If you had the opportunity to attend BIBA Conference 2023, you know that it provided an ideal opportunity to network, meet new companies and gather insights and was by far the most successful BIBA conference in many years. After speaking to many other professionals and learning about their experiences, I’d like to share several observations regarding key challenges and opportunities for brokers in 2023.

Everyone Feels Economic Pain

It’s no secret that post-Covid most economies in the world are suffering and the war in Ukraine is exacerbating the problems considerably. The biggest challenge in the UK is inflation. According to the Office for National Statistics, year-over-year consumer price inflation in the UK reached 9.6% in October 2022. As of April 2023, inflation has moderated somewhat, but it remains high at 8.7% which is considerably above the BofE’s target of 2% and these figures are proving very stubborn to decrease.

Because everything is costing more, property insurance is especially impacted because it costs more to rebuild due to increases in the price of raw materials and labor and so premiums rise. But index linking is running far higher than inflation and many insurers have been applying rates of nearly 20%. Often landlords pass this cost increase directly onto their tenants with increased rents too.

Brokers are tasked with explaining to their clients why insurance premiums are increasing, but getting clients to accept the economic reality isn’t always easy, and when faced with a stiff increase over last year’s premium, it can lead to dissatisfaction.

The Population Increases and Capacity has Decreased

According to World Population Review, the UK population is 67,723,781, as of 2023. It’s expected to reach 75 million by 2060. A growing population requires the building of new homes and results in more densely-inhabited districts. This calls for more insurance coverage – but finding capacity in a hard market is challenging. Our towns and cities are seeing more densely packed blocks of flats built to accommodate more people but these properties are not always popular with insurers. Escape of Water is a growing and expensive problem for claims departments and following the Grenfell disaster, insurers are cautious about all matters relating to fire safety in blocks of flats.

New Service Providers but Fewer Brokerages

In the past, Carriers and MGAs of different sizes operated in the market creating some balance and providing more choice. That was equally so with broking houses on both the retail and wholesale side. In more recent years, the number of independent small to midsize brokers has dropped with many brokers having merged or been acquired. Some new brokers have emerged, but the number being acquired exceeds the number of new entrants. This is also occurring at both the retail and wholesale level. Among the 100 independent UK brokers, almost two thirds have since been consolidated or acquired by a rival broker/insurer since 2010, according to Insurance Age.

To survive in this market, smaller brokers have to compete with the bigger companies, which they can only do by focusing on service and relationships while exploiting gaps in product range and volume requirements.

Regulations Are Increasingly Complex

Regulation of the insurance sector was once done with a light touch but that’s no longer the case and brokers and underwriters alike can expect to be monitored closely by the FCA. The compliance burden has also driven up the cost of doing business. Larger companies may be able to absorb these costs more easily, but for smaller entities, it’s proportionally a bigger challenge, which could make the economies of scale from a merger or acquisition more attractive.

In 2021, the Financial Times reported that UK fintech companies feared that new FCA rules would stifle startups. Indeed, starting a brokerage can now take a year before a licence will be issued.
In the personal lines business, many underwriters feel the compliance burden is now too great and it’s no longer worth handling the business due to increased costs. As a result, there’s a smaller pool of underwriters to draw on – and that hurts policyholders in the end. The FCA’s goal of protecting consumers was admirable but in reality its meant less choice and competition in the market.

The Rules Change

The FSA introduced Treating Customers Fairly guidance back in 2006. Those same principles remain in place under the FCA but things have evolved since. It’s up to firms to demonstrate how they are working to achieve the required outcomes and follow the principles. This isn’t always clear cut as our industry is so varied and the guiding principles are very broad. It’s normal practice to refer questions to compliance experts and the FCA themselves to clarify how best to approach different and new situations to ensure we meet the standards required. Keeping up to date on best industry practices is important, not only to ensure customers receive the best service but also to protect our business from complaints and to be prepared for audits from insurers, the FCA and PI insurers.

Navigating a Challenging Market

This is a time of change in the insurance industry. For brokers, change breeds challenges as well as opportunities. Here at Costero Brokers, we’re remaining steady in our focus on great service, specialisation, and continual improvement. If you’re interested in continued collaboration, reach out.

Q2 2023: State of the Global Insurance Market

Insurers are grappling with high inflation, geopolitical conflict, and climate change. This report examines how current trends are impacting the global insurance market.

The Reinsurance Market

According to the April 2023 report from Gallagher Re, the reinsurance market continues to be stressed as reinsurers attempt to achieve reasonable returns. Furthermore, without new capacity to alleviate the pressure, some companies are having to reexamine their underwriting strategies. In global marine coverage, capacity was good for core marine and energy lines but more limited for catastrophe-focused and war, terror, and political violence coverage.

