Category Archives: Insurance Companies

Side A D&O Product Insights

RLI has introduced its Enhanced Side A D&O product, a coverage line that is seeing important coverage enhancements.  I recently had the chance to interview RLI’s Chad Berberich, Vice President of its Executive Products Group, about his company’s approach to the coverage, his view of the market, and his experience with the brokerage community’s interest in Side A products.

The Betterley Report has been reviewing Side A D&O policies in its October issue since 2004.  27 different carriers are included in the 2015 Report, which can be viewed at www.betterley.com

Rick: Chad, you’ve recently introduced RLI’s new Enhanced Side A D&O policy to the market.  How is it different from your existing product?

Chad:  The new Side A D&O policy is a wholesale rewrite of the prior policy form, so the changes are pretty substantive. Changes were made to incorporate many things that were commonly endorsed on the old form into the body of the new policy. There were also a number of coverage enhancements made, such as including:

  • Two policy limit reinstatements
  • Deleting all the exclusions except the conduct exclusion (and narrowing that exclusion), and
  • Defining and providing coverage for a Cyber Claim

Rick: Were these changes driven by client/broker requests?

Chad:  Yes, the changes were driven by both client and broker requests, along with a desire to have a very competitive policy in the marketplace. Executives today are operating in a dynamic and complex business environment where the risks they face are constantly changing. We strive to anticipate the changing needs of our customers and modify existing products, or develop new products, to ensure we are providing them with the most comprehensive protection possible. The new Side A D&O Policy and new Representations and Warranties Liability Policy that we just announced are two recent examples of how we are shaping our products and insurance solutions to better serve the executive suite.

Rick: I see the market for Side A as primarily public companies, which is largely saturated.  Do you agree with my observation?

Chad:  Historically it has been public companies that buy Side A D&O policies, but there continues to be opportunity for growth in other market segments, such as nonprofits and larger private companies. And yes, I would agree that there is plenty of capacity.

Rick: I’ve been saying for years ‘why aren’t large not-for-profits buying Side A?’  It seems carriers agree with me, but I have yet to hear a good reason from the brokers that serve that market.  What do you think are the reasons?

Chad:  We’ve actually seen larger nonprofits and larger private companies start to buy Side A – those classes have been a strong source of new business for us over the last year or so. I think brokers have long promoted Side A to their larger private and nonprofit clients and the coverage has become more widely known and better understood than it was a few years ago. With increased awareness about the need for Side A coverage in this market, we’re starting to see more interested buyers.

Rick: What will it take for large not-for-profits to start buying Side A?

Chad:  We’re already seeing more buyers in the not-for-profit space. As brokers focus more on talking about the product with those customers and helping educate them on the unique risks they face and how Side A coverage can reduce their exposure, sales of the product will increase.

Demand would also increase if there was any significant loss activity where a given nonprofit organization was unable to indemnify the directors or officers. Given that board members on large nonprofit organizations are often prominent members of the community and often have substantial personal assets, they are uniquely exposed when they accept a position on the board of a large nonprofit organization.

Rick: Do you find that most Side A policies are largely sold by a relatively small number of brokers?

Chad:  I think any broker that sells D&O is selling Side A.

Rick: Do you find the non-global and regional brokers knowledgeable about Side A?

Chad:  I do – the non-global and regional brokers are savvy and hungry. They know the product and are definitely selling Side A.

Rick: Do you think that Side A will ever be bought in quantity by non-public insureds (i.e., large private companies and not-for-profits)?

Chad: I don’t think we will see the same limits purchased by nonprofits and private companies compared to public companies, but do believe that those nonprofits and private companies will buy more policies as time goes on and their awareness and understanding about the need for Side A coverage continues to grow.

Rick: Thank you, Chad.  I appreciate your sharing your inside knowledge of the Side A marketplace and the opportunity to highlight the changes in your new policy.

About Chad Berberich and the RLI Executive Products Group:

Chad Berberich is Vice President of the RLI Executive Products Group, a division of RLI that offers a comprehensive portfolio of professional liability insurance coverages for the Executive Suite. To learn more about the RLI Executive Products Group and its Side A DIC D&O liability policy, visit www.rli-epg.com or contact Chad Berberich at (972) 677-2116 or Chad.Berberich@rlicorp.com.

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Specialty Insurance Year End Wrap-up Webinar 12/12 at 11 AM by Advisen

Please forgive me for a bit of self-promotion, but this program should be really good; I already learned a lot from our panelists’ conference call.

