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First on the Scene: Keeping track of Matthew

02 03Harsha V. AgadiPresident and Chief Executive Officer Crawford & Company

ContentsIssue 03

On the FrontLineSpring 2017


On the FrontLineWelcome to the third edition of On the FrontLine and my first foreword as president and CEO of Crawford & Company®. It has never been more apparent that we live in an uncertain and unpredictable world. Political, technological and weather-related uncertainty has ever increased the demand for risk management and loss mitigation services.

Within the space of 12 months, global politics has shifted on its axis in unforeseeable ways. For example, the U.K. has triggered its exit process from the European Union. Crawford recognizes this and will continue to support our customers as they adjust their business models and adapt to the changes Brexit presents.

Weather-related risks are nothing new, but continue to be severe and unpredictable. Crawford adjusters are currently on the ground in Queensland, Australia responding to businesses and communities affected by Tropical Cyclone Debbie. While major storms, earthquakes, floods, landslides and other natural catastrophes have always tested us, their impact in a globalized world facing multiple macro challenges (climate change, population growth and urbanization amongst them) are amplified.

Technological advances have created emerging and evolving risks. An increasingly connected world offers immense opportunity for business, but with it comes new and unforeseen cyber exposures. Regulation and stricter legal frameworks prevent excessive risk taking and ensure high standards of quality are met across industry sectors, yet also increase compliance pressures for our insurance and corporate clients.

As we look to the future, both as an organization and as part of the wider insurance industry, it is clear that we must seek to embrace change and innovate to better serve our customers, and provide more specialized products and services that reflect an ever-changing risk landscape. While we change, we must also be mindful of our traditional role of supporting our communities, particularly during times of loss and uncertainty.

Crawford moves forward with an acute focus on service excellence. The speed of our response is critical, especially in a world where everything moves quickly. We recruit employees who are empathetic, customer-centric and technically competent, and who approach all situations with humility. This creates the best possible experience for our customers and results in the delivery of top quality programs that will continue to be the cornerstone of our company and our brand.

Harsha V. Agadi President and Chief Executive Officer, Crawford & Company

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NewsHow social media has shaped disaster preparedness and response over the past decade and the role of Twitter during major events

Keeping track of MatthewA First on the Scene special detailing how Crawford deployed its resources as Hurricane Matthew devastated parts of the Caribbean and threatened the Florida coast

The power of reinventionAfter a transformational year, Crawford’s President and CEO Harsha V. Agadi explains why he is taking a hands-on approach

A tale of three earthquakesHow three different quakes presented divergent loss adjusting challenges as a result of secondary hazards and differing market practices

If you would like further information about any of the articles in this edition of On the FrontLine, please contact a member of the Crawford communications team:

Nancy Hamlet Vice President of Global Marketing & CommunicationsT +1 404 300 1918 E [email protected]

Lynn CufleyDirector of Marketing & Communications, InternationalT +44 (0)20 7265 4067 E [email protected]

© Crawford & Company. No information contained in this publication may be used without the prior permission of Crawford & Company.

EditorsHelen YatesNigel Allen

DesignerMark Bergin

PublisherSuzanne Hirst

Crawford Spokespeople Harsha V. Agadi Rianne BaumannJavier Carvallo Pardo Kenneth CutshawRichard Day Kirsten EarlyKen Fraser Rob HawesRichard LaFayetteDanielle LisenbeyPaul OgniGeorge Oostrom Andrew RobinsonRobin SmithJay Strano Larry ThomasBeverley TricePeter Ziegler

How marine became a catastrophe class of businessMarine insurers grapple with their aggregate exposures in the aftermath of catastrophic events including Superstorm Sandy and Tianjin

3D: Supply chain resiliencePlanning ahead - where do we need to see the biggest steps taken to enhance future supply chain resilience?

All efforts have been taken to ensure the accuracy of the information publishedin OTF. However, the publisher accepts no responsibility for any inaccuracies orerrors and omissions in the information produced in this publication.

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U.S. Organizations exposed by reliance on third partiesMany not managing third-party risks effectively, report shows

Major cities in path of $30 billion volcano lossSWISS RE MODEL FINDINGS SPAN 500 ACTIVE VOLCANOES

Cities could be at risk of economic losses of as much as $30 billion, according to findings from global reinsurer Swiss Re, with one in seven of the world’s largest urban areas – and more than one billion people – located within a 150-kilometer radius of an active volcano.

The findings are based on data generated by the firm’s new global volcano model – the world’s first – which assesses the risks posed by 500 active volcanoes.

Cities such as Tokyo, Naples, Manila, Managua and Jakarta have significant exposure to volcanic eruption – a risk that is still largely uninsured. Currently, Swiss Re says, only Ice-land has compulsory insurance for volcano. Elsewhere the risk is largely uninsured.

“As global urbanization gathers pace, the protection gap for volcanic hazards widens,” says Jayne Plunkett, CEO for Reinsurance Asia at Swiss Re. “But economic disruption and large-scale economic losses for people and businesses locally are only one part of the picture. For example, in the case of any large-scale eruption, supply chain would be affected around the word, causing both economic and insured losses.”

In 2010, Swiss Re says, the volcanic ash clouds caused by the eruptions of Eyjafjalla-jokull in Iceland resulted in the cancellation of 107,000 flights and cost the airline industry alone $1.7 billion.

If such an event hit a major city, the eco-nomic costs and potential damage could be enormous, it added. Volcanic eruptions can cause damage to plants and production facilities, cut power lines and close trans-port hubs – all of which can “choke a coun-try’s economy.”

Economies and businesses must prepare for the risks posed by volcanic eruption, the reinsurer stated. For example, evacuation plans must be in place to help those who may be displaced. And building codes and zoning laws should take potential ash fall risks into account.

Also, plans are needed to keep economies going if disaster strikes. For example, ports or airports that could take over if a main hub is closed should be identified. And the avail-ability of financial resources, including insur-ance, should be considered to help rebuild and reconstruct after an event.

04 05NewsGlobal


U.S.

Global

According to a survey by MetricStream Research, 21 percent of companies say they have been exposed to risks because of dealings with a third party within the last 18 months. Of those that shared information on the financial impact of those losses, 25 percent said the loss was more than $10 million.

The survey also finds that almost half – 44 percent – of respondents do not have a dedicated third-party risk function, or a centralized third-party information repository. Of those that do, some 59 percent say that third-party risks fall under their company’s broader enterprise risk management function.

Approximately half – 48 percent – of companies say they used office productivity software to manage their third-party risks. The research also shows that the large majority of respondents – 73 percent – say they did not track fourth-party risks.

MetricStream Research says that incidents such as the Target data breach show just how vulnerable companies can be to third-party security risks.

In addition, the researchers say that increased use of third parties such as cloud providers, IT vendors and contractors – all of whom have their own third-party counterparties – means that companies increasingly are exposed to fourth-party risk.

For the study, MetricStream Research surveyed more than 40 organizations from 15 industries.

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Top 15 cities at risk from substantial economic loss caused by volcanic ash fall*

*exceeding 0.5% of country GDP

WEGOLOOK® CAPABILITIES INTRODUCE ALMOST REAL-TIME INSPECTIONS FOR SMALLER CLAIMS

Europe Lloyd’s to set up Brussels platformNew hub will ensure no interruption to EU trade

Lloyd’s of London has chosen Brussels to set up an insurance company to complement its London market structure once the U.K. leaves the European Union.

The market will be able to write risks from all 27 EU member states and three European Economic Area states once the U.K. has exited the EU in 2019, Lloyd’s said in a statement.

“It is important that we are able to provide the market and customers with an effective solution that means business can carry on without interruption when the U.K. leaves the EU,” Inga Beale, CEO of Lloyd’s, said.

Lloyd’s stressed that the U.K. remains a full member of the EU for at least two more years and, therefore, there is no immediate impact on existing policies, renewals or new policies written during that period.

Richard Day, vice president, global markets at Crawford, said the impact on claims of the move was yet to be seen, but that it was unlikely to make a huge difference to the claims process.

Some Crawford clients – managing agents or syndicates – might take the decision to use the Lloyd’s Brussels hub, while others may use other arrangements to write European business. Either way, he said, claims are likely to continue to be handled in London.

Where business is written via coverholders, Crawford typically has a relationship with the local coverholder and with the syndicate or managing agent in London. “We will watch closely what happens” over the next two years, Day said.

In January, Crawford established a new partnership that will enhance forever the way it handles high fre-quency, low complexity claims, with the acquisition of a majority inter-est in on-demand field services pro-vider, WeGoLook®.

WeGoLook’s revolutionary approach to data capture will ensure that smaller claims can be handled faster and more cost-effectively than ever before. By leveraging a 30,000-strong workforce of inde-pendent contractors – known as Lookers® – and an innovative data capture mobile app, Crawford will be able to significantly enhance its client response capabilities in this underserved area of the market.

Commenting at the time of the acquisition, Harsha V. Agadi, pres-ident and CEO, Crawford, said: “I am very pleased to welcome WeGoLook’s employees, contractors and customers to Crawford given the tremendous potential that I see as we combine WeGoLook’s innovative technology with Crawford’s global

reach and client relationships.” The new partnership provides

Crawford with virtually instant access to field agents across the U.S. and Canada. Each Looker is trained to perform precise on-site inspections and capture pre-con-figured claims data in the form of photos, video, measurements, etc. All photos are geo-coded, including date and time stamps. Data quality is assessed by WeGoLook’s quality assurance team prior to sending the report, which is delivered via API, email or a custom dashboard.

Launched in 2009, WeGoLook is one of the fastest growing and most innovative gig economy compa-nies in the U.S. “We provide a full turn-key solution for our enter-prise clients,” explains CEO Robin Smith. “The companies we serve are able to combine our extensive network of Lookers and our mobile data capture technology to develop new, dynamic processes that they can introduce seamlessly into their existing infrastructure.”

The firm’s contingent workforce of Lookers spans a diverse skills base, ranging from catastrophe adjusters and licensed drone oper-ators to mechanics and military personnel. “This diversity means that we are able to match a particu-lar task to the right Looker very quickly,” explains Smith. “The pro-cess is done automatically, with the requirements of the specific order dictating which Lookers are notified through the app.”

The advantages of being able to access on-demand agents are extensive, she believes. “Whether it’s commercial property dam-age, an auto accident or a slip-and-trip incident, our agility, mobility and coverage means we’re able to inspect the event in hours, if not minutes. This means that Craw-ford’s adjusters can process more claims faster and more efficiently, and they can focus more time on those complex claims that demand their full attention.”

“You have to remember,” she adds, “that at the end of the day the policyholder does not care whether it’s a Looker, a Crawford adjuster or an insurer representa-tive that comes to inspect the inci-dent. All they want is someone to be there as quickly as possible to get the process started and that’s what we deliver. And a claim that is dealt with faster means a better customer experience—and that’s good for everyone.” OTF

Acquisition set to revolutionize claims handling

The center of Brussels, home to the new Lloyd’s platform

CommentCommunication

On the FrontLineSpring 2017 07 06 Comment

Andrew Robinson On the FrontLineSpring 2017

Tens of billions of dollars of venture capital investment has been invested in fintech in recent years and fintech is now far more mature and developed. It has also become increasingly apparent that these same investors are turn-ing their attention to the risk and insurance space. In 2016, there was an estimated $2.5 bil-lion of venture capital investment in insurtech, according to KPMG U.K., and that number is expected to easily surpass $3 billion in 2017.

