN,IA,KS,LA,MI,MN,MS,MO,NE, NJ,NY,NC,ND,OH,OK,PA,SC,SD,TN,TX 23 - AR,CA,CO,FL,IL,KS,KY,LA,MI,MS,MT,NV,NJ,NM,NY,ND,OH,OK,PA, TX,UT,WV,WY 33 - AL,AK,AZ,AR,CA,CO,CT,FL,GA,HI,IL,IN,LA,MD,MA,MI,MN,MS,MO,NV, NJ,NY,NC,OH,OR,PA,SC,TN,TX,UT,VA,WA,WI 25 - CO,CT,DE,FL,GA,IL,MD,MA,MI,MN,MO,NH,NJ,NY,NC,OH,OR,PA,RI,SC, TN,TX,VA,WA,WI 7 - AL,AR,CA,GA,LA,SC,TN 18 - AZ,CO,GA,IL,IN,IA,KS,KY,MN,NC,ND,OH,PA,SC,SD,TN,UT,WV 24 - AL,CA,CT,FL,GA,IL,IN,IA,ME,MA,MI,MN,MS,MO,NJ,NY,NC,OR,PA,SC, TN,TX,WA,WI 6 - AK,CA,ID,NV,OR,WA 8 - MA,MI,NH,NJ,NY,OH,PA,VT 34 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,KY,LA,MD,MA,MI,MS,MO,MT,NV,NJ, NM,NY,NC,OH,OK,PA,TN,TX,UT,VT,VA,WA,WV,WY 22 - AL,AR,CA,FL,GA,IL,IN,KS,KY,MI,MS,MO,NE,NJ,NC,OH,OK,PA,SC,TN,TX,VA 4 - CT,MA,NH,RI 4 - IL,IN,IA,WI 7 - AL,CA,MN,NM,NC,TN,VA 4 - CT,MA,NY,RI 30 - AZ,CA,CO,CT,DE,FL,GA,IL,IN,KS,KY,LA,MD,MA,MI,MN,MO,NH, NJ,NY,NC,OH,OK,PA,SC,TX,VT,VA,WA,WI 5 - ME,NH,PA,VT,VA 34 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,IN,IA,KS,LA,MA,MI,MN,MO,MT,NE,NV, NJ,NY,NC,OH,OK,OR,PA,SC,TN,TX,UT,VA,WA,WI 21 - AZ,CO,ID,IL,IN,IA,KS,MN,MO,MT,NE,NV,NM,ND,OH,OR,SD,UT,WA,WI,WY 4 - IL,MI,MN,WI 23 - AZ,AR,FL,GA,HI,ID,IL,IN,MT,NV,NJ,NM,OH,OK,OR,PA,SC,TN, TX,UT,VA,WA,WY 2 - MT,WY 9 - CT,FL,MD,MA,NJ,NY,OH,PA,VA 33 - AL,AK,AZ,CA,CO,CT,DE,FL,GA,IL,IN,IA,LA,ME,MI,MN,NE,NV,NH, NM,NC,OH,OR,PA,RI,SC,TN,TX,UT,VT,VA,WA,WV 21 - AZ,CA,CT,FL,ID,IL,IN,MN,MO,NE,NV,NM,NY,OH,PA,SC,TN,TX,UT,VA,WA 5 - CA,HI,IN,NY,OH 6 - IL,IN,IA,MN,TN,WI 5 - AZ,CA,NV,NY,VA

INSURANCEJOURNAL.COM

Company

12/31/2020 DPW Group OOOs omitted Name

State Of Domicile

Number/States Greater than $1 Million DPW as of 12/31/2020

101 Goodville Mutual Casualty Co. 102 Harford Mutual Insurance Co. 103 Lancer Insurance Co.

$191,006 $190,807 $187,793

Goodville Mutual Group Harford Group Lancer Financial Group

PA MD IL

104 105 106 107 108 109

Union Mutual Fire Insurance Co. Old Republic General Insurance Corp. United Ohio Insurance Co. Preferred Professional Insurance Co. Concord General Mutual Insurance Co. Farmington Casualty Co.

$180,825 $173,020 $170,573 $169,979 $168,277 $164,409

Union Mutual Fire Insurance Group Old Republic Group Ohio Mutual Group Coverys Group Auto Owners Group Travelers Group

VT IL OH NE NH CT

110 111

Grange Insurance Association Ascot Insurance Co.

$164,135 $162,623

Grange Insurance Group Ascot Insurance US Group

WA CO

112

Executive Risk Indemnity Inc.

$162,590

Chubb Ltd Group

113 114

American Commerce Insurance Co. Penn National Security Insurance Co.

$155,137 $154,695

OH PA

115 116

Farmers Alliance Mutual Insurance Co. TransGuard Insurance Co. of America Inc.

$154,509 $154,069

Mapfre Insurance Group Pennsylvania National Insurance Group Alliance Insurance Group IAT Reinsurance Co Group

117 118

Columbia Mutual Insurance Co. Toyota Motor Insurance Co.

$153,814 $150,101

Columbia Insurance Group N/A

MO IA

119 Cambridge Mutual Fire Insurance Co. 120 Motorists Mutual Insurance Co. 121 Triton Insurance Co.

$143,446 $133,571 $131,864

Andover Group Encova Mutual Insurance Group Apollo Global Management Group

MA OH TX

122 123 124 125 126

Brethren Mutual Insurance Co. Mid-Continent Casualty Co. Cumberland Mutual Fire Insurance Co. Mutual Benefit Insurance Co. Physicians Insurance A Mutual Co.

$129,941 $123,683 $118,114 $115,153 $111,934

MD OH NJ PA WA

127 128

IMT Insurance Co. Capitol Indemnity Corp.

