EXPOSURES EVOLVE AS WORLD CHANGES - Business Insurance
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CLASS RESUMES: Schools face tough cyber market, tricky health risks - PAGE 4
JULY/AUGUST 2021
SPECIAL
REPORT
BROKER
PROFILES &
RANKINGS
PAGE 28
EXPOSURES EVOLVE
AS WORLD CHANGES
Insurers, brokers develop strategies
to manage sector’s sustainability risks
PAGE 22
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PRESIDENT
Steve Acunto
(Greenwich)
sa@businessinsurance.com
COVER STORY
PUBLISHER
Keith Kenner
(Chicago)
kkenner@businessinsurance.com
EDITOR Employees, policyholders,
Gavin Souter investors and ratings agencies
(Chicago)
gsouter@businessinsurance.com
are increasingly scrutinizing
how businesses, including
DEPUTY EDITOR
Claire Wilkinson brokers and insurers, address a
(New York) range of environmental, social
cwilkinson@businessinsurance.com
and governance issues, such as
ASSISTANT EDITOR
climate change, diversity and
Louise Esola
(New Orleans) inclusion, workplace conduct
lesola@businessinsurance.com and racial justice. PAGE 22
SENIOR REPORTER
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: BROKER PROFILES & RANKINGS
John Obrecht Business Insurance’s annual Broker Profiles issue details changes in the ranks of the
(Chicago) top 10 largest insurance brokers worldwide and the top 100 brokers of U.S. business,
jobrecht@businessinsurance.com
highlights market trends and profiles the leading brokers. PAGE 28
COPY EDITOR
Brian Gaynor
(Portland)
bgaynor@businessinsurance.com NEWS ANALYSIS PRESUMPTION TREND
ART DIRECTOR A growing number of states are considering permanent
Jeremy Werling FOR BREAKING NEWS infectious disease presumptions. PAGE 8
(Cincinnati)
jwerling@businessinsurance.com COVERAGE, VISIT
DIRECTOR OF RESEARCH,
businessinsurance.com SECONDARY PERILS
PLANNING AND INSIGHTS Severe convective storms and wildfires are causing
Andy Toh increasingly large insured losses. PAGE 10
(Chicago)
atoh@businessinsurance.com
MAJOR ACCOUNTS DIRECTOR - INTERNATIONAL
NORTHEASTERN U.S. & INTERNATIONAL The growth prospects for Laos’ commercial insurance
Ron Kolgraf
(Boston) market appear good over the next five years. PAGE 14
rkolgraf@businessinsurance.com
SENIOR VICE PRESIDENT,
BUSINESS DEVELOPMENT
Stephen Acunto
(Princeton) PERSPECTIVES
stephen@businessinsurance.com
HEAD OF SALES, EVENTS
The intensifying effects of climate change call
for resilient design and construction practices,
VIEW FROM
& REPRINT SALES MANAGER
Susan Stilwill
writes Andrew D. Mendelson of Berkley Design THE TOP
(Nashville) Professional. PAGE 47
sstilwill@businessinsurance.com
VICE PRESIDENT OF MARKETING RICHARD E.
Brian McGann
OFF BEAT ANDERSON
(Buffalo)
bmcgann@businessinsurance.com Budweiser Canada Dr. Richard E.
LEGAL BRIEFS Anderson is chairman
DIGITAL AD OPERATIONS MANAGER has brewed up plans
Recent court opinions PAGE 17
Jordan Kilty
to offer what it calls and CEO of The
(Raleigh)
“unique” insurance Doctors Company, a
jkilty@businessinsurance.com OPINIONS Napa, California-based
DIGITAL MARKETING MANAGER Ransomware concerns; event risks coverage opportunities.
Jen Jonasson PAGE 50 physician-owned
(Chicago) rise as sports return PAGE 46
medical malpractice
jjonasson@businessinsurance.com
insurer that was
MARKETING & EVENTS MANAGER MARKET PULSE
formed amid the med mal crisis of the mid-1970s.
Brittany Collins Products, deals and more PAGE 48
(Lafayette) Dr. Anderson, who practiced as an oncologist for 25 years,
bcollins@businessinsurance.com discusses the rise in the severity of med mal losses and risk
PEOPLE
MARKETING & EVENTS SPECIALIST management steps that can be taken to reduce physician
Beth Wojdyla Insurance industry moves PAGE 49
(Chicago) exposures. PAGE 18
bwojdyla@businessinsurance.com
SUBSCRIPTIONS & SINGLE COPY SALES BUSINESS INSURANCE (ISSN 0007-6864) Vol. 55, No. 8, Copyright © 2021 by Business Insurance Holdings, Inc. is published monthly by Business Insurance Holdings, Inc., 1030 Lake Avenue,
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BUSINESS INSURANCE JULY/AUGUST 2021 3
NEWS ANALYSIS
Schools hit with cyber price hikes CLASSROOM
HEALTH RISKS
IN SPOTLIGHT
BY ANGELA CHILDERS
V accinations and the
Reuters
achilders@businessinsurance.com safety and health of
students and staff remain
V
irus resurgence remains a major risk man- a priority for schools across
agement issue for school districts and the country, with many
universities opening in the fall, but others questioning their ability to
are joining the lineup of top concerns, includ- mandate vaccinations and
ing cyber protection and campus security. how far they should go with
Cyber risk has been a pressing worry in safety protocols.
