Hello and welcome to today's webinar titled Understanding Subscription Policies, presented by our esteemed presenters from Willis, Aon, Marsh, also known as WAM, throughout the webinar. Please be aware of the IMUA statement. We are fortunate to have three highly experienced presenters today. From Willis, I'm pleased to introduce Neal Kent. Neal is the Builders Risk Placement Leader of New York Construction at Willis. Next we have Scott Neeson, Managing Director of Construction at Aon Risk Services in Houston, Texas. Also with us today is Vincent Sagers, Managing Director of Marsh. Today's panel moderators are Jeffrey Factor, Senior Underwriter at Star Technical Risk Agency, Incorporated, and John Tutera, recently retired Senior Vice President and Line Manager of Construction Property at Hiscox. John is a past chairperson of IMUA's Construction Committee, and he has been a valuable resource to IMUA. Last year he received IMUA's Excellence in Education Award, and he and Vincent Sagers have presented at several past annual meetings on the topic of Builders Risk Soft Costs. And with that, I will leave the webinar in good hands of our hosts, John and Jeff. Thank you, Lillian, and thank you to our broker panels for agreeing to participate. We're not going to get into any names, but our broker panel has worked on some very high-end clients handling subscription policies for insurers that are contractors, joint ventures, developers, and project owners. These are some of the project-type things that they've worked on. So let's get started with subscription. The subscription policy, or quota share, is shared by two or more insurers who each assume a portion of the risk subscription. In case of a very large risk, several insurance companies may combine to issue one policy. But will they? We'll get into that a little bit more later. So what percentage of U.S. commercial insurance policies with limits above $25 million are in subscription or quota share basis? Again, we'll get into that a little bit later when we hear from the brokers. So Jeff is going to talk about the short version of subscription policy endorsement. So I just asked him to look at some highlighted areas. And one thing I want you to bear in mind, Jeff is a newbie here, but we're hosting him and making sure he's pressured like to death. So Anthony Freeman, if you're out there, make sure you get questions out to him. And one of the things I want to basically say, the discussion that Jeff and I will have will probably last about 30 minutes. But we want to make sure there's an hour of dedicated time to our brokers to make sure they can answer questions that we put on the table. But also, all your questions that are coming in. So we thank you. Jeff, go ahead. And we'll be monitoring your questions. So if there's anything pertaining to the topic that we're on, we'll try to address it as it comes in. But otherwise, we'll hold your questions until the end. Again, so let's get started with the subscription policy. So the first thing, several but not jointly agree. Basically, what this is saying is that if there's a subscription policy, each underwriter is only responsible for their line. So if there's something that happens, the other underwriter cannot pay or they go out of business, they wouldn't be responsible for that underwriter's line. And then the liability of each insurer is limited to the pro rata percentage of liabilities set against his name. And if you can see the example with AP insurance and KIC insurance, one would have 25% and one would have 20%. And the next thing, any changes to the terms and conditions of this policy must be accepted in writing by each of the prescribing insurers before the coverage change can become effective. And again, we're going to get into this a little bit more later when we hear from the brokers. And what you just saw there was a short version of what we call subscription endorsement. What I'm showing you here is one I've actually used before. And it's going to highlight some of the areas we want to talk about. The most critical thing I threw out and read to see there, inability or failure for any reason whatsoever in a prescribing company to pay a percentage share of the liability doesn't mean everybody else pays. They only pay for their share. And that's what you call a subscription participation share. All right, Jeff, go on to the next one because the last piece I just want to show everybody is a real change from the standpoint of what the subscription endorsement adds to this. Is any changes in terms of this policy must be accepted in writing by each of the prescribing companies and insured before any coverage change becomes effective. That's pretty much the U.S. version of it. But the critical part that I want to add at the end of the day, what we call services suit. If you're going to file a suit against the insurance carrier, who do you sue it against? So when you have a subscription policy, even though you're filing a form and everything else is coincidental, it's all part of the same form, you may have different attorneys or legal place that you do. We'll talk a little bit about London and we'll talk about Mendis and Mount as one of the companies representing Lloyd's Markets. So services suit is different from each company. The final slip is signed and stamped by all of the underwriters. Is this in the U.S. or in the U.S.? Sorry, this is the U.K. version. First we'll talk a little bit about the U.K. version, then we'll get into the U.S. The final slip is signed and stamped by all underwriters. Special language is included in the slip wording. And again, we already mentioned several, but not jointly. Some things typically will be handled by the lead carrier and others will follow the decision made by the lead, Lloyd's Claims Agent, as John has already mentioned. And there can be a second Lloyd's Leads Claims Agent agreement party. So I'm going to go on to just talk a little bit about policy that's still issued by the carrier for agreeing U.S. and U.K. wording terms. There is no subscription deck page, I was told. My broker's going to tell me something different, but I'll wait until I get a response from them. But what we're used to basically seeing in the U.S. market is a subscription endorsement, which basically we showed you earlier. And that in most cases, it's each people issue their own separate policy. Or there could be the case where there's one policy issued by the broker, and the only thing that's showing there is a subscription endorsement signed by each company. Now, there's an endorsement addressing claims. Zerk is a very good one that shows what's called a Claimful Operation Clause. Because this could be misleading, because all insurers do agree to a pre-agreed claims procedure, or a pre-agreed loss adjust, we call it third-party adjust, or TPA. Any comments from the underwriting brokerage community? Or the brokerage underwriting community? Yes, I would like to chime in here if possible. So you said it exactly correct, is that within the U.K., typically you see that the slip, the manuscript wording, including the deck pages, is stamped and signed by all the insurance companies. Whereas in the U.S., typically you see that every insurance company has issued their own deck page with the wording attached to it. So with the consequence that in the U.S., typically, if you have five or six companies participating on a subscription page, you have easily 160 to 200 pages combining the entire policy, which is a nightmare, of course, and not user-friendly. So there is a hybrid, which we explain here on page 12, or slide number 12, which is not common yet in the U.S. It has only been used a couple of times where there is a subscription deck page. So in other words, you have a deck page where you can see in a matrix who the participants are, their policy number, their share, and who the responsible underwriter is. Then you have the mandatory pages, of course, attached to it. But then you have only one form behind it. So you reduce the, let's say, 160 pages to about 40 pages. It's more user-friendly. That's why you see that it is becoming more and more common sense to use the subscription deck page. So more similar than what they're doing in the U.K. Thank you very much. Thank you. So how did this all start? John's going to go into a little bit about the background of Lloyd's and kind of how this marketplace took shape. Well, we talked a little bit of what's called a Lloyd's consortium. That's where you combine several small Lloyd's syndicates with the purpose of increasing the overall combined underwriting capacity. Competed the likes of the ACES, the AIG, the Excel, this world. And as an example, one of the consortiums, you have one in London that's formed by Beasley, Talbot, Hardy, and Opius Consortium. And now U.K.-based risk brokers are allowed to go to Lloyd's markets to submit risk. Nobody else can. And is there a U.S. consortium here? Any U.S. consortiums that we're aware of? Brokers? I'm not aware of. You cannot mix it with or confuse it with an MGA, of course, which is different than a consortium. I don't actually know. Well, Vincent, when you mention, you know, an MGA, what is true? Technical risk generators, aren't they a consortium? No, that is as far as I know, that's an MGA. So the difference between an MGA and a consortium is that the MGA, they have the pen to, they're authorized to write on behalf of certain insurance companies. So that is not seen as collusion because the lead underwriter from the MGA, he has, again, the pen, the authority to underwrite on behalf of those insurance companies, whereas a consortium, every company in that consortium has the right to refuse any risk. And therefore, the main reason why in the U.K. it is possible to have consortiums and not in the U.S., that in the U.S. they still see that as a kind of collusion if you have various insurance companies in a consortium sharing terms and conditions. So I know that some companies are working on the solution in the U.S., but it's not doable yet, whereas in the U.K. it is doable. But as you said there, John, you have to go to a London broker in order to access those companies. Does there have to be a broker, an agent that represents the consortium? Scott or Neil, are you familiar with that? If we're talking in terms of the Beazley Consortium, then yes, there has to be the access over there. Do you know who it is? For Beazley? Yeah, for the consortium in London with Beazley Capital? Which individual? Yeah, which individual broker? Well, Colin Rose would be the person typically to access that consortium. Well, yeah, but he's part of the Beazley Syndicate. Yes. He's not a representative broker. Well, we would speak to our colleagues in London. So it would be whether it's Whittisown or Marshall would be our colleagues over there. Scott, do you agree with the same thing? You'd have to use your local brokerage office that's controlled by the FSA to approach that consortium. I think if you think of the consortium in terms of a group of friends, underwriters getting together and say, look, there's a shortfall in capacity for what we're trying