CLIMATE CHANGE RISKS INTENSIFY - SPECIAL REPORT RISK MANAGEMENT INNOVATION - Business Insurance
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COVID-19 SAFETY: High-risk industries subject to increased scrutiny - PAGE 4
APRIL 2021
SPECIAL
REPORT
RISK
MANAGEMENT
INNOVATION
PAGE 22
CLIMATE CHANGE
RISKS INTENSIFY
Texas-sized winter storm,
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PAGE 19
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PRESIDENT
Steve Acunto
(Greenwich)
sa@businessinsurance.com
COVER STORY
PUBLISHER
Keith Kenner
(Chicago)
kkenner@businessinsurance.com
EDITOR Unusual weather events,
Gavin Souter such as February’s Texas
(Chicago)
gsouter@businessinsurance.com
freeze, and rapidly changing
U.S. climate policies are
DEPUTY EDITOR
Claire Wilkinson creating a host of liabilities
(New York) and exposures for businesses.
cwilkinson@businessinsurance.com
Meanwhile, companies are
ASSISTANT EDITOR
also facing greater scrutiny
Louise Esola
(New Orleans) from investors and regulators
lesola@businessinsurance.com on environmental, social and
SENIOR REPORTER governance issues. PAGE 19
Judy Greenwald
(San Jose)
jgreenwald@businessinsurance.com
REPORTER
Angela Childers
(Chicago)
achilders@businessinsurance.com
INSIDE
REPORTER
Matthew Lerner
(New York)
mlerner@businessinsurance.com
COPY CHIEF
SPECIAL REPORT: RISK MANAGEMENT INNOVATION
John Obrecht Tools are available for employers to track whether workers have received COVID-19
(Chicago) vaccinations; ‘supertall’ buildings heighten risk management challenges; sharply rising
jobrecht@businessinsurance.com
insurance prices are driving increased interest in parametric coverages. PAGE 22
COPY EDITOR
Brian Gaynor
(Portland)
bgaynor@businessinsurance.com NEWS ANALYSIS RAILROAD RISKS
ART DIRECTOR The implementation of positive train control technology
Jeremy Werling FOR BREAKING NEWS should significantly reduce railroads’ liability. PAGE 6
(Cincinnati)
jwerling@businessinsurance.com COVERAGE, VISIT
DIRECTOR OF RESEARCH,
businessinsurance.com PANDEMIC FATIGUE
PLANNING AND INSIGHTS Employers are finding it increasingly difficult to enforce
Andy Toh workplace pandemic safety protocols. PAGE 10
(Chicago)
atoh@businessinsurance.com
MAJOR ACCOUNTS DIRECTOR - INTERNATIONAL
NORTHEASTERN U.S. & INTERNATIONAL Although small, Iceland’s insurance market is relatively
Ron Kolgraf
(Boston) well developed and competitive, with a full range of
rkolgraf@businessinsurance.com covers available. PAGE 11
SENIOR VICE PRESIDENT,
BUSINESS DEVELOPMENT
Stephen Acunto
(Princeton) PERSPECTIVES
stephen@businessinsurance.com
HEAD OF SALES, EVENTS
Settling personal injury cases amid the pandemic
has offered challenges and opportunities, writes
VIEW FROM
& REPRINT SALES MANAGER
Susan Stilwill Jeffrey Miller of Pillinger Miller Tarallo LLP. THE TOP
(Nashville) PAGE 29
sstilwill@businessinsurance.com
VICE PRESIDENT OF MARKETING MIKE KERNER
Brian McGann
(Buffalo) OFF BEAT Mike Kerner joined
bmcgann@businessinsurance.com Bucknell University Munich Reinsurance
LEGAL BRIEFS America Inc. in
DIGITAL AD OPERATIONS MANAGER calls in fraternity
Jordan Kilty
Recent court opinions PAGE 13
brothers to help December 2018 as
(Raleigh)
manage pandemic risk CEO of Munich Re
jkilty@businessinsurance.com OPINIONS
at recreation center. Specialty Insurance.
DIGITAL MARKETING MANAGER Workplace safety challenges; making
Jen Jonasson PAGE 31 He previously served
(Chicago)
the most of technology. PAGE 28
as executive vice
jjonasson@businessinsurance.com
president, risk
MARKETING & EVENTS MANAGER MARKET PULSE
management and strategy, at Everest Re Group Ltd.
Brittany Collins Products, deals and more PAGE 27
(Lafayette) and prior to that spent 23 years at Zurich Insurance Co.
bcollins@businessinsurance.com
Mr. Kerner discusses Munich Re’s commercial insurance
PEOPLE
MARKETING & EVENTS SPECIALIST strategy and how the hardening market is affecting its
Beth Wojdyla Insurance industry moves PAGE 30
(Chicago) business and policyholders. PAGE 14
bwojdyla@businessinsurance.com
SUBSCRIPTIONS & SINGLE COPY SALES BUSINESS INSURANCE (ISSN 0007-6864) Vol. 55, No. 5, Copyright © 2021 by Business Insurance Holdings, Inc. is published monthly by Business Insurance Holdings, Inc., 1030 Lake Avenue,
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954-449-0736 Printed in the USA. POSTMASTER: Send address changes to Business Insurance at PO Box 1010, Greenwich, CT 06836.
BUSINESS INSURANCE APRIL 2021 3
NEWS ANALYSIS
OSHA sharpens focus of COVID-19 safety efforts
BY LOUISE ESOLA “demonstrated to be at a higher risk” over
lesola@businessinsurance.com the past year, according to John Ho, New
York-based chair of the OSHA practice
E
mployers nationwide and those man- for Cozen O’Connor P.C. “It makes sense
aging workplace safety have had their to me,” he said.
eyes on the U.S. Occupational Safe- Employers can also expect more on-site
ty and Health Administration, which in inspections, which were curbed during the
accordance with directives from the Biden pandemic due to safety concerns. Accord-
administration has been making guidance ing to OSHA documents, the NEP pro-
and enforcement changes to better protect gram “reaffirms OSHA’s adherence to
workers from COVID-19. longstanding inspection policy that relies
On March 12, the agency launched its predominantly on on-site (in person) pres-
National Emphasis Program to focus its ence for most inspections.”