Unsurprisingly, these investments have ini-tially focused on distribution by attacking costs through introducing new online models, com-parison engines and other customer-oriented efficiencies. This follows a pattern that we have seen in other sectors that have undergone tech-nological transformations, including the travel, retail and financial services industries.

Following this initial phase of insurtech ramp up, the venture capital world is expected to turn its attention to opportunities in other parts of the risk and insurance value chain, including use of next generation technology to improve underwriting, reduce loss costs and claims leakage, and loss adjusting expense. While insurtech development is going to be dynamic and unpredictable, we are likely to see attention in a few notable areas in the near term.

One area is high definition information and big data, both of which offer a far more granu-lar view of risk and events. This may be in the form of more detailed weather information, allowing for a more in-depth understanding of what kind of weather is occurring in a specific area, or data from the Internet of Things with sensor technology offering new insights and the ability to both understand and improve the underlying risk.

For instance, our response in the immediate aftermath of Cyclone Debbie in Queensland,

As Cyclone Debbie bore down on the Queensland, Australia coast on March 27 as a strong category 3 hurricane, Twitter was alive with updates. Information regarding wind-speed, location offshore, expected track and likely storm surge enabled coastal commu-nities and citizens to prepare for the worst.

As Debbie gained in intensity, a mass evacuation was underway in the Queens-land town of Mackay with real-time updates across a number of platforms. Crawford was among those reassuring cli-ents and colleagues that it was poised and ready to respond to the disaster across its social media platforms. “Central to being able to stay on top of weather-related developments is the fact that we are con-tinually monitoring key news and weather-related data sources, as well as using our own mapping and analytics capabilities to establish as clear a picture as possible,” says Lynn Cufley, marketing and commu-nications director, international, Crawford.

Social media has become such an important tool in pre- and post-disaster response that it is difficult to imagine a time when Twitter, Facebook and LinkedIn were not available. Yet as recently as 2005, when Hurricane Katrina breached the lev-

ical, behavioral, or some other treatment. This is enabled through very sophisticated advanced analytics.

A third big area of development is in the con-vergence of mobile technologies and the gig economy. Nearly everyone is aware of Uber and Airbnb. We believe similar development in the insurance industry could be equally powerful and interesting. There is tremendous poten-tial to dynamically utilize mobile technology and enable crowd sourced models to evaluate and underwrite risk, as well as evaluate dam-age following a loss event, and ultimately use it to resolve a claim.

Our acquisition of WeGoLook is the most compelling example in the industry. Today we are working with companies on everything from site inspections as part of the underwrit-ing process, to property damage assessments in response to a claim, to title assignment as part of a process to manage total loss. We see the potential application of the WeGoLook model as having a profound impact, and we are work-ing with our clients to create entirely new, far more efficient and customer-friendly processes.

With billions of dollars now being invested in the insurtech space, our industry is surely on the brink of exciting and unpredictable change in the years ahead. OTF

Social media has become such an important tool in pre- and post- disaster response

THE RISK AND INSURANCE INDUSTRY IS ON THE CUSP OF SIGNIFICANT TECHNOLOGICAL CHANGE. CRAWFORD’S NEWLY APPOINTED GLOBAL CHIEF OPERATING OFFICER, ANDREW ROBINSON, OUTLINES THREE BROAD TRENDS TO WATCH OUT FOR IN THE RAPIDLY EXPANDING INSURTECH ARENA

ON THE FRONTLINE CONSIDERS THE IMPACT SOCIAL MEDIA HAS HAD ON DISASTER PREPAREDNESS AND POST-DISASTER COMMUNICATIONS

Embracing the disruptive age

Tracking disasters in real time

Insurtech

Comment ees in New Orleans inundating large parts of the city, much of the devastation in the immediate aftermath was unknown.

The only news coming out of the city was brought via traditional news networks, with helicopter footage showing images of mass chaos and looting. Meanwhile, federal and state officials blamed one another for a poor response that left thousands stranded and waiting for help for days.

When Hurricane Matthew threatened the Florida coast in early October last year, it was clear 11 years had made a notable dif-ference. “One particular tweet highlighted that brief wobbles in the track likely saved Florida billions of dollars in damage,” says Steve Bowen, impact forecasting director and meteorologist. “This resulted in nearly 110,000 impressions on Twitter. The tweet was picked up by various media and indus-try outlets at a time when people were trying to initially determine the possible financial scope of the disaster.”

When Twitter celebrated its 10th anniversary last year, the company released a short video commemorating its role as an activist platform for world events, including the Arab Spring and the 2011 Tohoku earthquake and tsu-nami, among others.

“Social media played a huge part in our response to the U.K.’s Cumbria floods last year,” recalls Cufley. “With accessibility to the affected areas difficult, our adjust-ers were able to send and receive feedback in real time to colleagues and insurers. It also allowed us to promote our claims help centers so homeowners were able to meet our adjusters who could assist them in those first few days after the flood.”

In many ways, the rise of social media should help mitigate the impact of future calamities, particularly for natural catas-trophes everyone can see coming, such as hurricanes and as a communication tool in the immediate response following unfore-seen disasters.

“We live in an increasingly hectic world in which people are seeking information in short bursts of summary details, and social media is one area to highlight pend-ing or after-event details in near real-time,” says Bowen. OTF

Australia is a wonderful example. We deployed new drone capabilities producing high resolu-tion, geo-coded information, which in com-bination with client risk data, allowed us to produce orthomosaic images to assess dam-age and triage those most impacted. Such high definition information enables more accurate and timely loss assessments and enhances our ability, as claims adjusters and TPA service providers, to triage more effectively.

Second is the data science domain, compris-ing developments such as machine learning and artificial intelligence. One application of machine learning is to put structure around unstructured data to gain knowledge and insights that are not readily available today. The incredible richness of information within claims adjusters’ notes alone is a treasure trove of insight waiting to be harnessed. Similarly, development in all forms of advanced analytics for structured data enabled by artificial intel-ligence and machine learning is providing new insights and driving improved outcomes. For instance, in Broadspire in the U.S. we now have the ability to identify the best treatment for chronic pain before it leads to opiate abuse. We are achieving remarkable results through early identification and triage, and better insight into appropriate treatment, whether it be clin-

FeatureFirst On The Scene

On the FrontLineSpring 2017 0908 Feature

First On The SceneOn the FrontLineSpring 2017

Hurricane Matthew began as a tropical wave off the coast of Africa on September 22, 2016. Tracking across the Caribbean, it intensified rapidly, spiking from a Category 2 to Category 5 hurricane over a 15-hour period, with wind speeds topping 160 mph. On October 2, it made first landfall over the southwest coast of Haiti as a Category 4 storm, with successive landfalls in Cuba and Grand Bahama. Then, with wind speeds nearing 140 mph, Matthew shifted northwest and began bearing down on Florida.

“We had approximately 65 U.S. adjusters, including adjusters from the U.K. and Canada, focused on the Bahamas,” says Beverley Trice, vice president of Operations, Crawford Catas-trophe Services (CAT). “At that point, most people believed the U.S. was going to take a miss on this one. But then Matthew turned towards Florida and for many it looked as though their worst nightmare was to become a reality – this was going to be the storm we’d been talking about since 2005.”

Watching the storm buildCrawford had been tracking Hurricane Mat-thew for days in advance. Constantly moni-toring all relevant news and weather alerts, as well as utilizing proprietary mapping and analytics technology, the teams strove to stay ahead of the storm.

“Several days before the projected U.S. landfall, we were modeling potential impacts up and down the eastern U.S. coast,” explains Larry Thomas, CEO of Crawford U.S. Services and Contractor Connection®. “We were also conducting callouts with key clients to iden-

WHILE HURRICANE MATTHEW DID NOT HAVE THE SAME IMPACT AS SUPERSTORM SANDY, THE TRACK THAT IT TOOK AND THE SWATHE OF DAMAGE IT CAUSED PUT THE FULL RANGE OF CRAWFORD’S U.S. CAPABILITIES TO THE TEST

Keeping track ofFirst on the Scene

tify their potential needs and working directly with pre-identified network contractors to identify resources to mobilize into those areas affected as soon as the authorities provided access.”

Trice and the CAT team were working round the clock to establish a clearer picture of the forecast loss impact for their clients. “We were using client policy information to generate numerous claims scenarios based on varying tracks, wind speeds and water lev-els to get a sense of how many policies might be affected, and we were sharing this infor-mation with the particular companies. We already have in place contracts stating how many adjusters we will supply or how many claims we will handle.”

The Crawford Global Technical ServicesSM (GTSSM) team was also on high alert, as Rich-ard Lafayette, chief technical officer, GTS explains. “Given that the initial focus was on Florida, we put our Florida GTS team on standby and discussed their specific resource needs for their nominated accounts. Once we had established that, the next step was to con-tact our GTS adjuster base to determine who had capacity to assist in Florida, or wherever the storm might finally make landfall.”

“The adjusters were also in direct contact with account holders, providing advice on how to prepare and what to do in the event of a loss,” he continues. “While this was ongo-ing, the GTS leadership was in regular contact with our clients, informing them that we were ready to assist in the event of any losses and to set up central points of contact.”

Above:Damage to home at Ponte Vedra Beach, Florida, after Hurricane Matthew passed through October 8, 2016

Matthew

large organization,” adds Trice, “you have such a broad pool of specialists you can tap. They bring expertise from across the company, whether that’s IT, compliance or finance.”

As Thomas points out, a key benefit of the year-round interaction between the Pro-Act team and those clients who are part of the Crawford Catastrophe Program, is that in times of peril the information you need to respond is at your fingertips. “For the Con-tractor Connection team,” he says, “this means that in many cases, we have the policy in-force data mapped out by contractor coverage, and can leverage historical storm information and weather data to anticipate potential responses and contractor needs.”

Heading up the coastWith Florida hunkered down and ready for the worst, a slight deviation in its forecast track mercifully saw Hurricane Matthew bar-rel up the southeast coast rather than make a direct landfall. “There was a tremendous

sense of relief when it became clear that Flor-ida would not take a direct hit,” says Trice, “but there was still a great deal of uncertainty as to exactly what track the storm would take. At that point, we really couldn’t look at redeploy-ing adjusters because frankly we didn’t know exactly what Matthew was going to do.”

“It’s tough at the best of times keeping track of a large group of adjusters when they are located in one place,” she adds, “but when you have to mobilize them over such a large area the logistics are ramped up considerably.”

As Matthew paralleled the coast, the big challenge for the Crawford adjusting team was how to get sufficient feet on the ground given that the swathe of damage caused by Matthew was now over a much broader area than had initially been anticipated.

Its track up the coast brought extensive damage to property and infrastructure in Flor-ida, Georgia, South Carolina, North Carolina and Virginia. With Crawford’s loss adjusting forces stationed in Jacksonville, a new induc-tion facility was set up in Atlanta to enable the faster placement of adjusters into the affected areas once it was safe to do so.

