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   * Critical Risks
   * Risk Management
   * The Insurance Industry
   * Claims & The Law
   * Workers’ Comp Forum
   * Risk Insiders
   * Sector Focus
   * .
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EXPOSURE AGGREGATION DOESN’T HAVE TO BE AGGRAVATING. JUST HAVE JIM IERVOLINO ON
YOUR SIDE

The insurance purchasing landscape that risk manager Jim Iervolino operates in
is nothing short of complicated.
By: Dan Reynolds | July 25, 2022
Topics: July/Aug. 2022 Issue | Risk All Stars



Actuaries, underwriters, brokers and risk managers can be forgiven if they
sometimes confuse the word aggregation with the word aggravation.

For it’s the aggregation of risk, a concentration of high-dollar exposures in a
given geography or segment of a carrier’s portfolio, that can result in massive
losses in the event of a catastrophe or some other loss origin.

When it comes to property exposures and places where risk aggregates, the
neighborhood where the New York Rangers play their home games comes to mind.
Madison Square Garden, the Moynihan Train Hall at New York Penn Station and
numerous other high-dollar iconic properties call the area around 7th Avenue and
33rd Street in Manhattan home.

That part of the world is also where the Vornado Realty Trust owns millions of
square feet of office space.

Vornado’s senior vice president, risk management, Jim Iervolino, manages not
only massive aggregation risks, but an insurance purchasing environment where
carriers are pulling back on limits and raising prices. Where carriers were once
offering $25 million or $50 million in limits on excess liability exposures,
they are now offering as little as $10 million to $15 million for the same risk.

Iervolino’s ability to negotiate placements on a huge real estate portfolio
under very difficult circumstances, and still deliver programs with fully
secured limits and best in class terms and conditions make him a 2022 Risk All
Star.

“I think Jim does a masterful job of negotiating with partner carriers,” said
Nick Bozzi, a senior vice president, placement leader, real estate, for Marsh.

“Jim treats people as partners and negotiates with them as partners,” Bozzi
said. “Because people feel that they are a part of the process, they’re engaged.
It’s transparent, it’s communicative, and it’s honest.”

For his part, Iervolino also stresses the value of building and maintaining
partnerships: “I partner with the best resources in the market, whether it be
brokerage resources, insurance carrier resources, or risk control sources and we
put the best people together,” Iervolino said.

Manhattan may represent high aggregations of exposures and risk, but it also is
where a lot of talented and experienced insurance professionals go to work every
day. Iervolino said it’s the opportunity to walk insurance executives through
the neighborhoods where Vornado owns property that allows him to narrate his
risk management story. This in turn produces optimal placements for this
company’s insurance policies.

“We’ve toured more than a hundred times in the past year assets that otherwise
they would be looking at on paper,” he said.

Iervolino’s abilities as a communicator don’t hurt, Bozzi said. “He’s a very
good collaborator and a good partner, “ he added. “I think that goes a long way
in helping us broker his risk in the marketplace.” &

--------------------------------------------------------------------------------

Every year, Risk & Insurance selects deserving candidates to become Risk All
Stars. These are risk managers who, through their perseverance, passion and
creativity, make a big difference to the stability of their organizations.

See all the 2022 Risk All Star Winners here.

Dan Reynolds is editor-in-chief of Risk & Insurance. He can be reached at
reynolds@theinstitutes.org.





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SPONSORED CONTENT BY BHSI



SEARCHING FOR A SURETY PARTNER? LOOK FOR SOMEONE INVESTED IN STABILITY FOR THE
YEARS TO COME

Surety customers need stability and consistency to support their operations.
By: Berkshire Hathaway Specialty Insurance | April 3, 2023

While insurance products exist to help an insured in the event of a loss, surety
bonds are purchased so that a customer can guarantee their work on a particular
project will be completed within a certain timeframe and at a reasonable cost.

Bonds support everything from a guarantee that a construction project will be
completed on time to license and permit products that ensure a company will
operate following any specific laws and regulations. If a surety customer is
unable to complete these requirements, their surety partner will step in to
cover any financial obligations.

“Surety is an indemnity product,” said Geoff Delisio, head of surety, Berkshire
Hathaway Specialty Insurance (BHSI). “If our customers are unable to perform and
they’re in bankruptcy proceedings, we are there to stand in the shoes of our
customers.”

Governments often require surety bonds for businesses to become involved in a
particular contract. If a contractor wants to bid on a project to build a
highway, for example, they will be required to purchase a bond to guarantee the
work will be completed.

Since businesses are often required by law to purchase surety bonds, it’s
important they find a carrier partner that’s able to offer consistency and
stability over the long term. Look for underwriters who thoroughly consider your
business model, and who remain abreast of challenges like supply chain risks
that could cause project delays.


WHY CONSISTENCY AND STABILITY ARE KEY FOR SURETY CUSTOMERS

Geoff Delisio, Head of Surety, Berkshire Hathaway Specialty Insurance (BHSI)

Since surety bonds are often a statutory requirement, contractors and other
commercial customers are looking to build long-term partnerships with the
institutions issuing their bonds. Rates may be rising in traditional insurance
markets, but Delisio says that BHSI’s surety rates are “fairly stable,”
something surety customers — from contractors to airlines — appreciate.

“You tend to have long-term relationships,” Delisio said. “What really makes
that alignment is understanding their strategy and understanding where they want
to go with their business.”