both K-12 and higher institutions, some of “One of the questions
which are seeing cyber premium increases of we get most often from
as much as 300%, said Julie Theirl, San Fran- members, particularly in
cisco-based senior vice president and regional higher education, is can or
education practice leader at Aon PLC. should we mandate vaccines,”
“Cyber and ransomware are increasing at said Hillary Pettegrew, senior
a staggering pace,” she said. “This July 1 risk management counsel at
(renewal) cycle has been really difficult for Bethesda, Maryland-based
most organizations, and I think schools in United Educators, a reciprocal
particular.” risk retention group that
“That quick change to online learning cre- provides risk management
ated a huge, increased cyber risk,” said John consulting to more than 1,600
McLaughlin, senior managing director of K-12 CYBER INCIDENT TYPES ment liability is coming to the forefront.” schools. “On the federal level,
Arthur J. Gallagher & Co.’s higher education Luke Figora, vice president for operations at it’s pretty clear that they can
practice in Rolling Meadows, Illinois. Data breaches/leaks: 36% Northwestern University, said that the sensi- be mandated (for employees)
Cyber underwriters are looking for institu- Ransomware: 12% tivities surrounding the role of campus police and very likely for students
tions that have “stepped up their game” and Denial of service: 5% is a top concern for the university. as well. But you do have to
devoted the resources to provide sufficient Phishing: 2% While that risk has always been present, it is allow for certain exemptions.
protection; those that haven’t are facing non- Other: 45% “magnified today in terms of the reputation- And some states have specific
renewal or substantially reduced limits and al risk of having police deployed, and we’re laws playing on that as well.”
significantly higher premiums, he said. Other includes unattributed malware, class and absolutely paying attention to that,” he said. Although many are
meeting invasions, email invasion and website
San Diego-based Lilian Vanvieldt-Gray, “If something was to turn violent, when do expecting the school year
and social media defacement.
executive vice president and chief diversity you escalate toward (police) deployment?” beginning this fall to be a
Source: K-12 Cybersecurity Resource Center
and inclusion officer at Alliant Insurance Ser- College and university risk managers are return to normal, Jennifer
vices Inc., who also manages a portfolio of One school district, when faced with just also apprehensive about how divided poli- Smith, partner in the Chicago
schools and public agencies, said her school $3 million in coverage for $500,000 and a tics and civil unrest issues may affect students office of Franczek P.C., warns
clients collectively have received 37 cyber $1 million deductible, opted to use that pre- back on campus, experts say. that may be premature with
declinations this year. Those that have found mium money to invest in technology upgrades “How this might present on campuses is the number of unvaccinated
coverage are facing deductibles of $1 mil- instead of purchasing the policy, she said. certainly a concern,” Mr. McLaughlin said. individuals, particularly in
lion compared with $25,000 and premiums “I have yet to have a client that just for- “There’s concern with security … how to best lower-level schools with
climbing to $500,000 from $55,000 last year. goes it entirely, but I can see it heading in recognize the exposure and provide supportive many children under age 12.
that direction,” Ms. Theirl said. “What we’re security service that is viewed positively by all.” “In the fall, everyone
trying to do with our clients is say, ‘Here are Higher education is trying to take pro- is going to be used to a
the things you need to be doing over the gressive steps to head off potential issues new normal with no new
next nine months before you hit the next by talking to the community, reaching out restrictions, and I anticipate
renewal cycle.’” to students before they return to campus there will still be some
This may include installing appropriate fire and training campus security teams, he said. mitigation that educators
CYBER INCIDENTS IN walls and virus protection, using multifactor While a serious unrest issue would normally have to follow that people
PUBLIC K-12 SCHOOLS authentication and conducting cybersecurity be a general liability claim, “depending on the may not like,” she said.
n M
ore than 400 cyber incidents were awareness training, she said. magnitude of the claim, it could morph into For now, schools should take
publicly disclosed by school districts in 2020. Schools are also struggling with rising gen- an event-driven (directors and officers) claim a “wait and see approach”
eral liability premiums and seeking ways to for failure to take proper precautions,” he said. regarding their fall safety
n M
ore than 75% of all data breach adequately protect their infrastructure from Schools are also much more attuned to the protocols, said Byron Given,
incidents affecting U.S. public K-12 damage related to social unrest. However, mental health challenges stemming from area senior vice president,
school districts were the result of security with limitations for such incidents embed- the pandemic and looking at expanding regional director, for Arthur J.
incidents involving school district vendors ded in policies, it is a challenge and “carriers resources for students and bulking up their Gallagher & Co’s public sector
and other partners. are pulling back from the marketplace,” Ms. employee assistance programs for staff, Ms. K-12 education practice. “As
Vanvieldt-Gray said. Vanvieldt-Gray said. we have learned through
n D
ata compromised in breaches has included
It’s equally difficult for colleges and univer- For a group of K-12 leaders that Ms. Theirl this entire thing, sometimes
grades, bullying reports and Social
sities to sufficiently insure against their expo- speaks with regularly, mental health has it’s one step forward and
Security numbers.
sures for law enforcement liability, she said. become a top concern, resulting in a renewed two steps back. I think
n S
chool districts in cities and large suburbs “A lot of carriers don’t want law enforcement interest in employee wellness programs. Some the worst is behind us, but
and those with a larger proportion of liability or they’re taking out $1 million reten- schools have also purchased an additional we’ve been through it now.
higher-income students are the most tions for it … or eliminating their coverage,” trauma coverage that insures against the treat- If there is another outbreak
likely to experience a cyber incident. Ms. Vanvieldt-Gray said. “It’s a major con- ment costs related to a traumatic event and … at least we’re prepared.”
Source: K-12 Cybersecurity Resource Center cern. At the same time, certainly law enforce- can be accessed by students or staff, she said. Angela Childers
4 JULY/AUGUST 2021 BUSINESS INSURANCE
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NEWS ANALYSIS
Lawsuit funding sparks insurer concerns
BY JUDY GREENWALD tion funding must be disclosed, attempts
to pass federal legislation requiring such
jgreenwald@businessinsurance.com
“We don’t need new disclosure have so far been unsuccessful.