“Since most of the losses were scattered along the Georgia, South Carolina and North Carolina sea coast,” Lafayette states, “it was difficult moving our GTS adjusters from one state to the other given the configuration of the shoreline and the fact that there was no direct route. The type of damage also meant that while in some cases we were able to inspect affected areas within one to two days, in other areas where there had been exten-

A pressure situationPredicting the movements and potential impact of Matthew wasn’t the only major chal-lenge facing the Crawford team. With its path putting the storm on track to traverse within 75 miles of Jacksonville, Florida – the location of the Contractor Connection operations center – Crawford also had to prime its own catas-trophe response and business continuity plans.

“It was a unique situation for us,” Thomas states. “We were preparing for a major catas-trophe response somewhere along the eastern U.S. coastline, while at the same time prepar-ing our offices and staff for a potential direct impact to our operations center. We had to ensure that we preserved the safety of our staff while maintaining our ability to provide 24/7 client service.”

The potential scale of the impact was also putting adjusting resources under extreme pressure, as firms sought to ramp up their adjusting capabilities in advance of the storm hitting Florida. “We have about 5,000 fully

vetted seasonal CAT adjusting employees available to us,” explains Trice. “As Matthew was developing, we put them on standby and once the storm hit the Bahamas we started pooling all of our available resources.”

“We set up our induction center in Jack-sonville and pulled the trigger on all availa-ble resources to report into the facility. The induction process enables us to get our adjust-ers up-to-speed, putting them through any client-specific training they might need, and providing them with any necessary technol-ogy or software.”

The Pro-ActSM team, Crawford’s response taskforce of multidisciplinary professionals, was also on full deployment. “That’s one of the many advantages of being part of such a

10 FeatureFirst On The Scene


sive flooding it was weeks before access was available to us and others to carry out initial inspections.”

“As you headed along the coast, the scale and type of damage that you were dealing with changed,” Trice explains. “In Florida, the majority of the damage was wind related – there was only limited damage from wind-driven rain, and no real damage from tidal surge. However, as you moved up the coast, and particularly by the time you reached North Carolina, there was severe flooding across wide areas.”

Rainfall analysis by NASA revealed that extreme weather in North Carolina, resulting from the storm meeting a frontal boundary, saw some 20 inches of rain drop in the state as Matthew passed. The study also reported that a slow-moving frontal system in the last week of September had already saturated the region. In fact, even by October 12 major rivers in the area such as the Tar and Neuse were still rising.

An extensive clean-upGiven the nature of the event, the Crawford team dealt with an expansive range of losses in the days, weeks and months that followed.

“Our preparation plans meant that the Con-tractor Connection team was able to start receiving assignments overnight,” explains Thomas, “as Hurricane Matthew began impact-ing South Florida on its path up the east coast.

“The initial focus was on mobilizing our contractors for emergency service needs. These assignments ranged from removing fallen trees from buildings, emergency water extraction and emergency board-up and tarp-ing. These services were invaluable to the poli-cyholders as in many cases it meant that they were able to stay in their homes or keep their businesses running.

“It also meant that we were able to ensure our clients could ‘be there when it counts’,

“Several days before the projected U.S. landfall, we were modeling potential impacts up and down the eastern U.S. coast”

Larry Thomas

$15bn $10bn $5bn $5bn $2.6bn $1.9bn $600mTotal economic loss – approximately

Total U.S. economic loss – approximately

Insured losses – approximately

Economic loss outside U.S. –approximately

Cuba Haiti Bahamas

Counting the cost of Hurricane Matthew

Source: Impact Forecasting, Aon Benfield – November 9, 2016

apartment complexes, churches, municipali-ties and golf resorts, as well as manufacturing and industrial risks. In addition to deploying adjusters along the U.S. east coast, we also had adjusters in the Bahamas and Caribbean tack-ling extensive wind damage to a number of luxury resorts.”

While the number of claims stemming from Matthew was considerably less than the record number of claims tackled by Crawford in the aftermath of Superstorm Sandy, what made the storm such an extreme event for the team was just how extensive the damage footprint was.

“I’ve worked in the catastrophe arena with Crawford since 1979,” says Trice, “and I can honestly say that Matthew was a harder storm to manage than Sandy or many of the other large storms I’ve been involved with during my career. It was a tough storm to tackle and, given just how far the damage extended, it was cer-tainly a very trying event for our employees who were operating under very difficult conditions and under exceptional amounts of pressure.”

“You would think that after the number of storms that I have been through over the last 38 years you would have everything down to a science,” she concludes. “But every storm brings something completely different.” OTF

which is the Contractor Connection motto. Our ability to respond quickly not only mit-igated any potential additional damage, but also bolstered the customer service capa-bilities of our clients at a time of extreme pressure.” To date, the Contractor Connec-tion team has worked with approximately 5,000 policyholders of its clients, providing emergency services and general contract-ing services.

For the GTS team, the range and scale of the losses required the full extent of their capa-bilities. “We handled wind damage to roofs and other structures, coastal flooding, as well as significant inland flooding from various rivers,” says Lafayette. “We had several losses involving habitational risks such as condos,

11InterviewHarsha V. Agadi


FOLLOWING THE IMPRESSIVE FINANCIAL PERFORMANCE THAT CRAWFORD ACHIEVED IN 2016, PRESIDENT AND CHIEF EXECUTIVE OFFICER HARSHA V. AGADI DISCUSSES HOW HE SEES THE FIRM BUILDING ON THAT MOMENTUM

The power of reinvention

Interview: Harsha V. Agadi, president and chief executive officer, Crawford

cation of the significant advances we have made on many fronts,” says Harsha V. Agadi. “We are operating in a difficult revenue envi-ronment, but we have still been able to deliver strong operating margin and earnings growth, and moving forward we are in a much better position to deliver the financial predictability you need as a publicly-listed company.”

Delivering the numbersIn fact, for 2017 and onwards, Agadi, as CEO, has set the financial bar at five percent reve-nue growth per annum. “We need to be hitting that five percent target as an absolute mini-mum if we are to maintain a healthy business – one which is driven by new business and stimulates growth, opens up opportunities, creates jobs and generates more room for pro-gression for our employees.”

To achieve this target, the company must be built on a strong foundation, and to create this, Crawford has identified six distinct stra-tegic pillars to effect growth and earnings on a consistent basis.

“The first of these pillars,” he explains, “is to establish strong financial foundations. Sec-ond, we must ensure an entrepreneurial cul-ture pervades every level of the organization as we forge new opportunities. Third, we need to increase and enhance our global capabili-ties, both from a products and services, and a geographical perspective.”

The fourth pillar, he explains, is excellence in execution, a pillar that will require a fanati-cal focus on maintaining the highest stand-ards of service delivery, as well as being able to accurately measure that those standards are being met.

“We also need to be committed to deliver-ing innovation in products and services across the board,” he adds. “We must be looking at opportunities to break new ground each and every year. And finally, we need to be a fully sales-driven organization. That means we must be constantly looking at ways to provide more products and services to more insurance carriers and Global 2000 companies.”

Expanding the touch points Agadi is not a CEO who is looking to drive this change from afar. He is very much hands-on in executing his vision at Crawford, meet-ing regularly with employees from across the organization to gain a ground-level under-standing of the multiple levers that power the Crawford machine. And that desire to connect extends beyond the company walls.

“It is essential that as CEO I am involved in the conversations we are having with our cus-

2016 proved a transformational year for Crawford, as the company firmly positioned itself for a return to top line growth. Over the 12 months, it delivered consistent financial results – a feat not achieved in recent years – and its success was recognized by inves-tors, employees, customers and analysts alike.

This progress, however, has been hard won. It has demanded a rigid focus on expense reduction, stringent cost discipline and a recognition of the need to reduce the firm’s dependence on severe weather-related events – all against a backdrop of what continues to be a highly challenging revenue environment.

“Our full year results provided a clear indi-

Larry Thomas, Crawford

12 InterviewHarsha V. Agadi


tomers,” he stresses. “I want to be out there in our market, meeting face-to-face with our clients to better understand their specific needs and how we can help.”

“You have to remember that Crawford operates in a service industry,” he continues, “which means it is no different to any other industry that must pay very close attention to its customers. My career in the food and hospitality business has ingrained in me the importance of being customer-centric. So, we can’t be afraid to ask our customers fre-quently for feedback on how we are perform-ing. It’s about becoming a trusted partner, sitting at their table to discuss the challenges they face and the solutions we offer.”

There is now a strong push across the organization to demonstrate the intercon-nected nature of the multiple services the firm offers. “We have to be better at con-necting the dots within our own offerings,” he believes, “and translating that into how we can add more value to our clients. We service thousands of companies across the insurance sector and the Global 2000 but, in many cases, we are delivering only one or two sections of our services. There is a tremen-dous amount of room for us to cross-sell the breadth of capabilities we have.”

A critical component to the successful execution of Crawford’s growth strategy is the recent recruitment of Andrew Rob-inson, who joined the company in January 2017 as global chief operating officer, a new role for Crawford. “With each of our four business segments reporting to Andrew, we will be focused on optimizing our oper-ations and further expanding our client-centric organization and growth culture,” said Agadi. “I am excited to have Andrew on board as his skill set and experiences are well aligned with the renewed strategic direction of Crawford.”

property, disability, product recall and work-ers compensation.”

Seeing the potential“You have to be able to meet the fast-evolving needs of the customer,” he adds. “There is now much greater interest in instant access plat-forms, automated processes and on-demand services, and we have to be able to deliver on these fronts. That’s why we are actively involved in the insurtech revolution, looking at those technologies and processes that can posi-tively disrupt the insurance space.”

This was at the forefront of the company’s decision to make another strategic hire with the appointment of Hilton Sturisky, global chief information officer, who is already making an impact on how Crawford leverages its technol-ogy and data to support clients. “The addition of Hilton to our team is transformative, as he deploys his vast experience in leading IT organ-izations and creating modern technology eco-systems.”

Also central to the company’s transformation is the creation of Crawford Innovative Ventures, LLC, led by Ken Fraser, Crawford chief strategy and development officer. “We formed Craw-

ford Innovative Ventures specifically to invest in strategic acquisitions and partnerships that will be disruptive to our industry and intro-duce Crawford to more adjacent services,” Agadi explains. “We want to stay at the forefront of change, enabling us to diversify our services, and quickly adopt new technologies or service models that will positively impact our customer experience.” WeGoLook was the division’s first acquisition.

Crawford is accelerating fast along the insurtech highway, exploring technological and process routes that have the potential to vastly improve its service capabilities. These range from capitalizing on telematics that enable almost instant first notification of loss with-out the driver needing to contact anyone; to employing user-based apps and mobile tech-nology to enable faster reporting and inspec-tions; to using wearable tech, drones and 3D-imaging to not only speed-up data gather-ing from the frontline, but also helping to pro-tect clients from future risks.

Agadi also sees the ‘insurance direct’ market as offering vast potential. “In the U.S. alone, this is a $25 billion market,” he says. “Let’s take an example of a homeowner who has had a flood in the basement. To repair the damage will cost $6,000. So, the insurer sends the check and leaves it to the homeowner to choose the con-tractor to complete the work. We want Con-tractor Connection, our network of managed contractors, to be the first company they call.”

