Bruce D. Hayes is senior vice president of the Executive Assurance Group at Zurich U.S.
Management liability exposures are among the fastest growing in the property/casualty insurance arena. Fueled by burgeoning lawsuits involving securities, employment practices and allegations of fiduciary impropriety by corporate officers, these exposures could have a significant impact on a corporation's bottom line. Surprisingly, however, many corporations still remain uninsured or underinsured. One reason, for instance, is that smaller, privately held companies have not seen the need for directors and officers coverage, only finding out too late that management, while less likely to face lawsuits, still is at risk, especially from suits alleging violation of employment practice laws. At the same time, large corporations are looking for larger and larger limits of liability in the face of lawsuits and settlements that have rapidly escalated, exceeding policy limits.
The Executive Assurance Group at Zurich U.S., established in 1993, recognizes the unique needs of both smaller and medium corporations, which require more comprehensive management liability coverages and large corporations, which demand increased limits in conjunction with broader coverage. The group brings together experts who are able to address all aspects of potential management liability exposures. In addition the group takes a unique approach to underwriting--integrating the claims and underwriting process to ensure accuracy from inception.
One of the significant differences offered by Executive Assurance, notes Bruce Hayes, senior vice president of the Executive Assurance Group of Zurich U.S., is that "we involve claims specialists at the outset. Our claims staff works side by side with our underwriters, meeting with clients and reviewing coverages to ensure that the policy responds to the unique needs of each insured."
He adds that "another important difference is the quality of our people at all levels. We have people who have been through market changes and know what to expect. We've also collaborated to design meaningful loss control and risk management services that provide real value to our customers."
The Executive Assurance Group offers a variety of management liability coverages including: D&O liability; employment practices liability insurance; crime insurance; partnership liability; kidnap, ransom and extortion; fiduciary liability; environmental contract surety and a combined directors & officers and employment practices liability coverage for middle market, private companies--Zurich Private Solutions.
"Our objective was to establish a well-capitalized group that could respond to the management coverage needs of corporate America more effectively than most traditional insurers," states Hayes. "The group was created to serve a wide variety of business, complementing what Zurich U.S. is doing. We wanted to differentiate ourselves in this market segment by designing superior, tailored coverages and enhancing service."
Value-added service
Hayes observes that many of the coverages are "packaged with risk management services that help our customers reduce their exposure to risk." Among these services are:
-- Disclosure management, which enables insureds to respond strategically in advance of a negative business announcement to prevent claims and minimize losses. The service provides insureds with funding of up to $100,000--separate from the D&O limit--to hire a Zurich U.S.-approved firm that can respond skillfully in managing business events, which trigger D&O claims
-- An Employment Labor Law Audit (ELLA) that helps insureds self-assess their adherence to proper employment practices and pinpoints areas for improvement
-- Corporate Governance Newsletters for D&O and EPL insureds that cover developments in the relevant areas
-- An online, interactive publication that provides legal information on major laws pertaining to employment practices liability, a newsletter which is updated regularly on new developments in human resources legal developments, and an interactive forum for discussion of human resources issues
-- Customized on-site training that addresses such areas as sexual harassment and ADA compliance
-- A fax hotline service where insureds can contact a leading employment law firm about employment issues
"We are committed to providing important value-added services to our customers," Hayes says. "And our higher-than-average retention ratios indicate that we have delivered on our promise to provide excellent coverage and service."
Local service and support
In order to be closer to opportunities--particularly in the middle market--Executive Assurance has created local branches. "We've had significant growth in the middle market," Hayes says, "thanks to the efforts of our independent agents. The majority of our business is marketed through retail agents, although we also work with wholesalers for certain segments and for those retailers who prefer to access the wholesalers' expertise."
He continues that Employment practices has been an important coverage in convincing smaller companies of their need for this type of coverage, "but that is changing." A number of studies and results find that many smaller companies are experiencing financial difficulties. "Solvency concerns lead to D&O lawsuits" he says. "We've seen higher numbers of D&O lawsuits involving smaller companies."
A huge untapped market
According to studies by Commercial Insurance Research, LLC (CIR), the D&O insured market is around $5 billion, and the EPL market accounts for about $2 billion. However, this represents a very small percentage of the potential market. The total market for D&O represents an estimated $40 billion, according to CIR, and the EPL market potential is around $20 billion.
Hayes agrees that the "potential market is huge. Both employment practices and D&O lawsuits appear to be on the rise and losses are rising, both in terms of frequency and severity. We're definitely seeing a response to this from the insurance marketplace, which appears to be on the edge of a pretty decent correction."
He concludes that companies should be looking to "financially strong insurers, which will still be around when the dust settles. Because of long-tail coverages, clients want to be sure they're with a company that will remain in the market when change comes. Zurich has every intention of maintaining a strong presence in this marketplace. We have substantial capacity and are able to offer up to $50 million in limits on both a primary and excess basis. The significant financial resources of the Zurich Financial Services Group enable us to absorb more of the risk as the reinsurance markets begin to tighten." *