to achieve here. Why don't we get together and group and pool our capacity? But it has to be a situation where you've got to have everybody contributing that and agreeing to that. So you see here you've got, what, three players. You've got to have essentially the majority of those that signed on for that. And by virtue of that, they all play. If one decides they don't want to play, then that concept falls apart. The true example, the managing general agent, is essentially they've gone out to secure the ability to authorize capacity or write a piece of business on that behalf. They don't have to utilize all of the players. They can pick and choose depending upon the type of risk that's given to them. So if they have the capacity for 10 different lines behind them, they might just choose three or four. They don't have to, in each instance, use all 10 of them. So it's a different scenario there. Thank you, Chris. Thank you. And so what is LOIS? LOIS is not a company. It's a market. Members join together as syndicates to ensure risk. Much of LOIS' business works by subscription, where more than one syndicate takes a share of the same risk. And business is conducted the old-fashioned way, face-to-face, where underwriters actually, or brokers actually come over to underwriters to discuss risks face-to-face. Jeff, go ahead. I read that in your talk. Read that in mine. LOIS' market is home to 94 syndicates. And as I mentioned, it's still conducted face-to-face. There's actually, as we've seen over the last few years, some of these London syndicates are opening up U.S. operations. Some of them are also closing up U.S. operations shortly thereafter. The majority of business written at LOIS is placed through LOIS brokers, who facilitate the risk transfer between the clients and the underwriters. So, what I want to just talk about is some of the discussion background about the non-LOIS market here in the U.S. For those that might have been around the market in the 70s and 80s, I used to remember a period of time when some of the brokers I used to deal with, as John Sennig and Mark, a few others, used to run brokers around to have them sign one subscription binder. Anybody now signs broker binders? I don't see that quite frequently here in the U.S. And we also had started up back in the 80s what was called the New York Insurance Exchange. It was the equivalent of LOIS here in the U.S. And the intent of it was to help stem the flow of tide of business going into the U.K. market on U.S. But it closed in 1987. Would anybody know why? Briefly, I'll tell you, some of the syndicates went under. There was about 10 that I've reported. And then there was a couple of syndicates that went under. Briefly, I'll tell you, some of the syndicates went under. There was about 10 that I recall went bankrupt through Resolve. And has everybody heard of the AIG Breakfast Room? This is one that I go back with, even before I worked at Weitzman AIG, where brokers would come together in the morning, have breakfast in one of the AIG rooms, and get an opportunity to meet the underwriters. It was kind of the equivalent of what LOIS does, FaceTime with the underwriter. So it's interesting if you look back some of the history. Quick question. Is it only breakfast, or was there a business conducted? Yes, business conducted over breakfast, but no drinks promised. So why do we need to do business with foreign insurers for U.S. business? Don't we want to make Made in America? And if you think about LOIS, LOIS is McDonald's Insurance Street, and LOIS is still considered the world's insurance reinsurance center of the world. Try a new crap though. So what? No professional reinsurance company is owned by U.K. markets. They're owned by a lot of European companies, the Germans, Swiss, Americans, the French, and LOIS has ceased to be a member of the organization now, and now franchise brands to insurance companies from all over the world. And I think as Jeff just said, look at the number of LOIS markets that have opened in the U.S. I mean, this has probably happened over the last 10 years, but I go back about 20 years ago when I used to work for a company called Zurich Insurance Company that actually had a syndicate, not a syndicate, a LOIS operation out of London that opened up in the U.S. but only operated for about a year, then it closed down. All right. So now we get into subscription underwriting and competition law. The Business Insurance Sector Inquiry avoids potential breaches of competition law, and we're going to get into this a little bit more later, but what you'll see is the broker is able to guide underwriters to the optimal price or the premium to get the best deal for their client. However, underwriters are not able to discuss with each other what those terms are and whether or not those are terms that they want to get to or not. Two of the most serious restrictions on competition which are identified, agreements between competitors on pricing. Do we ever go to a bar and talk to our competition and say, hey, I quoted at this price in terms. What do you think? Is this good or bad? Well, sharing that competitively sensitive information can be a breach of terms. You don't want to do this. It really becomes a very serious thing, and we had that attorney from the state of New York that drove a lot of companies crazy over stuff like that. Go ahead. In principles reserved in the underwriting process, underwriters should only independently decide whether or not to participate in individual risk. Underwriters should neither confer nor reach any agreement of understanding with other underwriters, even if you're at the bar with them. And prior consultation, collaboration, and sharing of information is viewed as collusive, so it should be a serious breach of competition law. You don't want to do that whether you're in the U.S. or you're in the U.K. or any other market. That's a serious violation of the client's responsibility of getting the best terms conditions. Underwriters should not, as a condition of any agreement to underwrite, require the upward alignment of premium. Should any subsequent underwriter require or secure a higher premium? The legal status of best terms required by individual underwriters remains unclear, and we're going to get into that a little bit later when we hear from the brokers. But it still remains a question about the upward alignment of premium. Any commentary from the broker community on what that really means? John, does it refer to pricing, or does it refer to terms and conditions? Well, here's my perspective, going back to my early days. Hold on one second. Someone said that sound just cut out. Is everyone experiencing a problem with sound? Anyone? Joe, can you hear us? Joe? It might just be Joe, then. Joe, maybe you want to call in if the computer's not. All right. We'll start. I'll try to be a lot easier on it. All right. Thank you for those that responded. We'll try to be a little clearer. Here's the thing. If you had gone back and had done like a layered program, let me say the broker came out and said, can you do this primary 5 million for a million dollars? And we go, yeah, the terms and conditions look good. And he said, we're going to place the S and the M. And he said, we're going to place the excess 5x of 5 for $500,000. OK. They came back and basically said that excess price and fortune went up to $750,000. Well, I might have had a provision in my quote that basically said if that upward movement goes up by 50%, I expect my primary million dollars to go up to a million and a half. Have you ever heard of something like that before in quotes? Yeah. But some of the brokers, we were always, when we put out underwriting submissions, we typically put in there, we'll not accept best terms. So whatever rationale it means, whether it's pricing terms and conditions. So you can't tell me if the excess pricing went up. Right. Even though you're trying to price it at this level. Right. Scott, have you ever heard that before? Well, first off, the days of layered programs, at least in the builder's risk, are pretty much over. It's pretty, it's almost all on a quarter share basis. But as Neil says, we have to push back on the best terms. And I don't know, I can't think of one for a long time that's included a best terms clause. And it's even, some of the markets won't even accept the best terms. They say, we have to do this. And a lot of it goes back to the collusion laws and so forth. On our own, without any input or comment from any other participating markets. I don't think it's ever been tested in court, has it? I'm not aware of that. Right, right. So it just appears to be a term that was made up by underwriters to ensure that if they priced it less, that they would potentially get a better price had somebody else come in. Yes. Okay. And here's some of the principles we observe in the underwriting policy. Following underwriters should neither expect or require brokers to pass on details of the terms, including premium, on which other following underwriters have underwritten. But this does not preclude a broker from billing the terms of other underwriters, including premium, where the broker is using this as a bargaining chip. Bargaining chip. Remember that. Try to get the best terms for their client. Go ahead. No best terms. That's right. No best terms. Why use a subscription policy? Do I really want to put all my eggs in one basket? There are things like underwriter departures, underwriters leaving the company, especially for a long-term builder's risk. And, you know, to have the entire thing with one underwriter, when the next underwriter who picks it up may not have the same set of guidelines. Also, broker departures. A broker may issue a policy and then leave the company where he issued it from. Underwriter appetite changes. A lot of the companies change their appetites from time to time. And then things like financial departures. An AMVEST or a Moody's rating may drop, and it may be dropped to an unacceptable level where the insurer can no longer accept coverage from that carrier. Establishing a need. Does the type, term, location of risk affect market capacity? Things like combustible construction, or underground tunnels, or project durations that are longer than 75 months, or things in Florida, or on a fault line, or very large BI exposures. Also, leverage. Owners typically would like to have their builder's risk leave insurer be the same as the insurer's leaving their fixed property program so that they can have leverage on it. And here's the negative factors. You know what brokers normally say? Too many underwriters in my face, and not one can make a decision. So everybody's all over the place with this. And then you get to the point where claim adjustment process. Asking more detail, detail, detail. And who rules the field? The little kitty. So now we're going to go on with a brokerage comment and questions that have come up. And so you're aware, we've got about 16 to 18 questions that we brought to the field, and some we brought in. But certainly, if you'd like us to expand upon the questions that are in the same topical