Peter Cottrell, President Professional Liability Underwriting Society (PLUS)
As PLUS's first non-U.S. president, Peter Cottrell
has a broad, yet focused view of the industry's challenges and needs
By Phil Zinkewicz
Peter Cottrell, President
Professional Liability Underwriting Society (PLUS)
Today's professional liability insurance marketplace is in a state of turmoil. The provocative and headline-grabbing corporate scandals such as Enron, WorldCom and others have seriously exacerbated what had been an already difficult professional liability market, which started to emerge in the late 1990s.
For these reasons, Peter Cottrell, the recently installed president of the Professional Liability Underwriting Society (PLUS), envisions an increasingly important role for PLUS over the next few years.
"Currently, the professional liability business is in worse condition than it was in 1984, the last hard market," says Cottrell. "There are a number of factors that have driven the underwriters of this business to either withdraw from the market or drastically cut back. A whole generation of brokers, who have become accustomed to achieving their heart's desires, are now being faced with a totally different market that is unwilling to offer anything but very expensive and narrow coverage, if anything at all. This is a very difficult situation. It will not get any better as insurers continue to experience worsening loss ratios on business written in the last five years. Join with this situation insurers' problems in other areas of the insurance business plus low investment returns, and the industry's woes begin to look apocalyptic," says Cottrell.
Once an underwriter with Lloyd's of London, Cottrell is now head of international operations for Advisen, Ltd., a provider of strategic information services for the commercial insurance industry, combining comprehensive market data with proprietary analytic and benchmark modeling software. Advisen offers its services to insurance companies, brokers and risk managers, and those services include a "systematic perspective on writing, marketing and buying lines of commercial insurance," according to Cottrell. Advisen is based in New York City and has offices in Chicago and London, where Cottrell's office is.
Prior to his PLUS presidential appointment, Cottrell served on the PLUS international board of trustees. He has more than 25 years of experience in the commercial insurance industry, specializing in underwriting professional indemnity business, directors and officers liability, and financial institutions insurance. Cottrell is also experienced in the intellectual property insurance and cyber insurance fields. In addition, as a citizen of the United Kingdom, he is the first president in PLUS's 15-year history not to be a U.S. citizen.
A man of strong convictions, Cottrell is not shy about expressing them.
"As far as my being the first non-U.S. president of PLUS, it is not a major factor," says Cottrell. "PLUS caters, in the main, to professionals interested in education and information regarding professional liability in the United.States. The Society's non-U.S. activities are generally restricted to the inevitable influence of U.S. legal trends on the rest of the world, predominantly the English-speaking world. My nationality is probably more a highlight of the global nature of the insurance industry's approach to risk transfer. The main areas of insurance risk-taking remain the United States, United Kingdom and Canada. The major European reinsurers clearly have a powerful effect, but the expertise regarding underwriting individual insureds remains predominately in those three countries."
Cottrell says that he believes PLUS will become increasingly important to insurance professionals in the coming years. "By offering information, opportunities and solutions, PLUS seeks to support its members in an environment that is becoming increasingly hostile. Our members' employers are benefiting from education and training through the various symposia and conferences as well as our excellent RPLU program. The delivery of effective education is one of the most important factors facing the professional insurance business today."
--Peter Cottrell, President, Professional Liability, Underwriting Society (PLUS)
Asked to explain what he means by the insurance industry facing a "hostile" environment, Cottrell says that it is not just the corporate scandals that are plaguing the insurance industry, although they are having a major impact on the entire financial services sector. "But insurers are also facing challenges on several other fronts," he says. "There are the losses from the past that insurers are still reeling from. There are the large losses that are coming from the horrific World Trade Center attacks. The asbestos situation is rearing its ugly head once more. The industry is coming under increasing scrutiny by the courts and by regulators in terms of policy wordings and market conduct. And capital investors are criticizing the insurance industry for not making enough money."
Cottrell stresses the fact that the insurance industry must find ways of attracting additional capital. "We need more capital in the industry to replace that which has been 'burnt' already," he says. "But the capital will be forthcoming only if we as insurance professionals can display the discipline and knowledge that investors demand from other areas of the financial services sectors."
And that discipline must come from all areas of the insurance industry, says Cottrell. "Underwriters must be able to evaluate risk, in a technical and practical fashion. Brokers must be able to understand why insurance companies take certain measures and be able to communicate them to the client effectively. Our loss adjusters need to establish dialogues with both underwriters and brokers to ensure that we do not return to the practice of pulling the wheels off the truck in which we are hurtling down the freeway. All of these measures need to be implemented in an environment of cost-cutting and public scrutiny.
"One thing is certain," continues Cottrell. "The insurance business cannot continue being shocked by the fact that selling its services below cost leads to losses. This applies not only to the pricing of risk, but also to the charging of fees by brokers. Too often, we undervalue our services and this has inevitably led our clients to undervalue our services."
The good news is that PLUS stands ready to support and facilitate the changes needed through its education and networking opportunities, says Cottrell. "During this year, I intend to focus on three main areas--membership, chapter development and governance," he says. "The membership area needs to be studied in terms of how large PLUS potentially could be and what is the optimum size. We then need to explore these findings with our members and their employers. PLUS, as an organization, is composed of a number of regional chapters supported by PLUS centrally. We want to enhance the excellent work these chapters are already doing by providing more support in order to hold more events on a regional basis. The governance review is merely an attempt to be prudent stewards. We have an excellent organization and great people from our board who comprise the corporate governance review board--Dan Bailey, partner-attorney for Allianz USA; Sean Fitzpatrick, senior vice president of Chubb & Son; and Patrick Kelly, partner-in-charge, Los Angeles, for Wilson Elser Moskowitz Edelman and & Dicker. We want to keep our organization at the forefront of industry developments."
Cottrell says that the most recent PLUS annual meeting in Orlando was an unquestioned success. In so many ways, it reflected the very concerns that Cottrell believes need to be addressed by the insurance industry. One session was titled "Enron, WorldCom, Tyco and More: Financial Management and its Aftermath for Directors and Officers Liability." Another panel session looked at the rules that govern large law firms. "Are the rules changing?" was one of the questions asked of the panel. Still another session was titled "Accountants and Auditors: Regulating the Professional and Insuring the Risks Post-Enron," and that session looked at proposed legislative and regulatory changes affecting those who have a meaningful impact on corporate balance sheets.
The annual also had sessions on terrorism insurance, the mold litigation explosion and two panels on errors and omissions insurance coverages--one from the standpoint of exposures in the technology industry and the other specifically related to agents and brokers. The program also offered the views of an analyst on the state of the insurance industry and a panel that looked at the changing face of fiduciary duties.
"The people who attended our conference in Orlando were lucky enough to be offered a very high caliber selection of education and general interest sessions," says Cottrell. "It was one of the best conferences I have ever attended in terms of content. PLUS allies this to the networking opportunities that are vital in our business, providing pleasant social context for well-deserved evening events. The conference organizing committee, the education committee and the PLUS staff all deserve to be commended for their fine work." *