$111,786 $105,644

N/A American Financial Group Cumberland Group Mutual Benefit Group Physicians Insurance, a Mutual Group IMT Mutual Holding Group Alleghany Group Western Reserve Group Andover Group Philadelphia Contributionship Group Gray Insurance Group Hartford Fire & Casualty Group Providence Group Western Reserve Group N/A N/A Selective Insurance Group N/A RLI Insurance Group Mercury General Group Lititz Mutual Group Central Mutual Insurance Co Group Liberty Mutual Group ICW Group

OH MA PA

6 - IL,IA,MN,NE,SD,WI 29 - AZ,CA,CO,FL,GA,IL,IN,KS,KY,MD,MA,MI,MN,MO,MT,NV, NJ,NY,NC,OH,OK,OR,PA,TN,TX,UT,VA,WA,WI 2 - IN,OH 3 - MA,NJ,NY 4 - DE,MD,NJ,PA

LA IL RI OH VT IL NY CA IL OK PA OH NH CA

10 - AL,CA,FL,GA,IL,LA,MS,NC,TX,VA 9 - AZ,CO,CT,GA,IL,MI,NY,PA,VA 7 - CT,ME,MA,NH,NJ,NY,RI 2 - IN,OH 2 - NH,VT 16 - AZ,CA,CT,DE,FL,GA,IL,MA,MI,NJ,NY,NC,PA,TX,VA,WA 4 - AZ,CO,MA,NY 6 - CA,HI,IL,OR,PA,WA 8 - AZ,CA,CO,FL,NV,OR,TX,WA 4 - CA,OK,TX,VA 8 - DE,KS,MD,MO,NC,PA,SC,VA 14 - AZ,CT,GA,IN,MA,MI,NH,NY,NC,OH,SC,TN,TX,VA 10 - CA,DE,GA,IL,IN,KY,ME,NC,PA,RI 6 - CA,IA,MD,NJ,PA,VA

129 Western Reserve Mutual Casualty Co. 130 Bay State Insurance Co. 131 Philadelphia Contributionship Insurance Co.

$102,013 $100,059 $98,492

132 133 134 135 136 137 138 139 140 141 142 143 144 145

$93,688 $90,737 $90,583 $87,886 $86,714 $86,386 $83,784 $82,454 $77,755 $75,715 $74,577 $61,099 $59,030 $26,181

The Gray Insurance Co. Hartford Insurance Co. of Illinois Providence Mutual Fire Insurance Co. Lightning Rod Mutual Insurance Co. Patrons Co-operative Fire Insurance Co. AMEX Assurance Co. Selective Insurance Co. of New York The Dentists Insurance Co. Contractors Bonding and Insurance Co. American Mercury Insurance Co. Lititz Mutual Insurance Co. All America Insurance Co. Peerless Insurance Co. Explorer Insurance Co.

KS IL

IA WI

8 - DE,IL,IN,KS,OH,OK,PA,VA 10 - DE,DC,GA,MD,NJ,NC,PA,SC,TN,VA 30 - AL,AZ,AR,CA,CT,FL,GA,IL,IN,IA,KY,MD,MA,MI,MN,MS,MO,NV, NJ,NY,NC,OH,PA,RI,SC,TN,TX,UT,VA,WA 7 - CT,ME,MA,NH,NY,RI,VT 18 - AZ,CA,FL,HI,IL,IN,KY,LA,MD,MA,NV,NY,NC,OK,PA,SC,TX,UT 6 - CT,ME,NH,OH,RI,VT 17 - AZ,CA,CO,DE,FL,GA,IL,IN,LA,NE,NV,NJ,NM,OH,PA,TX,VA 4 - ME,MA,NH,VT 28 - AL,AZ,CO,CT,DE,DC,GA,IL,IN,KS,KY,LA,MD,MI,MN,MS,MO, NH,NY,NC,OK,OR,PA,SC,TN,TX,UT,VT 6 - CA,CO,ID,OR,WA,WY 29 - AL,AZ,AR,CA,CO,CT,FL,GA,IL,KS,LA,MD,MA,MI,MN,MO,NV, NJ,NY,NC,OH,OK,PA,SC,TN,TX,UT,VA,WA 22 - AZ,CA,CO,DC,FL,GA,IL,LA,MD,MA,MI,MN,MO,NV,NJ,NY,NC,OK,PA,RI, TX,VA 9 - CT,FL,ID,IL,OH,OR,RI,TX,WA 9 - AL,DE,MD,NJ,NC,PA,SC,TN,VA 8 - CO,ID,KS,MT,NE,ND,OK,SD 26 - AL,AZ,CA,CO,FL,GA,IL,IN,KY,LA,MD,MA,MI,MN,MO, NJ,NY,NC,OH,OK,OR,PA,SC,TX,VA,WA 12 - AR,GA,IL,IA,KS,MS,MO,NE,OK,SD,TN,TX 24 - AZ,CA,CO,CT,DE,FL,GA,ID,IL,IA,KY,MD,MA,MN,NV,NJ,NY,OH,OR,PA, TN,UT,VA,WA 8 - CT,IL,ME,MA,NH,NJ,NY,RI 5 - IN,KY,OH,PA,WV 29 - AL,AZ,CA,CO,FL,GA,IL,IN,IA,KY,LA,MD,MI,MN,MS,MO, NJ,NY,NC,OH,OK,PA,SC,TN,TX,VA,WA,WV,WI 4 - DE,MD,PA,VA 16 - AR,FL,GA,KS,LA,MO,MT,NJ,NM,ND,OK,SC,TX,UT,WI,WY 4 - DE,MD,NJ,PA 2 - MD,PA 5 - AK,ID,NJ,OR,WA

Data Source: The National Association of Insurance Commissioners, Kansas City, Mo., by permission. Information derived from an SNL product. The NAIC and SNL do not endorse any analysis or conclusion based upon the use of its data.

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JULY 5, 2021 INSURANCE JOURNAL | 33

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Idea Exchange: Specialty

Specialization Versus Fragmentation

A Coordinated, Cohesive Approach to the Specialty Market

ver the last decade, industry experts have touted the benefits of independent agencies building industryBy Bryan Salvatore and product-focused specialization amid an increasingly competitive specialty distribution landscape and complex risk environment. Studies have validated the correlation between specialization and agency growth — simply stated, independent agencies that specialize grow at a faster pace than those that do not. Many successful agencies have embraced the trend, building practices and verticals that concentrate on clients within a specific industry, such as construction, technology and nonprofits, or on a specific product line for clients across industries, such as management liability or professional liability. With this approach, an agency can offer deep technical expertise within its focus areas, establish credibility as a go-to agency for the industry, and build deep relationships with clients and others in the space. And, many carriers also have embraced niche, specialized strategies in efforts to be knowledgeable go-to markets for profitable risks and drive growth. For a good portion of this business, agencies have developed singular product relationships or have aligned themselves with single-line focused, niche carriers — a model that has been adopted throughout much of commercial lines. But at what expense? While niche carriers and single-line relationships can play an important role in an agency’s portfolio, writing too much business with these carriers can INSURANCEJOURNAL.COM

have an unintended consequence of fragmentated coverage. This leads to a more cumbersome placement process, complexity and duplication in service, inconveniences for customers, and insurance programs with potential gaps in coverage. Independent agencies can benefit from specialization, while keeping their books of business from becoming fragmented, by specializing across products and industries, coordinating placements across different units within their agencies, and strategically partnering with insurance carriers that offer broad portfolios of specialized coverage suites designed to simplify the placement process with total account solutions.