area, send a note, and we'll answer the questions. And if we can't, and if it's on a separate topic, please still send in the questions. And if we have time at the end, we'll try to get to your questions as well. Question number one, this one's for Neal. Can you give us an idea of the percentage of accounts you work on that are on a subscription quota share basis as opposed to 100% with one carrier? And also, if there's any trends in that. Well, let me say from an administrative standpoint, it's certainly easier to place a piece of paper of business with one carrier. I'm only negotiating with one underwriter, with one carrier, with one insurer. I'm not having to make numerous phone calls. So from a four-wall, let's say from, and yet my colleagues here can answer in terms of the other bills. But from a four-wall perspective, certainly I'm not looking for more than one carrier if my TIV is in the 100, 150 million. If I start to get a bit higher than that, then I'm looking for more than one carrier. If I start to get a bit higher than that, then I'm getting into potential PML restrictions. From a five perspective, their ability to put out a certain amount on the single policy. And particularly if I start to get into the CAT area, I'm looking at flood, wind, and quake restrictions from those markets for their net and treaty lines. I can increase with one carrier, or I can ask them to go out and seek some facultative protection to gross up their line. So to answer to that question, if you're looking at the smaller bills where there's no CAT, probably I see 100% of my placements being one single carrier up to that 150, scratching the 200 million mark. If I get to higher than that, then I'm starting to introduce another carrier, perhaps two or three. And obviously, the higher the flood limits I'm seeking to purchase, the higher the wind I'm seeking to buy, the higher the quake. And then in addition, if you're talking about combustible bills, if you're looking at frame, then that's certainly a limited market. And I would need to introduce more carriers there. So from a pure TIV, I would say certainly up to about 150 to 175 is start on the softer occupancies, again, I stress. It's where you start to consider bringing in another carrier. But obviously, the higher the TIV, the more pronounced they are in CAT areas, then that's going to be involving more than one carrier, perhaps as many as five, six, seven, or eight, depending upon the size of the bill. Any other comments? I would agree with Neil, just from the standpoint of if you're dealing more now into the civils world or the refining petrochemical power, that kind of drives PMLs and other way for these carriers. And at that point, you have specialty markets that do support those types of projects. And it's typically best for the client when you're seeking quotes and so forth to make sure that you get net and treaty capacity, and then you decide how you're going to build it from there, whether it's facultative reinsurance or on an additional subscription market maybe. And I think just to come back to the whole subject of subscription, it comes from the basis of quota share arrangements. To Scott's point, it's in this market right now, we're seeing most of the, I think all the deals I'm seeing are on quota share. I'm not seeing any layered deals, which tend to be more of a fixed property play where you chop it up and you get that patchwork quilt kind of arrangement. I don't see that on these deals right now. Thank you. Scott, I'll ask you a question, but everybody's filtering in here. How does a broker choose who's a lead and who's a follower? Well, generally it goes, you want to have the leader who is respected by the rest of the marketplace of having knowledge and expertise within that discipline of business. And so you will seek leader quotes and so forth from those types of markets. And then once you get the initial indications back and so forth, you know, whoever's got the best terms, conditions, pricing, and so forth, then you go to the following market to get that completed on a subscription type basis. And it includes, in addition to the market knowledge or respect, you also want to address the claims portion of it. And then you also want to look at risk engineering because all those have to be addressed and sorted out before you bind coverage on a subscription policy. Comment, Vincent? Fully concur. Thank you. The next, leader pricing. We mentioned a little bit about how underwriters aren't able to share it, but when does it share from a brokerage perspective to other underwriters during placement? I would say here that for sure, we will not share any pricing with any markets, especially in the beginning. You want to create competition on behalf of the client. So if you start sharing or disclosing that information, then the whole idea of competition is not applicable anymore. Only at the end, if you see that there are some markets not moving at all, and you only have, let's say, 60 or 70% of capacity locked in at the lead terms and conditions, and if the two or three following markets are just a little bit higher, you try to get the best deal for your client. So in that case, I would go back to those following markets to close the last 20, 30%, and share those terms and conditions from the leads, which typically are lower than what the following markets are providing. So in that case, I would say okay, because the client, in the end, is the winner there. So you don't have arguments with best terms anyway if they would agree they are the following markets to adhere to the lead terms and conditions. So I would say only at the end, if it is in favor of the client. Otherwise, I would not share any pricing with other carriers. And so suppose at the end, like you said, only at the end, if it's in favor, what if it's not? I mean, you have 20% capacity left to fill out, and no one's budging on their pricing. I mean, what would the next step be if you're not sharing? That depends. What they get is, we will come back later in a slide regarding best terms. Best terms, but that's just not the story. So we will address that topic. So from my point of view, there are no best terms. But in case, if, for instance, those two or three carriers are a little bit more expensive and they stick to their guns, so they say we need that pricing for whatever reasons, then I would go back to the client and say, listen, what is your relationship with those smaller carriers? How important is it for you to pay a little bit more for those following markets in order to have them on the slip? And sometimes clients, they say, listen, you have to put more pressure on them, or we have an existing relationship, so maybe we can make a call. And sometimes clients, they say, listen, we are not at all related to that company, or we don't see at all any reason to have them on the panel. So can you then go to other following markets and see if they are prepared to do so? But typically, in a soft market as we are in right now, and if the gap is not too big, following markets with a small share, they tend to agree to lower their pricing and or deductibles to the same level as the lead. Thank you. My question to Neil, and everybody's going, do brokerages admit it or not admit it? Well, one second. There's a couple of questions on the previous time. Okay. Let's just go back. This one's from Chris. What if the following markets have a lower price? Again, we're not talking about best terms. Suppose someone comes in later with a lower price on one of the following markets. How would that be handled? I have your lead price. Yep. Excellent. And someone else comes in and says, I can do better. And you already have, let's say, half a split filled out at the higher price. Well, it's what Scott Nissen said earlier. It's not only pricing. There's more involved for a market to be the lead. So if it would be a small carrier who would come in later with a lower price, I would still look at, you know, what is their risk engineering capabilities, credit rating, of course. Yes. Are they respected by the rest of the market? Because I don't want to go suddenly from an established lead position with some carriers to a following market who tends to be cheaper but doesn't have the other qualities which lead companies have. So I would take it in consideration, but I would not suddenly switch from a recognized market to a following market just because of the price. Okay. So you'd bump their price up, is what you're saying, if you want to keep them on. Well, I would probably go back also to the client because typically, and I think I can talk on behalf of my colleagues here or competitors where from time to time, especially with a bigger project, you have quote comparison discussion. So you put it in a quote comparison sheet and you go back to the client and say, this is what we have right now. Typically that happens two or three or four times depends on the size of the project location, et cetera. So you will bring them up to speed and say, listen, this is all we have now. There are some markets that are a bit cheaper but they are not that stable maybe from a credit perspective. We don't know if they're a long-term player. We understand that they might have some fat capacity. So if there are midterm changes which we will address later on, difficult with this company because then they hide behind their reinsurance companies or affect markets. So they're not even sure if they can extend policy. So there's a lot to it. So it will be a continuous dialogue with the owner or the contractor, of course, depend who the client is to see what we're going to do with the smaller markets. But typically if you establish the big lead markets, there are so many reasons why we have done that. So we stick to that situation where we are going forward and we try to squeeze in the smaller following markets. Technically for the lack of a best terms clause, you can have different participating security have a different price and not be in violation of everything. I think it's incumbent at the time binding and so forth that that be disclosed and there's transparency on that. But there is no requirement that company A has to charge the same price that company B does. So the theory of following line could have a lower price. Correct, yes. I mean, brokers have been using disproportionate pricing for a long, long time. For the fact that 80% of the carriers might be charging a million, but 20% is charging 2 million. Conversely, I'm not going to increase my price to 2 million to cater for that. I have a general question regarding that. Let's say you've got a market that has a great reputation in Europe, but has not really gotten anywhere in the US market it's just starting up and they give you a very good pricing compared to your lead markets that have had a good reputation. At the end of the day, you did mention their strength in terms of claims handling, the financial stability, servicing side. How would you feel about a startup market that's also had a good experience in the European side, but to start up here? I mean, what would be your attitude with a market like