UK Motor Insurance Premiums Surge

According to the Insurance Business, motor insurance premiums have increased by 20% year over year.

Inflation is a major factor fueling higher premiums. The Association of British Insurers (ABI) says inflation has resulted in higher raw material costs for vehicle repairs – paint and material costs are up by nearly 16%. Energy costs and courtesy car costs are also up.

The Economic Outlook

Rising interest rates and inflation are hindering the prospect of a robust global economic recovery, according to a mid-2023 report from the UN Department of Economic and Social Affairs. A prolonged period of low growth may lie ahead due to climate change, the lingering impact of the COVID-19 pandemic, and other factors. The world economy is expected to grow by 2.3% in 2023 and 2.5% in 2024. In the two decades before the pandemic, the average growth rate was 3.1% per year.

In the UK, PwC says that a recession is not expected, but the economy may grow by only 0.1% in 2023. High inflation is a major factor. PwC anticipates the cumulative rise in consumer prices between the start of the inflationary period and the end of 2024 to reach 20%.

Net-Zero Insurance Alliance Exodus

The UN explains that the Net-Zero Insurance Alliance (NZIA) is a group of insurers and reinsurers that have made a commitment to transition their underwriting portfolios to net-zero carbon emissions by 2050. Lloyd’s was a member, but it announced its decision to withdraw with immediate effect in May 2023. According to the announcement, Lloyd’s continues to support the UN’s Principles for Sustainable Insurance and Sustainable Development Goals and remains committed to its sustainability strategy, despite its exit from the group.

Lloyd’s is not the only member to exit NZIA recently. According to Reinsurance News, at least 10 major insurance and reinsurance players have withdrawn, possibly due to fears about anti-trust allegations. Other organizations to exit from NZIA recently include Swiss Re, Hannover Re, Zurich Insurance, Scor, and Munich Re.

Political Conflict and Cyber Warfare

Cyberattacks have become a common feature of modern warfare and geopolitical conflict. For example, according to the European Parliament, Russia has used cyberattacks against Ukraine ever since the annexation of Crimea in 2014. These attacks increased just before the invasion of Ukraine in 2022. The National Cyber Security Centre says an attack that presumably targeted the Ukrainian military also impacted many other internet users, including wind farms in central Europe.

War exclusions are common, according to IRMI, meaning losses that are the result of a declared or undeclared war may not be covered. However, state-sponsored cyberattacks are often a gray area.

Lloyd’s of London has recently sought to clarify this issue. The new state-backed cyberattack exclusion, which went into effect on 31 March 2023, requires coverage to exclude losses arising from a war (declared or not) when the policy does not have a separate war exclusion.

Natural Disaster Costs

According to the Beth Israel Deaconess Medical Center, natural disaster recovery costs could spiral as global temperatures rise. From 1980 to 2020, the number of billion-dollar disasters in the U.S. increased from three a year to 22 a year, coinciding with a temperature increase of almost one degree Celsius.

The World Economic Forum says the number of deaths related to extreme weather is decreasing, thanks to early warning systems. However, economic costs are increasing. Over the past 50 years, the economic costs from weather-, climate-, and water-related disasters have reached $4.3 trillion.

Download PDF version here

While researching topics for our Costero website blog, I came across a post on LinkedIn by Emmanuel Maggiori, a freelance software engineer, titled “I’ve been in tech for years, but I’ve almost never worked.”

The piece provides fascinating insight into working practices at large tech companies. You can read the full article here.

Emmanuel discusses the prevalence of freelance roles for projects that are continually overstaffed, so much so that engineers are barely working at all. In analysing why this happens, he cites task bloating as a key reason. Project managers have to predict how much time and costs a task will require. This is also broken down further into individual tasks, with the time and staff allocation wildly overinflated.

This phenomenon is largely driven by a strict adherence to the agile philosophy. As Emmanuel states, the principles behind agile software development are commendable. In fact, one of the key principles is “satisfying customers by delivering value as quickly as possible.” Sounds great, doesn’t it? However, to ‘be agile’, organisations adopt a number of agile ‘recipes’, with step-by-step guidelines. This is the bit that really jumped out at me: “The adoption of a recipe results in a box-ticking-exercise that makes companies believe they become agile just by strictly abiding by a set of inflexible rules. The effect is the opposite.”