L mechanisms in society to sue
itigation funding, in which capital is “It’s a multibillion industry with no
provided by a third party to finance regulation and no requirements for trans-
lawsuits in return for a share of the
ultimate settlement or award, is growing
people. We have enough of that parency,” said Page C. Faulk, senior vice
president of legal reform initiatives at the
in the United States.
Insurers and others contend it leads to
probably in most cases, and U.S. Chamber of Commerce’s Institute
for Legal Reform in Washington, which
increased claims and rates, while often
permitting funders to conceal their
I don’t think we need more.” calls for litigation funding’s disclosure. “It
is essentially turning our U.S. courtrooms
involvement, thus obscuring potential Jane Njavro, into casinos, which is why the chamber is
conflicts of interest. Woodruff Sawyer & Co. calling for disclosure.”
Its proponents maintain they help fund Disclosure “eliminates any conflicts
justifiable litigation on a highly selective of interest and sets the floor for the fair
basis and have a hands-off policy as to administration of justice,” Ms. Sutton said.
becoming directly involved in litigation Katelynn O’Rourke Gorman, a partner
strategy. with Clyde & Co. LLP in New York, said
Litigation funding, also called litigation she has worked on cases where she sus-
financing, is used in a range of lawsuits, “There’s no limit to the types of risk dent, chief legal officer and corporate sec- pects litigation funding was involved but
including complex multidistrict and class- that we look at, both first party and third retary for Zurich North America, said in has been unable to confirm it. She advo-
action litigation. party, wildfire, hurricane loss, product lia- a statement that litigation funding com- cates disclosure because third parties have
At its most basic, unlike contingency bility, and, of course, COVID business panies’ “abusive practices will be largely a vested interest in litigation’s resolution.
funding, where plaintiff attorneys oper- interruption,” said G. Andrew Lundberg, borne by insurers in defense costs and It’s hard to track the effect of litigation
ate on a no win/no fee basis, third party Los Angeles-based managing director of indemnity payments and by policyholders funding on cases because it is not always
funders provide financial help in exchange Burford Capital Ltd., a litigation funding in uncovered losses and higher premiums known whether funding is involved, said
for an interest in a potential recovery. The company. related to increased litigation, often friv- Tim McCarthy, actuarial product director
financing can be offered to law firms who Widely used in other countries, litiga- olous, driven by the profit motive” behind for commercial liability at data analytics
are unwilling or unable to fund a poten- tion funding is being used more frequently the business model. and risk assessment company Verisk Ana-
tially protracted case or to help under- in the United States but may not become “We don’t need new mechanisms in lytics Inc. in Jersey City, New Jersey.
funded claimants. as popular here (see related story). society to sue people. We have enough of Under Federal Rule of Civil Procedure
Many insurance industry participants that probably in most cases, and I don’t 26, insurance details must be revealed
CONCEPTUAL FRAMEWORK are unhappy with the growth of litigation think we need more,” said Jane Njavro, and, arguably, the same principle should
funding. Jennifer Marshall, a director in senior vice president and partner with apply to litigation funding “to make sure
DEFENDANT the property/casualty ratings department Woodruff Sawyer & Co. in San Francisco. everyone has a full understanding of the
BUSINESSES
at A.M. Best Co. in Oldwick, New Jer- But Eric J. Blinderman, CEO (U.S.) underlying facts of the litigation,” he said.
sey, said it puts upward pressure on claims for litigation funding company Therium Buford Capital’s Mr. Lundberg said liti-
Litigation
costs
costs and drives increases in awards and Capital Management Ltd. in New York, gation funding is “not relevant in the same
settlements. said litigation financing helps in “David way insurance coverage is required to be
Lawyer fees,
Having a third party that potentially versus Goliath” situations where small disclosed in litigation,” where parties are
FUNDERS solicitor fees,
Third-party litigation counsel fees profits from a lawsuit prolongs a claim plaintiffs get litigation help against “well- “effectively insured or indemnified against
funding (TPLF) and other “and makes it more expensive to resolve,” heeled, competent, large defense firms” a bad outcome.”
disbursement said Meg Sutton, New York-based senior that will “bury them in paper and do Therium’s Mr. Blinderman said judges
Share of the vice president of U.S. casualty claims for whatever they can to use the tools of the have “nearly unanimously ruled the extent
claimant’s General Liberty Mutual Insurance Group. litigation process” to help win their case. of litigation financing is both irrelevant
litigation costs for A settlement may be rejected because An oft-voiced objection raised by litiga- to the underlying merits of a dispute” and
recovery claimants of pressure exerted by litigation funders tion funding critics is that, depending on subject to privileged protection.
seeking a profit on their investment, and a the jurisdiction, its role in litigation is not Commercial litigation funders never select
CLAIMANTS plaintiff may walk away with nothing if the necessarily publicly revealed. counsel, have no “seat at the settlement
Litigation recovery
trial goes against them, its opponents say. While the U.S. District Court for New table and expressly disclaim in contracts the
Source: European Parliamentary Research Service Laura Lazarczyk, executive vice presi- Jersey held in June that third-party litiga- right to control litigation,” he said.
SLICE OF RECOVERY PIE PROVES ATTRACTIVE, BUT FINANCING MAY NOT TAKE OFF
L itigation funding in the U.S. will
increase, although it may not become
as widely used as it is elsewhere in
the world.
A study released in March by the
growth rate since 2008. It projects
the market could reach more than €48
billion by 2025.
Litigation funding will likely grow as
law firms look for additional funding
Tim McCarthy, Jersey City, New Jersey-
based actuarial product director for
commercial liability at data analytics
and risk assessment company Verisk
Analytics Inc., said litigation funding “will
RT ProExec, a division of R-T Specialty
LLC, said he does not believe litigation
funding will make significant inroads in
the United States.