that just starting for the first time here in the US? I think you have to be open and clear with your client and bring that up to them and share the good, the bad, and the ugly. And it definitely could be something that is a possibility to give them an opportunity. But I don't think you as a broker would want to do that in a vacuum without everybody having full knowledge of it, mainly your client. Okay. Agree? Agree. I wouldn't see them taking a huge majority position rather than, in lieu, they would be taking a smaller marginal line, particularly, and look to develop that line potentially on other pieces of business with that client. Well, I'm just saying, if a market wanted to really get its foot in the door and say, hey, I'll match up your lead market, and we're new kind in this market, but we're strong in Europe, and we've got good financial strength, but we're newbies here in the US. Could this be something to do with a prior employer of yours? I can't comment on that, sorry. But the only thing I want to add there, it's interesting because there are typically always two clients, from my perspective. One is the price buyer. They are going for the price. I have to be careful, but a lot of developers, they have one-off projects, and they go more for the price than for a long-term relationship. So still, what Scott said, you have to disclose that, of course, with the client or the prospect about this new company or companies entering the US. But typically, I would say 80% of the clients are not price buyers. They are looking at a good form, but also continuity in the future claims handling. So I think that they will make the decision that they prefer to pay maybe a little bit more for established markets than the newcomers until the newcomers have been also recognized as an established market. Okay, good. All right, my question to, I'll start with Neil, and I'll ask everybody to respond on this. Well, I think it's fair to say that the carriers that we're dealing with typically have admitted paper and non-admitted paper. They have capacity, will differ between those two. Obviously, you have the insolvency aspect to it for the protection there if you were admitted, which you don't have under the surplus lines aspect. From a client's perspective, again, by using admitted, you're saving on the insolvency, but you're also saving on the insolvency again by using admitted, you're saving on the 3.6%. So that makes a little bit of a difference. But for the most part, we would certainly seek admitted paper on those. If we look at some manuscript forms, often we'll hear that some of the carriers will have to use their non-admitted paper. So that may box us in a little bit. But I think it's fair to say that for the most part, whilst we will have on these quota share deals often in the mix of admitted, non-admitted, it's certainly our preference if we have that option to go towards admitted paper. Officially, there are still regulations in place, as we all know, that you have to have officially three declinations from admitted carriers before you can use non-admitted carriers, and or you have to inform, of course, your client that you are going into the non-admitted direction, so to speak. Overall, my perception is from clients that in the end, they don't matter that much if it is admitted or non-admitted if the pricing of the non-admitted is so much more competitive. So in other words, with a service like Texas, it's still cheaper than an admitted carrier. They will go for the non-admitted carrier because of pricing. And there is no protection, that's correct, but I think that's only up to $250,000, which will be paid if a non-admitted carrier is going out of business. With the admitted carrier, you have that backup, that's correct, but for the big projects, $250,000 is not that much to begin with, so. And just one point, I guess, the larger, the premiums that you're looking at, if you're looking at multi-million dollars over five years for big, heavy projects, then 3.6 or whatever the tax is can pretty, can significantly somewhat negate any broking that you've done to try and get a, if you're trying to get a 3.6% reduction down on your price, but then you've got the non-admitted tax facing you, then you're fighting that battle, so. And now, what about, let's say the leader is on non-admitted, would all the followers then be non-admitted and vice versa? Is there a combination on one placement ever? Right, there's a combination and it makes no difference whether the leader's admitted or non-admitted. Each carrier would declare what their member company would use, what they would use, and then how its status is in that domicile or jurisdiction, if it's an admitted or non-admitted company. Thanks. Next question, this will be for Scott, but again, anyone feel free to jump in. Can the brokers discuss drop-down provisions in the event of underlying aggregate exhaustion? Well, as we've already said, you know, the layered approach for the builder's risk world is really not prevalent in these days and times, so you really don't have the drop-down provisions. However, for, especially if you're dealing with a, maybe a course of construction extension under a master builder's risk follower property policy that includes the builder's risk, you definitely want to make sure that there is the drop-down is included in that from the excess in the event of exhaustion, especially for specific tasks, you know, peril and so forth, depending on the claim. So, it doesn't apply a whole lot, but yes, you do want to make sure that you do have drop-down addressed in the excess. And again, it's just for those perils that have ags on them. So, for fire, for example, you wouldn't have it, and the important thing was that the, typically the excess markets would drop down potentially over losses that they themselves would not see covering as well. So, there was a lot of, there's a lot of language pertaining to that, but to your point, Scott, on quite a share, we don't, we don't see it, so. Julia has a question, I'm not sure if it's related, but is non-concurrency typical construction placements? Let's say for a coverage standpoint, you don't want, you want concurrency all the way through it. Pricing, it can be non-concurrent. And brokerage commission should be as high as you can get it. All right, one question I do have with the whole issue of drop-down, has any of you ever been involved with a scenario where the exhaustion of the, typically in the US market, the flood and earthquake aggregate have been exhausted, and then, you know, it's basically the company now has to drop down for the balance of the term of the product. Are they aware, a lot of times, of that impact, that they have had any clients have been subject to that? I don't know that you have to worry about the drop-down, but you have an aggregate, and you do have, like back in, you know, 10 years ago, with Rita, Katrina, you know, all the other ones where just the aggregates were blown for coastal property, you know, the reinstatement of those aggregates can be a painful and expensive discussion. So, you know, it's a fact of life. There are aggregates for the cap perils, and they are subject to exhaustion, and at times, you might be able to negotiate up front a reinstatement, you know, for premium and calculation, but those are not even that prevalent anymore. I mean, you see it in the US market, the annual aggregate of flood and earthquake, but it's not typical of the European market. Is that correct, if I'm not mistaken, for at least non-US business? No annual aggregate on flood or earthquake? I think we're seeing it more and more. It's coming. It's a cat-exposed risk. Okay. You're seeing more and more of the aggregates, and I think that is driven from the trees of these other international markets. Anything going down on, like, name Winston, why would flood and earthquake have an annual aggregate, and name Winston or not? Any reason you think that? What I understand is that it was driven by regulations in the US, because I remember, and I don't know exactly when it was, about until eight or nine years ago, where also name Winston was aggregated. But there was, in certain states, I understand there was a regulation that it was not allowed to do that anymore because of the protection of the client. So that's why insurance companies, with their treaties behind them, agreed to have name Winston on a per occurrence basis rather than name Winston. Why not flood? That might have to do with the fact that there's a flood protection program in place, which is not there for name Winston. But what I do understand is insurance companies, they prefer, of course, to ag it rather than on a per occurrence, but name Winston, they have to offer it on a per occurrence basis. I do see some underwriters trying to put an ag on name Winston, and if that is the case, I'll push back on that. You don't see me do it, do you? No, no, not anymore, no. No, but I would say, especially in some of the longer term projects, especially in the heavy civils world, and in the processing of power, we're seeing it fairly common where there is a name Winston Armatic, and it's interesting if it is in one of those states, as Vincent says, where it can't be dumped through an admitted carrier. They'll either put it in a non-admitted company, or sometimes they'll scale their participation down to what they feel is a one-time pop. John, did you put annual ags on your, or did, for a long-term project, for a five-year deal, did you put your ags with a term? Yes. The ags with a term, or were they annual? Yes, annual aggregate. You can prepay it if you want. Otherwise, you have to pay as you go. So if I lose it all in my first 364 days, it's automatically reinstated on my name? As long as you want to prepay for the reinstatement, yes. And treaties operate very much in the same way. If you exhaust your aggregates, or exhaust your occurrence limit, then you get charged. So if you pre-agree, and if you think about some of the events, the 9-11 events, were typical examples, not related to flood or earthquake, exhaustion of your limits because of a loss, resulting from, terrorism was included at that point. But the chances on a construction risk, you've modeled your loss expectancy potentially, right? So you would perceive you blowing your ag only in the later stages of the build. Not necessarily. Think about Louisiana, Texas area. You probably have all seen a lot of liquefied natural gas plants that are being developed. In the billions of dollars range, you've got stage one, stage two, all of a sudden they're adding stage three, stage four, and all of a sudden you're building up from a billion dollars in a project value to, at the end of the day, maybe seven, eight billion dollars. When you're building up limits on something like that, that's where it gets layered, because all of a sudden you start out with maybe $150 million aggregate limit for the flood and name windstorm, and now you've got to build above that. And a lot of the companies that are involved on that tough class business is throwing annual aggregates on the flood and name windstorm and