I couldn’t help but feel this exact statement could also be applied to insurance regulation. In a similar vein, the need to protect the customer, which is at the heart of regulation, is a completely reasonable objective. However, what has gradually resulted over the last decade is a blind adherence to the correct processes, which are all geared towards “treating customers fairly” and more recently delivering “fair value to the customer”. Inevitably, to achieve these objectives, there needs to be auditable evidence that you are following the guidelines, and this means forms must be dutifully completed to adhere to these requirements and to demonstrate that you have given due thought, care and attention to the customer, particularly those who are at the smaller end of the scale.

Just to be clear, I am talking about businesses purchasing insurance as opposed to individuals, as that is the core focus of Costero’s business. However, if you are a business with a balance sheet of less than €6.2 million, and a net turnover of €12.8 million (I would love to know who establishes these very precise numbers), then you are still deemed to be ‘high conduct’ business. At a high level, the smaller the size of the customer, the more oversight is required, with additional layers of conduct sign-off, additional Product Oversight Group (POG) committees, more forms that need filling in and resultantly a higher barrier entry for an underwriter, who might ultimately decide they are better off sticking to what they know and avoiding the hassle.

In the Binders & Programs Division at Costero, our core business is facilitating binding authorities on behalf of MGA and coverholder clients, with an increasing emphasis on insurtech and emerging risks. In placing this type of business, we are regularly asking underwriters to step outside of their comfort zone. In most cases, we are also asking them to address a current weakness in a product area, whether that be in the claims process, the coverage being offered, the risk management being provided, or the customer experience.

In most cases, the opportunities to markedly improve on an insurance product or disrupt a traditional way of writing business tends to be focused on the micro to SME market, as historically this is where insurers have been less nimble in addressing the needs of the customer. Historically, the MGA market has filled the void left by insurers, addressing the coverage needs of SME clients, as well as more specific niches, geographies, or coverages. Insurers have been able to almost outsource creativity to MGA clients, who are closer to the needs of the actual customer. More recently, technology has given forward-thinking MGAs and insurtechs the ability to do this in an even more effective way by dramatically improving the user experience of purchasing cover, and, hopefully, of making a claim.

However, as the ability to improve the customer experience of an insured has improved dramatically over the last ten years, and as more and more tech-savvy talent has entered the insurance market, the barrier to entry for insurers has become increasingly burdensome. We are regularly told by underwriters that they are spending too much time on ever more reporting and form filling, and not enough time on underwriting, with delegated business being the biggest time vacuum for underwriters. The result is fewer underwriters willing to write a piece of business that might dramatically improve the experience of the insured, as the easier path is to do nothing and avoid the pitfalls of going through endless committees, oversight sign-offs, and so on.

There’s a second issue created by fastidiously adhering to these compliance processes. Every insurer needs to employ an army of compliance/DUA/conduct staff to make sure that the rules are being followed, with this perhaps being the biggest area of headcount growth at Lloyd’s syndicates in the last ten years. This might be a slightly more controversial point to make, but it is perhaps the elephant in the room as far as expense ratios are concerned.

Ironically, an ever-increasing expense ratio results in Lloyd’s syndicates having to write to larger profit margins, resulting in more selective underwriting. I can hear the underwriters amongst you questioning what is wrong with selective underwriting; however, the other outcome of this is a less competitive market environment where syndicates are perhaps less able to take on risks or opportunities that don’t fit within their core appetite. This is ultimately bad for the customer as it leaves them with less choice and higher insurance premiums.

This is what made me think of compliance in insurance when reading Emmanuel’s article. So many resources go into following the correct process itself, the outcome for the customer gets completely lost. The result, I believe, is less creativity, less innovation and fewer positive outcomes for the most important party in the chain: the client. In a similar vein to the way agile working practices have been loyally followed in the tech industry, how can the current compliance environment be working if it results in less competition and fewer product options for the customer?

There is no denying that compliance serves a purpose, but the customer’s benefit must remain at the heart of every business practice. If you are an InsurTech or MGA trying to navigate the pitfalls of the compliance process then please get in touch, a key aspect of our role at Costero is navigating this for you so you partner with the markets that are best set up to make the compliance process as straightforward as possible.

Learn more.

[vc_row][vc_column][vc_column_text]Imagine these scenarios …

• A hurricane rips off the roof of a chemical factory, compromising the materials and forcing the factory to close for the foreseeable future.
• Wildfire devastates a community, causing significant damage to a powerplant. A renewable energy company requires 250 sunny days per year to meet business goals and avoid additional costs. These are all scenarios in which businesses may have immediate cash-flow needs that aren’t addressed quickly enough by the traditional insurance claims process.