The human touchNo matter how extensive the technological capabilities that Crawford brings on board are, the caliber of its employees will remain the primary force behind its continued upward trajectory.

“When I took up the CEO role at Crawford, what really struck me was the level of passion, commitment and loyalty that I saw across our

employees,” he points out. “You only find that level of dedication in mature companies such as ours. We have a 75-year heritage and some of our employees have been with us more than half of that time.”

However, he recognizes that the talent arena is a key battleground for the firm, and believes that the insurance industry is only now acknowledging the skills deficit it faces.

“As an industry, we need to be much better at absorbing young, leading-edge talent into our skills pool, rather than simply watching it disappear into sectors such as investment or technology. We need to ensure we are recruit-ing and retaining the best possible people. How do we keep our employees motivated and sat-isfied? What is the best way to incentivize new talent? It’s not just about salary – it is about challenging them, giving them the opportu-nity to grow, and recognizing and valuing their contribution.”

It is not only about attracting the right skill types into the organization, but also those with the right approach. “I like to say that we are in the business of loss resolution rather than loss adjusting,” he continues. “We need to be able to show our customers that we truly care about the situation that they are in, so that they recognize that we are there to get their lives or their businesses back on track. It’s that empathy and that dedication to the customer’s cause that we look for in the DNA of the peo-ple we hire.”

There is no doubt that Agadi has set stiff targets for Crawford, but based on what has been achieved over the last 12 months, it is clear the momentum is there. These targets are not just financial. “Our aspiration is to get into the top 100 most admired companies in the world,” he concludes. “Those that break into that elite group tend to be high performance organizations, and that is exactly what Craw-ford needs to be.” OTF

13InterviewHarsha V. Agadi


Disrupting the gameOn January 5, 2017 Crawford acquired a major-ity holding in WeGoLook, an on-demand field services provider. The move marked a step-change in the company’s ability to conduct high frequency, low complexity inspections. Capitalizing on the gig economy model – where companies contract independent work-ers for short-term engagements – WeGoLook provides access to over 30,000 field agents or ‘Lookers’ who are able to conduct on-site inspections of claims-related incidents at short notice.

“WeGoLook offers us a revolutionary new capability,” states Agadi, “that greatly

enhances our ability to conduct claims inspec-tions for smaller losses. With Lookers across the U.S. and beyond, these agents can swing into action to collect and verify information on demand.”

“It is the Uberization of the inspection process. It gives us the potential to radically improve the costs, efficiency and effectiveness of our claims handling to shorten cycle times, and is a perfect complement to the services provided by our technical adjusters.”

As important as the acquisition is from a technology and innovation perspective, Agadi also cites the entrepreneurial spirit by which the company operates as another major ben-efit – a culture that he looks to replicate in other areas of Crawford.

“Led by CEO Robin Smith, the WeGoLook team is structured to adapt to market changes and bring new services to market to meet evolving customer needs with an agility that you don’t find in many other companies.”

“The potential WeGoLook offers is expan-sive. They already provide services outside of the insurance industry and we are develop-ing opportunities to extend the on-demand service into adjacent types of claims such as

“We need to be committed to delivering innovation in products and services across the board. We must be looking at opportunities to break new ground each and every year”

“It is the Uberization of the inspection process. It gives us the potential to radically improve the costs, efficiency and effectiveness of our claims handling”

15

the pieces together and to get to the point where we feel like we have a better handle on global claims management.”

A shift in approachIn the beginning, a key challenge was commu-nicating the new approach and bringing about a change in mindset – an acceptance that claims were being handled globally, with a consist-ent approach across the board. “At least ini-tially, there were some claims that were being treated as if they were local assignments,” explains Garcia. “Those involved at HSBC were not aware of the global relationship that we had with Broadspire and were also not aware that there are special handling instructions and recording requirements, and that the fee arrangement is also set.”

In certain regions where a TPA had not been a feature for HSBC, a cultural shift was also required. “A lot of countries were used to hand-ing everything over to the insurance companies and not dealing with the TPA,” he adds, “so some of them had a hard time understanding the rela-tionship and what Broadspire was doing for us.”

From a Broadspire perspective, it was also necessary to emphasize the global program and ensure a consistent approach from representa-

Four years ago, when HSBC decided it wanted to break down the silos and go global on its third party administrator (TPA) program, it turned to Broadspire for a solution. With an existing relationship in the U.S., and Broad-spire and Crawford’s global reach, it made sense to partner with a TPA that could ful-fill the global needs of a major multinational financial institution.

The decision to centralize its approach to claims handling was driven by the desire to gain efficiencies and a global perspective on where claims were coming from. “We wanted to be able to view certain claim activity around the world, because before this point we really didn’t have a full understanding of claims developments across our organization,” says Francisco Garcia, head of claims operations, HSBC Technology & Services U.S. “So once we broadened that TPA, it helped us bring everything to the center.”

However, for both HSBC and Broadspire, setting up a global program on this scale was not simply a case of flipping a switch. “There was a feeling that Broadspire would just step in and everything would run perfectly from day one,” says Garcia. “However, because we’re such a large organization and we cover so many countries it took a lot of time to fit

FRANCISCO GARCIA AND KIRSTEN EARLY EXPLAIN WHY SOME SHORT-TERM PAIN IS WORTH THE LONGER-TERM GAIN WHEN IT COMES TO PUTTING TOGETHER A GLOBAL TPA PROGRAM

14 FeatureBroadspire TPA

InterviewThe Honorable Tom RidgeOn the FrontLineSpring 2017

A globalmindset

HSBC’s decision tocentralize its approach toclaims handling was drivenby the desire to gainefficiencies and a globalperspective on whereclaims were coming from

Feature

16 FeatureBroadspire TPA


lows our claims philosophy,” says Garcia. “It’s important because we’re a bank, so we have to be very careful how we handle claims.”

“Most of the losses occur at a retail banking business level and we have to be very careful how we handle those, because the claimants are typically our customers and the relation-ship with the customer is very important,” he continues. “The philosophy is to make sure we listen to the customer and understand what the claim is and try to be flexible when it comes to resolving their issues.”

Contesting or over-questioning every claim that comes its way is not part of HSBC’s philosophy. This does not mean the company has an open checkbook policy, and in fact putting the customer first can help to pre-vent losses from escalating.

“The way to look at it is, if you handle your customer appropriately, you keep the rela-tionship and you avoid the situation getting out of control, such as getting into litiga-tion with the customer,” says Garcia. “That’s something we want to avoid. Unless we have a situation which is quite clearly spurious then we might look at it differently. But that rarely happens, so we’re just trying our best to balance handling a claim the way we would typically handle a claim, and at the same time trying to take care of the customer.”

As the global TPA program becomes fully embedded, Garcia hopes the company will reap the benefits of having access to cen-tralized data. “We’re already able to see which countries have certain issues with claims and we can take it from there if we need to partner with, for example, our cor-porate real estate or health & safety depart-ments to identify and improve those claims activity trends.”

“Before, we just didn’t have a clear picture of what was happening around the world, whereas now we can really see where the claim activity is and if we need to drill down into it,” he continues. “If there is a spike in claim activity we can investigate what is causing that. In the U.S. for instance, we do a lot of analytical work around workers com-pensation losses, because it is high volume business and the costs can be significant. We are at a point where we can dig deeper into the numbers and come up with infor-mation to help us with claims leakage.” OTF

tives around the globe, explains Kirsten Early, vice president of Broadspire global accounts. “As an organization you need to be well-structured globally in order to put together a program like HSBC. You’ve got to have the right mindset across all your business units, adjusters and a global management team that can assist.”

“Part of my job is to get through to coun-tries globally that only see a claim a year and get them to understand the global TPA model and way of thinking,” she continues. “Yes, they may only receive a claim a year or every other year, but if they don’t deliver good service on that one claim they need to understand that could cost us the much larger global relation-ship. It’s getting them to shift their thinking from ‘me’ to ‘we’.”

“Global programs, across every line of business, need to be serviced in the way the client has asked, and as a global TPA you have to follow claims handling instructions,” she adds. “One of the hardest aspects of man-aging a global TPA program is getting peo-ple into that right mindset. It’s getting every adjuster, every office, every global function across the globe to work as a cohesive unit, which requires a much broader perspective.”

“Here at Broadspire we have spent a great deal of time explaining the global TPA endeavor, so that everybody responds in the way that is expected, because that’s what we promised our client,” she adds. “It’s about having one set of protocols, one system, one service level agreement, one contract, shared pricing around the globe and one point of con-tact for all global issues.”

However, achieving consistent claims payment and accounting protocols is far from straightforward, explains Garcia. “In the U.S., we have a loss fund which we put money into, and Broadspire pays claims directly from that fund and bills us to replenish it. We are able to do that in the U.K. too, but we’re not able to do that in every country. So, it does become a chal-lenge from a financing and accounting standpoint, because once we have a claim, Broadspire gets involved and we end up settling; we may then have a lengthy pro-cess of working out how we are going to pay the claim with accounting procedures that can be hard to navigate.”

“We’ve spent a great deal of time explaining the global TPA endeavor, so that everybody responds in the way that is expected”

Striking the right balanceGarcia bel ieves a close partnership approach is essential to overcoming these hurdles. At the heart of the promise inher-ent in a global TPA program is that the TPA provider will protect the brand and values of its client, and do so in a reliable fashion regardless of where the claim is made.

“What we’re asking Broadspire to do is handle claims on our behalf,” states Garcia. “And so there has to be a strong partnership because in many ways they are an extension of us and they will be associated with our business and brand. They therefore need to understand our claim philosophies, who our claimants are and ensure they are han-dling claims in line with our best practices.”

From a reputational perspective, Broad-spire is expected to balance HSBC’s strong approach to customer satisfaction with the ever-present requirement to contest spuri-ous claims. “It’s essential that Broadspire fol-

17FeatureMarine


WITH TWO $3 BILLION LOSSES UNDER ITS BELT, THE MARINE AND CARGO INSURANCE INDUSTRY HAS AWOKEN TO THE REAL POTENTIAL OF MAJOR CATASTROPHE LOSSES. THE CHALLENGE FOR AN INDUSTRY DEALING WITH MULTIPLE PRESSURES IS HOW TO MEASURE, MANAGE AND PRICE FOR THESE GROWING EXPOSURES

When Superstorm Sandy bore down on the Eastern Seaboard on October 27, 2012, it quickly became apparent the event was not just a major property loss but would also heavily impact the marine and cargo market. Total marine claims eventually came in at around $3 billion, according to Risk Management Solutions Inc (RMS), with $2 billion of those falling to the cargo sector. The largest-ever marine nat-ural catastrophe loss, it effectively wiped out 2012 U.S. marine market premiums.

Less than three years later, the sector was hit by another $3 billion loss, when

How marine became a catastrophe class of business

Feature

an astonishingly powerful chemical blast at the Port of Tianjin destroyed ware-houses, shipping containers and thou-sands of new cars. Taken together, these events raised awareness of the sector’s exposure to catastrophic losses, both natural and man-made, an exposure that is increasing as insurers strive to bet-ter understand their risk accumulations.