enforcement efforts on industries with the With an increase in federal funding —
largest number of workers at serious risk the latest COVID-19 stimulus bill ear-
of contracting the coronavirus. The pro- marked $75 million in pandemic-related
gram will remain in effect for up to one funding to the agency — the new program
year, though OSHA said it has the flexibil- could result in up to 2,000 more inspec-
ity to amend or cancel it as the pandemic tions a year for targeted employers, said
subsides. In March, OSHA launched its National Emphasis Program to enforce safety during the Eric Conn, Washington-based founding
The enforcement announcement arrived COVID-19 pandemic among frontline workers, such as grocery store employees. partner of Conn Maciel Carey LLP. “They
as employers and watchdogs awaited an are not just talking about enforcement,” he
emergency COVID-19 safety standard, take precedence over citations of the gen- said. “They are putting a lot of money and
which some experts had expected under
an executive order issued by President Joe
TALLY OF OSHA eral duty clause.”
Even without a COVID-19 standard,
effort behind it.”
The program’s launch follows a Feb. 25
Biden on Jan. 21 that asked OSHA by
March 15 to consider establishing such a
COMPLAINTS “the agency has more than enough reg-
ulatory authority to cite a large number
report from the U.S. Department of Labor
Office of Inspector General that found
standard (see related story).
While many believe a standard is still in – BY INDUSTRY
The Occupational Safety and Health
of employers for not following rules and
regulations that are in the books,” said
inefficiencies in OSHA’s handling of
inspections during the pandemic.
the works, experts say the new enforce- Andrew Brought, a Kansas City, Missouri- Specifically, investigators found that
Administration has been keeping count of
ment program represents a resource man- complaints reported to the agency, by industry,
based attorney with Spencer Fane LLP. while OSHA received 15% more work-
agement strategy that will divert more since the start of the coronavirus pandemic. The NEP program “is less a shift in pol- place safety complaints between Feb. 1,
attention to industries where workers are icy and more a shift in resourcing,” said 2020, and Oct. 2, 2020, it performed 50%
Number of complaints
more exposed to COVID-19, because they Courtney Malveaux, Richmond, Virgin- fewer inspections than during a similar
interact with the public more or because Health care 3,142 ia-based principal and co-leader of the period in 2019.
social distancing is more difficult, as in Retail trade 1,706 workplace safety and health practice group “Due to the increase in complaints,
some manufacturing settings. Grocery stores 240 at Jackson Lewis P.C. “This is hunting reduction in inspections, and most inspec-
Without a specific standard that dic- Construction 417 where the ducks are. … The agency has tions not being conducted onsite, there is
tates what employers must do to prevent General warehousing and storage 270 identified health care providers and high- an increased risk that OSHA has not been
COVID-19, experts say the program Restaurants and other eating places 877 er-hazard employers in terms of COVID.” providing the level of protection that work-
could result in citations justified by vio- Automotive repair 126 The program will target 21 industry ers need at various job sites,” the report
lations of regulations such as the general Source: OSHA, as of March 14, 2021 codes in the North American Industry stated, adding, “we are concerned that
duty clause, a catch-all rule that requires Classification System, with 11 codes per- since most OSHA inspections were done
employers to maintain a safe workplace with the president’s executive order, that taining to health care facilities, such as remotely during the pandemic, hazards
free of hazards for employees. Standards reiterated the need for such mitigations nursing homes, hospitals and dental offices. may go unidentified and unabated longer,
that mandate respiratory protection and as mask-wearing and social distancing in The remaining 10 codes pertain to other with employees being more vulnerable to
training, personal protective equipment the workplace to prevent COVID-19 out- high-risk work sites, including restaurants, hazardous risk exposure while working.”
and record-keeping could also be cited. breaks. Meanwhile, the NEP states that “in supermarkets, correctional facilities and OSHA said the new surge in inspections
The agency is also leaning on new the event that OSHA issues an emergency meat processing plants. will include “some follow-up inspections of
guidelines, issued Jan. 29 in accordance temporary standard, those provisions will The targets named in the NEP have worksites inspected in 2020.”
OSHA MISSES DEADLINE ON NATIONAL SAFETY STANDARD FOR COVID-19
T he March 15 deadline passed without
the U.S. Occupational Safety and
Health Administration delivering details
of an expected emergency temporary
standard for COVID-19 workplace safety,
get this right” but did not provide further
details of an extended timeline.
President Joe Biden on Jan. 21 signed
an executive order calling on OSHA to
issue an emergency temporary standard
briefing on March 15 that “OSHA has been
working diligently, but we, of course, believe
they should have the time to get it right
and time to ensure it’s right, and so we’re
waiting for them to make a conclusion.”
risk architect at risk and analytics company
Aclaimant Inc. “What the ETS does is
bypass two to three years of rulemaking
and compresses it down to something that
is immediate,” he said.
as it had been directed to do under an if “determined to be necessary,” among Several experts said the delay was The new standard “is a given,” said
executive order. other safety guidelines. Such emergency no surprise. Eric Conn, Washington-based founding
Meanwhile, numerous labor groups have standards have already been put in place in “The issues and consequences of this partner of Conn Maciel Carey LLP. “It’s
publicly stated that a standard is still in the California, Michigan, Oregon and Virginia. emergency standard are so big that they not a question of whether; it’s a question
works, and an OSHA spokeswoman said When questioned about the deadline, a could not get it done on time,” said Gary of when.”
the agency would be “taking the time to White House spokeswoman said in a media Pearce, Waterford, Michigan-based chief Louise Esola
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NEWS ANALYSIS
SUICIDES
Technology helps reduce railroad risks
REMAIN
TOUGH
PROBLEM
BY JUDY GREENWALD
jgreenwald@businessinsurance.com
S uicide is a
tough, and in
some respects
T
he general implementation of positive train intractable, risk
control, technology intended to stop trains management issue
before accidents can occur, will significant- facing railroads.
ly reduce railroads liability but is not a cure-all, “Just think
experts warn. of the physical
The Federal Railroad Authority announced characteristics of a
in December that PTC systems — designed railroad,” said David
to prevent train-to-train collisions, over- Adamczyk, New
speed-caused derailments, incursions into York-based executive
established work zones and train movements vice president of
through switches left in the wrong position — U.S. railroad for
have been widely adopted. Aspen Insurance
The agency said the technology was in opera- Holdings Ltd.
tion in all 57,536 required freight and passenger “You’ve got railroad
railroad route miles prior to the Dec. 31, 2020, track throughout
statutory deadline set forth by Congress. the country.”