For businesses dealing with lost revenue and urgent repair needs, these delays can pose a serious threat. If coverage excludes some of the losses, the situation is even more dire. Parametric insurance provides an alternative solution, delivering fast relief to businesses.

What Is Parametric Insurance?

Unlike traditional indemnity-based cover (which pays claims based on the assessed magnitude of the loss), parametric insurance pays a set amount following the occurrence of a specific event, based on the magnitude of that event. The parametric method simplifies the claims process, removing the need for lengthy investigations and costly legal disputes and facilitating a fast claims payout to policyholders when they need it most.
In the hurricane example above, the payout may trigger as soon as the track of the hurricane is reported by the National Weather Service to have come within an agreed distance from the insured property.

What Can Parametric Insurance Cover?

Parametric policies typically provide coverage for a single weather or natural catastrophe peril, such as tornadoes, hurricanes, wildfire, or earthquakes. However, coverage is also available for non-damage BI scenarios such as drought. In fact, parametric covers are available for almost any type of event which can be linked to an independently verifiable, third-party data source. Parametric triggers may include wind speed, rainfall, snowfall, earthquakes, wildfire, hail, days of sunshine, temperature and agriculture yield to name a few.

Consider the following scenarios:

• A car dealership can’t find coverage for damage due to hail, despite having to store the majority of their stock in hail-exposed outdoor parking lots. They choose to cover a portion of their stock value with a parametric hail policy.
• A ski resort needs a certain amount of snow to open for business. The resort buys a parametric insurance policy that pays if X inches of snowfall does not occur by a certain date.
• A wheat mill depends on a large crop yield. If the crop yield is lower than expected, the government may pay the wheat farmers a subsidy, but other businesses like mills that support the agricultural industry may not qualify. The mill takes out a parametric insurance policy that triggers if the crop yield is below a threshold.

Other triggers are also possible, depending on the needs of the policyholder. For example, a company could explore parametric coverage to protect against cyber downtime, acts of terrorism, active shooter scenarios, or travel cancellations. Coverage is possible for nearly any large exposure.

Who Needs Parametric Insurance?

Parametric insurance is suitable for businesses with significant risks that traditional insurance excludes or may not adequately cover. The typical premium threshold is $100,000 for any single opportunity.

After a major loss, business interruption can be as costly as the property damage itself. Businesses need robust coverage for these losses. However, securing adequate coverage can be challenging, especially for businesses with risks that insurers are reluctant to take on. As a result, businesses may face exclusions and retentions that reduce the amount of coverage available. Parametric insurance provides an alternative way of controlling risk.

For example, let’s say a company has a $10 million limit with a $1 million self-insured retention. The company does not want to take on $1 million of the risk, but the large retention is necessary to secure coverage, due to the nature of the business and the hurricane-exposed location. The company can purchase a parametric insurance policy that covers hurricanes to protect its own $1 million exposure.

More complex examples may involve working with an insurer, reinsurer or captive that requires a certain amount of liquidity to maintain its financial rating. A parametric policy provides a fast payment of funds following a catastrophic event that may threaten the strength of their balance sheet.

Parametric insurance may not make financial sense for businesses that are able to secure affordable traditional insurance to cover their risks adequately. However, for organizations with complex risks that are more challenging to insure, parametric coverage offers a useful alternative. A few industries that may benefit from parametric insurance include construction, energy, and agriculture.

How Does the Underwriting Process Work for Parametric Insurance?

Although parametric insurance streamlines the claims process, the quoting process may take longer than indemnity insurance. Businesses and their brokers should start the process well in advance of when they need coverage.

Although terms are generally open for 30 days, because of the limited number of carriers offering coverage for certain perils in a geographic area, quoted terms may be withdrawn with short notice when they hit their coverage limit. For example, if you need wildfire coverage for your vineyard but all the neighbouring wineries have already purchased coverage, the carrier may have reached its aggregate limit and be unwilling to provide any more coverage in the area. Additionally, rates may increase as the season approaches. For these reasons, it’s important to begin the process as early as possible.

Businesses interested in parametric coverage need to supply the necessary information, including the following:

• Name of the Insured
• Risk Location
• Total Value of the Asset/Portfolio
• Limit to Be Insured under the Parametric Policy
• Target/Budget Premium
• Loss History
• Confirmation of Acceptability by Client/Lender

What Else Should Businesses Know About Parametric Insurance?

The initial price of parametric insurance may be quite high depending on the peril and the threshold when payments start to become due. However, it’s possible to tailor the pay-out structure to fit the policyholder’s budget, and there are significant savings to be made in the claims process.