On Thursday morning, December 12 at 11 AM (eastern time), I will be on a panel moderated by Advisen’s David Bradford to review the trends and developments of 2013 in Specialty Lines insurance. The panel of experts will also provide insight into 2014 & beyond. This free, one-hour webinar is sponsored by OneBeacon Professional Insurance; registration is here.

The panel includes:

  • Paul Romano, President, OneBeacon Professional Insurance
  • David Lewison, National Practice Leader, AmWINS
  • Rick Betterley, President, Betterley Risk Consultants
  • David Bradford, President, Research & Editorial division, Advisen (moderator)

The economy continued to improve in 2013, which generally benefitted the insurance market. For specialty insurers, however, the year posed a number of challenges. Healthcare reform continued to reshape the risk landscape of hospitals and other healthcare organizations. Lawyers continued to feel the fallout of the credit crisis and recession as claims activity remained above historical averages. Network security challenges further evolved in the endless cat-and-mouse game between cyber criminals and system security experts.

This webinar will review the trends and developments of 2013 in “Specialty Lines” insurance. Our panel of experts also will provide their insights into the factors that will influence the market in 2014 and beyond.

Hope you can join us!

Reinsurer Interest in Cyber Products

100 members of the Reinsurance Association of America were in the audience in New York City for the RAA’s Current Issues: Cyber Liability program May 21st.  I think the heavy attendance was indicative of a growing interest in the product by reinsurers, especially since this was a members-only event.

I was joined in the opening session on The Cyber-Liability Landscape by Stephen Serfass, partner with Drinker Biddle.  My comments were focused on the evolving product, what I worry about, and product opportunities.  Steve spoke about the risk landscape.

Other speakers were Mike Brown of Guy Carpenter on reinsurer involvement, Beth Diamond of Beazley on breach and claims activity, and Larry Greengrass of Mound Cotton on claims and traditional policies.

The afternoon session provided insight into state and federal legislation, and was addressed by Robert Gordon of PCIAA and Steve Serfass.

I think the heavy attendance and the level of knowledge and interest expressed by the audience speaks volumes about the growth in importance of this fascinating product.

AM Best interviewed the speakers after their sessions; the videos are  here and were conducted by Meg Green.  Apologies for the very brief ad that precedes the interview.

Cyber Endorsements for Traditional Insurance Policies

Sandy Hauserman (of Digital Risk Resources) and I co-authored an article on cyber product add-ons to traditional insurance policies (such as BOPs and Management Liability).  It is published in the May issue of IRMI’s Risk Report.  Although normally available only by subscription, IRMI was kind enough to make this article available at no charge.

The article examines the various mechanisms by which cyber coverages and services can be offered to smaller insureds on a cost-effective basis, as well as some of the challenges of doing so.  It includes examples of the approaches various carriers are using.

The article is here.

More on Cyber Risk Management Services – An Interview with Oliver Brew of Liberty International Underwriters

I have been thinking, researching, and writing about applying the lessons we have learned from the property and EPL lines of insurance to Cyber/Privacy insurance for some time now.  As a line, Cyber seems to have a great opportunity to educate, encourage, and reward insureds that are careful with the data for which they are responsible.  Insurance can be a great lever to improve the risk profile of its customers; Cyber 3.0 makes use of that lever by making available Value-added Risk Management Services to insureds.

One area that I am very interested in is the intersection of risk management services offered by the Insurer and the use of those services by their Insureds.  As we learned in EPLI, a good set of services doesn’t necessarily mean that Insureds will make use of them.

Liberty International Underwriters is offering a particularly deep set of value-added Risk Management Services to its Cyber insurance insureds.  I interviewed Oliver Brew, Vice President, Specialty Casualty, Liberty International Underwriters to gain a better understanding of those services and how they are delivered.

Q: Oliver, you recently introduced your Data Insure Privacy and Security Risk Management Services product for mid-sized and larger insureds.  What does it provide for services that an insured wouldn’t normally find in a Cyber/Privacy policy?

A: Risk management services have evolved a lot since they were first offered almost as an afterthought with the early privacy policies. We include access to privacy specialists who can, for example, answer that tricky question about how a new product or service might impact the privacy stance of an organization. We offer an online client portal with a wealth of resources regarding privacy compliance and regulatory issues, but also practical help like training templates and posters, and sample privacy policies to help guide clients through what is a complex and fast-changing area.