From a catastrophe loss perspective, Superstorm Sandy changed everything, thinks Rob Hawes, head of global marine, London, Crawford. “Sandy changed a lot of people’s views in the marine market,” he explains. “It was the biggest-ever marine market loss for various reasons. There were two major claims in New Jersey – organizations which accumu-lated imported goods including motor vehicles and bottled alcohol – that were upwards of $200 million.”

While man-made severity losses have

Kirsten Early, Crawford

18 19

always been a feature of the market, losses have continued their steady rise, with Costa Concordia and Tianjin stealing the limelight from other major events. The market has received a number of significant claims that have remained somewhat beneath the radar in recent years. “There are others over $100 million that you don’t hear about,” says Hawes. “There were some huge misappro-

lation problem could be very significant.”Aggregations at major ports are also a

growing concern. “The ports have had to grow to accommodate these mega ves-sels, creating more portside storage loca-tions and higher values at risk,” explains Ed Messer, catastrophe modeler at Aon Benfield. “The Port of Singapore is a prime example of this, with the new Tuas Ter-minal eventually expected to handle 65 million TEUs of cargo annually – nearly double what Singapore handled in 2014.”

Last year, RMS identified the top ten ports globally at greatest risk of catas-trophe loss. While the two riskiest ports are in Japan and China, six are in the U.S. and the remaining two in Europe (see table). The study took into account both the accumulation of assets and the size of the ports, in addition to exposure to natural hazards.

“Surprisingly, a port’s size and its catas-trophe loss potential are not strongly cor-related,” says Chris Folkman, director product management at RMS. “For exam-

ple, while China may be king for volume of container traffic, our study found that many smaller U.S. ports rank more highly for risk, largely due to hurricanes.”

“Our analysis proves what we’ve long suspected – that outdated techniques and incomplete data have obscured many high-risk locations,” he adds. “The indus-try needs to cease its guessing game when determining catastrophe risk and port accumulations.”

RMS has partnered with leading marine insurers and brokers to produce a marine and cargo specie catastrophe model to help underwriters better understand, price for and manage their risk exposures. Chubb, Aon Benfield, AXIS, Liberty, MS Amlin, Munich Re and Sompo Canopius AG are helping develop the model by providing cargo specific vulnerability information, differentiating between types of cargo and providing industry exposure databases that quantify average and peak exposure in key global ports at high-resolution.

“The latest RMS marine model will ena-ble clients to get a better handle on both their stockpoint and non-static cargo accu-mulations,” explains Aon Benfield’s Messer. “Having said that, there is a long way to go in terms of cargo modeling and there is still a significant gap in knowledge compared to our property colleagues, who have been using sophisticated modeling techniques for over 20 years.”

“The standard market approach to port aggregation is to make assumptions based on cargo volume, average container dwell time and container value,” he continues. “This is too basic to accurately assess expo-sure, particularly post-loss as we found out after Tianjin.”

The Internet of Things could prove another critical source of data in track-ing the movement of assets within global supply chains and logistics. “Every ship is tracked by GPS and cargo TEU containers are nearly all electronically tagged,” says Messer. “There’s a wealth of data out there, but it’s going to take a holistic industry-wide approach in order to change the status quo that ‘modeling marine cargo business is impossible’.” OTF

Maersk Triple E class container ships can carry over 18,000 containers, representing massive aggregations of risk

Sandy was the largest ever marine natural catastrophe loss, effectively wiping out U.S. marine market premiums for 2012

locations,” he adds. “Marine by its nature is a truly international business and it’s critical that you’ve got a network you can call upon. Very large losses are sporadic – so it’s about having the resources ready to deploy to wher-ever they are needed when disaster strikes.”

Super-sized container vesselsFactors contributing to the growth of marine catastrophe claims include glo-balization, the increasing value of assets at risk and huge accumulations of cargo – both in ports and on super container ships. Maersk Triple E class container ships can carry more than 18,000 containers (or TEUs), representing massive aggregations of risk. Many of these carry high value goods, including aerospace parts, chemi-cals and electronics.

“Twenty-five years ago, the biggest con-tainer ships were seven or eight thousand TEUs,” says Hawes. “It’s crept up-and-up and now the accumulation on board one ship is huge. So if it sank, that cost and accumu-

FeatureMarine

FeatureMarine



Shipping industry under pressure

Significant catastrophe losses, such as those arising from Superstorm Sandy and Tianjin, are putting the marine insurance industry under significant pressure. In recent years, capacity has flooded into the sector, as major carriers look for opportunities in specialty classes. This has driven down premium rates and resulted in broader policy wording at a time when the potential for severity losses is growing.

Underlying pressures within the shipping industry are also having an impact, with the sector expected to feel the brunt of the high-profile insolvency of Hanjin, as cargo owners seek to recoup over $14 billion in goods stranded on cargo vessels around the globe.

“It did lead to widespread supply chain disruption for a time,” says Nick Derrick, IUMI Cargo Committee chair. “But cargoes did eventually get to their destinations.”

“Hanjin has caused insureds to reassess their supply chain arrangements to try and avoid being exposed in future,” he continues.

From a marine insurance perspective, he says there was “no major impact.”

“Cargoes involved were typically non-perishable and the risk was spread across the market globally.”

“There were multiple individual losses, principally in relation to forwarding charges, rather than one big loss or casualty and so no one insurer would

have suffered a major hit,” adds Derrick. “The woes of the container market continue – the major container lines and their financing banks continue to show red ink on their figures, but the recent wave of mergers and new alliances shows an industry that is trying hard against a difficult economic backdrop to ensure no repetition of Hanjin.

‘From an insurance perspective, it is difficult for an underwriter writing a global account to avoid carrier insolvency risk but the hope is that the steps taken by the container industry should reduce the risk of a major carrier default.”

There is some concern that Hanjin is just the tip of the iceberg.

“I know there’s one port in Asia with over 1,000 containers sitting unclaimed, slowly deteriorating depending on what’s inside,” reveals Hawes. “A lot of the cargo cover would have been placed locally, so the losses haven’t hit yet and will probably come through via reinsurance.”

He thinks there could be other insolvencies. “Hanjin was the first major ship owner insolvency that has widely reflected the state of the shipping market,” he explains. “It was all caused by overcapacity in the shipping and freight market, which has driven down rates to an unsustainable level. There has been a lot of M&A activity, but that problem has come home to roost.”

Ports at risk of highest losses

(500 year estimated catastrophe loss for earthquake, wind, and storm surge perils) Estimated Marine Cargo Loss in Billions USD*1 Nagoya, Japan 2.32 Guangzhou, China 2.03 Plaquemines, LA, U.S. 1.54 Bremerhaven, Germany 1.05 New Orleans, LA, U.S. 1.06 Pascagoula, MS, U.S. 1.07 Beaumont, TX, U.S. 0.98 Baton Rouge, LA, U.S. 0.89 Houston, TX, U.S. 0.810 Le Havre, France 0.7*Losses rounded to one decimal place

(Source: RMS)

priation of aluminum losses in Southeast Asia a couple of years ago, for example, and some pre-launch satellite losses, which fell into the cargo market.”

There are significant challenges with handling larger marine claims from a loss adjusting and claims management perspec-tive, explains Hawes. “These larger losses require specialist brokers, loss adjusters and marine claims handlers with the right level of expertise to handle them effectively.”

The politicized aspect of major claims such as Costa Concordia adds another dimen-sion. “You have to be extremely careful that the information flow is managed correctly and that confidentiality, data protection and compliance come to the fore,” says Hawes. “It’s also understanding the client’s pres-sures, because they’re not only dealing with a large loss, but also a high-pressure situation with lots of media and political scrutiny.”

“As a loss adjusting entity, severity losses are all about resource planning, making sure we’ve got the right expertise in the right

OSHA has long required employers to keep a log of certain workplace incidents that result in injury or illness

Early access to data is key, and TPAs can step up and help employers build out their data sets

20 21InterviewDanielle Lisenbey

InterviewDanielle Lisenbey


Keeping it all on recordBROADSPIRE’S PRESIDENT AND CHIEF EXECUTIVE OFFICER, DANIELLE LISENBEY, CONSIDERS THE IMPACT OF OSHA’S NEW ELECTRONIC RECORDKEEPING RULE ON EMPLOYERS AND THEIR TPAS

the final rule, employers with 250 or more employees that are required to maintain OSHA injury and illness records must sub-mit their logs, summaries of injuries and illnesses, and incident reports.

Employers with 20 to 249 employees in industries classified as having high rates of occupational injuries and illnesses must submit an electronic summary report. Industries on OSHA’s list include construc-tion, manufacturing, healthcare, transporta-tion and others – all of which are important sources of employment and productivity.

Industries that OSHA considers to have lower injury rates, which include insur-ance and financial services, and some retail businesses, are partially exempt from such reporting. The reality is, however, that OSHA’s new rule will cover a large number of U.S. employers and their workers.

How does Broadspire see this new rule benefiting employers and workers?The intent of OSHA’s new final rule is to increase workplace safety and moti-vate employers to reduce injury and ill-ness for their workers. That is a noble

goal – and we not only support it; it is at the heart of our business.

Broadspire exists to help employers reduce claims frequency and sever-ity. We believe that the more data an employer has, the better it can plan ahead and mitigate situations that can cause injury or i l lness. OSHA’s new rule will make more workplace data accessible, which will encourage employers to focus more attention on the causes of occupational injuries and illnesses. That’s a positive thing for all concerned.

Workers will benefit because they will be healthier and safer. Employers will benefit from reduced downtime and increased productivity, which in turn will benefit communities through economic growth. Truly, improving workplace safety pays big dividends, well beyond an employer’s door.

What are the downsides or unintended consequences of the new OSHA rule?Some observers have expressed concern that online publication of employer-

The Occupational Safety and Health Administration (OSHA) implemented a final rule in 2017 requiring employ-ers that must record workplace injuries and illnesses for OSHA to submit reports of such incidents electronically. For the first time, OSHA will post on its web-site establishment-specific data, rather than only aggregated industry data. The goal is to encourage employers to iden-tify workplace hazards and improve their safety records. We ask Broadspire’s Dan-ielle Lisenbey for her views.

What does OSHA’s new rule mean for employers and TPAs?OSHA has long required employers to keep a log of certain workplace incidents that result in injury or illness. That basic recordkeeping requirement is not new, but what is new is that OSHA is now asking employers to submit certain forms elec-tronically. That will greatly facilitate the administration’s ability to make employer-specific data publicly available.

Employers and their third-party admin-istrators (TPAs), including Broadspire, will

submit injury and illness reports fully and accurately. We also believe that the general pop-ulation of employers will see the data points as helpful to keeping them focused on the big picture, which is to make workplaces safer. We certainly hope that OSHA has considered the implications of this final rule and will swiftly address any problems should they arise.

What is Broadspire doing to help prepare its clients to comply with the rule?Broadspire is deeply invested in helping employers to improve their claim out-comes and to reduce the costs of workplace injury, illness and disability. Early access to data is key, and TPAs can step up and help employers build out their data sets.