Even if the exposure or scenario you need insure is not mentioned above, coverage may be possible. The options are endless. Call us to collaborate.[/vc_column_text][/vc_column][/vc_row][vc_row][vc_column][vc_separator color=”custom” border_width=”2″ style=”solid” show_icon=”yes” accent_color=”#164578″ icon=”fas fa-globe” icon_color=”#164578″ icon_border_color=”#164578″ icon_wrap_border_color=”#164578″][vc_row_inner][vc_column_inner width=”1/3″][/vc_column_inner][vc_column_inner width=”1/3″][vc_custom_heading text=”SPEAK TO OUR EXPERTS” font_container=”tag:h2|text_align:center” use_theme_fonts=”yes”][/vc_column_inner][vc_column_inner width=”1/3″][/vc_column_inner][/vc_row_inner][vc_row_inner][vc_column_inner width=”1/3″][vc_single_image image=”1915″ img_size=”200×200″ alignment=”center” style=”vc_box_border_circle_2″ border_color=”black” label=””][vc_custom_heading text=”James Forbes” font_container=”tag:h5|text_align:center|color:%23000000″ use_theme_fonts=”yes”][vc_column_text]

james.forbes@costerobrokers.com

[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/3″][vc_single_image image=”1917″ img_size=”200×200″ alignment=”center” style=”vc_box_border_circle_2″ border_color=”black” label=””][vc_custom_heading text=”Jamie Webb” font_container=”tag:h5|text_align:center|color:%23000000″ use_theme_fonts=”yes”][vc_column_text]

jamie.webb@costerobrokers.com

[/vc_column_text][/vc_column_inner][vc_column_inner width=”1/3″][vc_single_image image=”1916″ img_size=”200×200″ alignment=”center” style=”vc_box_border_circle_2″ border_color=”black” label=””][vc_custom_heading text=”James Gadbury” font_container=”tag:h5|text_align:center|color:%23000000″ use_theme_fonts=”yes”][vc_column_text]

james.gadbury@costerobrokers.com

[/vc_column_text][/vc_column_inner][/vc_row_inner][/vc_column][/vc_row]

Jamie Webb and James Gadbury joined Matthew Grant on episode 239 of InsTech podcast discussing the role they play as specialty brokers at Costero Brokers Ltd. Listen here.

Q1 2023: State of the Global Insurance Market

As pressures from the COVID-19 pandemic ease, new economic pressures are emerging, as are both climate change and geo-political risks. This report looks at the impact of these risk factors on the state of the insurance market in the first quarter of 2023.

Economic Outlook

Inflation surged around the world in 2022. According to the International Monetary Fund, inflation in the UK reached 9.1% in 2022. The World Bank says the global core inflation rate could be around 5% in 2023, assuming supply disruptions and labor-market pressures do not subside. This is nearly twice the five-year pre-pandemic inflation average. A global recession could occur in 2023 as a result.

Swiss Re expects the global GDP to grow by only 1.7% in real terms in 2023. In advanced markets, GDP growth is expected to be only 0.4%. For the insurance industry, high inflation is the top concern, but higher interest rates could help alleviate some of the pressure.

Lloyd’s of London says rising interest rates on fixed-income portfolios have forced a write-down of asset values, and this is expected to lead to higher yields and investment returns in the future. Lloyd’s has reported an investment loss of £3 billion, but this is expected to reverse as assets mature over the next two to three years. For 2022, Lloyd’s reported a full year loss of 0.86 billion before tax, compared to a profit of £2.3 billion for 2021.

Premium Growth and Underwriting Performance

According to Gallagher Re’s 2022 Lloyd’s of London Market Report, Lloyd’s saw improved profitability beginning in 2021 after four years of combined ratios above 100%. In 2021, gross written premiums increased by 11% to reach £39.2 billion. 2022 saw continued growth; Lloyd’s has reported that gross written premium increased by more than 19% in 2022 to reach £46 billion.

Lloyd’s of London says major claims, including losses stemming from the conflict in Ukraine and Hurricane Ian in the U.S., have impacted underwriting performance. Nevertheless, underwriting improved by 1.6 percentage points, which was more than expected, and the combined ratio for 2022 was 91.9%.
Globally, Swiss Re predicts 2.1% premium growth in real terms for 2023 and 2024. Total nominal premium volumes are expected to exceed $7 trillion. Higher interest rates, property and casualty market hardening, and increased life insurance demand are key factors.