In order to create consistent and stable surety capacity , underwriters need to
have a full understanding of an organization’s business model and the risk it
needs a bond to cover. Some underwriters rely on credit models to select which
surety risks they’re comfortable with, but Delisio believes that to truly make
the long-term commitments necessitated by bonding institutions requires a longer
view.

Credit models often offer only 12-month projections of financial performance,
but the projects a surety bond is guaranteeing can last much longer than that.
“If you’re looking at one-year default models and you write a six-year
obligation, that may not end up well at all times,” Delisio said.

Construction projects in particular can last a number of years, so bond
underwriters often want to have a strong understanding of a contractor’s
financials, its business models and the particular project it needs bonded.

“The typical duration of a performance and payment bond is right around 36 to 40
months. It is not uncommon to have five- or six-year duration obligations,”
Delisio said. “No one can predict the future, but just a strong understanding of
what the business does well, what they don’t do well and where they want to take
the business is important.”


SUPPLY CHAIN AND OTHER EXPOSURES MAKE UNDERWRITING SURETY MORE COMPLEX

One reason that carriers need to rely on more than credit models when
underwriting surety bonds is the unpredictability of today’s exposures.

Supply chain, inflation and labor issues are just a few factors that might
affect a firm’s ability to meet the commitments guaranteed by the bond in a
timely and cost-effective manner.

Take supply chain issues, for example. In 2020 and 2021, the pandemic and other
events led to shortages of large numbers of products. In some cases, businesses
couldn’t find any suppliers for a particular resource. Delisio knows of one
supplier who couldn’t guarantee when a supply would arrive or how much it would
cost when it did.

“There were times in 2020 and 2021 that people just couldn’t get things at any
price,” Delisio said.

By understanding a company’s business models, surety partners can ensure that
they can support their customers, even through these challenges. Delisio says
that BHSI has worked with customers to understand their contingency plans for
supply chain issues and other risks in order to keep projects on track.

“There were a lot of discussions. How are they handling their supply chain? How
are they handling contingency?” Delisio said.


A SURETY PARTNER COMMITTED TO LONG-TERM PARTNERSHIPS

BHSI is committed to underwriting practices that allow it to offer long-term
stability for its customers. The firm is still writing bonds for customers who
began working with the firm in 2014 when its surety business first began.

BHSI’s underwriters work directly with customers seeking surety bonds and their
brokers, ensuring BHSI has a robust understanding of a customer’s financials,
business model and long-term strategy. Rather than relying on credit models,
they emphasize careful risk selection in order to maintain a consistent appetite
in the market. To date, they’ve completed just over a half-billion dollars in
gross written premium.

“Our underwriters are going to work with the broker and the customer daily,”
Delisio said.

Since surety is an indemnity product, ensuring that a carrier’s claim
professionals and its underwriters are aligned is key to its long-term success.
If the underwriting team starts to notice a deterioration in a company’s
quarterly financials, they’ll get the claims team involved in an attempt to help
the company remain solvent.

They might bring in an accountant to independently review the customer’s books
and identify opportunities for cost savings that could help a company avoid
bankruptcy.

“We get claims involved really early,” Delisio said. “With an indemnity product,
anything that we can do to help the customer stay solvent helps us. At the end
of the day, our customers get much better outcomes.”

To learn more, visit: https://bhspecialty.com/us-products/us-surety/.





This article was produced by the R&I Brand Studio, a unit of the advertising
department of Risk & Insurance, in collaboration with Berkshire Hathaway
Specialty Insurance. The editorial staff of Risk & Insurance had no role in its
preparation.

Berkshire Hathaway Specialty Insurance Company (incorporated in Nebraska, USA)
ABN 84 600 643 034, AFS License No. 466713 (www.bhspecialty.com) provides
commercial property, casualty, healthcare professional liability, executive and
professional lines, transactional liability, surety, marine, travel, programs,
accident & health, medical stop loss, homeowners, and multinational insurance.
The actual and final terms of coverage for all product lines may vary. Berkshire
Hathaway Specialty Insurance Company holds financial strength ratings of A++
from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway
Specialty Insurance has offices in Atlanta, Boston, Chicago, Columbia, Dallas,
Houston, Indianapolis, Irvine, Los Angeles, New York, Plymouth Meeting, San
Francisco, San Ramon, Seattle, Stevens Point, Adelaide, Auckland, Barcelona,
Brisbane, Brussels, Cologne, Dubai, Dublin, Frankfurt, Hong Kong, Kuala Lumpur,
London, Lyon, Macau, Madrid, Manchester, Melbourne, Munich, Paris, Perth,
Singapore, Sydney, Toronto, and Zurich.

For more information, contact info@bhspecialty.com.

The information contained herein is for general informational purposes only and
does not constitute an offer to sell or a solicitation of an offer to buy any
product or service. Any description set forth herein does not include all policy
terms, conditions and exclusions. Please refer to the actual policy for complete
details of coverage and exclusions.

Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial
property, casualty, healthcare professional liability, executive and
professional lines, surety, travel, programs, accident and health, medical stop
loss, and homeowners insurance. The actual and final terms of coverage for all
product lines may vary. It underwrites on the paper of Berkshire Hathaway's
National Indemnity group of insurance companies, which hold financial strength
ratings of A++ from AM Best and AA+ from Standard & Poor's.







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