Between the data and benchmarking that we provide, and the reports that OSHA intends to make available, the ultimate objective is to reduce loss costs for the employer and improve the care of the injured worker. It’s a win-win for both employer and employee. Compliance is a big part of what we do every day for our clients, and we are having ongoing conversations with our clients to ensure they submit the appropri-ate data to OSHA by the July 1, 2017, deadline. OTF

specific reports could create cyber expo-sures, increase litigation and might even discourage some employers from track-ing minor incidents to artificially improve their safety results. While public disclosure may not be the preferred method to moti-vate employers to improve safety, greater transparency and competitiveness are likely to accelerate changes.

It is our belief that the vast majority of employers required to report to OSHA will

work closely to make sure the appropriate data is submitted to comply with all appli-cable OSHA rules. Our mantra as a TPA is “early reporting and early intervention lead to better outcomes.” The new OSHA rule ultimately ties into that.

Which industries are primarily affected by the new electronic tracking rule?The new recordkeeping rule applies to a significant number of employers. Under

Danielle Lisenbey

23Comment3D


The complexity and fluidity of today and tomorrow’s multi-tiered global supply chains mean that such networks are by their very nature vulnerable to risks along their entire length. These can range from more immediate issues such as IT failures, cyber breaches or political unrest, through to exposures that stretch into the longer-term like our over-reliance on transport networks dependent on oil, or increasing fragmentation in the value chain.

Yet when we distill this risk data down to get to the crux of the issue, as is frequently the case, we find that the root cause is a failure to communicate. Companies are failing to maintain supplier visibility and are not facilitating the flow of information which is essential to the first line in any risk defense – creating a full awareness of the potential vulnerability; revealing those hairline cracks in key links that could break the chain in an instant.

There is no doubting, however, the scale of the challenge involved in establishing and maintaining these communication lines across the length and breadth of the supply chain. This is particularly the case given the silo mentality which infects many organizations, coupled

People are a lot more aware of their supply chains now than they were before events such as the 2011 Thai floods and Tohoku earthquake. These events exposed the growing complexity and increasing vulnerability of their supplier networks.

However, there is now some discussion about whether we should be talking about ‘supply chains’ or whether this conversation should evolve into a discussion about the risks inherent in ‘business ecosystems’.

As the World Economic Forum’s Global Risks Report demonstrates so aptly, the majority of business risks facing organizations in today’s connected world are interlinked and part of the same ecosystem. They are not isolated to a single ‘chain’.

There are all sorts of benefits in terms of understanding this ecosystem that come from a greater sophistication in other business disciplines, particularly technology, data management and IT. These have a positive knock-on effect from the perspective of improving insight into the interconnected nature of business risks.

An individual who works in a disaster recovery company told me that one of the biggest benefits organizations get from plotting where their technology dependencies are, for instance, is the significantly greater insight into their supply chain and its multiple tiers. Clearly, if you can’t plot where all the links are in your technology ecosystem, then you can’t plot the supply chain.

So companies are finding that one by-product of carrying out exercises like determining how to recover their systems if there is a network outage, is that they develop a much better understanding of what the overall ecosystem in their business looks like, who owns what, and where the data is.

with the instinctive resistance to sharing information that exposes weaknesses or potential failings.

We must therefore strive to build a more partnership-based relationship with our critical suppliers. The technology exists to facilitate this communication and information flow – but we must establish the most effective way to ensure that it is embedded and becomes part of business-as-usual activities.

We must look to build unified goals that serve to bond organization and supplier. We must clearly establish the financial foundations and mutually-beneficial nature of the relationship. We must create reciprocal data-sharing arrangements which demonstrate a commitment to openness and transparency on both sides of the contract. Where possible, we must look to support suppliers in their efforts to shore up their defenses.

If we are to enhance the resilience of our supply chains today and into the future, then we must take steps to shorten the distance between our own organizations and the suppliers which support us. By bringing them closer, we can stand together against an increasingly volatile and risk-exposed world.

Companies are failing to maintain supplier visibility and are not facilitating the flow of information

There are all sorts of benefits in terms of understanding this ecosystem that come from a greater sophistication in other business disciplines

22 Comment3D

On The FrontLineSpring 2017

Where do we need to see the biggest steps taken to enhance future supply chain resilience?

3D Question:

Jay StranoManaging director,Crawford ForensicAccounting Services /Global Technical Services

Julia GrahamTechnical director, AIRMIC

‘Industry 4.0’ refers to the fourth industrial revolution marked by the rise in automation and data exchange, and the emergence of the ‘smart factory.’ We need a similar revolution in supply chain management – a supply chain 4.0, where resilience is built into every aspect of outsourcing and procurement.

We have seen a shift towards this, but many companies are starting from a relatively low base. I still speak to organizations that believe they are managing their suppliers as they have secured financial appraisals and business continuity plans, and have no idea whether their sites are in flood or quake-prone areas. What is of even greater concern is that while the Business Continuity Institute’s Supply Chain Resilience surveys have shown a steady rise in top management commitment to supply chain resilience over the last few years, 2016 saw that commitment level drop from 33 to 27 percent, according to respondents.

Achieving greater top management buy-in is essential to delivering supply chain 4.0. We must be better at making the business case for better risk understanding in the supply chain – illustrating disruption costs, highlighting regulatory requirements and demonstrating the brand exposure supplier failure creates. Top-level commitment will break down silos, ensure alignment of resilience objectives, free-up resources, and reset procurement metrics to encourage greater resilience focus.

We need to expand our supplier resilience remit. Financial appraisals are useful, but are only one part. Legal case history, for example, can provide a useful early warning of potential supplier issues. We also must ensure that not only are we obtaining business continuity plans, but they are being rigorously assessed by qualified staff.

Technology must also play a much more integral part in scaling up supplier-monitoring capabilities. Automatically geo-coding your supplier base, for example, and overlaying flood or quake maps can expose supplier location risks; while creating 3-D supply chain risk simulations can inform supplier-related decisions. Machine learning and cognitive computing also bring significant supply chain resilience potential, and are already enabling us to monitor geo-located social media and newsfeeds as part of early warning systems.

To drive forward the supply chain management revolution, we must capitalize on the full breadth and depth of resilience-related capabilities at our disposal.

Achieving greater top management buy-in is essential to delivering supply chain 4.0

Nick WildgooseGlobal supply chain product leader, Zurich Commercial Insurance

WE ASK THREE INDUSTRY EXPERTS FOR THEIR VIEWS ON STRENGTHENING THE SUPPLY CHAIN

The series of earthquakes in and around Christchurch revealed the sizable impact of liquefaction as a secondary peril

related to and whether it had been measured accurately, so they knew whether it rested with them or another reinsurer.”

Safety was a key concern for Crawford adjusters. “In September, which is where the story started for me, there was somewhat of a naiveté and we would find ourselves rolling up our sleeves and getting stuck in,” says Ziegler.

“The February event changed that,” he continues. “The loss of life and considera-bly greater building damage heightened our awareness of the risk, particularly given the increased number of intense aftershocks.”

The series of earthquakes in and around Christchurch also revealed the sizable impact of liquefaction as a secondary peril. “Liquefac-tion can suggest there are voids under the sur-face. So when you’re trying to bring machinery and equipment across the surface you have to

24 25FeatureNatural disaster

FeatureNatural disaster


A tale of three earthquakesTHREE COUNTRIES, THREE EARTHQUAKES, THREE UNIQUE LOSS ADJUSTING CHALLENGES. PAUL OGNI, JAVIER CARVALLO AND PETER ZIEGLER GIVE THEIR FIRSTHAND ACCOUNTS OF DEALING WITH EARTHQUAKES IN ITALY, CHILE AND NEW ZEALAND

be careful because you can run the risk of peo-ple being harmed.”

A problem of accessSince the 2009 L’Aquila earthquake, Cen-tral Italy has also suffered strong aftershocks, including last year’s deadly earthquake in Norcia and the avalanche in January 2017 near Gran Sasso, which killed 29 people. Access to this sparsely-populated mountainous region has at times been problematic, and was severely hampered during rescue efforts fol-lowing the avalanche.

“The unusual combination of heavy snowfall and then the earthquake led to a massive avalanche that hit the Rigopiano Hotel,” explains Paul Ogni, country man-ager, Crawford Italy. “Before that, I would never have thought of avalanche as a sec-ondary earthquake hazard, but that’s what happened and it was a very tragic case. Aftershocks and looting are the more usual secondary aspects we deal with in Italy.”

Access has also been an issue following the November 2016 Kaikoura earthquake in New Zealand. “Container operations are being significantly impacted given the dam-age and liquefaction at the Wellington port,” explains Ziegler. “The network of roads in the

upper part of the South Island have also been severely damaged and as a result you have longer routes being used that weren’t designed for the heavy traffic.”

“Furthermore, the Main Trunk railway line south from Picton to Christchurch has also suf-fered significant damage and is not operational, forcing more freight movements onto the road. These have manifested themselves in surcharg-ing for freight movements across the Cook Strait and through the upper part of the South Island.”

“All that brings contingent costs,” he contin-ues. “That increased cost of freight is coming through as increased costs to businesses are growing and slow-burning losses.”

A devastating tsunamiGiven its predisposition to major earthquakes, Chile, situated directly on the Pacific Ring of Fire, has a long history of disaster preparedness, strong building codes and high insurance pen-etration. But the February 2010 Maule earth-quake triggered a tsunami that engulfed several coastal towns in South-central Chile. The tsu-nami warning came too late, and 350 people lost their lives in the coastal vacation town of Con-stitución.

Looting was another unexpected second-ary aspect to the earthquake. “Usually you

Of all natural catastrophes, earthquake is the peril most associated with loss creep and a complex and lengthy claims process. From a loss adjusting perspective there are many con-siderations, particularly when dealing with secondary hazards such as strong aftershocks, tsunami, landslides, liquefaction and even – as witnessed following the 2011 Tohoku earthquake – a nuclear catastrophe.

As recent earthquakes in Italy, Chile and New Zealand have demonstrated, each event and insurance market has its own unique char-acteristics that impact the adjusting process. These can determine how quickly businesses and communities get back up and running, and how long the claims process takes.

While most claims from the 2010 Maule M8.8 earthquake were settled within a year, for instance, in New Zealand, some claims from the 2010 and 2011 earthquakes in Christchurch (which together cost the indus-try over $9 billion) are still outstanding and “earthquake fatigue” is setting in.

Coping with aftershocksA significant secondary factor following Christchurch’s deadly earthquake in February 2011 were the high number of aftershocks, one as high as M5.7. The earthquake was itself a M6.3 aftershock following the M7.1 Canterbury earth-quake in September 2010. But while the 2010 tremblor caused some damage, it was the Feb-ruary 2011 aftershock that devastated the city, causing widespread damage and 185 deaths.

Although there had been a five-month gap between the events, it was, in some cases, unclear which was responsible for the building damage. Underlying weaknesses in founda-tions emanating from the mainshock in Sep-tember were believed to have caused further damage following February’s quake.

“Identifying which event the damage arose from matters for many reasons,” explains Peter Ziegler, head of specialist services, Crawford New Zealand. “In insurance policies, some-times there is a period of time – usually 72 hours – where a subsequent event is consid-ered to be related to the first. After that period, it’s considered a separate event, and you face a separate claim and insurance deductible.”