Natural Disasters

Scientists warn that natural disasters may worsen due to climate change, but costly natural disasters are already a major factor in the insurance market.

The World Economic Forum says 10 climate-related disasters each caused more than $3 billion worth of damage in 2022. The events include a European drought that caused more than $20 billion in damages and Storm Eunice that caused more than $4.3 billion in damages in Europe and the UK.

Political Conflict

The Lloyd’s 2023 Market Oversight Plan notes that geo-political tensions increased in 2022. It cites Russia’s invasion of Ukraine and increased rhetoric from China regarding Taiwan.

The invasion of Ukraine has had far-reaching consequences. Microsoft says cyberattacks targeting critical infrastructure increased from 20% to 40% of all nation-state attacks. This increase was largely due to Russia’s attempts to damage Ukrainian infrastructure and target Ukraine’s allies.

The invasion has also impacted energy in Europe. According to the BBC, Nord Stream 1 used to supply European Union states with 35% of all the gas imported from Russia, but it was closed after leaks were discovered. The cause of the leaks has been a source of contention, with EU leaders saying the leaks were deliberate and Russia denying responsibility.

ESG and Climate Change

According to UCAR, the average global surface air temperature increased by 1.1 degrees Celsius between 1900 and 2020. The United Nations warns that climate change could threaten food production and increase the risk of catastrophic flooding.

In response to climate change risks, there has been a push for investments and business practices that promote environmental, social, and governance (ESG) responsibility.

The 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) took place in November 2022 in Sharm el-Sheikh. The United Nations says COP27 resulted in decisions designed to reaffirm a commitment to limiting the average global temperature increase to 1.5 degrees Celsius. The conference closed with an agreement to provide loss and damage funding to vulnerable countries impacted by climate disasters.

Individual organizations are also doing their part to address climate change. In its 2023 Market Oversight Plan, Lloyd’s says it will continue its sustainability agenda in 2023, including a commitment to net-zero underwriting.

Costero celebrated our five year anniversary in October 2022.  With the closing of our 2022 year, I am humbled by how much we have accomplished in such a short period of time. Founded with just two employees, we are now sitting at 35 employees and a very broad and capable product offering. 2022 was a profitable year for the firm with top line growth of 40% and we exited the year with a solid culture and a very optimistic outlook on the future.

The global (re)insurance marketplace will likely become increasingly challenging in 2023. Our teams of specialists are set up to handle any client need and we have had some impressive success with the most unique risks you can imagine in 2022.  I am sure we will be equally tested in 2023 and rise to the challenge.

The continued support of our colleagues and clients has been amazing and we are very excited about the future.

Best,

JT

London, UK – August 02, 2022. Costero Brokers Ltd., a privately held London-based brokerage, announced today a new MGA program for medical malpractice insurance run by senior underwriter, Philip Murphy, who joined the company in May 2022. Elysium Insure is the newly formed MGA arm of Costero Brokers LTD.

With the addition of Phil Murphy, Elysium Insure provides coverage to protect healthcare entities and medical practitioners from claims for negligence that may result in third party injury. This includes the resultant damages and defense costs incurred during legal proceedings and the settlement of a claim. The MGA also provides coverage for costs incurred through related disciplinary actions.

Murphy joined Elysium Insure to underwrite the International Medical Professional and Clinical Trials Liability portfolio. He brings with him over 20 years of experience in Global Healthcare and nearly 35 years’ experience in the London insurance market. During this career, he has had the privilege of working with many of the world’s leading healthcare providers, aiding them in the design and implementation of superior insurance and reinsurance solutions.

Murphy began his career in the US sector, where he worked with a wide range of providers, from rural or community hospitals to major tertiary urban teaching institutions and physician groups, leading him to a successful transition into underwriting a portfolio of international healthcare and individual medical practitioners.

“We are thrilled to add Phil Murphy to the Costero and Elysium teams,” said John Tallarida, CEO of Costero Brokers. “Phil will be an integral part of building out our MGA capabilities in London with Elysium Insure.”

CONTACT:
Phillip Murphy
Senior Underwriter – Medical Malpractice
phil.murphy@elysiuminsure.com
elysiuminsure.com

About Costero Brokers Ltd.
Costero Brokers Ltd., formed in 2017, initially focused on property and professional lines. Costero Brokers Ltd. is now a multi-class Lloyd’s of London broker and is looking to expand into added specialist areas with the hiring of individuals and teams.