Q: Who provides these services and how did you select the providers?

A: We have partnered with ePlace Solutions who have been long-time experts in providing data privacy risk management solutions to complement our insurance offering. We work with them to develop relevant content about current issues, and also to respond to client demands as they change.

 Q: One problem I often see with Value-added Risk Management Services is that insureds don’t take advantage of them as much as they should.  This obviously makes the service less valuable and even worse leads underwriters to resist reducing premiums for what ought to have been an effective loss reduction strategy.  How does LIU address this dilemma?

A: Yes – I have seen that issue in my career, where what starts as well-intentioned service becomes a cost to the carrier without the associated benefit due to lack of usage.  We have addressed this by a dual approach – firstly we spend a lot of time with brokers, educating them about the services as a core part of our offering, so that it is integral to our insurance solution. Secondly every client is contacted after purchasing an LIU Data Insure policy to let them know about the services and make sure that the appropriate people within the organization have access to the resources. The person making insurance purchase decisions may not be the same person responsible for privacy issues.

Q: Is there any additional cost or a time limitation for the insured using these services?

A: No – these costs are paid for by LIU. I firmly believe there is a long-term benefit to LIU loss ratios when our clients are better educated and aware of the exposures.

 Q: What if the insured would like to obtain more services from the providers; can they do so at a favorable cost?

A:  Yes – we have relationships with a number of providers of comprehensive privacy risk management services such as a HIPAA privacy assessments and more technical legal reviews which we can facilitate.

 Q: Can you describe which insureds should consider this approach to coverage, and what their incentives are?

A: All organizations can benefit from the support provided by risk managements services, but particularly those where perhaps the privacy function is not as mature. Many companies are still considering data privacy insurance for the first time, and this can be a significant factor in their decision-making as to how the insurance will support them, not just in the event of a claim. There are also aspects of the product they can use and benefit from, even if they do not have a claim. For clients, it is like having access to an employee privacy training department without the overhead.

 Q: How can our readers get more information about this product?

A: http://www.liu-usa.com/omapps/ContentServer?pagename=LIUUSA/Views/Main&ft=2&cid=1240007318048&ln=en

Thank you, Oliver – I appreciate your providing some insight into the value-added risk management services LIU is providing to its Cyber insureds.

 

AIG Introduces Improved Cyber Product – Is This Cyber 3.0?

AIG has just announced its new CyberEdge insurance product.  It is a combination of risk transfer (insurance), technology-based protections, and a set of web-based tools to help insureds learn about and manage the risk of data loss.  Sounds like what I have been calling Cyber 3.0.

I recently had an opportunity to visit with AIG’s John Gambale, Head of Professional Liability & Lexington Financial Lines Executive; U.S. & Canada Region and RiskAnalytics’ Brian Branner, Managing Director, Insurance to discuss this new approach to Cyber insurance.  John and Brian briefed me on the concept, how it came about, and the advantages they hope it brings to their insureds.

Q: AIG has just announced its new CyberEdge insurance product.  How is this different from more traditional Cyber products?

A: (John) CyberEdge is a comprehensive risk management solution for cyber insurance offered by AIG.  The protection that CyberEdge provides is a valuable additional layer to the most powerful first line of defense against cyber threats – a company’s own IT system.  We’re taking the coverage that we’ve been offering as a market leader since the late 1990s, and providing additional loss control services including the CyberEdge RiskTool, AutoShun®, and the CyberEdge Mobile App for iPad. By adding our expertise to that of our clients, we are helping them stay ahead of the curve.

A: (Brian) This is the first time real loss prevention solutions have been provided with a cyber insurance policy.  Previously, carriers were only admiring the problem and focused on how to best react when a breach occurred. Now, tools are being provided to improve both the network security and human element of cyber risk.

Q: John, what part of the market does this product target?

A: We think it can be useful to all companies, regardless of size or industry, since all have some degree of cyber exposure in a networked world.  In fact, our recent study found more than 85% of the 258 decision-makers surveyed said they were very or somewhat concerned about cyber risk’s impact on their organizations, compared with the group’s response to six other areas of risk, including income loss (82% of executives were very or somewhat concerned), property damage (80%), and securities and investment risk (76%).

We can tailor our coverage to meet the needs of almost any organization, but the new value-added services we are providing are particularly relevant to small and mid-size organizations. 

Q: John, are there any major coverage differences from your existing products?  Will those products remain available?