But the process took awhile. Pres- “It’s wide open.
ident George W. Bush signed You can’t put a
the Rail Safety Improvement fence around the
Act of 2008, which required RAIL-RELATED and that concern now “goes Railroad crossings are an issue “because there’s entire stretch of
PTC systems to be fully FATALITIES away in large part,” he said. a lot of moving parts,” with in some instances a track, and you’ve got
implemented by Dec. 2019 TOTAL — 1,102 While PTC is helpful, it municipality owning the crossings and in others people living near
31, 2015, on main lines Highway-rail 293 doesn’t fix every problem the railroad owning them and being responsible railroad property,”
with regularly scheduled Suicide 192
Metra might encounter, for their upkeep and maintenance, said Kevin he said. “(Suicide) is
inter-city or commut- Mr. Anderson said. Wood, Monroe, Louisiana-based national direc- an exposure that’s
er rail passenger service. Trespass 591 PTC can be effective for tor for rail services at Arthur J. Gallagher & Co. inherent to railroads.”
The deadline was twice Other 26 such things as controlling “You’re talking about a pretty expensive con- “Basically, there’s
extended, first to Dec. 31, Source: U.S. Department of a train’s speed or prevent- versation” when it comes to installing fully oper- nothing anyone can
Transportation — Federal Railroad
2018, then to year-end 2020. Administration ing it from moving from one ational crossings, he said. do to someone who
John Anderson, deputy track to another because of a Mr. Anderson said grade crossings designs and wants to commit
general counsel at Metra, the switch misalignment. “But what the types of safety devices used have improved suicide by train,”
Chicago-area commuter rail system, it won’t control is, if a truck gets stuck significantly, including fail-safe mechanical said John Anderson,
said the technology would have prevented a at a grade crossing” or if a pedestrian is on devices that prevent crossings. deputy general
2005 Metra train derailment in Chicago due to the track, Mr. Anderson said. Mr. Adamczyk said railroads have done an counsel for Metra,
“the engineer’s lack of attention and speeding” in One major problem remaining in the industry effective job informing communities on this a Chicago-area
which two people were killed and 200 injured. is accidents that occur along railroad rights-of- issue, but there are always “going to be people transit system.
Mr. Anderson said PTC also may have pre- way and at railroad crossings. A Federal Railroad who always are going to take a chance to go Metra offers
vented Amtrak derailments in Philadelphia and Administration study released in December around those crossings or gates or blow through educational programs
Washington state in 2015 and 2017, respectively, found a motorist is 40 times more likely to be the lights and try to beat the train.” focused on trains
that were attributed to excess speed. killed in a vehicle-train accident than in any “It’s a dangerous situation, but I don’t know and mental health,
“It’s certainly a step in the right direction inso- other type of highway collision. It said there were how you can change human nature,” he said. including speaking at
far as improving safety measures, but it’s new 18,289 vehicle-train collisions between 2008 and “There are situations where railroads have been high schools, he said.
technology,” said David Adamczyk, New York- 2017, resulting in 2,250 fatalities and more than sued for accidents at crossings even where they It has also trained
based executive vice president of U.S. railroad 8,000 injuries. have complied with local ordinances and require- station personnel,
for Aspen Insurance Holdings Ltd. “We’re just The study said an investigation of more than ments. There is coverage for these claims within conductors and
going to monitor what’s happening out there 9,000 crossings “revealed that most drivers did the railroad policy, of course, subject to policy engineers to detect
with PTC, and hopefully it does everything that not visually scan for trains and did not prepare terms and conditions,” Mr. Adamczyk said. behavior they suspect
has been talked about that it will do, but at this to stop, regardless of the type of warning device Fred Millar, an Arlington, Virginia-based inde- signals a planned
point it’s wait and see.” present and the crossing or the environmental pendent transportation consultant, said he would suicide, such as
“There are still some misconceptions about conditions at the time of transversal.” like to see trains be required to have electronical- “people who stand on
PTC,” said Daniel Bancroft, New York-based It said a better understanding of driver behav- ly controlled pneumatic brakes, which can stop the platform and don’t
North American transportation practice leader ior at crossings, which could be helped through them at shorter distances. get on the train,”
for Willis Towers Watson PLC. “The greatest machine learning and artificial intelligence, Effective in September 2018, the Department Mr. Anderson said.
one I see is the misconception that trains can go would help predict situations where drivers are of Transportation repealed a 2015 rule requiring “We have had
faster now, so we can have fewer trains” and need less cautious and could be at risk of accidents. the installation of the advanced braking systems several successful
fewer railcars, which “is not really true.” According to the Federal Highway Admin- on tank cars that carry explosive fuels, based on interventions of
“PTC was installed for safety purposes, not istration, as of 2017, rail crossings were about its determination that the costs “would exceed people who were
necessarily productivity improvement, and so I evenly divided between those that have active three-fold the benefits it would produce,” accord- contemplating
think underwriters are happy to see that,” he said. warning devices, including flashing lights and ing to the department. suicide by jumping
In the past, underwriters had to worry whether, gates that descend as a train approaches, and Sen. Charles Schumer, D-N.Y., was among in front of a train,”
if commuter and freight railroads shared a track, those with passive devices, such as stop signs and those who objected to the repeal, calling it “abso- Mr. Anderson said.
one was compliant with PTC and the other not, “crossbucks,” which are X-shaped warning signs. lutely unacceptable” because of safety concerns. Judy Greenwald
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NEWS ANALYSIS
Buoyant insurance M&A market rolls on
amid abundant capital, hardening rates
BY MATTHEW LERNER
mlerner@businessinsurance.com
M
ergers and acquisitions activity in the
insurance sector was strong in 2020
despite COVID-19 and is expected
to remain robust in 2021 as rising com-
mercial insurance rates bolster earnings,
making insurers attractive targets, and
“deployable capital” remains abundant,
analysts and others say.