earthquake. I'd say almost all of those have the annual aggregates on those cap barrels, and you're right, some of these LNG plants have added additional trains and so forth to it. You can't get the capacity from the original subscribing markets or you do have to go by access or you have to do a separate placement. Exactly. And that's where this really comes into play in the big projects. It looks like Alexander mentioned that wind is in the public interest, but as we're seeing on some of the projects down in the Gulf, they are seeing some aggregate. Correct. And all the privatization in the, you know, in the public sector, you know, with P3s and so forth. It's P3. I've never heard of that before. Public-private partnership. It's the privatization of public assets. It's basically a financing scheme where they operate it for 25 to 50 years and the way the private sector is building critical U.S. infrastructure. It's been done in Europe for 25, 30 years. So from an insurance standpoint, what does that mean as to my building risk policy? It depends on the contract. It could be that the day that you take financial close into that asset, you now are responsible for the physical damage to it as it currently sits. Then you're going to make a whole lot of construction, improve it, change it, whatever. You've got all the builder's risk exposure plus the operating asset exposure that goes along with it and then at the end. So it does totally change the risk profile on some projects outside of the typical, you know, guaranteed maximum price or design-build type of arrangement. So it's a real long-term arrangement. Real long-term. So I've got to be able to write builder's risk and property. Property underwriters listen to this out there. Okay. All right. Let's move on to the next topic. Best of terms. We touched on this a little bit before, but how and when does this apply, if ever? Yes, correct. We discussed that earlier and I think I can be very assured here that best terms, they don't apply. It came into the market years ago, but I think, again, I talk on behalf of my colleagues here as well, that we will not agree to best terms. So what you can do is either be very clear and put in a submission that best terms will not apply. It's interesting because still I see in certain quotes from insurance companies in the U.S. that they have a footnote somewhere that in case they are cheaper that the best terms will apply for them. But because it's a soft market, if you don't have spotted that phrase there or that footnote, then still I go back to the insurance company and say, listen, you were cheaper and you can't be participating on this list, but you cannot get the best terms. It would not be fair because if we would agree to best terms, all insurance companies could come in ridiculously low just to have a foot in the door. And then if they find out that the lead is higher, then they get the benefit of the higher pricing. So we are all very experienced and adults in that respect. You have all your models. You can calculate whatever you want, but that's the pricing, and you should stick to that if you are a professional insurance company. Any comments? Agree. Totally agree. Well, a question I have for you, Vincent, and I keep hearing this a couple of times, soft market. You say soft market out there. Not totally related to everything we're talking about, but how would you see combustible construction today, of course? Is that still a soft market? Combustible as in wood frame, for instance? Well, that is still a very, very delicate area, as you know. Right. Delicate because of the fact that it's combustible. It's a very unbalanced portfolio. The only way I think that you could write wood frame or combustible is if you have a really, really big share of the market. Truman Hicks, in the past, he wrote only wood frame, and he had an amazing loss ratio because he wrote it all. So in that case, maybe it's doable, but a good example is the MGA, which you mentioned earlier. They suffered four or five losses in the last year, totaling about $160 million or $180 million of losses. So it's difficult to underwrite that line of business. Most of the treaties, they don't allow it. And you see even the big insurance companies, they can put up a billion dollars for LNG plans, etc., but only $2 million for wood frame because it is very volatile. Still, there's some arson going on there in certain areas of the country. So it's just a very difficult class to underwrite. The markets there are soft as well, but it's for sure. There are maybe five or six companies who are prepared to do it, and or there are some MGAs. And why are they doing it? Because they have several companies behind it with small lines, typically what you see in the London market as well, where there are a lot of companies with small shares. Their individual losses are not as big as if you would absorb 100% of a big wood frame project. What percentage of your markets would you say would not even deal with frame construction or combustible? I would say 90%. 90% wouldn't. Before you interrupt, I'm going to ask Scott a question on the soft market. We mentioned liquefied natural gas projects. Is there a lot of capacity built for that? Is that still a soft market area? Maybe in apparel. I mean, if it's named wind, floods, storms, explosions, the rest of it, there's pretty much ample capacity. We did a non-scientific review of the market about six months ago, and if there is not a problem with accumulation and everything, there is potentially $2.5 billion of named wind capacity along the Gulf Coast of the United States. For risk. Capacity. Capacity. If there was no commitment of capacity and so forth. But realistically, for any one individual risk, you're hard-pressed to get up above $800 million to $1 billion in capacity, and that's got to be where some of these newer ones are done in south Texas, like in Brownsville and Corpus Christi, where they don't have the accumulation as the upper Texas coast or Louisiana. But fire and explosion, you're probably in collapse. You probably have easily, I don't want to say easily, but you put $2, $3 billion together. But when you get into the cap perils, it really drives it down. Okay. And you were going to say something? I was just going to say coming back to the frame thing. So for noncombustible, your PML typically will be a percentage of your total insured value or your MSL. For frame risks, your perceived maximum loss is everything going down. So that risk, probably more than anything else, I talked about the TIV, but that risk more than anything else lends itself to that quota share placement, because no way is the guy who's sitting on top going to give you any credit for having that buffer of limit there as well. So your markets contract exactly whether it's frame on slab versus your noncombustible bills. Okay. Next. How do the brokers deal with participating carriers applying their own mandatory endorsements, whether it be terrorism or any other mandatory wordings that they have, which differ from carrier to carrier? Well, I think it's fair to say that in the terms of contract certainty and concurrency, we try and avoid them at all costs. Again, the soft, I want to say soft, soft-ish market permits us to be able to do that. I know on the fixed property placements, you know, each market would say, well, we'll sign on to the form, but we've got to apply our own date recognition, pollution, terrorism, mold endorsements. But for this example, for construction insurance, for quota share, we go out with our form. If it's a manuscript form, it addresses those. If it's a company form, then we will attach the main body of the form with all the accompanying endorsements, and we all make sure that everybody signs on to that and basically puts their subscription page or deck page on top of that, and that will be it. There should be no reason whatsoever why Company A should be issuing their own debris removal and then Company B, because as soon as you start to get that, then you're moving away from that certainty with the deal that you were bound. And are there markets that are unable to comply and have to issue, and therefore you will utilize them? I haven't. I haven't. I don't see it right now. I don't see it right now, not in this current environment. Okay. Scott, any comment? Agree. It was interesting, the last quarter of last year with the whole matter of trade-off kind of up in the air, you know, where how different carriers were addressing that, was probably the one area you couldn't get concurrency on, because, you know, you were dealing with that. But other than that, it's, in the last couple of years, because of the competitive market as opposed to soft. It's a better word, yeah. Yeah. All right. All right. I'm going to ask Scott to do this question. How does the claims handling procedure differ between a single carrier placement and one which involves many participants? And I heard something about a claim cap amount. What is that? Conceptually, you could have a claim cap amount where you would have a designated limit, say a million dollars, where the leader has, you know, exclusive authority to settle on behalf of the entire panel of underwriters. And, you know, you address that amount and make it go faster. Everybody is satisfied and otherwise. But when you get into a major loss and so forth, when it does come down to claims, you know, each one of the carriers does have a voice in the adjustment process. And depending on the loss and depending on the, you know, the policy terms and so forth, you know, there has been situations where, you know, one or two carriers who might represent a minority position on the placement don't agree with the adjustment and so forth and the settlement. And it can, it's a problem. So you have to be willing to deal with that on a subscription placement. With a single carrier, you have one adjuster, one, you know, set of individuals you're dealing with on adjustment. Now there might be reinsurance in the background, but that's not for anybody's problem other than the carrier. Comments? Well, no, I agree with the claim cap idea. That would be very good for everybody, including the client. You can establish that, of course, that if you go out with a submission, you can have already a pre-agreed endorsement where you can establish that cap. That depends on the type of structure, size of the project, of course. So you have to do that in advance, of course. Do you do that now in your policies? No, no. It's just more and more I'm getting involved in claims now. And, again, as Scott said, big claims. I understand that insurance companies, they want to have their own judgment and flexibility to settle or not. But a million dollars, especially if you have four or five carriers, so their share is maybe 20%, I think we could save a lot of time and frustration for sure to have that pre-agreed endorsement going out of the submission, establish the cap. And you can always argue with the lead whether the cap is a million or two million dollars, but I think it would be in favor of everybody to do that. And you can maybe carve out net cap