A:We’re still offering the innovative protection that CyberEdge provides.  We are enhancing the product with the additional loss control services, and clients can still customize the coverage they need with the current CyberEdge coverage parts: security and privacy liability insurance, event management insurance, network interruption insurance and cyber extortion insurance.

Q: Brian, AutoShun® sounds like a form of active defense, a concept that we have thought the Cyber insurer might place a high value on.  How does it work?

A: AutoShun will be a new layer of security for most organizations. It complements the firewall, Antivirus, IDS/IPS and any other securities an organization may buy, by simply blocking network communications, both incoming and outgoing, from our list of known criminals, who we’ve tracked by IP address for over 14 years.  Our list of known criminal IP addresses is typically in the millions and updates about every ten minutes.  Our intelligence feed is the real magic behind RiskAnalytics’ services.

Q: Brian, how does this technology differ from other forms of network security that companies may already be buying?

A: AutoShun complements existing securities. But those securities are proving ineffective daily, so rather than looking for signature based infections, AutoShun simply focuses on the source and destination of network communications, and kills communications involving known “bad” IP addresses.  If you think of it like the Flu, rather than a shot or medicine to make a sick person healthy, we just keep our clients away from the sick people, to prevent the infection in the first place.

Q: The CyberEdge RiskTool is a novel approach to supporting risk managers.  It looks like it takes a more active approach to providing information and tools.  What motivated AIG to develop its own portal?

A: (John) By talking to clients, we realized that many of them were looking for a web-based risk management platform that could simplify the risk management process, regardless of the size of the company. The CyberEdge RiskTool is a web portal enabling qualifying CyberEdge policyholders to proactively manage risk management policies, training and compliance to mitigate cyber exposure. The portal provides a simplified process and peace of mind to clients that the risks to their sensitive information and electronic assets are removed, limited or transferred.   

AIG is constantly monitoring the cyber landscape and staying at the forefront of the industry as cyber risks continue to evolve which allows our innovation to become our clients’ protection. 

A: (Brian) We’ve been developing the RiskTool system with AIG for over a decade on the Environmental and Health/Safety side.  Conversely, people, or users, also play a significant role in network security risk and the CyberEdge RiskTool system can directly improve this risk.  Inherently, we think users want to do the all “right things” but we often need to educate them as to how their behaviors can actually impact security. Cyber awareness and training are also a requirement for many regulated entities, so we are essentially providing them a simple and cost sensitive solution to both achieve regulatory compliance and be an overall safer risk. Best of all, CyberEdge RiskTool provides a daily training activity report for organizations to prove they were trying to do all the right things and not negligent in their efforts.  This is paramount should a breach actually occur.

Q: John, have you considered providing a live “Ask an Expert” capability?  That’s one aspect of Cyber value-added services that I think would be really useful.

A: We are always evaluating new ideas to continue to offer innovative value-added services to help our clients stay ahead of the curve. 

Q: John, I see there is a CyberEdge app for the iPad; any plans to offer it on the Android platform?

A: Yes.  The initial release of our Mobile App for iPad is a first-of-its-kind resource for cyber risk-related information, featuring the latest cyber news, real-time information on data breaches, a breach-cost calculator and a glossary of common cyber terms.  For version 2.0, we plan to make the app available for other platforms.

Q: Thank you, John and Brian – where can our readers get more information about this new product?

A: Visit www.aig.com/us/CyberEdge or download the CyberEdge Mobile App for free in the App Store on your iPad.

Snips from EPLI Market Survey 2011

Posted our 2011 EPL Insurance Market Survey 2011 last week; here are some of our observations:

  • Rate adequacy and expense control continues to be the story, with carriers finally convinced of the need to obtain higher rates.  (Note: I could probably have said that better; carriers have been convinced for years – now they are executing, and the intermediaries and consultants are willing to accept it).
  • 34 carrier products included – we added Zurich after some years away (Zurich/Steadfast was in our original survey of 5 carriers way back in 1993) and Arch.
  • Carriers removed from the Survey this year: CoverX/First Mercury (sold to Crum & Forster) and Evanston, which hasn’t responded to information requests for 2 years running.  Evanston promises to provide information for the 2012 Survey.
  • More carriers bringing out industry-specific products, especially for health care.
  • Established EPLI carriers extending the product to their Business Owner Package-type products.
  • Value-added Risk Management services continue to be added and improved.
  • And lastly, but not surprisingly – real wage & hour coverage remains scarce.   We wish it were otherwise.