Unintended Consequences of Specialization

Many agencies underestimate the level of fragmentation that exists within their portfolios. Analyzing agents’ books of business using The Hanover’s proprietary data, we found: • 50% of commercial accounts have only a single policy with an agency, but have many more insurance policies elsewhere. • When this occurs, agencies can miss valuable opportunities to sell the full suite of coverages a customer may need, which invites competitor agencies into the relationship since the customer must turn elsewhere to get the additional coverages. It also increases confusion and risk for the customer, who now has policies with a variety of agencies and carriers. • When commercial accounts do have

continued on page 36 JULY 5, 2021 INSURANCE JOURNAL | 35

Idea Exchange: Specialty continued from page 35 more than one policy with an agency, 24% are split across multiple markets, causing added work for agencies that are often left trying to coordinate placement and servicing across multiple carriers. • As a result, the typical mid-sized agency has at least 50 carrier relationships, and sometimes significantly more, leading to diluted relationships and lost opportunities to generate higher revenues through partnerships with select carriers. • Yet, more than 60% of agencies’ premium is placed with their top five markets, indicating widespread fragmentation in an agency’s portfolio This all results in extra work for agencies. At the same time, customers experience inefficiencies when they must juggle multiple bills from different carriers, a variety of customer-facing applications, numerous loss control visits and more.

Safeguarding Against Fragmentation

Specialization does not have to create fragmentation. The best agencies are taking a collaborative approach to coordinating coverage across several specialized practices and partnering with the right carriers. Often, it is beneficial to have a deep relationship in which an agency and customer partner together to build and customize an insurance solution across lines of business, allowing the agency to gain a deeper understanding of the customer’s insurance needs. Importantly, this helps agents to have an overarching

view on clients’ insurance protection and risks, and enables them to identify possible gaps in coverage. The best case scenario is placing a variety of a clients’ risks with a single carrier that specializes in those areas. This allows agents to take advantage of policy language that is often designed to complement and integrate with other policies offered by the carrier. With this approach, customers are also in a much better position to efficiently protect their business with a single bill and a single carrier contact. Customers can especially benefit from coordinated risk management programs and simplified claims handling. Loss control activities can be coordinated across lines of business. Similarly, if a loss occurs and more than one coverage is triggered, claims handling can be coordinated more efficiently and effectively when coverage is placed with a single carrier.

‘Specialization does not have to create fragmentation. The best agencies are taking a collaborative approach to coordinating coverage across several specialized practices and partnering with the right carriers.’ Top agencies look for carriers that have both the knowledge and the product offerings to deliver insurance programs that offer a full suite of coverages for their

customers’ businesses. This cohesive approach helps address a business’s total risk portfolio, rather than its individual parts. Niche carriers that offer a few capabilities can still play an important role, but, agencies that specialize across multiple products and industries may not find as much value in these carrier relationships. Those who do recognize the risk of fragmentation are taking steps to guard against it by: • Building broad sets of specialized capabilities. By building these capabilities themselves, across products and industries, agencies are putting their businesses in a position to address the majority of their clients’ insurance needs in an efficient and effective manner. • Taking a coordinated approach to placement. While it’s helpful to center agencies around specialized capabilities, those that can operate across internal silos to effectively coordinate coverage for various lines are helping position their agencies for future success and efficiency. • Partnering with carriers that have similar specialized capabilities. When agencies build strong partnerships with carriers that have broad, specialized capabilities that mirror their own, they maximize the value of the relationships and help agencies present account-focused solutions for their clients. While at times carriers may not be able to solve for all of the P/C needs of a customer, they very often can provide comprehensive solutions that reduce fragmentation, which helps agencies more efficiently deliver robust, tailored coverage, while enhancing the insurance experience for their clients. Agents who are adept in this space are building broad specialization and partnering with carriers that have designed product portfolios that respond to the wide variety of risks facing businesses. Strategic carrier partnerships can empower agents to be more efficient and maximize protection for their customers. Salvatore is president of specialty insurance at The Hanover Insurance Group Inc.

36 | INSURANCE JOURNAL | JULY 5, 2021

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Idea Exchange: Tech Talk The Cybercrime Challenge for Agents By Tom Wetzel

ansomware is all over the news of late — Colonial Pipeline, CNA and JBS plus hospitals, municipalities and many other businesses. If only reading the headlines, you might conclude that ransomware affects primarily either large or high-profile companies, so agents and small commercial policyholders need not be overly concerned. This view is not just dangerously wrong but also diverts attention from the overall cybercrime threat that agents and their clients depend on – their digital ecosystem. In a ransomware attack, a hacker “kidnaps” data, assumes control of an organization’s computer system and then demands a payment to give back that control. These attacks have increased in frequency and severity over the past two years. Chainalysis, a blockchain research firm, estimates ransom payments jumped 341% during 2020 alone. Many cybersecurity experts believe the pandemic has driven the spike in ransomware in part because so many employees have been working from home with lessthan-ideal protection. Ransomware attacks accounted for 41% of the total number of filed cyber insurance claims in the first half of 2020, according to a report released last year by Coalition. Insurance companies have responded by raising premiums and tightening underwriting standards just as demand for cyber coverage has risen. Premiums increased from 10% to 30% in late 2020, according to a survey cited by the U.S. Government

38 | INSURANCE JOURNAL | JULY 5, 2021

Accountability Office. In some cases, annual premiums may rise as much as 50%, according to Joshua Motta, founder of Coalition. A group of cyber insurers including American International Group Inc. and Chubb Ltd. have joined to form CyberAcuView LLC, a consortium aimed at enhancing cyber risk mitigation efforts across the industry. The emphasis on ransomware is not misplaced, as it represents the largest cybercrime segment. The Coalition report also reported that 59%of cyber insurance claims were not due to ransomware, but to other cyber events including funds transfer fraud and email compromise. At the same time, reports have surfaced that hackers have also gained access to personal identifiable information (PII) through agency vendors, such as quoting software and through policyholder groups, particularly contractors. Every agency must step up its efforts to address its own cybersecurity vulnerabilities and those of its clients. Cybersecurity experts agree the best defense involves using a layered approach by combining multiple authentication methods with more secure systems and protocols. Some insurers offer security audit services to agents and others are revising agency agreements to require greater attention to cybersecurity. A good starting point is specialist insurer Beazley’s “Steps to Protect Against Ransomware,” which applies to most types of cyber events. Beazley advises: • Start with a risk assessment. Addressing risks starts with identifying what they are, where they are, and how severe the consequences are. • Email content and delivery. Enforce strict Sender Policy

Framework (SPF) checks for all inbound email messages, verifying the validity of sending organizations. Filter all inbound messages for malicious content including executables, macro-documents and links to malicious sites. Manage •

access effectively.

