Head of International Programs, U.S. National Accounts and Middle Market
Zurich North America
Andy Zoller is the Head of International for Zurich North America in the U.S., responsible for Zurich’s overall international value proposition and go-to-market strategy. Previously, Andy was the Area Executive in Zurich North America’s South-Central Area and Director of International Programs for Zurich’s Midwest and West regions. Since joining Zurich in 2009, he established the Commercial Markets international underwriting practice in the U.S., where he led product development, created department guidelines, designed underwriting and marketing tools and implemented several strategic business plans for multiple regions. Prior to joining Zurich, Andy held various underwriting positions with Chubb and was a Commercial Account Executive with American Heritage Insurance Agency, Inc.
This post is a part of a series of follow-up articles written on sessions that happened at last November’s PLUS Conference. If you are interested in attending a PLUS event, you can visit the PLUS Website for information on the upcoming D&O and Cyber Symposia.
In my role as the Head of International & Captive Solutions for Zurich in the U.S., it’s my job to promote our international products and services. One of our key growth areas is Financial Lines, as these products seem to be at an inflection point driven by dynamic market needs. Take Directors & Officers (D&O) coverage, for example — many countries have built frameworks for class-action lawsuits similar to what we have in the U.S., and we’re seeing activity in China, Saudi Arabia and the Netherlands. There’s also rising social inflation, which refers to exceptionally high jury awards that exceed what most would consider reasonable. All of this has led to many of our multinational customers looking for innovative ways to address these risks.
So when I heard that the PLUS conference was allowing sponsor-led sessions last year, I knew we wanted to be a part of it. Along with highlighting our capabilities, this was also a way for us to share insights into the nuances of complex international programs with an audience that manages a market space that is rapidly expanding.
The Changing Global D&O Landscape
While I hoped our topic would resonate, I was pleasantly surprised to see that we had a standing room only crowd! I believe there are two reasons for the success of our discussion. First, we had a GREAT panel of speakers: Aon’s Lee Lindsay, along with Brian Zink and Tom Ripp from Zurich (who have a combined 80 years’ worth of experience between them). Lee, in particular, has been at the forefront of creating change in the International D&O market space for a long time. Second, our session focused on the evolution of global D&O programs, including the changing landscape and the need for new product offerings.
Some interesting notes from our session — the number of foreign-initiated D&O claims has steadily been increasing over the last five to 10 years. In-country directors and corporate officers are becoming more aware of their exposures, especially how they are both professionally and personally responsible if adequate coverage and limits are not purchased. In addition, they have become increasingly aware of how U.S. Securities claims can erode the entire program limits of a globally structured policy, potentially leaving no limits to cover local losses if they do occur. This is a real worry for the foreign directors and officers, and possibly a risk that the U.S. risk manager controlling the global placement hasn’t given enough thought. Historically, the worry has been whether enough capacity was purchased for the U.S. exposure, without considering they could be underinsured elsewhere due to increased foreign-loss activity.
Thankfully, the industry is evolving to address this enhanced risk. One of the newer solutions is the use of a stand-alone international-only D&O liability tower that provides limits for foreign directors and officers separate from the U.S. tower. Until 2021, the only option to solve for this was to purchase a policy out of the London market. Now, carriers like Zurich are bringing this innovative solution in the U.S. As the foreign legal landscape continues to evolve, we must expand renewal discussions with customers to include both the U.S. and foreign exposures to adequately address the client’s risk.
The Cyber Challenge
Another area within Financial Lines that is top of mind is Global Cyber programs. Recently we conducted a survey of brokers/agents who primarily work with Middle Market customers, and one question was: “What emerging risk needs do you see for the International insurance market?” While we received a lot of expected answers (Property, Climate Change, Regulations, etc.), my team was surprised that the overwhelming response was Cyber.
As I mentioned in a recent podcast, COVID-19’s impact on the cyber insurance risk cannot be understated. Prior to the pandemic, many parts of the world still relied on employees coming into an office and accessing data that in many cases was stored on a local database, with little access to the wider network. After the great work-from-home experiment that we all have been living for the past two years, most medium-sized and large corporations have now shifted to a remote work model that allows all levels of the organization, located anywhere in the world, to directly access their data. Now, a hacker only needs to access a remote server in Panama to connect to a U.S. server almost immediately.
The good news is that while the pandemic did increase the risk faster than expected, risk mitigating solutions are being created just as quickly. Most firms would say that ransomware is their No. 1 threat given the potential to paralyze companies operationally and cause reputational damage. . While the risk will never be zero, many clients have now implemented multi-factor authentication and other security measures across their global networks, and many didn’t have this form of protection in place before remote work. I believe more cybersecurity solutions will be coming in the next few years, and Cyber insurance will continue to innovate along with them.
As the need increases for more solutions in Cyber and D&O coverage and other Financial Lines products outside the U.S., I expect that buying behaviors of customers will evolve and they will seek to centralize their various international programs with as few carriers as possible. One reason is the complexity of local regulatory and premium tax requirements, especially considering the sheer number of jurisdictions (Zurich provides coverage in 210 countries and territories). My colleague Spring Uphoff Neely recently wrote an article outlining these compliance challenges. In my conversations with customers and brokers, I’ve heard a desire to access data related to the compliance risk without having to search several carrier portals and/or data platforms, which is the current norm with separately placed international programs.
Another reason is that international programs, whether Global Property or Professional Liability, are extremely difficult to service. The more lines of business a customer has, the more policies the carrier’s service team needs to track and monitor. Utilizing international servicing teams at different carriers makes it difficult to get the consistent service that a client expects across all lines of business. Based on my 20-plus years in the international insurance space, the fastest thing that gets a broker or carrier fired from an account is poor servicing on the international program. No CFO or risk manager wants their local office in Dubai calling every week asking when the local policies will be invoiced. That is why it is vital to collaborate with an insurance carrier that invests in their network, including adequately staffed servicing and claims teams that are responsive and fully trained. At Zurich, our dedicated 75-person servicing team works across more than 15 lines of business under one leadership and set of operating directives. In addition, every member of Zurich’s D&O Claims team is an attorney with broad knowledge of the current litigation environment and an understanding of global exposures. And we are proud to be the first carrier to implement an international certification program that trains underwriters along with claims and operations teams on helping our broker colleagues partners understand the nuances of international risk programs.
While the global landscape for Professional Liability risks is evolving, I do believe the industry is up for the challenge. It is an exciting time to work in this dynamic space, but the underlying need for innovative solutions and consistent, timely service remains. Organizations that invest in these areas will continue to have a competitive advantage in the years to come.