For more information, visit costerobrokers.com

Political turmoil is causing disruption around the globe. Whether it’s an unexpected terrorist attack, the ongoing Israeli-Palestinian conflict, or the sudden invasion of Ukraine, for many businesses, these events and others like them could lead to severe business interruption and losses. Business leaders who don’t already have political violence and terrorism coverage may want to add it to their commercial property insurance policies or purchase stand-alone coverage.

Deaths Are Down, But Conflicts Are Up

War, political conflict, and terrorism attacks remain serious threats. In fact, the number of incidents appears to be increasing. The UN says that even though the number of war deaths has decreased since 1946, conflict and violence are growing. The Peace Research Institute Oslo (PRIO) says that there were eight active wars and 56 active conflicts in 2020, including new conflicts in Tanzania, Algeria, Cameroon, Chad, DR Congo, and Sudan.

Meanwhile, Vision of Humanity says that terrorist attacks increased in 2021, with 5,226 incidents in total. The current war in Ukraine is expected to result in an increase in traditional and cyber terrorism.

Acts of War and Policy Exclusions

Many commercial property insurance policies contain exclusions for acts of war and terrorism. If your business is damaged in a fire and you need to pause operations during evacuations and repairs, you can expect to file a claim with your insurance company to cover the property and business interruption losses. On the other hand, if a terrorist attack damages your business and necessitates a similar suspension of operations, you may not be able to file a claim.

Political violence and terrorism cover adds this protection. The policy covers property damage and related business interruption resulting from any type of violence that is politically motivated. This can include war, civil war, and terrorism.

Flexibility for the Cover You Need

Many types of incidents can be covered, including riots, strikes, civil commotion, malicious damage, insurrection, counter insurgency, civil war, mutiny, coup d’etat, war, sabotage, and terrorism. You can secure coverage for all of these perils or just for some of them. Parametric terrorism and cyber terrorism cover are also available.

A standard political violence and terrorism policy only covers business interruption if property damage occurs. However, there are many coverage options that can be added to address your unique risks. For example, imagine you have operations in a country that is suddenly threatened by war. Your government is advising people to leave, so you heed their warning, close your operations, and make sure your workers get to safety. While this is necessary, it also involves substantial losses for your businesses. Because there is no property damage, standard political violence and terrorism policy may not provide cover, but a forced abandonment policy could. We can also provide coverage for the costs incurred when you have to evacuate and repatriate staff.

Confiscation cover is another option to consider. Although it does come with an added premium expense, Confiscation, Expropriation, Nationalization, and Deprivation cover protects against the risk of asset confiscation by a foreign state.. This can happen if there is a change in government and the new government takes ownership of your company’s overseas assets – for example if your company owns a mine in another country and a new regime seizes control of it.

Cover Availability

Political violence and terrorism can occur anywhere. Likewise, political violence and terrorism cover is available worldwide and for nearly all businesses. During the application process, you will need to provide information on the location of the assets and the values to be insured. In many cases, underwriting can be accomplished in as little as a couple of days although some situations may require longer.
Unlike Terrorism Risk Insurance Act (TRIA) coverage, this cover is very flexible, and you can structure it according to your needs. For example, if you have multiple assets, you may purchase coverage for the total value or only for some of it. You can also customize the size of the deductible. Coverage is also available globally, whereas TRIA is only available for assets situated in the U.S.
Coverage can be a very affordable add-on to your property policy. For example, with an underlying property insurance premium of $500,000, adding political violence and terrorism cover could cost as little as $8,000. Naturally, the actual rates will depend on a business’s specific circumstances. Some organizations may have a more challenging time obtaining coverage due to their risk levels. Likewise, some regions may see higher premiums.

Active Assailant and Third-Party Risks

Active assailant coverage provides coverage for certain immediate losses, such as property damage and emergency response costs. It also covers certain extra expenses, including public relations costs, relocation, medical expenses, counseling, and additional security.
Coverage is also available for businesses that are worried about third-party risks. Contingency business interruption covers losses that an insured would incur if a key supplier or customer was affected by an incident of political violence.

Putting Your Package Together

Because there are so many different cover options and exclusions, obtaining a comprehensive cover can seem like putting together a complicated puzzle. However, it is possible to obtain a customized coverage package for the risks you face, and Costero can help you make sure all the necessary elements are in place.

The threat of political violence is not going away. If you need cover for yourself or for one of your clients, we can guide you through your options. Contact us for assistance.

It’s hard to imagine a violent attack on your organization – but that doesn’t mean you shouldn’t prepare for the possibility. Both active shooter incidents and riot-related losses have increased over the past two decades. As with any other type of crisis, a comprehensive plan can help businesses survive an incident, and that plan should include appropriate insurance coverage.