He said the U.S. has two things most
European Parliamentary Research and investors in financing firms seek continue to grow in use to the extent the other countries do not — contingency
Service estimated the European Union increased returns on their investments, financial returns to the people investing fees and “a very sophisticated plaintiffs
litigation services market represented said Jennifer Marshall, a director in the in it exceeds their cost of capital.” bar that does not necessarily need
almost €39 billion ($46.55 billion) property/casualty ratings department at However, Kevin LaCroix, executive litigation financing.”
in 2019 and has had an annual 3.5% A.M. Best Co. in Oldwick, New Jersey. vice president in Beachwood, Ohio, for Judy Greenwald
6 JULY/AUGUST 2021 BUSINESS INSURANCE
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and Specialty
Insurance Finally
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NEWS ANALYSIS
Expanded presumption laws loom
BY LOUISE ESOLA
HEALTH
WORKER
EXPOSURE
LEVELS
lesola@businessinsurance.com
A
s many COVID-19 workers compensa-
tion presumption laws put in place last
year are set to expire, a growing number
of states are considering permanent infec-
A re health care
workers more at risk
for COVID-19?
A recent study of nearly
25,000 of them who faced
tious disease presumptions that experts say COVID-19 exposure seems
could change the way the industry views and to buck the notion that
pays for occupational injuries. the workplace is the likely
As of late June, lawmakers in 16 states place of transmission.
had introduced legislation that would allow Published in the Journal
employees who suffer from a communicable of the American Medical
disease to file workers compensation claims Association in March,
presuming they contracted their illness at the study concluded that
work, according to a roundup of bills by the “exposure outside the
Boca Raton, Florida-based National Coun- workplace was the strongest
cil on Compensation Insurance. risk factor” for health care
“We are seeing preparations for the next workers, especially those
pandemic,” said John Hanson, Atlanta-based living in a zip code with
vice president at Alliant Insurance Services higher COVID-19 incidence,
Inc. “You can see the legislative trend is for and that “none of the
contagious diseases.” assessed workplace factors
The language in the state proposals varies. were associated” with
Most of the presumptions would be rebutta- connected to working in mines. Other exam- contraction of COVID-19.
ble, meaning that if an employer can prove the NCCI TRACKING ples cited by experts include Legionnaire’s The study suggested “that
worker contracted the illness elsewhere, the COVID-19 DATA disease, a bacterial infection caused by expo- current infection prevention
claim can be denied; some would only apply Tracking COVID-19 data
sure to the legionella bacteria, which can strategies in health care
to certain workers who are at higher risk of is an ongoing project for only be contracted under certain conditions. are effective in preventing
contracting an infectious disease, such as the National Council on “To me those rebuttable presumptions make patient-to-(health care
health care workers and first responders. Most Compensation Insurance. sense,” said Carin Burford, Birmingham, personnel) transmission
of the measures would only go into effect if As of June: Alabama-based shareholder with Ogletree, in the workplace.”
there is a state of emergency or a pandemic. n NCCI calculated $260 Deakins, Nash, Smoak & Stewart P.C. and an Meanwhile, COVID-19
Yet the trend toward accepting claims for million in COVID-19 workers compensation adjunct professor who teaches workers com- workers compensation
diseases that can be contracted almost any- losses, excluding self-insureds, for 2020 pensation law at the University of Alabama claims from health care
where — such as COVID-19 — is problem- in the 36 jurisdictions where it provides School of Law. “But when you are talking workers and first responders
ratemaking services.
atic, experts say. about broad types of diseases” where there’s represented the lion’s
“By its very nature (a communicable dis- n NCCI estimated COVID-19 claims, excluding community spread, “what you are doing is share of claim activity.
self-insureds, have the potential to ultimately
ease) can take place outside of the work- taking the occupational out of the equation;
result in comp losses exceeding $500 million
place, and to just presume it occurred in the over the duration of the pandemic. you are just recognizing the disease.”
workplace is very dangerous for the workers Jeff Adelson, partner with Newport Beach,
compensation system,” said Steve Bennett, California, firm Adelson McLean P.C.,
Washington-based assistant vice president $10,000, according to NCCI data. which represents employers, said any expan-
for workers compensation programs and Yet there’s concern that another commu- sion of infectious disease presumptions has
counsel for the American Property Casualty nicable disease could prove catastrophic for the potential to create more litigation.
Insurance Association. “We would view any a comp system that could be responsible for “If you bring all these presumptions in
presumption, especially of a contagious dis- covering diseases a person could contract with so many different occupations, where
ease, as an extremely dangerous precedent.” anywhere, experts say. does it stop?” he said.
“I think that is a real indication of why pre- And the potential financial impact is
“This is an unprecedented expansion sumption bills are dangerous,” Mr. Bennett
said.
impossible to quantify for an unknown risk,
experts say.
of workers compensation into an Mark Walls, Chicago-based vice president
of communication and strategic analysis for
“We are the number crunchers and if
there was a way to estimate the impact of The Boca Raton, Florida-
area that is not appropriate.” Safety National Casualty Corp., said such (an infectious disease presumption) then based National Council on
widespread disease presumptions are a “fun- we would, but it is difficult to come up with Compensation Insurance
Mark Walls, damental change in the workers compensa- a number on how to price this,” said Jeff reported in June that
Safety National Casualty Corp. tion burden of proof ” in that a worker would Eddinger, senior division executive of data nursing/convalescent home
not have to show that he or she was injured quality and compliance for NCCI, which is employees, other health care
at work. “This is an unprecedented expan- still gathering data on COVID-19 claims, workers and first responders
Perhaps spurring the trend toward comp sion of workers compensation into an area some of which are now considered long-tail. have collectively accounted
solutions in a pandemic is the emerging data that is not appropriate,” he said. Mr. Adelson said the swiftness of the for 72% of all COVID-19
that COVID-19 claims were not as severe as While the wave of disease presumption industry’s reaction to COVID-19 might workers comp claims reported
predicted: 61% of the reported COVID-19 proposals is turning heads, the concept of complicate the issue for insurers. “Now to the ratings agency since
claims have cost employers and insurers less occupational disease is not new. Black lung, how do you underwrite for something that the start of the pandemic.