Ransomware doesn’t have to go viral in an organization. Put in place appropriate measures for general user and system access across the organization: privileged access for critical assets (servers, endpoints, applications, databases, etc.) and enforce multi-factor authentication (MFA) where appropriate (for example remote access/VPN, externally facing applications). Back-up key systems and databases. Ensure regular back-ups that are verified and stored safely offline. Use strong, unique back-up credentials, and secure them separately. Test backups to ensure restoration from them. • Educate users. Most attacks rely on users making mistakes. Train users to identify phishing emails with malicious links or attachments. Regular phishing exercises are a great way to do this. • Patch systems and applications. Conduct regular vulnerability scans and rapidly patch critical vulnerabilities across endpoints and servers – especially externally facing systems. • Secure remote access. Do not expose Remote Desktop Protocol (RDP) directly to the Internet. Use Remote Desktop Gateway (RDG) or secure RDP behind a multi-factor authentication-enabled virtual private network (VPN). Wetzel is CEO of Thomas H. Wetzel & Associates, an insurance marketing firm for independent agents whose signature services include a cyber assessment designed exclusively for insurance agencies, HI-TRUST-certified messaging and the Wetzel Digital Roadmap. Website: www.wetzelandassociates.com. Email: twetzel@wetzelandassociates.com. INSURANCEJOURNAL.COM

Idea Exchange: Is It Covered? Logic & Language and Forms & Facts Coinsurance… Even WE Don’t Understand It

book I’m considering writing, probably next year, is about how to make insurance more understandable, not only to policyholders, By Bill Wilson but also to the industry itself. For example, whether the use of a vehicle, from lawn mowers to watercraft and drones, is covered by a homeowners policy is an incredibly complex undertaking. I wrote about lawn mowers in my October 2020 column. There HAS to be a better way to limit the risks assumed by insurers while making insurance contract language easier to understand. The same is true in commercial lines where ISO alone has over 30,000 mainstream policy forms and endorsements. One issue I’d like to address in this article is coinsurance. My first experience as an expert witness was a major shopping

‘Is coinsurance a mid- to late-19th century concept whose time has passed? Perhaps, but for now, we have to deal with it and explain it to property owners.’

center fire where there was a substantial coinsurance penalty. Not only did the property owner claim he didn’t understand how coinsurance works, this excerpt from the agent’s deposition demonstrates that he too was lacking in understanding: “You need, you need to know what

coinsurance is a little bit deeper...I could give you the wrong thing, and I can stand to be corrected. But on coinsurance if you’ve got, like, a million dollars’ worth of coverage and if a person has an 80% coinsurance factor, all right, that means that it’s going to have to be sure that it is insured up to 80% of the value. That comes into play when it’s a partial claim is one thing that it will come into play. If a person is only insured up to 50% of the value instead of 80%, then it would be stated on the policy. Then there would be probably a 30% depreciation taken off the policy. So, the 80% is really better than a 90% coinsured or the coinsurance being 100%. And so that’s on that particular incident now. I mean, I’m....”

Apparently, this level of ignorance is

not limited to the agency ranks. About a year ago, I got an email from an agency commercial lines account manager. A major carrier had just implemented a new policy whereby the building limit on a commercial property policy was now being set at the coinsurance percentage times the actual building value. For example, if the building has a $1 million replacement cost and property coverage is written at 90% coinsurance, the insurer will only insure the building for $900,000. This represents an astonishing misunderstanding of coinsurance and it was shocking to me that apparently only the agent’s husband, a new underwriter at the carrier, had spoken up in the underwriting department about this. A $1 million building is often insured for that full value at an 80% or 90% coinsurance rate. One of the reasons someone might not select a 100% coinsurance rate is that property valuation is not an exact science and sometimes the replacement cost of property can increase in an unanticipated way. For example, reconstruction costs can balloon following a widespread catastrophe like a hurricane. As a result, a 100% coinsurance clause could result in a pen-

alty whereas an 80% or 90% coinsurance clause is less likely to do so. But you still want to insure to what is believed to be the full value of the building in the event of total or near total losses. Is coinsurance a mid- to late-19th century concept whose time has passed? Perhaps, but for now we have to deal with it and explain it to property owners. The purpose of coinsurance is not to punish an insured for carrying inadequate insurance-to-value, though that may appear to be the result in the example above. Rather, its purpose is to provide a financial incentive to carry adequate limits for major losses and reward the insured with a premium reduction for doing so. To illustrate using real-life scenarios, the following is an example I used to give when I did property rating seminars. The gross or flat property rate (“gross or flat” meaning no coinsurance requirement) of a $500,000 fire-resistive office building is $0.64 per $100 of coverage. The 80% coinsurance rate is $0.18. The premiums with and without coinsurance would be $900 and $3,200, respectively, a huge difference. If the building owner chose to only insure the building for $100,000,

the premium without coinsurance would be $640. So, for an additional $260, the insured can increase the amount of coverage from $100,000 to the full value of $500,000. That decision for most property owners would be a no-brainer and we can thank coinsurance for making an offer the insured can’t refuse. To contrast, let’s say an insured owns a $500,000 wood frame building used for woodworking and spray painting. The gross or flat rate is $3.74 and the 80% coinsurance rate is $3.37. Without doing the math, note that the rate difference is tiny. Why? From a coinsurance perspective, the building owner does not need much in the way of financial incentive to insure his building to value. Woodworking and spray painting in a wood frame building presents a dramatically greater exposure to a total fire loss than an office occupancy in a fire-resistive building. This is one of the main purposes of coinsurance. Why do insureds need an incentive to insure to value beyond these examples? The reason is that most losses are partial. The last time I looked at a study published by the National Fire Protection Association (NFPA), it indicated that less than 2% of

fire losses were total and 86% of fire losses resulted in damages of 20% or less of the building value. So, for a $500,000 building there would be almost a 90% chance that a fire loss would amount to $100,000 or less. In that case, if the property owner is a risk taker, why not insure for $100,000 or less? The answer is the same for people who only want to buy minimum financial responsibility auto liability limits. While the chance of a major loss is relatively low, such losses do happen and they can bankrupt you. Plus, in the case of property insurance, there are other perils to consider such was windstorm, water damage, etc. Coinsurance, as complicated and difficult to understand as it is, provides an incentive to insure to value. The question for another day might be, isn’t there an easier, more transparent way to do this? In the meantime, perhaps this article will help you explain the purpose of the coinsurance clause. Bill Wilson, CPCU, ARM, AIM, AAM is the founder and CEO of InsuranceCommentary.com and the author of six books, including “Why Insurance Doesn’t Cover the COVID-19 Pandemic,” available on Amazon.