claims maybe because of other situations, internally legal issues maybe, but I think it would be very beneficial to everybody to have that claim cap agreement in place. Now, I know you handle a major client. You can't mention the name of the client. But one of the things I was going to ask you about, and I know there must be about eight to nine companies on the subscription policy, how did you get them all to agree to the third-party adjuster? Is that an issue at all that you find with incoming? I bought them drinks at 6 p.m. that evening. I think just to come back to this, the one carrier, the one single carrier versus the many. I mean the single carrier on the face of it would appear to be the easiest avenue to go down, right, only one person to negotiate with. But conversely, if that one carrier that you're placing that piece of business doesn't agree with you, then you're in a worse predicament than you would be if you had the multiple party to negotiate with. So just to put that there. But, yes, if you've got a quota share deal and you've got ten players there, what we've been successful in, I'll say been successful in for the example you have, is to get the majority. So say, for example, you've got three 20% guys sitting in there giving you 60% and the rest, it shies off there. So it becomes five, two-and-a-half, seven-and-a-half percent or whatever. If you can have what I've called for this argument, essentially a steering committee where you could get the agreement that if everybody of the 60% agrees, then the others would follow suit. That's how I would see that. And that can be, to Vincent's point, can be negotiated up front as to who they would be depending upon. Would you normally have to do that up front? What's that? Negotiate up front as far as. Well, you would have an adjuster in there, but I'm not sure that the adjuster, maybe somebody will take advantage of this, but I'm not sure the adjuster would. Would you require the adjuster name to be in the policy? Absolutely. On the bigger builds, we would always have a named adjuster in there. All right. And so that would be given. And that would be someone who is chosen with you in conjunction with your client and someone who professes to have experience in losses of that kind of nature, and you would put them in, because they would be seen as the experienced individual in the room. So as brokers, you all have pre-qualified TPAs that you would recommend to the client? Correct. And that would be with underwriter approval as well. Yes. But typically, it's more, I think, driven by owners. Contractors, they have their preference, of course, but owners, they are very happy with their loss adjusters for their property program, of course. Now, construction is not the same as property. Sure. But they have an established relationship. They know the culture of that specific client, so they would like to have the same TPA in place who knows, again, the culture of the client, who knows how they react, how their risk management is established. So they ask us then, of course, to have the same TPA, which they are using for their property placement, also for the building. There's a DSU or soft cost. Sure. Any time element. And I think it's the individual more than the company. Correct. Would that be a fair comment to make? Correct. So that even if that individual is not necessarily living in the area of where the risk is, which obviously you're probably not going to find anyway, that he would have a handle on that and he would monitor that, but he would have somebody there on the ground locally who he could work with. But I think it's important to stress that the relationship there is a relationship with the individual versus purely from the company perspective. It's also interesting in practice where there has been situations on large contentious losses where, say, you got 80, 90% of the panelists agree, and there's a percentage that's wanting to hold out where there's all of a sudden the rest of the market will bring pressure to bear because they're looking for a global settlement. This thing could go to court. It could get ugly with litigation costs and where, in that case, I don't think there's any problems with collusion. There can be pressure brought by the rest of them to say, we hear you, but it's time to fold your tent and go home. Hey, one last question I'd like to throw out. Vincent, I don't know if you're aware of the fact that Marsh has a dedicated claims team that ends up working on claims. I know I have an ad account in one of my companies in the past. The broker was Aon, and all of a sudden Marsh got brought in to work with a client, not a broker, a regulator, to handle a claim. Are you aware of something like that within Marsh organizations? The only thing which I do know is that, and I can only talk on behalf of Marsh, we have a dedicated construction claims group headed by Brian McGrath. So we have 17 people only involved in construction claims, whether it's workman's comp, whether it is liability. And also we have three or four really good experience builders risk claims people. But they're not settling the claim on behalf of insurance companies. They are there as a resource that in case a claim is getting difficult or nasty or whatever, then we can either for an additional fee that depends on the fee or the commission structure, when we accepted the placement and then we can bring in those people who have, you know, contacts of course with the big insurance companies, their claims department. So because they have been involved in many, many claims before. So that is the added value we can add. So it's a client marketing concept they brought in. They made an acquisition of a company, Forensic Accounting called Dunstein Associates about 18 months, two years ago. And they are a standalone, if you will, they're not part of the construction group or the other retail part of it. You know, they are a forensic accountant and they are for fee, you know, higher. So they, a lot of claims are involved, but they do it with other clients as well that are not AM clients. No, no, I agree with that. I mean, there's two things that that operation essentially does. It's the post-loss and it's the pre-loss in terms of looking at values, be it PD or business interruption. So obviously they play a role here in terms of forensic accounting and they'd be working in conjunction with the loss of justice. Okay, good. Thanks. Let's move on. Next question, this will be for Vincent. How is loss control and monitoring of things like the critical timeline conducted when there are multiple carriers participating on a risk? Well, first of all, there is a distinction between, again, the UK and the US. As far as I know, years ago when I was working in the London market in Europe or overseas, it is common that automatically the lead will ask 2% or whatever the percentage is to conduct risk engineering. And there is no problem at all with the following market. So that percentage is paid by the following market. According to their share, the risk engineering will be done by the lead. You choose the lead because of the capabilities of that company who has an extensive experience in certain type of projects. And then the lead risk engineer will go out there and afford, because they pay, they are the following market, they pay the 2%. They have the right to have access to those files, of course, which they can use for their own purposes. So the US is a little bit different. It is changing over the last couple of years. Now you see more and more as well for the bigger projects that they will, they as the lead, they will conduct that risk engineering. Sometimes you see that they do it for free. Then, of course, they're not happy to share those reports with the following markets. And now we have placed a couple of big projects where also there you see a percentage being allocated to the lead carrier, not paid by the client, but by the following markets, which in the end is not that much. If you have 10 quota share participants on the policy, so 2% divided by nine, because the lead carrier, of course, is not paying to himself. That is not a problem at all. The other question embedded in this slide is monitoring of the critical timeline. That is, of course, important when there's delayed startup or time, time element included. Because I can imagine that if there is a build-a-vis policy, hard cost only, I don't want to go into soft cost, of course, we need another three hours to go through the soft cost issues again. But let's stick to the delay in startup. If there's no delay in startup endorsement added to the build-a-vis policy, then the critical timeline is not as a big concern. Because insurance would say, listen, I don't care how long you work on this project and or on a loss. If there is no delay in startup coverage added to it, then the timeline is not that important versus where you have a big project and you have a huge amount of delay in startup amounts involved. Then an extra task for the risk engineer is to look at the critical time. You know, what is the buffer? What is the question? Is there any time maybe already spent on excusable delays for measure type of events? Not per se physical damage. So. But what about things like in the U.S. market where multiple carriers may want to have their own individual loss control folks out on site doing their own surveys? And if there are potentially recommendations which they're going to want to comply with, have you run into any issues? Yeah, we have issues there. We try to avoid it at all times. Actually, just last week, I had a following market for a person in Hawaii. They said the same thing. Can we go there? And I said, well, we don't want to have six or seven insurance companies inundating or overwhelming my client. And then every other week, there's another guy standing there with the same question. So we say, no, if there's nothing established in the wording, we would still say to following market, sorry, that's why we have a lead. They will go out there. I will for sure ask them to share the reports with you guys, but we don't want to have, you know, many companies during many years, going to the site and ask, but in the end, it's most of the time, the same questions they will ask anyway. So I think that's embarrassing for everybody. So we don't allow that. Okay. Any comments? No. One question that I do have for you as a brokerage, how do you stay on top of when a policy is going to expire? Within your organization, do you have any prenotation that comes to you or to the people you're dealing with in the office that you did placement for? Well, our systems are set up so that we have that. And also, I guess, coming from your perspective, I know that Hiscox was always one to send out, you know, notifications prior to a certain time, saying that, you know, do you require an extension? If you don't require an extension, you know, can we have the value so we can do the audit at the end, et cetera, et cetera. So that was pretty impressive from your perspective there too. So what does Woolis do right now? I mean, do they send out notices three