than $1,500, and 94% have cost less than for example, is typically seen as an illness doesn’t quite exist?” Louise Esola
8 JULY/AUGUST 2021 BUSINESS INSURANCE
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NEWS ANALYSIS
Sharp rise in lower tier catastrophe claims
triggers policy changes, mitigation strategies
BY MATTHEW LERNER
mlerner@businessinsurance.com NATURAL CATASTROPHE
INSURED LOSSES — 2020
S
evere convective storms and wildfires
have caused increasingly large insured Total
losses over the past few years due to
increased frequency and severity. $81 billion
While traditional windstorm catastro-
phe losses continue to be a major source 2019: $54B
of claims, the so-called secondary perils 10-year average: $74B
losses are reaching levels akin to moderate Secondary peril
hurricane events, experts say. $57.4 billion (71%)
Insurers continue to focus on loss pre-
vention and risk engineering to combat 2019: $31.9B
Primary peril
the rising secondary peril losses but have
$23.2 billion (29%)
also begun to make defensive moves.
Secondary perils caused $57.4 billion 2019: $22.5B
or 71% of worldwide insured losses from Source: Swiss Re Institute
natural catastrophes in 2020, with the
main drivers being severe convective was a case in point, Mr. Fuller said. The
storms and wildfires in the United States storm “activity impacted a number of
and Australia, according to a March carriers and reinsurers. This rare, large
report by Swiss Re Ltd. er with the climate team at catastrophe at Marsh LLC. first-quarter event required some prima-
modeler Risk Management Solutions Inc. “Certainly, there’s been an increase ry carriers and reinsurers to reassess their
“I think people recognize there’s an in losses with respect to severe convec- cat risk management strategies for the
“I think people recognize there’s increase in the severity and the damage tive storm and wildfire, and we’ve seen remainder of the year.”
an increase in the severity and that’s occurring from weather-related
incidents,” said Scott Ewing, regional
increased scrutiny around deductibles
and, in the case of wildfire, limitations
Risk assessment and catastrophe man-
agement need to be updated, said Mohit
the damage that’s occurring from property risk engineering leader in New
York for Axa XL, a unit of Axa SA.
in capacity from some carriers,” he said.
Insurers are moving to re-underwrite
Pande, head of property underwriting,
U.S. and Canada, at Swiss Re.
weather-related incidents.” Wildfire losses are “starting to rise to and reprice exposures in regions of the “Up to now, risk assessment has focused
levels that potentially affect solvency U.S. that have experienced persistent less on secondary perils than primary per-
Scott Ewing,
metrics,” said Michael Young, Newark, severe weather in recent years, said Randy ils and we feel that a rebalance is required.
Axa XL
California-based vice president, model Fuller, managing director and head of Given the rise of their associated losses,
product management, at RMS. the North America property center of secondary perils need to be better under-
“There is the potential for a wildfire excellence for reinsurance brokerage Guy stood for the purpose of more complete
From 1990 through 2020, aggregate event as large as $100 million” in the Los Carpenter LLC. and accurate risk assessment,” he said.
U.S. insured losses from severe convective Angeles basin area under certain condi- “Many carriers are adjusting wind and Risk managers are changing how they
storms and winter storms exceeded loss- tions, he said. hail deductibles. Coverage considerations prioritize risk improvements and bud-
es from hurricanes by 13% and hurricane As the losses mount, insurers have such as actual cash value for roofs instead geting for those improvements, said
losses were greater in only six of those begun to increase deductibles and pare of replacement cost coverage are becom- Amy Brown, staff vice president, man-
individual years, said Christopher Allen, back capacity, said Michael Rouse, New ing more prevalent,” he said.
London-based senior product manag- York-based U.S. property practice leader The February U.S. winter storm Uri See PERILS page 12
INSURERS TAP TECHNOLOGY TO CUT LOSSES FROM SECONDARY WEATHER RISKS
I nsurers and others in the sector
are using technology to improve
risk mitigation and loss control in
the face of mounting claims from so-
called secondary perils, such as severe
used to assess elements such as roof
condition and proximity of vegetation
and signal the need for onsite
inspections.”
Risk Management Solutions Inc.
catastrophe modeler.
The observation teams are able
to produce “really high-fidelity
measurements,” and data that can be
used for modelling purposes, he said.
virtual meetings with clients for risk
engineering and mitigation discussions.
The Insurance Institute for Business
& Home Safety has online tools that
small businesses can use to prepare for
convective storms and wildfires. collaborates with observation networks, Axa XL, a unit of Axa SA, has potential loss events, said Chris Cioffi,
“There is more data available comprised of instrument and data developed its “remote risk dialogue” commercial lines engineer at the group.
today than ever before to inform risk scientists, who can deploy portable, to track changes at insured sites Its “Wildfire Ready” tool can help small
selection,” said Josh Darr, managing storm-proofed equipment such as and conduct project reviews, said businesses with mitigation, as can other
director, head of North America peril anemometers to measure wind speed, Scott Ewing, regional property risk modules for severe convective storm
advisory, for Guy Carpenter LLC. “High- said Christopher Allen, London-based engineering leader in New York and thunderstorm, he said.
resolution satellite data can now be senior product manager with the for the insurer. The program uses Matthew Lerner
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21 PHLY BI - BrainGenPHLYDiff.indd 1 3/11/2021 10:32:37 AM
Ad Template.indd 7 6/29/21 3:01 PMGLOBAL INSURED LOSSES FROM SECONDARY PERILS SINCE 1970, IN USD BILLION (2020 PRICES)
Insured losses from secondary perils have been growing steadily. Among them, losses from severe convective storms represent the biggest component.
However, in recent years losses from wildfires have been growing fastest.