Insurance technology investments have
also grown, providing another avenue to
enter the sector. In addition, special pur-
pose acquisition companies, the use of
which has boomed in many sectors over
the past year, are being used in the insur-
ance sector as a means of potentially taking
companies public.
Another indication of this year’s strong
M&A market is Chubb Ltd.’s offer in late
March to buy rival Hartford Financial
Services Inc.
“The mergers and acquisitions market
in general, not just insurance, has
been off the charts from last June.”
VOLUME OF DEALS COMPLETED GLOBALLY — 2009-2020 As the insurance industry sees increased
Mark Purowitz,
rates, buyers in search of returns in a
Deloitte Consulting LLP 300 low interest rate environment may be
more attracted to the sector, said J. Paul
250 Newsome Jr., Chicago-based managing
“The mergers and acquisitions market in director at investment brokerage Piper
general, not just insurance, has been off the 200 Sandler Cos.
charts from last June through today, and The low interest rate environment also
we aren’t seeing anything right now that 150 contributes to the availability of capital,
says that will slow down anytime soon,” which, combined with the search for
said Mark Purowitz, senior partner in 100 returns, helps drive M&A activity, he said.
the mergers and acquisitions practice of On the other hand, rising rates and pre-
Deloitte Consulting LLP in New York. 50 miums could blunt M&A activity as insur-
Some in the insurance industry were ers focus on organic growth as opposed to
“surprised at how much deal activity there 0 growth via acquisition, said Meyer Shields,
ended up being last year,” despite the Baltimore-based managing director at
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interruption to markets in the spring due Keefe, Bruyette & Woods Inc.
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to the coronavirus pandemic, said Vikram Source: Clyde & Co. “There are enough opportunities for
Sidhu, New York-based partner at law growth that companies are not looking
firm Clyde & Co. on themselves and how to adapt to work- deals completed in the second half of 2020 for more complicated growth available
Deal advisors expected COVID-19 to ing from home” and other manifestations was slightly higher than the first half, with through acquisition,” which carries inte-
chill activity, but 2020 proved to be a busy of the pandemic. 206 deals compared with 201. gration and reserve risks, he said.
M&A year for the sector globally, he said. Some deals that were put on hold due Although “deal activity in the insurance Technology investing also continues to
Similarly, deal activity in the broker sec- to pandemic-related issues will likely be sector slowed in the spring of 2020,” it grow in the insurance sector.
tor paused only briefly, said John Marra, a completed in the first half of this year, Mr. came “roaring back in the second half of Investors are “very solidly coming in”
deals partner with PricewaterhouseCoo- Purowitz said. the year,” PwC said in a late January deals to the insurtech space, said Mr. Sidhu of
pers LLP in New York. The total of 407 mergers and acquisitions report. “We expect strong M&A activity Clyde & Co. The sector has seen signifi-
“The distribution space continues to be completed worldwide in the insurance sec- to continue as we head into 2021,” buoyed cant investment over the past five to seven
very attractive,” he said. Broker M&A tor in 2020 was down slightly from 419 the by “the hardening of specialty (property/ years, he said.
“saw a bit of a pause in the second quarter previous year, according to a late February casualty) markets and significant levels of Major investment activity in the
last year as those businesses were focusing report from Clyde & Co. The number of deployable capital.” insurtech sector last year included Aon
8 APRIL 2021 BUSINESS INSURANCE
States introduce changes
to promote legacy deals
U.S. SPAC IPO ISSUANCE
Amount raised by Special Purpose Acquisition Companies (SPAC)
$83.4B
$89.8B
for insurance sector
in billions U.S. dollars.
M ergers and acquisitions among ongoing insurance sector
companies are triggering more interest in runoff transactions
to seal off old liabilities, and the trend has been boosted by
legislation in various states seeking to simplify the process.
Legislation passed in 2018 in Oklahoma led to the first transaction
being approved in the state last year and several other states have
either enacted or are considering enacting similar laws.
$10.0B $10.8B $13.6B
Oklahoma’s Insurance Business Transfer Act provides a mechanism
2017 2018 2019 2020 2021 “for insurers to absolutely transfer blocks of insurance business to
Source: SPAC Research (through late March) another insurance company,” according to the Oklahoma Insurance
Department.
PLC’s purchase of Coverwallet Inc. for an undis- ships, which will be beneficial from an acquisition The law allows for insurers to achieve contractual finality on the
closed sum and Duck Creek Technologies Inc.’s perspective,” Mr. Grossberg said. policies being sold or transferred as well as allowing for court,
successful initial public offering, which raised $405 In addition to insurtech M&As, several estab- insurance department and independent review and approval of all
million and valued the company at about $5.2 bil- lished insurtech companies raised significant funds transactions in the interest of policyholder protections.
lion. In addition, “multiple investments” in insurer in the past several weeks, including San Francis- The first successful transaction
Hippo Enterprises Inc. propelled its valuation to co-based cyber managing general agent Coalition under the Oklahoma law was
more than $1 billion, according to the report by Inc., which raised an additional $175 million in completed in October 2020 when
Clyde & Co. capital, and Boston-based cyber managing general a court approved Providence
KBW’s Mr. Shields said that while insurtech deals underwriter Corvus Insurance Holdings Inc., which Washington Insurance Co.’s
have largely been smaller thus far, “we’re starting to raised $100 million. plan to transfer substantially all
see some very prominent insurtech companies with, the insurance and reinsurance
in many cases, very impressive valuations.” business underwritten by PWIC
Growth in SPACs
to Yosemite Insurance Co.
“There are enough opportunities Special purpose acquisition companies, shell
companies formed to raise capital without the need
of Oklahoma.