“The loss adjusting challenge is to tie the damage and increased cost back to the first or second event,” he continues. “This is also important because some insurers had a dif-ferent set of reinsurers during the event in September to the event in February. So rein-surers also undertook audits of the claims set-tlements to identify which event the damage

of the devastation caused by the M6.3 L’Aquila and M6.6 Norcia earthquakes, neither were significant insurance losses. By contrast, two earthquakes in the Emilia-Romagna region of northern Italy in 2012 cost insurers $1.6 billion. “Emilia-Romagna is an economically impor-tant part of the country, and therefore a lot of the businesses had commercial insurance that includes earthquake cover,” says Ogni.

While there is talk of an Italian earthquake pool and purchase of quake insurance becoming compulsory in the future, at present the major-ity of losses stemming from quakes in Central Italy are economic in nature. New Zealand has a public private approach to covering earthquakes, with the Earthquake Commission (EQC). How-ever, in Chile the market is entirely private.

Carvallo believes this – along with a no-nonsense approach from the regulator – is a significant factor that enabled over $8 billion in claims emanating from the Maule earth-quake to be settled so quickly and efficiently. “Within two years the whole event was settled. In the first nine months, almost 96 percent of all residential claims were settled and 53 per-cent of all commercial claims. The industry is very sophisticated in terms of its procedures and the quality of its reinsurance.”

“Out of 202,000 claims, we only had 30 cases that ended in litigation,” says Carvallo. “This is because of laws which dictate that all discussions between disagreeing parties must take place within the adjusting process. It offers both parties the opportunity to ask the adjuster’s opinion and to hold immediate negotiations to solve the problem.”

Ramping up resourcesInevitably, there is a huge demand for resources and adjusting personnel in the aftermath of major events. Following the Maule and 2010/2011 Christchurch earthquakes, experi-enced adjusters were drafted in from Crawford’s offices around the globe.

“They were all very capable people – they got here from Spain and the U.K. and worked with us to settle a $532 million case,” says Car-vallo of the Maule earthquake.

One key benefit of this global experience is the opportunity for information sharing. “We do a good job of learning from earthquakes around the world, and information and data is shared not just within Crawford but across the industry,” adds Ogni. “Then there’s the informal sharing that comes about through the standard mentoring programs within the group and just the fact that adjusters love to share their war stories.” OTF

would expect earthquakes and tsunamis to come together,” explains Javier Carvallo, pres-ident Crawford Chile. “However, looting is another totally different risk, but it’s a direct consequence of an earthquake.”

“It’s impossible to distinguish between the destruction caused by an earthquake, tsunami or looting,” he says. “Normally the insurers ended up paying for all the consequences that occurred within the first 72 hours of the earth-quake. This was a practical solution, because it was impossible in some cases to identify what hazard the loss emanated from. But there are quite different deductibles for earthquakes, tsunamis and looting. So what the market did in this instance was to apply the bigger one.”

In stark contrast to New Zealand and Chile, Italy is highly underinsured, particularly from a residential earthquake perspective. In spite

Chile Italy

New Zealand

Left to right:The Chapel of Animas, in thecenter of Santiago, was seriously damaged after the earthquake.Santiago, Chile - Dec. 2012.Earthquake in Emilia-Romagna in northern Italy - May, 2012.A deserted open-air chess board in Cathedral Square. Christchurch, New Zealand - Feb. 2011.

2726

The number of high-profile collective actions in Europe reached record levels in 2016, her-alding a new era of litigation. While the majority of actions are led by shareholders, their consumers and other parties, such as lottery players, are also coming together to seek redress.

From Fortis (now Ageas) and RBS to Petro-bras and BP, such class-action groups have attempted to take major multinationals and their directors to task in the European courts for reasons including inadequate disclosure, fraud (e.g., emissions and accounting scandals), cartels and insolvencies (see chart). And some of the more recent cases have been both suc-cessful and lucrative.

While the floodgates may not yet have opened, there is no doubt that collective actions are on the rise, aided by the introduc-tion of new class-action frameworks. In 2013, the European Commission published a recom-mendation that those member states that had not yet done so, adopt a framework for collec-tive redress by no later than June 11, 2015.

HIGH-PROFILE CASES, INSOLVENCIES, AN INCREASINGLY INFORMED AND ACTIVIST PUBLIC, NEW LAWS AND SOURCES OF FUNDING HAVE CULMINATED IN A NEW ERA FOR COLLECTIVE ACTIONS IN EUROPE. AND THE NETHERLANDS HAS BECOME THE UNDISPUTED CENTER FOR SUCH LITIGATION

Above: The Palace of Justice in Amsterdam is a new city landmark

Feature

How the Netherlands became the class action center of Europe

However, in an effort to prevent excessive litigiousness, it recommended a number of safeguards. This included prohibiting recovery of punitive damages and using an opt-in, rather than an opt-out, structure (as is the case in the U.S.). “It’s not as efficient as in the U.S. where you can directly ask for monetary damages, but there is currently a draft bill sent to Parliament to introduce an opt-out system in the Neth-erlands, inspired by the U.S. system,” says Jur-jen Lemstra, partner and litigator at specialist Dutch law firm Lemstra Van der Korst.

A strong jurisdictional link with the Neth-erlands will be required in order for collective actions to successfully be brought there, how-

Breaking down the barriers

FeatureEuropean class actions




Inadequate/untimely disclosure Accounting fraud/irregularites M&A bump up claims Insolvency Other breaches of fiduciary duties Other

26%26%

14%

8%

4%

22%

ever. This should go some way to address the issues raised in the recently attempted VEB vs. BP collective action. The Dutch share-holder association was unsuccessful when the Amsterdam District Court ruled on September 28, 2016 that it lacked jurisdiction to hear the action on behalf of BP investors.

A U.S. importAccording to Lemstra, the steady rise in U.S.-style class actions within Europe, and the Netherlands in particular, is not a coincidence. “We are seeing an increasing number of cartel cases coming up, which is at the heart of cur-rent activity – for instance the Air Cargo car-

tel, which is being litigated in both London and Amsterdam.”

In July 2016, the European Commission fined a cartel of European truck makers over $3 bil-lion for breaching EU antitrust rules. It found they had colluded for 14 years on truck pricing and on passing on the costs of compliance with stricter emission rules. “You can see all kinds of jurisdictions getting involved in that case, including the Netherlands,” observes Lemstra.

Statistics show that shareholders are more likely to enter into litigation where regulators have already successfully investigated. Since the financial crisis, where there was a sense that financial regulators had been ‘asleep at

Statistics by structural driver of the claim

(Source: AIG)

28 29FeatureEuropean class actions




the wheel’, supervisory authorities have been under pressure to demonstrate that they will hold corporates to account for wrongdoing.

While not all have adequate resources to hit their ambitious targets (with the U.K.’s Seri-ous Fraud Office asking for more funding again in 2017), there is strong evidence of a growing appetite to flex their muscles. “Regulators have increased their enforcement activities in the aftermath of the financial crisis and are increas-ingly willing to cooperate across borders in investigations that concern multinational organ-izations,” explains Noona Barlow, head of finan-cial lines claims at AIG Europe.

“This enhanced oversight has prompted share-holder class actions in Europe in some instances, although European shareholders remain signif-icantly less likely to sue than their U.S. coun-terparts,” she adds. “As an example, two of AIG Europe’s largest ongoing securities claims have arisen following investigations under the U.S. Foreign Corrupt Practices Act (FCPA).”

The tort environment in the U.S. remains a significant source of collective action litigation in Europe. According to claims statistics from AIG, the biggest shareholder claims payouts involved a U.S. element. They were responsible for 65 per-cent of total claims payments despite represent-ing just 40 percent of total shareholder claims for AIG EMEA.

Barriers to collective actions have also been eroded by a heightened appetite from share-holders and consumers alike to hold companies responsible for perceived wrongdoing. “Social media and the internet are playing a significant role,” explains George Oostrom, CEO, Craw-ford Benelux and France. “Now via social media it’s easier than ever before to make a complaint about an organization.”

“It’s similar to product recall, where in the past you had to inform an official body if you as a consumer found fault with a product,” he

come here to see if they can pursue their U.S.-style actions in the Netherlands for ex-U.S. cases,” he continues. “That’s not always easy as the BP case demonstrated. You need jurisdiction and BP didn’t have a seat in the Netherlands.”

While momentum is clearly building, there are no signs Europe is set to become as litigious as the U.S., thinks AIG’s Barlow. “Since I moved here from Canada 10 years ago I have heard about the ‘tidal wave’ of U.S.-style class actions that would flood into Europe,” she says. “That definitely has not happened and, given the very different litiga-tion landscape, I am not sure it will.”

“However, shareholder class actions are on the rise in Europe as a result of a number of factors, including the Morrison decision, the rise of share-holder associations and litigation funders and the development of class action frameworks/collec-tive redress mechanisms in Europe. There are several high-profile claims working through the

continues. “Now you can just go to YouTube, Twitter or Facebook and you make your com-ments about a certain product and suddenly the whole world knows about it and a recall is likely. So yes, shareholders and consumers are becoming increasingly active.”

Seizing the opportunityWhile collective action is beginning to pick up in countries such as the U.K., Denmark, France, Germany and Sweden, the Netherlands has cemented its status as the ‘class action center of Europe’. “The Netherlands saw the opportunity quite early on,” explains Rianne Baumann, vice president, Crawford Global Markets. “It’s a very tax-friendly country, so a lot of multination-als have their headquarters in the Netherlands. Legislation also makes it more attractive to go to the Dutch courts.”

It is still early days. The Dutch class action pro-cedures used in the March 2016 Fortis settlement, for example, were only adopted in 2005. And the liability provisions that were the basis of the claims asserted against RBS were part of an over-haul of U.K. securities law that went into effect in the year 2000, according to Kevin LaCroix, author of The D&O Diary and an attorney and executive vice president at RT ProExec.

“The most vivid examples of how much has changed are the massive settlements reached during 2016 in two separate collective investor actions,” he noted in his online blog in January 2017. “First, in March 2016, shareholder associa-tions acting on behalf of former shareholders of the failed financial firm Fortis entered a $1.3 bil-lion settlement under the Dutch Collective Set-tlement procedures. Second, in December 2016, collective investor groups negotiated a $1 billion partial settlement in the U.K. of the credit crisis-era claims asserted against RBS.”

The Morrison ruling in 2010 was another critical ruling, which made it clear the U.S.

courts will not accept jurisdiction for lawsuits that are brought by foreign plaintiffs against for-eign defendants, concerning securities traded on a foreign exchange (so-called F-cubed lawsuits). “There is more appetite amongst U.S. lawyers to come to the Netherlands to see if they can resolve shareholder actions that are not related to the U.S. exchanges,” states Lemstra.

“So there is increasing appetite from the U.S. to

courts in the U.K. and Europe and the outcome of those cases could give rise to more activity.”

Litigation funding will remain a critical factor. Both shareholder associations and their backers have made it easier to bring groups of like-minded shareholders together and offer them the funding they need for cases deemed to have a strong likeli-hood of success. The massive settlements gener-ated in last year’s actions against Fortis and RBS are likely to encourage shareholder associations and litigation funders to seek redress.