Idea Exchange: Talent Hybrid workforces — comprised of remote and in-office workers, as well as part-time and full-time employees, temporary teams, consultants, and more — are becoming the future of work. Along with providing access to highly-skilled individuals across geographic locations, a hybrid workforce enables organizations to respond to shifting needs with ease and agility. As catastrophe season picks up, property and casualty insurers are preparing for several months of unknowns. Last year’s Atlantic hurricane season saw the most named storms on record (going through the entire alphabetical list for only the second time ever.) We also saw record-setting wildfires in 2020, due to extensive drought conditions. It’s vital claims departments have plans in place to take on the increased workloads CAT season may bring. Strategically building and mobilizing these blended teams is essential for managing changing needs, especially in the coming months. By focusing on the benefits of flexible team structures, accommodating a variety of employee needs, and being strategic and transparent, insurers will cultivate claims teams ready to take on any challenge or project.

Provide Clear Expectations

Be Ready to Take on New Challenges By Building Hybrid Teams

hile it was an initial whirlwind of change, the pandemic served as a catalyst for creative working arrangeBy Brittni Smith ments in many organizations. Insurance organizations who had not yet offered remote work gained insight into its benefits, overcame 42 | INSURANCE JOURNAL | JULY 5, 2021

associated challenges, and in most cases, realized their teams could continue to function in efficient and productive ways. As organizations begin to implement return-to-office plans, it’s likely most organizations will continue to offer some form of remote work. Yet, in addition to offering flexibility in location, effectively blending a variety of work arrangements is key to staying ahead in a continually evolving business climate.

One of the most important factors in creating a strong hybrid team is directly and transparently communicating expectations. Ensure team members understand their roles, the roles of other individuals, and how those roles and responsibilities interact. Encourage individuals to be respectful of others’ unique working hours and set standards around communication preferences, frequency and response times. Facilitate open lines of communication to minimize avoidable misunderstandings and quickly clear up misalignments, while providing forums for ongoing feedback.

Have a Set Strategy

It may be hard to predict future catastrophes, but it is possible to have a plan that can be set in place as needed. Discuss potential needs and scenarios with your team as early as possible. Do INSURANCEJOURNAL.COM

you have a staffing partner in place who understands your organization and can quickly provide teams of adjusters? How will customer service be impacted and what measures should be taken to ensure your policyholders are accommodated? Who can be cross trained to step in during times of need? Which part-time employees are able to work more hours? These and similar questions should all be reviewed and discussed as part of a flexible talent strategy. Understand the tools and levers available to you and how they will be implemented when needed.

Communicate Values

In order for employees to work as a cohesive unit and toward a common goal, clear guiding values can serve as a reference point. Start by reviewing your organization’s vision and values and then help team members connect these values to their daily roles. Consider incorporating this exercise into your onboarding process, even for temporary employees. Especially for those in decision-making positions or working autonomously, understanding and embodying these values can provide a sense of structure and shared purpose.

Be Thoughtful with Meetings

Depending on the size of your team, it’s likely you have individuals working in multiple time zones, with different work hours and varying employment arrangements. Be cognizant of how you can best accommodate schedules and include all individuals in important discussions. Hold weekly or biweekly team meetings and invite all team members, even those who are temporary or part-time. Provide an open forum for individuals to share challenges, wins or best practices. There’s a great opportunity for knowledge sharing in these interactions, especially for more seasoned employees to offer their insight to those less familiar with the company and team. Be inclusive and help create a sense of camaraderie, which can foster innovation and better working relationships, while harnessing the perspectives of a variety of voices. Even if you’ve been slow to adopt a hybrid working model within your orgaINSURANCEJOURNAL.COM

nization, know it’s critical for remaining competitive and continuing to attract and retain top talent. Skilled individuals are in demand and have many options when it comes to choosing an organization that best meets their needs. Insurance organizations that are adapting and evolving with the shifting employment landscape

will be primed to attract top talent beyond geographic limits, and cultivate a team of dedicated and satisfied employees. Smith is a property and casualty client advisor with The Jacobson Group, a provider of talent to the insurance industry. Phone: 800-466-1578. Email: bsmith@jacobsononline.com.

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JULY 5, 2021 INSURANCE JOURNAL | 43

Idea Exchange: Agency Management

The Future of Agency Work

here is no shortage of articles opining on the future of work after COVID-19, all seeming to believe that virtual work in By Tony Caldwell one form or another is here to stay. I agree. But I also believe the issue is not whether we will continue to work virtually, return to our offices or move back and forth between the two work styles. I think we will do both simultaneously, and that includes agencies. Agencies with highly professional, easily managed staff — coupled with the highly digitally adapted prospective employees that all agencies with a future must recruit — are ideally suited for the opportunities offered by blended work styles. However, despite the general concurrence about the arrival of digital work, there has not been much thinking around how to maximize effectiveness in a mixed virtual and physical business climate. I’d like to offer some suggestions for that.