The deal included the liabilities associated with those policies
for growth that companies are not for a traditional IPO, have been growing wildly in
popularity.
as well as $38.5 million transferred from PWIC to Yosemite as
consideration for assuming the liabilities. Both PWIC and Yosemite
looking for more complicated growth By late March 2021, there has been $89.8 billion are wholly owned subsidiaries of Enstar Group Ltd.
raised across 276 SPAC deals, compared with $83.4 The law was modeled on Part 7 transfers in Europe, according
available through acquisition.” billion in 248 deals in all of 2020, according to data to Oklahoma Insurance Commissioner Glen Mulready, who as a
Meyer Shields,
from SPAC Research, an industry tracker. In 2019, state legislator prior to becoming commissioner co-authored the
Keefe, Bruyette & Woods Inc.
there was just $13.9 billion raised in 59 deals, show- legislation.
ing how quickly the market has grown. Mr. Mulready said the completion of the first deal was “an
Personal lines insurer Hippo Enterprises, based historic moment.” Another transaction is working its way through
in Palo Alto, California, is going public through the approval process at the court level, and there has been further
One insurtech, Integrated Specialty Coverages a merger with Reinvent Technology Partners Z, a interest in additional transactions, he added.
LLC, a Carlsbad, California-based program admin- SPAC that launched last year, in a deal that values Each proposed transaction must be reviewed and approved by an
istrator, had a majority stake acquired by KKR & Hippo at $5 billion. independent expert, the state insurance commissioner’s office and
Co. Inc. in March. KKR bought the stake from The growing popularity of SPACs should provide the courts.
Sightway Capital, which will continue to hold a another avenue for insurtech investing, according “The sole intent of each one of those steps is to ensure
minority interest in the company. to Martha Notaras, managing partner at Brewer policyholders are not materially adversely impacted,” Mr. Mulready
KKR, which made its investment through its Lane Management LLC, a venture capital firm in said. Impetus for the initiative was born of a conversation at a
Americas XII Fund, also holds investments in Los Angeles. meeting of the National Association of Insurance Commissioners
USI Insurance Services Inc., Alliant Insurance “The mergers and acquisitions market continues to about runoff transactions, he said.
Services Inc. and Sedgwick Claims Management heat up,” said Mr. Grossberg of Integrated Specialty. Total global reserves for runoff business increased to $864 billion in
Services Inc. “It’s incredibly active right now, especially given 2020, a 9% increase over 2019, according to PricewaterhouseCoopers
Founded in 2017 by CEO Matt Grossberg, Inte- many participants still don’t get to meet face to face. LLC, which tracks the sector.
grated Specialty writes approximately $300 million Acquirers don’t get to meet in person with most The United States is the largest runoff market, with an estimated
of specialty premium annually. of the candidates they’re buying. There’s a lot of runoff reserve of $385 billion, and North America is the largest region
KKR brings “a depth and wealth of knowledge in willing and excited capital out there looking to enter at $402 billion, followed by Europe at $302 billion, according to PwC.
the insurance space, and they have a lot of relation- the space.” “We support (IBTs) as another possible tool for our companies to
use to complete transactions,” said Carolyn Fahey, executive director
of the Association of Insurance and Reinsurance Run Off Companies.
RECENT Other states with laws or regulations addressing runoff transactions
DEVELOPMENTS: include Rhode Island, whose law predates Oklahoma’s but which has
RESTRUCTURING yet to see its first transaction, and Vermont.
LEGISLATION Arizona, Connecticut, Georgia, Illinois, Iowa, Michigan and
Pennsylvania have introduced various measures allowing insurers to
divide, according to information from AIRROC.
The laws and state initiatives help bring attention to runoffs and
“help more people look at runoff and help understand what runoff
is,” Ms. Fahey said.
n Legacy Insurance Management Act The hardening property/casualty market also has a bearing on the
transfer legislation: runoff market.
Vermont “There’s a lot going on in the legacy market right now, and part of
n Insurance business transfer legislation: the reason why is companies are looking to free up capital to focus
Rhode Island, Oklahoma on core business, for example,” Ms. Fahey said. “As insurers look at
n Various forms of division legislation: the hardening market and ways to free up capital, we believe they
Arizona, Connecticut, Georgia, Illinois, Iowa, Michigan, Pennsylvania will look at legacy transactions as a way to do that.”
Source: Association of Insurance and Reinsurance Run Off Companies Matthew Lerner
BUSINESS INSURANCE APRIL 2021 9
NEWS ANALYSIS
Employers wrestle with pandemic fatigue
BY LOUISE ESOLA OPTIMISM
lesola@businessinsurance.com ABOUT
A RETURN
W
idespread vaccinations and states’ easing of TO NORMAL
pandemic mandates have sent the message Philadelphia-
that the country could resume normal activ- based law firm
ities soon — a message that has trickled down to Blank Rome
the workforce, leaving employers grappling with LLP queried 130
expectations versus reality. C-suite executives,
in-house
“We are seeing this play out in the political arena,” attorneys, and
said Twane Duckworth, risk manager for the city human resources
of Garland, Texas, and member of the board of professionals in
directors of the Risk and Insurance Management March for its fourth
Society Inc. Mr. Duckworth noted governors in COVID-19 survey.
Texas and Mississippi lifting mask mandates and
80%
authorizing the reopening of businesses, along
with ongoing public debate over vaccine safety. The
same division “is playing out in the employment
aspect as well,” he said. “You have some people who tancing, hygiene and air flow are the things that president of risk engineering for Crum & Forster of employers are
more hopeful
are not in agreement with the protective measures.” many employers and businesses have deprioritized Holdings Corp., wrote in an email that employers that things are
Some attribute the problem to “pandemic fatigue.” worrying about.” should “emphasize meaningful and ongoing two- beginning to return
“Pandemic fatigue is very real and has been for Ms. Wells added: “The employers are saying ‘vac- way communication with their employees” to battle to normal, up from
a number of months, both in the workplace and cine this, vaccine that.’ Until we reach herd immu- pandemic fatigue. 43% who said so
outside of it,” said John Dony, senior director of nity, all of the safety stuff is more important than “While this has always been an important char- in a similar survey
in July 2020.