months in advance of expiration, Marsh, Aon? Typically, part of the accounting system, it's almost treated as an expiration. So I think every broker, large and small, has that capability within their accounting type system. So it's sent out automatically? It's sent out automatically. Because usually, you never have to... Yeah. There are also insurance companies now, more and more, not only Hiscox, or it used to be Hiscox then, but also other companies now, they have automatically people sending out from their accounting department, not the underwriter. They get the same email, of course, notifying that in two months, either close it out and we need that amount of information, or do we need an extension? And there are four or five critical questions that in case an extension is required, why is that extension required? Okay. Moving along. Policy documentation. We touched a little bit on this, but whose form is being used, concurrent versus non-concurrent, what and how do following lines issue documentation, London versus U.S., major things like storm surge. Neil. Yeah. I guess Julia asked that question as well, is non-concurrency typical for construction placement? I would say the answer is no, you've got to have concurrency all the way through. Again, it comes back to your underwriting submission. You're sending the form out with that underwriting submission, so they're pricing it based not only on the risk itself, but also the terms and conditions. That policy would have, obviously, the language in it, it would have the deductibles, it would have the sublimits. Occasionally, if we'll see some markets not being able to match a sublimit, in which case they could either be replaced, or we could, sorry, not replaced, we wouldn't consider them, or we would have another company do a larger line, or if we felt that their pricing was such, then the sublimit differential was so minimal that potentially they could stay in there. Storm surge, typically now, it goes into the flood. I know in London, that's a little bit different from the manuscript forms over there, I think you've been in the wind, but it plays a role in terms of, again, we come back to the aggregates, deductibles play a role as well. You can't have a program out there with 10 markets on there, with 10 different separate terms, conditions, that would be an adjusting nightmare, and we wouldn't be as broke as doing our job correctly if that was the case. We can potentially have small differences, like maybe a claims preparation sublimit could be different, or something like that, but certainly, in a significant arena of the larger sublimits in terms of conditions, then you've got to have it, it's got to be clean all the way through, and that comes back to Vincent's point of having the one policy with a subscription page, and just give it to them in a PDF form, they can't change it, and you have that certainty there. Sure. Comments? One question I do have with this coming into play, do you find more cases where you're using your broker forms, are broker forms being used now, or is it such a thing, or can that be my consulting job for you? By more and more, I would say, more and more involving London markets, because the London market, as you know, is very, I don't want to say software competitive, which is a better word, you see now that more and more the US markets, they are also, they can agree or they agree to use manuscript wordings. It was typically not the case in the US, let's say, until a couple of years ago, there are some exceptions, but now more and more we see manuscript wordings accepted by the US companies. Depends, of course, if there are very crazy extensions in the manuscript wording, then US companies might still say, listen, we cannot do that, either they use it as an excuse that treaties don't allow it, which is most of the case not correct, by the way, but more and more we see manuscript wording coming into play in the US. I think, again, that goes into the size of the project and the type of work and so forth. I mean, I've seen pushback here in the US on the payment terms, you know, like we want 50% within a year and 50% within 24 months, I get pushback on that. You know, the sublimits in addition is often a tough one. The AG on the DSU versus the pro-currency tends to be an issue. So you know, some of those issues like that tend to play in. So how do you sell that to decline at the end of the day when there is some potential differences? Do they realize that could be a major issue? Well, I don't think those are deal breakers, because it's definitely what we have in the US, but running right now in the US, so. Yes. Next for Scott, what if an underwriter wants to make a change to the proposed terms during the quoting stage? You know, you mentioned if it's on like a broker's form, it could be a PDF. What if your typical lead market is looking to make a change to certain terms? Well, I would say prior to binding with the lead, all those terms are open to negotiations. So, you know, if you're, you know, brought down to two or three markets and you're going to make a leader selection at that point, you know, those, all those areas are open for negotiation and final agreement. I would say once that's been agreed, you send it out to the following markets and so forth, assuming you have, you know, complete, or ability to complete it and, you know, subscribe at 100%, then probably that's not open for discussion. But for leaders, yeah, everything until you've established a lead, it's all on the table. Okay, great. Yeah, I guess just the, when you, when you have found the deal and it's in the, oh, you're talking about just the quoting stage. Okay, I'm sorry. Next. John. Midterm changes, which is probably the more critical piece, minor versus major change, and what happens if there are holdouts in certain markets? Want different terms to be changed, exposure, potential backdating issues, which is really nightmarish. That's what I wanted to bring out. But Vincent, why don't you start here in terms of some of the stuff that I killed you with at times? Well, I think any broker cannot avoid changes midterm, but you cannot anticipate those changes because you don't know what they're going to be. So, so first of all, my reaction is, is you have to deal with it at the time when it, when it occurs, especially if you have longer term projects, it can be anything. So you cannot prepare yourself for those changes. You have to go back to markets and explain what those changes are, minor or major. A couple of things maybe you can already anticipate when, when binding, for instance, if possible, and now I'm talking for myself, but I believe the other brokers, they do the same thing, is you don't, or you avoid to have maximum capacity locked in from companies because typically values are going up eventually. You have your 10% margin clause, sometimes 30% margin clause. Margin or escalation clause? Or escalation clause. Longer they go with margin clause. But anyway, so there is room for the fact that if the TIV increases, that they, is the insurance company, they have to stick to their share. But sometimes the escalations are even higher. So what you can do there is either reduce the share a little bit to create more caution for those companies that in case TIVs are going up dramatically, that you don't have to reshuffle shares or, or bring in other participants. So that's, that's for sure a possibility. So, but in case there are midterm changes and, and certain markets they don't agree to at all, then there's a big problem. So either what you could do then is, and I did it once or twice, especially in competitive market, they will follow, but there are maybe restrictions and treaties that people cannot do. So then you have to be very innovative there. So what you can do is ask the other participants on that slip to take over that share because they're familiar with the project already. And if they're not maxed out, and if the results are, are good, of course, results as in loss ratio for the specific project, then you might see that insurance companies involved in the project already, that they are prepared or several other insurers are prepared to take over the share in case that company is, is, is not able to, to, to accept that change. And if it is a change which they really cannot do because of treaty limitations, it's sad, but then I'm not that mad. But if it's just because of an overall approach, like we don't like it, then we have to do whatever it is to, to convince them and, and, and make that change. Backdating issues. I have never heard about a backdating issues midterm. Maybe it's new to me. Of course, we have backdating at the beginning of the project where the project already started and lenders, they need an, an, an inception date earlier than the binding date. We can do that. Of course, you need special letters, no known loss letters, et cetera, the reason why, et cetera. But I have never experienced, and, and I look now at Neil and Scott where they asked me to backdate midterm. But again, if that would happen, I would like to know what the reason is. Maybe the lenders, they didn't see it when binding and they asked later on, oh, wait a minute. If there are administrative purposes, if there are no losses, then I think that still insurance companies will be, will be prepared to, to backdate if there's no concern or something going on fishy or, yeah. Scott, you had mentioned this when I'll bring up, despite mentioned names like Taurus. When Taurus closed down their book of business, they didn't do it on a runoff basis. They closed it down. How did you manage that? Because that was how fast you got the information from Taurus, how fast you were able to make money around, bring other markets in and take over the line. And those are really serious midterm changes when they lose a market. They didn't take it to expiration of their policy? They did take it to expiration. Okay. And they were in a quasi runoff. But if you find yourself where the scope changed, you needed an extension, you needed an increase or whatever the case where they said, no, it's what we have bound, we will honor until the end of the, of the policy expiration. And I don't know, everybody would probably agree that probably more than half of the builders risk policies end up with some sort of an extension or amendment or something where you've got to have the carrier's involvement. But generally speaking, we made the decision to replace them on virtually every placement. Right away. You didn't wait for them. Right away. We did not wait. Vincent, any comment on that? No. I agree. No, I guess the only thing would be, you know, in terms of how much they're taking, somebody else is taking on a risk when those builds have already been in effect. Therefore, they don't have that time value of money there. And, you know, obviously the way the premiums are charged, they're based on the fact that there's nothing up front. And then on the final day of construction, they've got... In some cases, we did a pro-rata. In other cases, Taurus agreed to give us more than pro-rata because they were coming off risk