Farella’s Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.
How long have you been in the insurance industry?
How did you get into the insurance industry?
As a practicing attorney for the first 10 years of my career, I represented executive liability insurers as coverage and monitoring counsel, with a focus on shareholder and commercial litigation. I transitioned to brokerage to help policyholders with post-loss advocacy and recovery, as well as pre-loss consultation on program structure, policy wording and manuscripting.
What trends are you seeing in the insurance industry or markets?
We used to experience ebbs and flows with softer and harder insurance markets. Over the past several years, however, the executive and financial risk marketplace has endured more sustained softened conditions, with breadth of coverage expanding beyond points we previously would not have imagined. In 2018, the softness of the D&O market, in particular, will be tested, with record levels of securities litigation filings in 2017.
What advice are you giving to clients looking to purchase or repurchase insurance?
Clients should be focused on risk more holistically, utilizing insurance as one of potentially many tools in the risk manager’s toolbox. In addressing insurance specifically, clients should emphasize the quality of coverage (breadth and clarity of policy wording), as well as quantity of coverage (adequacy of limits, risk modeling), and then balance coverage and cost with the value of strong insurer relationships.
What 2 – 3 questions do you wish your clients would ask you?
- To address our risk more comprehensively, does your firm maintain subject matter experts beyond insurance placement professionals to work with our in-house finance, technology and legal personnel, as well as our outside providers, such as corporate, litigation and coverage counsel?
- How does your firm’s integration of interdisciplinary expertise help me to educate my management and to drive more informed insurance purchasing decisions?
- As an alternative to traditional executive liability insurance programs, what are examples of unconventional program structures you have helped design and implement?
How are insurance products in today’s markets changing?
With executive and financial risk insurance, the coverages continue to expand, from ever-broadening D&O coverage to newer crime and privacy exposures. Clearly, the expansion of Cyber insurance is the big headline for this decade. Going forward, I’m excited to see how courts will interpret Cyber policy language in the context of changing technologies and cybercriminal tactics. I’m also interested in whether organizations are successful in mitigating losses through broker and insurer-backed third party services and implementation of enhanced C-suite and board level governance protocols.
What is the key issue you are facing as it relates to insurance products / policies today?
The rapid pace of changing exposures continuously challenges us, as an industry, to keep up. Several years ago, we heard Crime insurers assert that their forms were never intended to cover Social Engineering losses, and only belatedly did they introduce more specific coverage. Similarly, Cyber insurers today must consider how their policies may apply to privacy laws of the future or to technology yet to be invented. Of course, it’s hard to address what we can’t foresee, but we must continue looking ahead and innovating.
What risks should clients be using insurance products to mitigate that they may not know they can use insurance for?
With greater frequency, acquisitive companies are turning to insurance coverage for their M&A/representations and warranties exposures. More so now than before, Representations & Warranties insurance is a staple component in a merger or acquisition transaction, purchased as a substitute for seller indemnities and escrows.
Most often purchased by buyers, the coverage helps buyers enhance their profile in the bidding process and has the added potential to protect them against riskier, distressed sellers.
Sellers may seek the coverage to avoid delays in the refund of escrow amounts and to mitigate the risk of costly disputes over whether representations were breached. The insurance now has the buy-in of M&A counsel and private equity firms and, due to more streamlined underwriting processes, it is widely available.