“There is a huge financial problem in a lot of cases in Europe,” says Lemstra. “But over the last three to five years we have seen that foreign liti-gation funders are coming to the Netherlands and setting up new businesses to try to facilitate the financing of class actions, as was the case in the Petrobras case – which our firm is involved in – where the plaintiff is financed by a U.S.-based funder.” OTF

Reservoir containing toxic mud from the nearby Alumina factory leaks into nearby towns and villages, Hungary - October 5, 2010

Fortis, MasterCard and RBS: Setting a high benchmark (source: Crawford)

Garden City Group® turns its gaze to Europe

Three cases in 2016 serve as a strong reminder that the relatively new procedural vehicles that allow for collective actions in Europe can result in a big exposure for companies and their directors (covered under professional liability and D&O policies).

The $1.3 billion settlement announcement in March 2016 of

claims against Ageas (formerly Fortis) made by shareholders group Stichting Investor Claims Against Fortis (SICAF) was enabled by the Dutch collective settlement procedure known as WCAM, and was unique in its cross-border nature. Previous settlements under WCAM, while being globally binding, had largely focused

on companies based in the Netherlands.

In July 2016, MasterCard was hit by a multi-billion pound ‘opt-out’ class action by U.K. credit card customers, brought under the new U.K. Consumer Rights Act 2015.

Then in December, lawyers representing claimants against the Royal Bank of Scotland

(RBS), in the mammoth £4 billion rights issue litigation, reached a partial settlement whereby RBS agreed to pay £800 million ($1 billion). A further 24,000 corporate and individual investors have not settled and the trial is due to start in May 2017.

These cases represent potential watershed moments

in enabling volume litigation by customers and investors.

The ultimate impact of these lawsuits remains to be seen, but the Fortis case in particular shows that the stage has been set for significant class actions to be brought and for binding global settlements to be reached, even in a country where the defendant is not domiciled.

Responding to the trend towards more collective actions in Europe, Crawford subsidiary Garden City Group (GCG®) intends to establish a presence to better service some of its long-term clients. As GCG President and CEO Kenneth Cutshaw explains, many of the U.S.-based plaintiff law firms that it currently supports have already made the move across the pond, anticipating a steady rise in multi-party litigation.

“They have established offices in Amsterdam, Frankfurt and London in order to be engaged in these types of collective actions,” he explains. “These are law firms we’ve done business with for many years and we want to continue serving them as they establish their operations in Europe.”

“It’s also an ideal set of circumstances for us to work more closely with our Crawford colleagues as they prepare the cases and reach settlement on these collective actions,” he adds.

The firm’s highly trained team of lawyers and other experts offer services including collective action settlement administrations, restructuring and bankruptcy matters, mass tort settlement programs, regulatory settlements, and data breach response programs. The initial aim is to place GCG staff within Crawford’s existing

offices in London and Amsterdam.

“This is where we see much of the opportunity for multi-party litigation against corporations – both consumer and security actions,” says Cutshaw. “We have been handling legal claims administrations for settlements in Europe for many years. In the past, these cases have originated from the U.S., but the claimants have been from Europe. Now we are seeing the trend of this movement of collective actions from the U.S. to Europe.”

“This is largely a reaction to the U.S. federal court system, which has been less receptive to accepting European-based cases if they do not have more substantial reasons other than they are operating in the U.S.,” he explains. “They have indicated these cases should be brought in Europe.”

One of the most challenging aspects of dealing with collective redress is the ultimate timing of the final disposition of the case, explains Cutshaw. “Sometimes cases can last two to three years and sometimes they can continue for decades. From our perspective, we often work with our clients throughout the different phases of the process. For instance, we would be retained to assist in sending notices to all the potential class members well before the case is litigated, settled or any other final resolution.”

Court Room, Palace Of Justice, Amsterdam,

31NewsCrawford Matters


The acquisit ion of on-demand f ield services provider WeGoLook on January 3, 2017 also marked the launch of Crawford Innovative Ventures, LLC – a division set up exclusively to target opportunities in the disruptive innovation space.

Led by Ken Fraser, Crawford chief strategy and development officer, Crawford Innovative Ventures (CIV) looks to make strategic invest-ments in innovative and nimble organizations which can positively transform the way that Crawford, the insurance industry and indus-tries beyond that operate.

“The insurtech wave has been building and building,” explains Fraser, “and we are seeing capabilities such as AI, data analytics, robotics and the gig economy being applied to areas of the insurance sector in very creative and pro-ductive ways.”

“Through CIV, we want to position our-selves on the crest of that wave. We want to work with those companies that can help us make a meaningful difference to our customers by enhancing on all fronts the level and range of services that we provide.”

However, he is keen to point out that the goal is to build partnerships. “Our aim is not simply to acquire and integrate these transformative organizations into Crawford. We want to pro-vide that early-stage investment, creating an incubator-like environment to help accelerate their growth through the long-established cli-ent network we have.”

WeGoLook provides an ideal example. “This

In January, we announced that Andrew Robinson was joining Crawford as its newly appointed global chief operating officer. In his new role, he has responsibility for the company’s four business units (Broadspire, U.S. Services, International, and Garden City Group, LLC) as well as information technology on a global basis. Previously he was president of specialty, executive vice president of corporate development and chief risk officer at the Hanover Insurance Group.

Robinson says he has joined Crawford at a pivotal moment, both from an organizational and industry perspective. “It’s an amazing time and opportunity. We have a board and a leadership team that is fully committed to growing the company by serving our clients with distinctive, unique solutions and having the best capabilities in the claims services world.”

Commenting on the appointment, Crawford President and CEO Harsha V. Agadi praised Robinson’s operational expertise and proven leadership in utilizing innovative technology for a competitive advantage.

This is an area where Robinson feels he can add significant value. “As a publicly-traded company but with a principal investor, we have the ability to take a far longer term view than many of our competitors,” Robinson said. “We have a global reach and breadth of competency that is unmatched

by others at a time when the industry we serve is going through tremendous technological change. Structurally we believe that the conditions are really suitable for our success.”

“A lot of capital has come into the industry and has spawned a whole new cadre of risk takers,” he adds. “We believe this is good for the industry, but it is also encouraging incumbents to think more creatively. As the market leading claims service provider, we are extremely well set up for this and it’s important for our clients to know we’re going to be out in front of those changes.”

Before his time at Hanover, Robinson was managing partner of global insurance at Diamond Consulting, now PwC Consulting; and a co-founder of Exchange Partners, a management consultancy and technology company. He is chairman of the board for WeGoLook, an online and mobile collaborative economy platform that Crawford acquired the majority interest in earlier this year, and he is on the board of Groundspeed, a machine learning, software as a solution (SaaS) provider to the insurance industry. Robinson served previously as a non-executive director of the board of Chaucer Syndicates Limited, one of the largest managing agents in the Lloyd’s marketplace, and as a board advisor to Breckenridge, an Arsenal Capital backed wholesaler and MGA.

30 NewsCrawford Matters


Crawford Matters

NEW DIVISION FOCUSES ON TRANSFORMATIVE FIRMS IN THE INSURANCE SECTOR AND BEYOND

MAJOR BRAND CAMPAIGN LAUNCHED ACROSS U.S.

Crawford Innovative Ventures launches with acquisition

Contractor Connection takes to the airwaves

As part of an ongoing strate-gic initiative to offer services direct to property owners seeking to restore or improve their properties, Contractor Connection has extended its branding campaign following the success of recent social media activities.

I n J a n u a r y, t h e f i r m launched an expansive new campaign. Focusing on the slogan ‘With one finger…’, the multimedia marketing offen-sive sees T.V. commercials air-ing on cable and local stations in several markets – as well as a series of Contractor Connec-tion billboards dominating the skyline at key locations.

With campaign s logans inc luding : “ I repaired my damaged home with one fin-ger”, “I remodeled my game room with one finger” and “I updated my kitchen with one finger”, the branding message seeks to drive home just how

quick and easy it is to find the right contractor to complete your project by using Contrac-tor Connection.

“The number of consumers that have insurance damage is a $25 billion marker and they need to find reliable trust-worthy contractors that can provide a positive customer experience for larger projects,” explains Larry Thomas, CEO of Crawford U.S. Services and Contractor Connection.

“We see huge potential in this particular sector, and with over 5,000 fully vetted con-tractors working across our network, we have the capacity to meet that potential.”

Capita l iz ing on the ful l spectrum of social media, the commercial is also being streamed via the Contractor Connection YouTube channel, as well as on the firm’s Face-book, Twitter and LinkedIn pages.

Andrew Robinson joins Crawford as global COO

relationship is very much a true partnership – one where we both benefit from each oth-er’s strengths. What I love about WeGoLook is that in two sentences you can explain why they are so transformative for the insurance sector.”

Launched in 2012, the firm has expanded considerably since then – from two employ-ees and 4,500 Lookers to 120 employees and 30,000+ Lookers in 2017. What Crawford pro-vides is the ability to grow those numbers exponentially.

“What we want to do is to open doors for the WeGoLook team that they might not be able to open without our support,” says Fraser. “The company’s potential is huge and we want to give them the chance to fulfill that potential by making our customers aware of their capa-bilities.”

According to Robin Smith, CEO of WeGoLook, this has been the case from day

one. “Crawford is in 70 countries with very high level contacts,” she explains, “and that cre-ates huge opportunity.

“They have been extremely proactive in put-ting us in front of the right audiences so that people really understand the service that we offer and how it works. They have been fantastic at this and I have been extremely impressed by the approach the Crawford leadership team has taken. They are fully focused on helping us grow.”

Fraser is also excited about where this rela-tionship will go. “When the WeGoLook team has presented to our own adjusters and man-agement teams, the buzz of potential new ideas that it generates is deafening. And it’s not just about how we can use this for our insurance customers, but also in other sectors which can benefit from the ability to conduct custom tasks, document retrieval or product verifica-tion services.”

With over 75 years of claims adjusting expe-rience under its belt, Crawford has secured its position at the forefront of the market. Yet it is critical that the legacy does not infer stag-nation. “The traditional adjusting model has served us extremely well,” Fraser concludes, “but we are now at an inflection point. We must change to stay relevant in this new tech-nological era. Through CIV, we are demonstrat-ing our commitment to seeking out innovative technology and taking control of how we trans-form our organization, rather than being dis-rupted by it. We are a company with a vision and we are on the move.”

Ken Fraser, chief strategy and development officer, Crawford

A look aheadThe next edition of On the FrontLine will feature how Joseph Blanco, senior vice president and general counsel, leverages his skillset and expertise to oversee enterprise risk and how his M&A experience contributes to the success of Crawford Innovative Ventures; and, how Hilton Sturisky, Crawford’s global CIO, is transforming the company’s technology ecosystem to provide enhanced value to customers.

On the FrontLine (OTF) is published by Zebra Media Limited.Editors: Helen Yates, Nigel Allen. Design: Mark Bergin. Publisher: Suzanne Hirst.www.zebracm.com

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On theonthefrontlinemagazine.com/.../11/2017/...25-April.pdf · Asia at Swiss Re. “But economic...

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Transcript of On theonthefrontlinemagazine.com/.../11/2017/...25-April.pdf · Asia at Swiss Re. “But economic...