thought leadership at the Itasca, Illinois-based the vaccine.” acteristic of any successful company, during this
National Safety Council. “There were people in the beginning who were ‘new normal’ employers should redouble their
“Personal stressors and work stressors often com-
pound one another, and after a challenging year, it’s
understandable why some workers and employers
… may be falling behind on or getting distracted
saying, ‘We can do this’ … and now you see people
with masks down and a why-bother attitude,” said
Linda Tapp, Madison, New Jersey-based president
of safety training company SafetyFUNdamentals
strong-leadership-by-example efforts, reassuring
their teams they are an integral part of the compa-
ny, while also recognizing employee contributions
and celebrating meaningful events,” she said. “In
87%
of employers
plan to take the
when it comes to adherence to proper pandemic and member of the board of directors of the Amer- other words — making them feel as fully engaged COVID-19 vaccine
protocols.” ican Society of Safety Professionals. “It’s important and heard as possible.” themselves but
are hesitant to
Mr. Dony said the vaccine rollout has created for employers to stay on top of safety and not get Ms. Tapp said a mainstay of safety programs is institute a mandate
significant optimism, “which can, in turn, make it complacent themselves.” key in this case as well: explaining why. that employees be
easy to let down our guard around the basics such Pat Tyson, partner and head of the OSHA prac- “Like most safety stuff, people have to understand vaccinated. Only
as physical distancing, masks, disinfection, testing tice in the Atlanta office of Constangy, Brooks, why they are doing it,” she said. “In the beginning, 15% plan to require
and contact tracing.” Smith and Prophete LLP, said employers are we were good at explaining why we are wearing a vaccinations, while
47% aren’t sure
Vik Ramaswamy, Nashville, Tennessee-based increasingly aware of the challenges. mask, washing our hands (and) social distancing. of their plans.
senior risk control manager for Safety National “It’s hard to enforce mask wearing all the time, It’s about keeping that (explaining) up and not let-
Casualty Corp., said workplace “leadership is hav- and it’s hard to enforce social distancing all the ting people down … not letting people get fatigued
ing a much more challenging time (and) over the
next month it is going to get much, much harder.
… Everybody is getting fatigued.”
time,” he said. “We have clients that have monitors
going around all the time to make sure (workers) are
social distancing and disciplining those who aren’t.”
and not following procedures.”
Mr. Dony said fatigue is a factor in any major
program, including safety and health initiatives,
32%
of employers say
“We are seeing a lot of fatigue around those Communication is the answer, experts say. and that is why employers should give a great deal they could get
safety issues,” said Martine Wells, a Denver-based Mr. Dony said employers should reinforce the of attention to change management. back to “business
as usual” in less
shareholder with Brownstein Hyatt Farber Schreck basic risk mitigations put in place in the early days “In many ways, pandemic fatigue is simply a than a month if
LLP, which represents employers. “It’s a profound of the pandemic and stress their continued impor- symptom of a long and difficult change process COVID-19 were
slowdown. … People walking around without tance during the vaccine rollout. that has affected nearly every aspect of our lives,” to end “today.”
masks. Those fundamental tenets of masking, dis- Louise Vallee, Morristown, New Jersey-based vice he said.
COMMUNITY SPREAD OUTPACES WORKPLACE TRANSMISSION makes perfect sense that the positive cases
(in the study) were likely coming from the
W hile pandemic fatigue may be
causing some laxity in adherence
to COVID-19 workplace safety
measures, a new study has shown that
most coronavirus exposure comes from
Atlanta, Johns Hopkins University and the
University of Maryland in Baltimore, Rush
University in Chicago and the Centers for
Disease Control and Prevention.
The researchers analyzed the antibodies of
COVID-19 patients did not increase their
odds of seropositivity, and that there was
no clear association between workplace
contact with coronavirus patients and a
positive antibody test.
community.”
The study did note that health care
workers younger than 30 years of age
had higher odds of positive antibody tests
compared with older health care workers,
community spread, not the workplace. participants in Georgia, Maryland and Illinois “We’ve seen similar kinds of anecdotal but the researchers said that is likely due
A study of 24,000 workers in four and had them complete questionnaires data,” said Deborah Roy, Falmouth, Maine- to the “community-based behaviors of
large health care systems between April about their occupational activities and based president of SafeTech Consultants younger people.”
and August 2020 found the majority possible exposures to coronavirus both Inc. and president-elect of the American The full study was published March 10
of COVID-19 exposures resulted from inside and outside the workplace. Society of Safety Professionals. “(Employers in the Journal of the American Medical
community spread, according to They found that health care workers with) good procedures in place, they have Association.
researchers from Emory University in who worked in a COVID-19 unit or with had very little transmission, if any. …It Angela Childers
10 APRIL 2021 BUSINESS INSURANCEINTERNATIONAL
PROFILE: ICELAND
MARKET
DEVELOPMENTS
Updated March 2021
n The Central Bank of Iceland
took over responsibility for
Although small, the Icelandic insurance market is the supervision of insurance
82
relatively well developed. A full range of covers companies, pension funds,
is available, using both local or foreign expertise. savings banks and all other
While competition in the market has been strong, financial institutions on Jan. 1,
there is only a limited amount of “new” business, 2020, in accordance with
and competition has tended to be for the 5% to 10% the Act on the Central Bank
of risks that are open to new offers of insurance or of Iceland No 92/2019.
which the current insurer does not wish to keep. n The full impact of the
Foreign insurers, particularly in the London and COVID-19 pandemic on the
Scandinavian markets, are involved in Iceland on Icelandic nonlife market
both a direct and indirect basis. Indirectly, foreign remains to be seen. It was
insurers and reinsurers provide the local market expected that any reduction
with the capacity and expertise to write some of the in the size of the economy
GLOBAL more specialist classes, such as directors and officers because of the dramatic
liability. Iceland’s major property risks are placed
P/C MARKET abroad because international markets are required to
decline in tourism and the
increase in unemployment
RANKING provide capacity or because they are foreign-owned
and are covered by multinational insurance programs. AREA would negatively affect nonlife
insurers’ premium income.
39,769
According to market estimates,
MARKET SHARE PROPERTY overall nonlife premium
22.7% may have declined 5% in
SURETY, BONDS 2020 compared with 2019.
& CREDITS
0.1% square miles n Figures for auto business for
the first six months of 2020
MARINE, showed premium down about
AVIATION & 6% compared with the same
TRANSIT period in 2019. Given the
4.6%
POPULATION reduced claims frequency in
early spring — down 40% for
354,234
WORKERS
AUTO one insurer — insurers returned
COMPENSATION 55.8%
4.8% premiums for the month of
May as a gesture of goodwill.
PA & HEALTH
CARE WRITTEN n In December 2020, Howden
BY NON-LIFE Broking announced the opening
LIABILITY of a branch office in Reykjavik,
COMPANIES 6.1%
6.0% the first to be established by an
international broker in Iceland.