and the tougher portion was up front. But it's something just, you have to be very proactive in that situation because you can find yourself at the end of a project with high CAD exposure, maybe that's had some losses, and now you need an extension and the rest of the world says, no, thank you. Has there been any client reaction to some of this stuff that's taken place with the closure? And, you know, it wasn't necessarily financial breach in the market, it was closure. I mean, have you ever had any feedback from clients as to, you know, why this is taking place? Oh, yeah. There's shock and awe when those things happen. There's disappointment and everything else. And, again, that's why you have to have, you know, transparency and good communication with your client. I can tell you with the Taurus situation, we had bound them on a fairly large risk where they took 50% literally a month before the announcement that they went, you know, into runoff. And we immediately replaced them at 100% within the market just because, you know, the client was not very happy. Correct. Correct. All right. I just want to, let's move on because we have about three or four more questions to get to and we're running short on time. So, next question. Multi-year policies. Possibility of underwriter departures. Actually, we just mentioned this a little bit. Business being downgraded and how we deal with that. I think we've already touched on this, so maybe we can skip to the next one for the sake of time. How about claim payment? Go ahead back one more. Okay. How does a broker deal with this, the claim payment aspect? Are you talking about an ongoing claim or a... Could be an ongoing claim for multi-year policies where a company is now closing down the shop. Does that become a problem when they're closing down because of underwriting reasons versus insolvency? Right. Typically, there hasn't been a problem from an underwriting decision to go and to run off. You know, they still honor their claims and pay them. Yes. And if they've sold it, they're gone. Yeah. Okay. All right. Can you provide any examples or case studies of any of the topics that we've been discussing? Scott or actually anyone on the panel, if you have any examples that come to mind. You don't have to mention names, obviously, but just kind of scenarios that you've dealt with. You mentioned the Taurus example. Yeah. We have one major civil project in the greater New York area where the project ended up, you know, being twice as long in terms of budget and, you know, twice as long in term. And we had to seek, you know, extensions. And in that case, some of the original players just said, no, we don't want to support it anymore. And in that case, we were able to get other markets to, you know, sign on for those other, you know, for the carriers that were withdrawing. But, you know, it was a little bit of a negotiation getting more than pro-rata and so forth, you know, from the other guys. So it's difficult. In scenarios like that, I mean, given the case, would you basically agree to the fact that maybe you don't want any one market to take a big share, like a market taking 50, 40% line, and instead basically, you know, making sure you got the spread? So, you know, in the event that something like that takes place, you got to replace some markets out there with additional capacity. Well, I think it comes back to the security thing, the rating, and all of the brokers get regular updates on the security. So if we...it's brought to our attention that one of the participants on our program has been downgraded, then we will deal with that as we see fit and take action to potentially replace them if necessary. But I don't think that, to a certain extent, we would say you've got to cut back on the capacity with one specific carrier because of their non-ability in claims situations to reach an amicable decision, because then the client would turn around and say, well, what the hell are you selecting them for in the first place? Anything else? Any case studies? Nobody wants to mention names? Okay. All right. Can you discuss certain policy definitions? I know we mentioned a little bit about storm surge and flood and maybe whether that's in the wind definition or the flood definition. I think you mentioned it a little bit earlier, Neil. Well, I know from a...on the completed property side, and I'll talk to that quickly for a second, from FM, typically their policy form would have it, you know, within the flood. It plays a role...what happened was out of Sandy, I guess, was in terms of, okay, well, where is it and what's the limit? So it plays a role in terms of what's the overall policy limit, is there an aggregate on it, and what is the deductible applying to that peril? If there was no difference in your policy as to whether, in terms of those two criteria for the wind or the flood, you wouldn't have an issue where you put the surge, okay? But because of those two, there can be vastly differences in terms of deductibles versus the limit. So be very careful as to where that is. And obviously, with the new flood maps coming out, with how conscious or cautious, rather, some of the markets are in terms of authorizing their flood, then that plays a role. Again, per occurrence, per building, per location, that also plays into it. So you've just got to be careful and clever as to where you've got those perils. Yeah, so in addition, Sandy was for sure an eye-opener for a lot of insurance companies because at that time before Sandy, I'm saying, most of the companies, they had their storm surge definition in the flood definition. What happened is, mainly because of Sandy, that insurers, clients, and their brokers, of course, they could stack up limits, which was a concern for insurance companies. So in other words, if there was only a $20 million flood sublimit and a $50 million named windstorm, first of all, I think it's very difficult if the whole project is blown away, how can you assess whether 20% of the loss was only due to the windstorm and the rest was flood or vice versa or storm surge? So stacking up limits was a difficult issue for insurance companies. So that's why you see after Sandy that a lot of insurance companies, they moved the storm surge from flood into named windstorm. There are some companies now, they just did it about six months ago, where they have even a distinction between storm surge as a result of named windstorm, then it is named windstorm. If it is storm surge as a result of windstorm, so not named windstorm, then they leave it in flood. It's a little bit confusing, but that's how they do it. So the good thing is if you, of course, move storm surge into the definition of named windstorm, you have only one limit, but you know where you stand. You also have only one deductible, of course, and if you have two perils which you can allocate, you can stack up limits, but then also you can apply or the broker can apply two different deductibles. The other definition quickly, which I think is always confusing, not for the three of us here, but for a lot of people, is the difference between earth movement and earthquake. You see many, many times that insurance companies, they have not earthquake as a definition, but earth movement, which includes, of course, subsidence, landslide, et cetera. So especially in California, when you see suddenly that clients say, I don't want to buy quake, or I only need $10 million, or insurance companies are saying, because of the location, I only give you $10 million for earth movement, not earthquake, you have to be very careful that you also then limit or exclude other events, not quake, but movement. So you have to be then, again, aware that you say earthquake is only as a result of seismic or tectonic events, but not all the other events which then are still considered to be earth movement. So confusion there, you have to be careful. Got any comment there? No. Okay. The master is focused. All right. How does a broker keep track of all the subscription underwriters, all the movement of changes, both at the company underwriting level? And I'm gone, so. We got to do this. Neil, you keep getting it all the time. So we'll leave with you with five minutes and less to go. Well, I guess we're in the market all the time. It's important for me to tell my clients about it before I hear about my competing brokers telling my clients about it. But really, I mean, I don't see it changing that often. But, you know, certainly we would be aware of it and we would take the corrective action to notify insurers as a result of that. Scott, I'm going to go to you. While they're speaking, again, if there's any questions from the field, we're just about wrapping up. Maybe we have a few more minutes left. So please, feel free to send us some questions in the chat pod. We track through our accounting system. So when you have a subscription policy, each carrier is entered into the system. So if you did have an insolvency, we can run a report fairly easily to say, you know, what carrier is participating and what placement. So we can go ahead and make arrangements. Vincent? Yeah, exactly. We have our administrative and accounting systems and they will track all those things. So we have no time to do that, but we get alerts from our systems, people, and then we react accordingly. All right. Send me an alert to who's taking them from me. Thank you. Nobody can replace you. You're not involved. All right. And then again, any questions from the field? It's been relatively quiet in the chat box. But please, we have a couple of minutes if there are any questions. Otherwise, thank you very much. Well, last but not least, put the next slide up. Thank you for your service and how you would respond to these subscription issues. And I ended with Santa out there because he's got the most difficult thing. When trouble arises and things look bad, there's always one individual who perceives the solution and is willing to take command. Very often, that individual is crazy. Thank you to our broker panel. And certainly throw one more slide up there. You should all join the ILLAM Marine under our association. I was on the co-chair of the construction committee. And if you ask Bilbert, he's saying the only way you get identified is join the IMUA. This is the training world for people out in the market, and I'm looking forward to being able to do more panel groups, more opportunities for people to talk. So any more questions? Thank you. I think we got all the thank yous out there. Yes, I see lots of thank yous coming in. And thank you for an excellent presentation, gentlemen. We appreciate your time and effort in planning this webinar for us. In particular, we'd like to thank John Tutera for his vision and help in coordinating the panel and content. And I'd like to thank Jeff over here with me, who's going to be taking on a lot of my role now. Thanks, Jeff. Thank you also to our attendees for your participation.

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CAT perils

long-term projects

construction insurance

earthquake definitions

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