A Surge in Civil Unrest

Civil unrest has doubled during the last decade, according to the 2020 Global Peace Index. Both violent and nonviolent demonstrations have increased.

France 24 reports that anti-lockdown protests have occurred in many European countries. According to Yahoo News, Steve Reed, MP for Croydon North, has said that the risk of unrest in the UK is “higher than ever.”

Civil unrest has also surged in the United States. Axios says that the 2020 riots sparked by George Floyd’s death caused $1 billion to $2 billion in insured losses. This amount eclipses the previous record for riot-related losses, set by the 1992 Los Angeles riots.

Shootings and Vehicle-Borne Attacks

Shootings are another problem in the United States. According to the FBI, 277 active shootings occurred between 2000 and 2018. Nearly half of these took place in commercial businesses, while 20.6% took place in educational settings, 4.3% took place in health care facilities, and 4.0% took place in houses of worship. The number of incidents has been increasing. In 2000, only one incident occurred. In 2020, there were 40 active shooter incidents and the numbers are rising.

In Europe, terrorist attacks using vehicles have increased. According to the European Commission, ramming attacks have killed at least 130 people since 2014.

Changes in Risks and Coverage

Following a riot, businesses may look to their property insurance policy for coverage. However, after the recent riots and record-breaking losses, some carriers have pushed for heavy premium increases for Strike, Riots, and Civil Commotions (SRCC) coverage.

As a result, businessowners may see their insurance rates increase. Carving out these perils to the specialized political violence markets can give businesses a more economical solution and the peace of mind of having a specific, primary coverage. Active Assailant Liability coverage can offer a form of deductible buy-back for General Liability policies with increased excesses.

Insurance products have also evolved to effectively respond to active shooter incidents, vehicle-borne attacks, and other incidents. These coverages focus on death and injury to personnel and subsequent crisis management, in addition to property damage and business interruption.

Terrorism Coverage Beyond TRIA

When people think of coverage for terrorism, TRIA might come to mind.

TRIA, or the Terrorism Risk Insurance Act, was a temporary federal program established to help insurers deal with terrorism losses. According to the National Association of Insurance Commissioners, TRIA was originally created as a three-year program in the aftermath of the attacks on the World Trade Center and the Pentagon. TRIA has been renewed four times and is currently set to expire in 2027.

However, TRIA may not meet all modern coverage needs. Although TRIA provides coverage for terrorism incidents that occur in the U.S., are declared by the government and have a minimum loss value of at least $5 million, this narrow definition of coverage can exclude many losses. In fact, due to its strict definitions, and industry-wide retention requirement, TRIA hasn’t paid out since 9/11 according to the Insurance Journal.

Superior coverage options are available. Lloyd’s of London offers coverage for both terrorism and sabotage, and coverage is also available for nine additional loss events. It is worldwide multijurisdictional, the trigger can be any event per policy wording definitions, whether or not it is a government-declared terrorism event, and there’s no minimum criteria for the loss value.

Protecting Your Business

A terrorism, riot or active assailant threat can be devastating. In addition to the possibility of injury and death, organizations can also face substantial property damage, as well as losses stemming from event cancellation. Even just the threat of an attack or a hoax can cause significant losses for your business.

The right insurance can shield your business from these losses. Costero’s solutions include, but are not limited to:

• Sabotage, terrorism, riots, strikes, civil commotion, malicious damage, looting, rebellion, insurrection, coup d’etat, mutiny, counter insurgency, civil war, and war. (Cover can be structured to include all, or only a selection of these perils.)
• Active assailant, including crisis management, death & injury benefits, public relations costs, relocation, counselling, medical expenses, and additional security.
• Business Interruption, including loss of revenue, loss of attraction, contingent business interruption, utilities, denial of access, threats and/or hoaxes and any declared extra expense.
• Liability, including third party and employers’ liability coverage, following insured perils.
• Parametric terrorism and cyber terrorism.

Take Steps Now

Comprehensive insurance can help your company deal with the aftermath of terrorism, riot or active assailant incident. To get your team through the event, however, you need to implement training and policies designed to protect your workers and your business.

• Do your workers know what to do if there is an active shooter? The FBI provides active shooter resources and training videos that demonstrate the “Run. Hide. Fight.” strategy.
• Does your business have a plan to deal with riots? The S. Chamber of Commerce Foundation has tips on how to protect your business from civil unrest.
• Do you know how to stay safe during a terrorist attack? Read the advice from the Metropolitan Police on how to stay safe.

Need Guidance?

Learn more about political violence and terrorism solutions and contact us to speak to an expert.