MARKET CONCENTRATION n With economic activity in the
85.25%
MARKET GROWTH country recovering in the wake
In millions, U.S. dollars of the COVID-19 pandemic, the
Life Nonlife PA & Health
main trends in the insurance
600
market in the next year are
market share of top three insurers going to be influenced by
500 competition, particularly
in property and auto. Price
400 movements in international
markets will affect risks
300 requiring foreign capacity.
2021 GDP CHANGE
200 (PROJECTED)
100
0
2015 2016 2017 2018
Source: Axco Global Statistics/Industry Associations and Regulatory Bodies
2019
4.1%
COMPULSORY INSURANCE NONADMITTED INTERMEDIARIES MARKET PRACTICE
n Fire and natural accountants and health By law insurers must be locally Local brokers and agents are required Although there is nothing to
catastrophe insurance care institutions licensed to carry on insurance to be locally licensed to do insurance stop an Icelandic individual
on buildings business in Iceland. At the business. Where local risks are placed or corporation from arranging
n Medical malpractice,
same time, there is nothing as part of a multinational insurance insurance outside the European
n Auto third-party including clinical trials
in the law to indicate that program, brokers involved in nonadmitted Union/ European Economic
liability insurance
n Pollution liability (coasts insurance must be purchased placements do not have to warn buyers Area, this practice is not thought
n Professional indemnity and coastal waters) from locally licensed insurers, that their insurer is not subject to local to be common and is not seen
for insurance brokers, with some exceptions. This is supervision. Overseas intermediaries as a particularly important
n Shipowners liability
real estate agents, generally interpreted to mean from outside the European Economic issue for the authorities.
against marine oil
stockbrokers, used-car that insurers can issue policies Area cannot be involved in the
pollution (financial
dealers, solicitors, from abroad, with exceptions, if placement of local insurance
architects, design
guarantee or insurance)
approached by a buyer and/or business without establishing a
Information provided by Axco.
engineers, construction n Workers compensation an intermediary, but unlicensed branch operation licensed by the For free trial access to
engineers, chartered (state scheme) insurers may not solicit business. Icelandic supervisory authority. global insurance intelligence,
visit axcoinfo.com.
BUSINESS INSURANCE APRIL 2021 11CANNABIS UPDATE 2021:
INSURANCE &
RISK MANA
MANAGEMENT
GEMENT
IMPLICA
IMPLICATIONS
SAVE THE DATES APRIL 8 | APRIL 22 | MAY 6 | MAY 20
FOUNDING PARTNER CONTACT US SUSAN STILWILL BI EVENTS TEAM
HEAD OF SALES - EVENTS events@businessinsurance.com
(312) 833-4099
sstilwill@businessinsurance.com
2021-22
event schedule
DIVERSITY & INCLUSION WEBINAR INNOVATION AWARDS
MARCH 30 | VIRTUAL SEPTEMBER 9 | VIRTUAL
CANNABIS UPDATE 2021: U.S. INSURANCE AWARDS
INSURANCE & RISK MANAGEMENT SEPTEMBER 30 | VIRTUAL
IMPLICATIONS WEBINAR SERIES
APRIL 8 | APRIL 22 | MAY 6 | MAY 20 CANNABIS UPDATE 2021:
VIRTUAL INSURANCE & RISK MANAGEMENT
IMPLICATIONS CONFERENCE
BREAK OUT AWARDS OCTOBER 13-14 | VIRTUAL
JUNE 24 | VIRTUAL
WOMEN TO WATCH AWARDS & CONFERENCE (EMEA)
LONG-TERM CARE CONFERENCE NOVEMBER 10 | VIRTUAL
JULY 15-16 | VIRTUAL
WOMEN TO WATCH AWARDS & CONFERENCE (US)
DIVERSITY & INCLUSION DECEMBER 8-9 | VIRTUAL
CONFERENCE
AUGUST 24 | VIRTUAL
CONTACT US SUSAN STILWILL BI EVENTS TEAM #BI_Events
HEAD OF SALES - EVENTS events@businessinsurance.com *Event details subject to change
(312) 833-4099
sstilwill@businessinsurance.comLEGAL BRIEFS
Insurer must fund
D&O settlements
Investors Inc., an investment trust with 20
hotel properties, including the Marriott
Boston Long Wharf, had a “site environ-
v. General Star Indemnity Co.
“This dispute turns on the meaning of
the phrase ‘direct physical loss of or dam-
DOCKET
mental impairment liability” policy from age to’ property, which cabins the Policy’s
n The Delaware Supreme Court upheld a Sompo unit Endurance America Specialty scope of coverage,” the ruling said.
lower court and ruled an Alleghany Corp. Insurance Co., according to the ruling in “Taken together, these terms require
unit is obligated to fund the settlement of Sunstone Hotel Investors Inc. v. Endurance some enduring impact on the actual integ-
two directors and officers liability insurance American Specialty Insurance Co. rity of the property at issue. In other words,
settlements involving Dole Food Co. Inc. In February 2020, the Marriott hosted the phrase ‘direct physical loss of or dam-
Alleghany unit RSUI Indemnity Co. had an international meeting of leaders from age to’ doesn’t encompass transient phe- NO REQUIREMENT
sought a declaration it was not obligated to Cambridge, Massachusetts-based Biogen nomena of no lasting effect much less real TO COVER MARIJUANA
fund the settlement of a breach of fiduciary Inc., a biotechnology company. or imagined reputational harm,” it said. The Appeals Court of Massachusetts
duty action filed in Delaware Chancery After the Centers for Disease Control “Moreover, reading the phrase ‘direct in Boston ruled a self-insured
Court and a federal securities action filed and Prevention notified Sunstone in March physical loss’ in the context of the Policy employer does not have to
in the U.S. District Court in Delaware that three attendees tested positive for underscores the lack of coverage for losses reimburse medical marijuana
under its excess coverage, according to the coronavirus, the hotel closed for months. arising from a virus.” costs to an injured worker. The
Delaware Supreme Court’s unanimous The conference was subsequently deemed The policy excludes remediation for the court ruled that the federal stance
ruling in RSUI Indemnity Co. v. David H. a superspreader event that led to more than presence of bacteria, the ruling said. “A that marijuana is illegal means
Murdock and Dole Food Co., Inc. 20,000 coronavirus cases globally. construction of the policy that covers losses the state cannot require that an
Westlake Village, California-based Dole related to COVID-19 yet excludes losses insurer reimburse such costs. Mark
holds a $15 million D&O insurance policy arising from substances of a similar nature T. Delano sought reimbursement
issued by Axis Insurance Co. RSUI has — e.g., biological microscopic parts — is for medical marijuana used to
the eighth layer of coverage, providing unreasonable. By extension, the absence of treat pain stemming from a
$10 million payable upon the exhaustion an express (virus) exclusion does not oper- work-related injury he suffered
of $75 million in coverage from the under- ate to create coverage for pandemic-related in 2014. Partners Healthcare
lying coverage and payment of a $500,000 losses,” it said, citing a 2003 case. System Inc., which was self-
retention by Dole. All the other insurers The ruling concluded that “numerous insured for workers compensation
have paid their policy limits or settled with cases have endeavored to stretch the terms benefits, denied the claim.