Proximity Becomes Irrelevant

Six years ago, I attended a cocktail 44 | INSURANCE JOURNAL | JULY 5, 2021

reception of the Screen Actors Guild in Los Angeles. I wandered freely throughout the ballroom eavesdropping on the conversations of the famous, but I really was not there physically. I was in a hotel a half a mile down the street wearing a crude form of virtual reality goggles and observing and listening through the use of 360-degree cameras and microphones. The next day I attended a conference with 300 entrepreneurs from all over the world. A dozen people were unable to make it to the west coast because of a massive blizzard which shut down east coast airports. But they came anyway using Beam™ telepresence robots. Very quickly, those of us attending in person became used to talking with the remote attendees at breaks, sitting with them at tables, and seeing them roll up to microphones to ask speakers questions. They even participated in the cocktail receptions. These experiences led my company to buy our own telepresence robots which allowed remote employees to participate as fully in physical meetings as if they were in our office. Employees are able to move from office to office and meet with other employees just as if they were physically

there. These robot devices also allow us to bring remote clients into our office for meetings and our salespeople to take the knowledge, expertise, and relationships of our office staff into the offices of prospects and clients for face-to-face meetings. As we realized the irrelevance of physical proximity, we were free to hire a CPA firm 1,500 miles away that specialized in businesses like ours. We were emboldened to hire employees in five states where we did not have physical locations. And we began to seek and win clients throughout the country. Although this all happened years before COVID-19, I think it offers important clues about how many businesses will operate in the future. It showed that the two-dimensional virtual work the pandemic made commonplace in 2020 is just the beginning.

Virtual Reality Today

In early 2019 wearing a virtual reality headset, about the size of large sunglasses, I sat across a conference room table from someone and discussed the future of augmented virtual reality. Having followed this technology for several years, I was still amazed at how real, and lifelike, my INSURANCEJOURNAL.COM

conversation partner was. I also noticed that despite being in a noisy tradeshow environment, my brain almost immediately filtered out all of the distractions around me as it literally entered a different dimension. Within the next 24 to 36 months, as 5G technology becomes more widespread, and the form factor of wireless VR headsets becomes available and inexpensive, the conversations that we are all having regularly now on Zoom are very likely to evolve and move into virtual reality. This virtual reality isn’t the clunky avatar laden world that exists today. Instead, it is incredibly lifelike and realistic. Recently, I attended meetings and classes of a large national real estate brokerage, which has built an entire business campus with offices, training facilities and extensive meeting space all constructed in cyberspace. This company’s agents deal with clerical staff, accounting personnel and other routine business matters as well

as attend continuing education classes in virtual reality. Currently, these agents use avatars, but within the next 24 to 36 months, these avatars will go away and be replaced by actual 360-degree virtual replicas of human beings. These technologies seem a bit exotic to most people. But they are real and usable today. They also point to a future where work will blend seamlessly between virtual and physical space. Some of the technology I have described is relatively expensive when compared to the purchase of laptop computers for example. But they are not only rapidly developing in capability but also decreasing in cost. For many businesses they will become commonplace over the next few years and, I believe, will be quickly and eagerly adopted by businesspeople who now have, because of COVID-19, become emotionally and intellectually untethered to their physical offices and their limited geographic relationships.

Insurance agencies are rapidly developing strategies for allowing their employees to continue to work from home on a part-time basis. Some are recognizing that talent can be hired, wherever it is found. A few are experimenting with expanding their geographical reach using Zoom and similar tools. And a cutting edge few are also experimenting with telepresence robots, virtual reality, and remote hiring. This cutting edge is where most of us will be in five years. And like all new technological adaptation and adoption, typewriters followed by computers for example, those early adopters will have an enormous advantage in the marketplace and shift the very definition and idea of what it means to be a “community” insurance agency. Caldwell is an author, speaker and mentor who has helped independent agents create over 250 independent insurance agencies. Website: www.tonycaldwell.net. Email: tonyc@oneagentsalliance.net.

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Idea Exchange: Disability Top 5 Contractual Disability Obligations That Can Crush Ultra-Successful Clients

hether your client is a corporation, small business owner, private equity firm or an ESOP (Employee By Sean McNiff Stock Ownership Plan), they are constantly making decisions that require navigating a minefield of contractual obligations that could topple them at any moment should they not step lightly. Potential dangers often lurk when large financials decisions are made, and obligations are set within a contract. Whether it’s a company merger or acquisition, the establishment of a business continuation plan, the hiring or firing of a key employee, or the application for a business loan, exceptional clients rely on sophisticated advisors to protect them from financial danger. They are seeking advisors who are acutely aware it’s a minefield out there, and they know how to play the role of minesweeper. So, let’s identify the mines and start sweeping. 46 | INSURANCE JOURNAL | JULY 5, 2021

1. Disability to a Key Person. Contractual

key person insurance obligations are most often found inside the mergers and acquisitions arena. They’re established when one company buys another company and the acquisition agreement, or purchase agreement, requires “key person insurance.” In this scenario, your average advisor will traditionally recommend life insurance on the named key executive, but what statistics have shown us is that a person is four times more likely to become disabled than die during their working years. And therein lies the mine just waiting to be stepped on. For example, let’s say there’s a private equity firm that has acquired a new portfolio company, and suddenly the CEO of the newly acquired company suffers a stroke. Fortunately, they survive but are unable to perform their duties. If there was only a life insurance policy in place, the deal could crumble like three-day-old pound cake. This is precisely why sophisticated insurance advisors keenly understand that a “key person insurance” clause within a

purchase agreement requires corporately owned key person life and disability to keep the company — and the deal — afloat.

2. Disability to a Successful Business Owner. A majority of privately held

business owners have the majority of their wealth tied up in their businesses. Protecting their equity from the event of a disability to either themselves or to one of their partners becomes a clear focal point as the value of their business rises. Many business owners utilize buy-sell agreements to establish a succession plan in the event a partner dies or becomes disabled. And while these agreements are terrific tools to provide security for a business owner’s equity, they can also establish contractual obligations that can burden the remaining partners. For example, let’s take the case of a Chicago investment firm run by five partners all in their 40s and 50s, and let’s assume their firm carries a $50 million valuation. A classic entity purchase buy-sell agreement establishes a requirement for

continued on page 48

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Idea Exchange: Disability continued from page 46 the entity (remaining partners) to repurchase all outstanding shares of a deceased or permanently disabled shareholder. Funding this obligation for death is an easy task utilizing the power of the American life insurance market. However, finding sufficient coverage to fund the obligation for share repurchase upon disablement requires an advanced approach. In the U.S. disability markets, advisors can secure up to around $2 million in buy-sell disability insurance. But when an owner’s equity value exceeds that $2 million mark, there is a void that requires a specialized approach. For these titans of business, sophisticated advisors utilize surplus lines carriers like Lloyd’s of London to design buy-sell disability solutions with the capacity needed to fully fund the disability buy-out obligation should a partner become permanently disabled. Carriers such as Lloyd’s can provide benefits exceeding $100 million per person, allowing business owners to preserve both their wealth and their partners’ wealth.