$70B
Severe convective storms Floods Wildfires Other secondary Secondary effects of primary perils
$60B
$50B
$40B
$30B
$20B
$10B
$0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Source: Swiss Re Institute
ager for natural hazard underwriting, at to adjust one’s priorities,” she said. Home Safety conducts research on build- is also important as an aged system will
FM Global. Risk mitigation for secondary perils can ing materials, such as asphalt shingles, to perform less well than a new system, said
“As secondary perils are becoming more be straightforward and inexpensive — promote fire resistant construction and Chris Cioffi, commercial lines engineer
frequent and are having a larger impact from adding extra fasteners on the corners hail resistant roofing systems, said Anne at IBHS.
to loss trends, risk managers are doing of roofs to ensuring that ducts and vents Cope, chief engineer at IBHS in Rich- Studies have shown that investments
their due diligence to see how it affects are sealed against embers, she said. burg, South Carolina. in mitigation can return up to four times
their portfolio and where it makes sense The Insurance Institute for Business & Maintenance of structures such as roofs their cost in savings, he said.
Wildfire ignition risks rise as temperatures climb
E
xtreme heat and drought conditions thing,” she said.
across the western United States are Designing buildings without gaps under
increasing concerns about a dangerous doors or around windows and installing
wildfire season ahead, but there are steps covers over air-conditioner vents help pre-
businesses can take to reduce losses. vent sparks from embers that winds blow
Some 88% of the land area of Western onto an industrial facility from a distance,
states is in drought conditions, while more Ms. Klosowski said.
than 50% is in extreme or exceptional Automatic protection such as sprinklers
drought, according to the U.S. Drought installed on the exterior as well as inside
Monitor, a collaboration between the buildings can minimize damage as well.
National Drought Mitigation Center Businesses can install lightning protec-
at the University of Nebraska-Lincoln, tion rods on a roof, or highest point of a
the U.S. Department of Agriculture and facility, Ms. Klosowski said. If lightning
the National Oceanic and Atmospheric strikes the structure, it will hit the rod
Administration. and bring the charge down to the ground,
Long-term extreme drought typical- she said.
ly increases the risks of fire in forested Building in layers of protection is import-
regions, even though dry conditions can ant, she said. “Big losses often have a series
limit growth of vegetation in grasslands the weather at the time of ignition are crit- decreasing the likelihood of loss, experts say. of events that go wrong. … If you can
potentially reducing the risk in those areas, ical, said Philip Cunningham, senior sci- Business owners should keep properties break that cycle, you’ve got a better chance
experts say. entist at catastrophe modeler AIR World- well-maintained, clear brush and cut back of safeguarding the business,” she said.
Naturally occurring wildfires are most wide Corp. in Boston. trees around the sides of buildings or roofs The cost of lightning-caused claims sky-
frequently caused by lightning, while Wildfires caused by man-made ignitions that can potentially ignite, Mr. Cunning- rocketed due to 2020’s wildfires, according
man-made ignitions include power lines typically outnumber wildfires from natural ham said. Keeping roofs clear of debris is to a spokeswoman at the Insurance Infor-
and utilities, not properly extinguished ignitions, but in 2020 almost all of the big especially important as winds can blow mation Institute in New York
campfires, sparks from dragging chains on fires were caused by lightning, he said. embers hundreds of meters or even miles, “The average cost per lightning claim in
vehicle trailers, cigarettes, and fireworks. California, in particular, saw unusually igniting materials, he said. California was $217,555 last year, while
Among natural ignition sources, light- large amounts of dry lightning last August The best thing businesses can do is the national average for this type of claim
ning is of greatest concern, said Robyn that ignited hundreds of fires, he said. control damage to their sites, assuming a was nearly $29,000 in 2020,” she said.
Heffernan, national fire weather sci- The August Complex fire, started by wildfire has ignited and is headed toward The severity of wildfires means that
ence and dissemination meteorologist lightning strikes in August 2020, was the their facility, said Katherine Klosowski, homes and other structures are often
at NOAA National Weather Service in largest in California’s history based on global vice president of natural hazards destroyed rather than partially damaged,
Boise, Idaho. acres burned, according to the California and structures at FM Global, in Johnston, which pushes the claims value higher, the
The Southwest monsoon season, which Department of Forestry and Fire Protec- Rhode Island. I.I.I. spokeswoman said. The likelihood
began June 15, typically includes a good tion. It spread across 1 million acres and Passive protection methods for industrial of total loss is also increased if a wildfire
amount of lightning, she said. Monsoon affected seven counties. buildings include using non-combustible spreads quickly in an area that is hard to
rains can decrease fire activity in the Unlike man-made ignitions, which tend construction, such as masonry walls, con- access, she said.
Southwest, but in adjacent areas, such as to occur in more populous areas, fires ignit- crete block, brick walls or even an insulat- Rebuilding can be costly because the
farther north into the Great Basin, the ed by lightning often start in remote areas, ed metal panel of low combustibility, Ms. price of materials such as lumber is higher
Rockies and along the west coast, lightning which means they can grow large before Klosowski said. and supply chain issues from the pandem-
can ignite new fires, Ms. Heffernan said. they are spotted, Mr. Cunningham said. “Safeguarding the walls and roof of a ic have contributed to rising construction
Drought is only one component of wild- Maintaining adequate defensible space facility using non-combustible materials costs, the I.I.I. spokeswoman said.