Dole, the ruling said. of insurance policies to their limits in the
In November 2013, Mr. Murdock, Dole wake of the widespread losses caused by INSURER MUST PAY
director and CEO, took the company pri- COVID-19. … In fact, courts have also CONDO ASSOCIATION
vate through a merger transaction that was uniformly declined to follow outlier cases A condominium association is
approved by shareholders. However, some that have allowed complaints containing entitled to damages for 22 boat
Dole stockholders filed a lawsuit in chan- Sunstone sought business interruption similar allegations to survive dismissal. slips destroyed by water released
cery court challenging the transaction. coverage for the closing under its environ- The court will follow suit here.” from the Lake Conroe Dam in
The court found Mr. Murdock and mental policy, but Endurance denied the Texas to prevent its overflowing
Dole’s general counsel jointly and sever-
ally liable for $148.2 million. Separately,
claim, saying the policy’s business inter-
ruption coverage was subject to a $100,000 Salt mining firm during Hurricane Harvey in August
2017. The 5th U.S. Circuit Court of
a securities class action was filed in federal
court, which Dole settled.
self-insured retention for cleanup costs.
The trust sued Endurance, and the U.S.
can’t nix settlement Appeals in New Orleans affirmed
a lower court ruling that the
Meanwhile, litigation filed in state court District Court in Santa Ana, California, n A policyholder does not have stand- association, Playa Vista Conroe, was
by RSUI, among other insurers, resulted in ruled in Sunstone’s favor, saying that ing to object to a $1 million settlement entitled to $190,828 in damages
the court ruling against the insurers. Issues nowhere in the policy’s section on business reached by units of American International and $50,000 in attorneys fees from
raised on appeal by RSUI included wheth- interruption “does it say that an insured Group Inc. and Zurich Insurance Group San Diego-based Insurance Co.
er California law, rather than Delaware must incur $100,000 in cleanup costs to Ltd. in connection with a huge Louisiana of the West, a unit of ICW Group
law, applied. trigger” business interruption coverage. sinkhole, a federal appeals court ruled in Holdings Inc., which had denied
The Supreme Court ruling said, “the “What is more, there are express indi- affirming a lower court decision. coverage on the basis its policy
Insureds’ legal ties to Delaware are more cations” that the cleanup coverage’s The case involves the emergence of the did not cover flooding caused by
significant — and therefore should be self-insured retention “does not apply” to Bayou Corne sinkhole in Assumption Par- a hurricane or tropical storm.
afforded greater weight — than their phys- the business interruption coverage “and ish nearly 10 years ago, according to the
ical location in California.” that only a 3-day waiting period applies ruling by the 5th U.S. Circuit Court of OSHRC VACATES
“Nor do we find the other previously instead,” the ruling said. Appeals in New Orleans in Dianne Sanchez ELECTROCUTION CITATION
discussed California contacts to be legally et al. v. Texas Brine Co.; American Guarantee The Occupational Safety and
significant or as laden with policy con-
siderations as Dole’s status as a Delaware Court dismisses & Liability Insurance Co. et al.
In August 2012, a salt dome operated
Health Review Commission, citing
a lack of proof that an employer
corporation and the individual insureds’
status as directors and officers, all oper-
‘outlier’ virus suit by Houston-based Texas Brine collapsed,
creating a sinkhole that has expanded to
had “knowledge of a violative
condition,” vacated a serious
ating under the authority and guidance of n A federal district court in Boston agreed about 34 acres, swallowing trees in its path citation issued to a construction
Delaware law,” the ruling said. to dismiss a COVID-19 business inter- and releasing methane gas, according to company in 2014 after an employee
ruption case filed by a real estate company news reports. was electrocuted while working
Hotel trust prevails against a Berkshire Hathaway Inc. unit,
stating it is joining other courts that have
Before the collapse, units of AIG and
Zurich had insured Texas Brine, which
in an aerial bucket relocating
energized, overhead power lines.
in COVID-19 case also agreed to dismiss similar “outlier” cases.
SAS International Ltd., which oper-
had conducted decades-long salt-mining
activities in the area.
The Occupational Safety and
Health Administration had issued
n A Sompo International Holdings Ltd. ates a real estate business in Fall River, AIG and Zurich reached a $1 million Coral Gables, Florida-based
unit inappropriately tied its denial of a Massachusetts, sued Berkshire Hathaway settlement with a group of area landowners MasTec North America Inc. a
hotel investment trust’s COVID-19 busi- Group Inc. unit General Star Indemnity related to pre-sinkhole subsidence dam- citation alleging a serious violation
ness interruption claim to a separate clean- Co. after it refused to indemnify SAS for age, the ruling said. Texas Brine, which of the Electric Power Transmission
up provision in its environmental policy, a COVID-19-related business interruption was not a party to the settlement, objected and Distribution Standard after the
federal district court ruled. losses, according to the ruling by the fed- because the settlement did not release all of incident in Merritt Island, Florida.
Irvine, California-based Sunstone Hotel eral district court in SAS International Ltd. the plaintiffs’ claims against the company.
BUSINESS INSURANCE APRIL 2021 13You can also read