3. Disability to a Lendee. There are very few businesses that can start-up or expand their operation without benefit of an infusion of capital. And that injection usually involves securing a loan from a bank or some other financial institution. But like any loan, the lender will be looking for collateral, and that collateral is required should a death or disability prevent an owner from paying back the loan. So by protecting the lendee, we also protect the lender. Case in point: An entrepreneur is looking for a $1 million loan to open a new branch office. But the loan institution is asking for a disability insurance policy to cover the balance of the loan should the entrepreneur become disabled to the point where he can’t make his loan payments. What he needs to keep all parties happy is a disability policy structured to pay $16,667 per month for five years to coincide with the payment schedule. And if you customize the policy with a reducing benefit structure, you can protect the outstanding balance while also saving premium dollars. 48 | INSURANCE JOURNAL | JULY 5, 2021

‘We are living in unprecedented times, where now more than ever, clients rely on advisors to protect them from a wind tunnel of events that are constantly affecting their business.’ 4. Disability to a Severed Executive. It’s no coincidence that producers have sold a lot more of this product since the pandemic inflated our unemployment numbers. What happens if you have had a CEO who gets a separate agreement, and inside the severance agreement, the company says, "We’re going to extend your current benefits for two years." The dilemma is that the disability coverage terminates upon the termination of their employment. Therefore, they don’t really have the coverage. Perhaps inside the termination agreement, they’ve guaranteed to that executive $10,000 per month of coverage until they’re retired. But if that executive is only in his 40s, that’s a multimillion-dollar land mine that the companies don’t know how to step around. A plan needs to be in place to eliminate that exposure to the corporation, and that plan often takes the form of a severance disability insurance (SDI) policy. SDI is a corporately owned risk mitigation tool that’s used to transfer the risk that’s created upon executing a severance agreement, such as a severed executive becoming disabled and making a claim on his now canceled disability insurance.

land mine establishes an obligation to repurchase an employee’s shares on death, disability and natural retirement. It is true that ESOPs typically insure against the death of a key shareholder, but what if your client has an ESOP already in place and you’ve got people that have shared values in excess of, say, $500,000? And what if that person becomes disabled? How does the repurchase obligation impact cash flow and operations? Further, how does it impact the company valuation and other participating ESOP owners? Unlike traditional disability insurance, which focuses on replacing income for a disabled person, specialized disability programs speak to the need of avoiding the one-two punch of no longer having the services of that key employee plus needing to fund the repurchase of the ESOP stock. We are living in unprecedented times, where now more than ever, clients rely on advisors to protect them from a wind tunnel of events that are constantly affecting their business. Clients are focused on utilizing their unique abilities to build both successful companies and their personal wealth and may not be aware of where they are stepping. And it’s your job to make sure you have the insurance products they need so that the next sound they hear isn’t… boom! McNiff is the vice president of business development and marketing at Exceptional Risk Advisors, a Lloyd’s of London Coverholder, advising clients on high-limit specialty life, accident and disability products. Email: Sean.McNiff@exceptionalriskadvisors.com.

5. Disability to an ESOP Shareholder. Employee

stock ownership plans can serve as a tremendous tool for business owners to exit their business while taking care of their employees. However, the creating of an ESOP should not only focus on transferring the business to its employees, but protecting that business for its employees. For ESOPs, the contractual INSURANCEJOURNAL.COM

My New Markets Garages, Auto Services & Repair Market Detail: Arrowhead General

Insurance Agency Inc. (www.arrowheadgrp.com) offers a commercial package, formerly offered by Universal Underwriters. Submit up to $125,000 total account premium (instant online quotes up to $50,000). Garages, mechanical/collision repair, transmissions, tires, brakes, mufflers, stereo stores and more are eligible. Lowered rates available in Ariz., Iowa, Ill., Ks., Mich., Minn., Neb., Ore., and Wisc. Scheduled rating available in all states for accounts of $15,000 or higher. Express package provides specialized commercial insurance coverage with industry experience and an admitted A+ (XV) rated carrier by A.M. Best Company. Accounts can be submitted in any size in total account premium for instant online quotes on qualified accounts below $50,000. Target classes of business include: auto body/collision and repair shops; auto glass repair/installation shops; auto quick lube shops (oil and lube); brake shops; general/mechanical repair; muffler shops; retail auto parts and accessories stores (new parts only); and retail tire stores. Program for towing and other classes not mentioned requires production commitment and contract. Coverage highlights: business auto liability and physical damage; online quotes up to $50,000, up to $125,000 total account premium in most states; crime – employee dishonesty, forgery or alteration, money and securities; equipment breakdown coverage; Garagekeepers – direct or legal liability basis; general liability and employee benefits liability; and property coverage extensions. Available limits: Maximum $125,000 Carrier: Zurich States: All states except Alaska, Hawaii, La., and Texas Contact: Steve Goebel at 800-669-1889, ext. 8733 or e-mail: marketinginfo@ arrowheadgrp.com

Umbrella/Excess Liability

Market Detail: Blackmoor General Agency

(www.blackmooragency.com) has a dedicated team of service professionals based out of Atlanta and Doylestown, Pa. A variety of products are available for INSURANCEJOURNAL.COM

retailers, including property and casualty programs for specific product lines. Both primary liability limits as well as umbrella and excess, both supported and unsupported are available. Quick turnaround on terms with complete submissions. Available limits: Minimum $1 million, maximum $5 million Carrier: Various, admitted and non-admitted available States: All states except Alaska, Ark., Hawaii, and W. Va. Contact: Audrey Nudelman at 267-4952322 or e-mail: anudelman@blackmooragency.com

Wineries/Cideries

Market Detail: Glencar (www.glencar-ins. com) specializes in a variety of programs with a primary focus on small to mid-sized niches. These programs include value added components such as specialized knowledge of business segment or customized coverages, a specialized method of distribution, or an element of underwriting leverage. Property and casualty programs include the following coverages: commercial property; commercial and personal inland marine; general liability; miscellaneous professional; excess liability/umbrella; workers compensation and commercial auto written primarily in support of other lines of business.

July 5, 2021 Carolina Casualty Insurance Company PO Box 2575 Jacksonville, FL 32203 The above company has made application to the Division of Insurance to amend their Foreign Company License to transact Property and Casualty Insurance in the Commonwealth of Massachusetts. Any person having any information regarding the company which relates to its suitability for the license or authority the applicant has requested is asked to notify the Division by personal letter to the Commissioner of Insurance, 1000 Washington Street, Suite 810, Boston, MA 021186200, Attn: Financial Surveillance and Company Licensing within 14 days of the date of this notice.