fire risk, and sources of ignition as well as around building structures is critical to is first and foremost the most important Claire Wilkinson
12 JULY/AUGUST 2021 BUSINESS INSURANCEBusiness_Insurance_Final_Bleed.pdf 1 6/29/21 2:11 PM
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CMY
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Ad Template.indd 18 6/29/21 3:33 PMINTERNATIONAL
PROFILE: LAOS
MARKET
DEVELOPMENTS
Updated June 2021
n The growth prospects in this
small market over the next five
The commercial insurance market in Laos is small, years appear to be reasonably
131
generating nonlife premium income of LAK 629.30 good, but the economic effects
billion ($71.22 million) in 2019. Nonlife premium volume of the COVID-19 pandemic could
is largely composed of construction/engineering and fire have an impact on gross premium
(property) business. The country’s new insurance law, volume. The pandemic has hit
which went into effect in April 2020, increased minimum the important hospitality sector
capital requirements for insurance and reinsurance especially hard as a result of an
operations. Important economic and infrastructure almost total halt on the arrival
developments have been underway in land-locked of foreign visitors and a ban on
Laos, although the COVID-19 pandemic, with its tight incoming international flights.
restrictions on cross-border travel, has reportedly The speed of any recovery this
caused a significant slowdown in new construction year will depend heavily on how
projects. A $6.7 billion railway link being built between rapidly the government can
Laos and China is nearly finished and is expected to reinstate pre-pandemic levels of
GLOBAL be fully operational this year. It is expected to boost international travel and tourism
P/C MARKET
RANKING
local economic development and growth, promoting AREA by relaxing the current strict
enhanced trade and tourism between the two countries restrictions on these sectors.
91,429
and more broadly within the ASEAN free trade area.
n The government’s debt position
remains vulnerable and has been
MARKET SHARE PROPERTY exacerbated by the COVID-19
26.7% pandemic, which has also reduced
square miles incoming remittances from
abroad by Laotian expatriates.
MARINE, n The Insurance Law (Amended)
AVIATION & No 78/NA went into effect on
TRANSIT AUTO
12.4% April 15, 2020. Among other
1.9% POPULATION things, it increased the minimum
7.57
required registered capital from
LAK 16 billion ($1.81 million) to
LAK 30 billion ($3.40 million) for
insurance business operations
and LAK 60 billion ($6.7 million)
million for reinsurance business
MISC.
59.1% operations. Existing companies
have three years to comply
with the new requirements.
n Under the new law, third-
MARKET CONCENTRATION party liability insurance is now
94.9%
MARKET GROWTH mandatory for hydropower dams.
In millions, U.S. dollars n After many years in which foreign
Life Nonlife
broking interests dominated
$80
major project and property
$70 market share of top five insurers insurance, it’s interesting to
note that by the end of 2020
$60 the insurance regulator had
licensed 11 local brokers.
$50
$40
2021 GDP CHANGE
$30 (PROJECTED)
4.6%
$20
$10
$0
2015 2016 2017 2018 2019
Source: Axco Global Statistics/Industry Associations and Regulatory Bodies
COMPULSORY INSURANCE NONADMITTED INTERMEDIARIES MARKET PRACTICE
n Auto third-party bodily injury and property damage Nonadmitted insurance is not Intermediaries need authorization The majority of foreign insurable
permitted in Laos, because the to do insurance business in interests in the market can be
n Professional liability for insurance brokers
law provides that insurance Laos. Brokers and agents are accommodated locally. Foreign
n Third-party liability for hotels, places of entertainment, must be purchased from not permitted to place business interests can gain government
restaurants and markets locally licensed insurers, with nonadmitted insurers. exemption from the nonadmitted
n Third-party liability for construction sites with some exceptions. regulations and purchase insurance
in their home markets.
n Liability for carriers for damage to goods or injury to
passengers during transportation by land, air or water
n Workers compensation (state scheme or optional
purchase of wider coverage in the private insurance Information provided by Axco.
market) For free trial access to
global insurance intelligence,
visit axcoinfo.com.
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With diverse perspectives,
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With structure,
diverse and
perspectives,
acollaborative ways of
flexible structure, working,
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we bring clarity
collaborative to complex
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Ad Template.indd 9 6/29/21 3:01 PMLEGAL BRIEFS
The Illinois law, referred to as BIPA,
requires businesses that store biometric
information to inform the subject in writ-
Judge Stephanie A. Gallagher’s ruling said.
“In fact, it is the dispositive weight on
the scale in favor of finding ‘no duty’ here,
DOCKET
ing that it is being collected or stored and despite the fact that the narrow majority
the purpose and duration for which it is of factors, including foreseeability, favor
being collected. It also requires that busi- imposition of duty.
nesses receive the subject’s written consent. “Maryland courts have made their pri-
The law creates a private right of action orities with regard to third-party duties
for individuals harmed by violations and clear, and the prospect of an unstemmed
imposes a $1,000 fine for each violation and ill-defined tide of third-party plain- RACIAL DISCRIMINATION
caused by negligence and a $5,000 fine for tiffs bringing suit predominates the duty LAWSUIT DISMISSED
each intentional or reckless violation. analysis,” the court said, in dismissing the A federal district court in
Insurers largely lose In 2019, the Illinois Supreme Court held
that individuals need not allege injury or an
litigation.
Ms. Madden’s attorney, Dan R. Mastro-
Chicago dismissed a potential
multibillion-dollar lawsuit by
pandemic ruling adverse effect to successfully assert a viola-
tion of the act.
marco of the Mastromarco Firm PLLP in
Annapolis, Maryland, said he had no com-
Black franchise owners that
charged McDonald’s Corp. with
n A New Hampshire state court ruled The settlement notice states that Six ment on the decision and was “considering racial discrimination, stating the
largely in favor of a hotel chain in a Flags has agreed to pay up to $36 mil- the many options available to us.” lawsuit’s allegations were vague.
COVID-19 business interruption coverage lion without admitting fault or liability. The proposed class action, led by
lawsuit filed against a group of insurers.