Available limits: As needed Carrier: Unable to disclose States: All states Contact: Al Kennedy at 630-361-9418 or

e-mail: al.kennedy@hannover-re.com

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Advertisers Index Applied Underwriters 2, 3, 52 www.auw.com Builders & Tradesmen's Insurance Services www.btisinc.com 19 City of Hope www.cityofhope.org 47 Foremost Insurance Group www.foremoststar.com 9 Golden Bear Insurance www.goldenbear.com W7 Great American Insurance Group www.gaig.com 13 IICF www.iicf.org 51 Insurbanc www.insurbanc.com 43 ISU Group www.joinisu.com 21 ITC www.getitc.com 39 JM Wilson www.jmwilson.com S3, M2 Lighthouse Property Insurance Corp. www.lighthousepropertyins.com SC5, S1 M.J. Hall & Company www.mjhallandcompany.com W5 Monarch E&S Insurance Services www.monarchexcess.com W3 Nationwide Mutual 17, 34 www.nationwide.com Pacific Gateway Insurance Services www.pgiainsurance.com W1 PersonalUmbrella.com www.personalumbrella.com 45 ProAssurance Companies www.proassurance.com 16 Smart Choice Agents Program www.smartchoiceagents.com 7 Texas Mutual www.texasmutual.com SC1 Texas Surplus Lines Association www.tsla.org SC3 The Hartford Insurance Group www.thehartford.com 5

JULY 5, 2021 INSURANCE JOURNAL | 49

Closing Quote A Message from a Cybersecurity Expert

By Pete Sfoglia

ere we go again, same evil, same demons: trojan horses, bots and botnets, spyware, worms, scams and phishing. Then there’s ransomware, a set of malware programs that hackers install on your network that blocks access to data or publicizes confidential data unless a ransom is paid. Ransomware has become big business. Not even our critical infrastructure is safe. Public disclosure of confidential company data leads to the mother of all bumpy roads. Victims are subject to hefty regulatory fines, expansive remediation costs and irreparable damage to brand reputation. A publicly traded company will see its stock tank. Folks need to get serious about cybersecurity. While no one is immune to cyber assault, several high-impact/ low-cost countermeasures have shown to be highly effective in neutralizing the invisible forces that threaten to undermine our business. Here’s what you need to do. Use your local Windows Firewall. Enable the Windows Firewall default settings on all agency workstations. If you’re already using a third-party firewall, save yourself some money and get rid of it.

Perimeter firewalls are overkill for most agencies. Windows Firewall is all your agency needs to both thwart most attack vectors and prevent the insertion of network services that are not on Microsoft’s safe list. Your antimalware system will scan incoming program files for malicious programs, thereby completing your endpoint protection. Use two-factor authentication (2fa). 2fa technology requires two authentication methods to verify your identity: something you know (your password) and something you, not the bad guys, have (a four to six-digit integer texted to your smartphone). This second hurdle makes it more difficult for the bad guys to access your applications, emails or devices. Microsoft provides step-by-step instructions on setting up 2fa on your agency’s desktop computer, employee home computers/laptops, tablets and smartphones. Implement a robust pass-

word management system.

Password management systems like LastPass or 1Password enable you to securely log into any web-based system from any computing device, anywhere in the world. It chooses complex passwords for you and stores them, along with other

50 | INSURANCE JOURNAL | JULY 5, 2021

authentication information in the cloud, where they are available whenever you need them. You’ll never have to remember another URL, login ID or password again. Enable full-disk encryption. Activate Microsoft BitLocker, a Windows 10 Pro feature that encrypts your entire hard drive when you’re logged out for the day, rendering it useless to intruders. Encrypt all email

attachments that contain non-public information. Never

send non-public information (NPI) in an unencrypted email attachment. You can easily encrypt email attachments using PKZip, WinZip or the native encryption features in office applications like Excel and Word. Likewise, never store NPI in the body of an email. Use a virtual private network (VPN). VPNs use an encrypted connection over the internet, ensuring that sensitive data is safely transmitted. It prevents intruders from eavesdropping on your internet traffic and effectively extends your agency’s network far beyond its four walls. ExpressVPN, NordVPN and PureVpn all offer great plugand-play VPNs at reasonable monthly costs. Store sensitive company

information in cloud-based “vaults.” Never store NPI locally. If you must feature NPI in Word, Docs, Sheets, Excel, etc., store it in Microsoft Vault or Google Vault. These free tools enable you to store sensitive files in a 2fa secured, encrypted directory in the cloud.

Call to Action

Insurance agencies face a plethora of challenges from using the internet as a business-enabling technology. For example, securing NPI used to mean locking the front door. Now, it has taken on a level of complexity that most agencies are ill-equipped to address. Governments have now stepped into the fray, imposing vague cybersecurity regulations that declare what you must protect, without saying how — case in point, the New York Department of Financial Services Cybersecurity Regulation. Daunting indeed, but not to worry. Take a deep breath, relax. You can mount a vigorous defense. Commit yourself, get some help if you need it and get it done. It’s easier than you think. Sfoglia Ph.D. is executive vice president and co-founder of Insurun. Email: Pete@insurun.com. INSURANCEJOURNAL.COM

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Insurance Industry Charitable Foundation (IICF) is a unique nonprofit that unites the collective strengths of the insurance industry to help communities and enrich lives through grants, volunteer service and leadership. Having contributed $42 million in community grants and over 300,000 volunteer hours, to hundreds of charities and nonprofit organizations, IICF continues to reinvest locally where funds are raised for greatest community impact. #insurancegivesback Visit www.IICF.org to learn more and follow us on social media @doubleicf

Join your industry colleagues and make a difference. Get involved today! Midwest Division Kelly Hartweg Phone: (773) 991-2149 khartweg@iicf.com

Northeast Division Betsy Myatt Phone: (917) 544-0895 emyatt@iicf.com

Southeast Division Sarah Conway Phone: (214) 228-2910 sconway@iicf.com

Western Division Melissa-Anne Duncan Phone: (714) 870-1084 maduncan@iicf.com

Insurance Industry Charitable Foundation Helping communities and enriching lives, together.

UK Division Wendy Wilder Phone: +44 (0) 7469 392 453 wwilder@iicf.com

Insurance Industry Charitable Foundation contact@iicf.com www.iicf.org FEIN: 20-1240972

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