Judge John C. Kissinger Jr., of the state
The class comprises anyone who visited
Six Flags Great America between Oct. 1, Fired worker’s ADA brothers James and Darrell Byrd,
who operate four McDonald’s
superior court in Keene, New Hampshire,
denied a motion filed by most of the insur-
2013, and Dec. 31, 2018, and had their
fingers scanned.
charges reinstated restaurants in Tennessee, was
filed in October by the same
ers for partial summary judgment in Schle- Under terms of the settlement, people n A federal appeals court reinstated dis- law firm representing 52 Black
icher & Stebbins Hotels LLC et al. v. Starr who had a finger scanned between Oct. 1, ability discrimination charges filed by a former franchisees who had filed
Surplus Lines Insurance Co. et al. 2013, and April 30, 2016, can receive up former insurance company employee who a similar lawsuit in August.
“The Court rejects the argument of the to $200. Those who had a finger scanned charged she was fired despite excellent
Defendants that ‘distinct and demonstrable’ between May 1, 2016, and December 31, evaluations because her multiple sclerosis NIGHTCLUB’S COVID-19
changes to property must be readily percep- 2018, can receive up to $60. condition was costly for her employer’s CASE CAN PROCEED
tible by one of the five senses, be incapable benefits plan. A Rhode Island state judge
of remediation, or result in dispossession,” A key factor in the ruling by the 11th refused to dismiss a COVID-19
the ruling in favor of the Hooksett, New U.S. Circuit Court of Appeals in Atlanta business interruption lawsuit filed
Hampshire-based chain said. in Jennifer Akridge v. Alfa Mutual Insurance by a Providence nightclub against
The ruling cited an earlier decision by Co. was that Ms. Akridge tried unsuccess- Scottsdale Insurance Co. based
the New Hampshire Supreme Court that fully more than a dozen times to depose on executive orders calling for its
held that “‘physical loss,’ when used in an the Montgomery, Alabama-based insur- closure because of the pandemic.
insurance agreement, includes ‘not only er’s top human resources official, but was Atwells Realty Corp., the licensed
tangible changes to (an) insured proper- repeatedly denied by the lower court. operator of the Desire nightclub,
ty, but also changes … that exist in the Ms. Akridge worked for Alfa for 27 filed suit against Scottsdale
absence of structural damage,’ provided years, beginning in 1989. In 1993, she seeking coverage under its “all
only that such changes be both ‘distinct was diagnosed with MS, which caused risk” policy based on Gov. Gina M.
and demonstrable.’” her to suffer migraine headaches and Raimondo and Providence Mayor
The court did grant Axis Surplus Insur-
ance Co.’s separate motion for partial sum- Flight attendant’s prevented her from sitting for long peri-
ods of time. Despite her diagnosis, she
Jorge O. Elorza’s executive orders
closing its business operations,
mary judgment based on a virus exclusion
in its coverage, which the other insurers
lawsuit dismissed continued to receive positive perfor-
mance reviews, and one year was select-
according to the ruling by the
Rhode Island Superior Court in
did not have. n A federal district court judge has dis- ed as employee of the year out of nearly Providence Atwells Realty Corp.
The hotel chain, which has four hotels in missed negligence charges filed by a South- 1,000 employees. v. Scottsdale Insurance Co.
New Hampshire, 18 in Massachusetts and west Airlines flight attendant who blames After being terminated in late 2016, she
one in New Jersey, had a total of $600 mil- the airline for her husband’s COVID-re- sued Alfa, alleging the insurer had violat- RACETRACK WORKER
lion in coverage, for which it paid $1 mil- lated death, stating that permitting the ed the Americans with Disabilities Act by DENIED COMPENSATION
lion in premiums, according to the ruling. litigation could lead to a flood of lawsuits. subjecting her to disparate treatment based A racetrack worker who was
Flight attendant Carol Madden said she on her disability. The company contended asleep at a stable when a fire
Six Flags settles became ill with COVID-19 three days
after attending training required by the
her position’s termination was a result of a
reorganization and automation introduced
broke out and severely injured his
back did not suffer a compensable
biometric case Dallas-based airline in July 2020, and her
husband became ill 10 days later and died
to reduce costs.
The district court in Montgomery
workers compensation injury
because he was not working at
n The biometric case filed against Six from the virus’ complications in August refused Ms. Akridge’s efforts to depose the time, an appeals court in
Flags Entertainment Corp., whose liti- 2020, according to last month’s ruling by the HR executive on the basis that he did Arkansas ruled. Juan Lopez, who
gation path included an Illinois Supreme the U.S. District Court in Baltimore in not have material knowledge of the cir- tended to racehorses as part of
Court ruling, has been settled for up to $36 Estate of William Madden at al. v. South- cumstances surrounding her termination, his job at the James Divito Racing
million. west Airlines Co. and it granted Alfa’s motion for summary Stable in Hot Springs and slept
Stacy Rosenbach charged in the proposed The court weighed various factors in judgment. on the premises because living
class-action lawsuit that the Grand Prairie, considering whether the airline had a duty A unanimous three-judge appeals court in town was not affordable, had
Texas-based company’s Six Flags Great to protect Mr. Madden before concluding panel vacated the lower court’s decision returned from dinner and went to
America amusement park in Gurnee, Illi- the risk of numerous lawsuits was the pre- and remanded the case with instructions sleep in a space above the stables
nois, had failed to comply with Illinois’ vailing factor. that the executive be deposed, saying, “We before his 6 a.m. shift. When a fire
Biometric Information Privacy Act when “Cumulatively, Maryland’s third-party find that the district court committed a broke out at 5:45 a.m., he leaped
it scanned her 14-year-old son’s thumb duty case law and its emphasis on limiting clear error of judgment when it impermis- from a second-story window,
during a school field trip in 2014, accord- the class of prospective future plaintiffs sibly curtailed her access to discoverable suffering a fractured vertebra.
ing to documents in Rosenbach v. Six Flags. heavily informs the Court’s balancing,” information.”
BUSINESS INSURANCE JULY/AUGUST 2021 17You can also read
