RIMS 2013 Lives On

The 2013 RIMS Annual Conference & Exhibition may have been almost four weeks ago, but it continues to live on through internet videos. The World Risk and Insurance News—an online television network—has released several high-quality videos taken during RIMS. The following is a recap of the conference, featuring interviews with RIMS Executive Director Mary Roth, Steve Hearn of Willis, Jason Harris of XL and Alison Quinlivan of Aon, among others.

To see more videos from the conference, click here.

Ed Hochuli Negotiates with the Big Boys

In a colorful presentation at RIMS 2013 in Los Angeles last week, NFL referee and attorney Ed Hochuli shared his secrets of successful negotiations gleaned from decades on the gridiron and in the courtroom. Accompanied by film clips showing him flubbing on-field instructions and being berated by coaches, Hochuli pointed out that there are two types of negotiators. Understanding the strengths and weaknesses of each is how you win the negotiation.

The aggressive type, he explained, are “always on the push.”

They use intimidation, threats, claims of superiority and cast blame on their opponents in an effort to get their way. Aggressive negotiators will make extreme demands and few concessions. While these types will rarely get taken advantage of, they tend to create a feeling of mistrust and are, more often than not, unsuccessful — 75% receive poor results, Hochuli said. Cases take longer to resolve and end up going to trial at twice the rate of other cases.

Cooperative negotiators, on the other hand, try to find agreement and move toward their opponents.

They generally establish credibility and good faith by presenting themselves as trustworthy and fair. They are willing to make concessions in an effort to reach the best outcome for both parties. This strategy results in more success and easier settlements, as both parties tend to feel like they’re getting something out of the deal. Of course, this strategy runs the risk of exploitation, especially by an aggressive opponent who considers a cooperative opponent to be weak. But Hochuli pointed out that this can still work as long as the cooperative party understands what is happening and doesn’t get rattled.

Hochuli’s final bit of advice for successful negotiation was simple: Make the first offer.

He demonstrated how starting with a low number in a discussion anchors the conversation to that range and can allow you to set the tone for settlement at an appropriate level for your company. It gives the opponent a better idea of what a claim is worth. Or at least what a company is willing to pay.

And when you’re negotiating with, say, the NFL about ending last year’s referee lockout, this is probably good information to have.

Green Construction Risks and Rewards

Green construction has become more and more popular over the past decade. Businesses and homes are turning to green while the government encourages it through tax incentives. But going green is not just about sustainable or local products in construction. It involves specific construction standards, various rating systems and green construction codes. Last week, a session at the RIMS Annual Conference & Exhibition helped us understand the complexities of green construction.

Speaking on the matter were:

Stephen Grossmark, partner at Tressler
James McIlnerney, vice president, field operations and risk manager for Leopardo
Matt Lumelleau, producer for Lockton Companies

There are many different green construction standards depending on what type of construction is being done and what the intent is. ASTM International (formerly the American Society for Testing and Materials) is known as the gold standard for green construction standards. There is also ASHRAE (the American Society of Heating, Refrigerating and Air Conditioning Engineers), which focuses on building ventilation.

And of the different green construction rating systems, the most prominent is LEED (Leadership in Energy and Environmental Design), which addresses:

  • Sustainable sites
  • Water efficiency
  • Energy and atmosphere
  • Materials and resources
  • Indoor environmental quality
  • Innovation in operations and regional priority (using local products)

With LEED there are four certifications: certified, silver, gold, platinum. As the speakers said, LEED is a flexible program as to the number of points needed to earn a green construction certification and how they are earned.

“It’s not whether you can get a green certification, it’s how green are you going to be,” said Grossmark.

“Basically, the whole point of LEED is to convert structures from energy efficiency to energy neutral to energy-producing buildings,” he added.

The most impressive example is the Bullitt Center in Seattle, which is known as the greenest commercial building in the world. The building captures rainwater and uses it on site. It even uses raw swage as fertilizer off site. “The goal is to be self sustained, not to pull electricity from the grid if they don’t have to, or water for that matter,” said Grossmark.

According to McInerney, there is a basic formula for sustainable design. He believes that design plus construction plus commissioning equals:

  • Higher productivity
  • Healthier conditions for occupants
  • Meeting green market demands
  • Potential tax credits

But of course, as McInerney pointed out, there are performance and contractual concerns. As with anything, there are risks involved.

The major causes of loss for green buildings are:

  • Envelope leaks
  • Electrical fires
  • Plumbing leaks
  • Mold growth
  • Building code and rating upgrades
  • Unknown green construction risk
  • Vegetative roofs (the weight of the soil can cause problems)
  • Indoor air-quality problems (can use vapor extrusion to move bad air out)
  • Materials characteristics and integration
  • Brownfield sites (environmental exposures related to prior land use)

Then there are the builder’s issues, including:

  • Inexperienced contractors and subcontractors
  • LEED projects require experienced personnel
  • Alternative energy and other advanced systems/learning curves
  • “Greenwashing”
  • LEED point challenges

“If it’s your first time building a green building, you’re not going to get everything right,” said Lumelleau.

There are two ways of dealing with that from insurance standpoint: OCIPs (owner-controlled insurance programs) and CCIPs (contractor controlled insurance program). Current carriers of such insurance include Liberty, Fireman’s Fund, FM Global, Travelers, Zurich, GenRe and Lexington/AIG. Many times, carriers will offer discounts for green-certified buildings for property coverage or upgrades to greener technologies after a loss occurs. 

The Risks and Opportunities of Doing Business in Brazil

China and India get the lion share of the headlines when it comes to emerging markets. But Brazil presents plenty of opportunities for the right companies.

Bryan Tedford, senior vice president of foreign casualty for ACE, gave a presentation on the nation’s potential and challenges for businesses today at the RIMS 2013 Conference & Exhibition in Los Angeles.

He noted that, as the world’s fifth-most-populous nation and seventh largest economy, Brazil is in a “fantastic position for economic growth over the next few years.” It has a strong, growing middle class that fuels a large domestic demand, which separates it from some of the other oft-discussed emerging markets. Tedford also highlighted the nation’s strong trade relationship with the United States, which he said actually sells about $11 billion more in goods and services to Brazil than Brazil sends back.

The nation also weathered the economic downturn better than most and has very little natural disaster exposure relative to many other growing economiesStill, there are plenty of challenges.

With a land area that is nearly as large as continental Europe, there is an imbalance of economic distribution in cities. This means that the opportunities for foreign companies reside mostly in crowded markets full of established competition. There is also a large informal economy in areas both urban and rural that can limit sales potential.

It doesn’t help that the legal and regulatory environment is very protective of Brazilian companies. In practice, new entities are very difficult to set up. “You really need to have some friends in Brazil … before you can really go after it,” said Tedford. “Having strong personal and business relationships seems to be the key for U.S. companies succeeding in Brazil.”

One way to make friends, says Tedford, is to give a small gift or token at a first meeting. Even offering something that may seem trite can be seen as a welcome gesture.

But don’t expect even friends to be punctual. “The conception of time is, I’ll say, liberal,” said Tedford. Don’t be surprised if an 8 a.m. breakfast meetings doesn’t start until 9:15. Perhaps it’s the traffic. Transportation and logistics can be a nightmare, so don’t expect to get anywhere quickly. The drive from the airport to São Paulo, for example, can take hours.

As far as more-business-related concerns, Brazil has strict liability rules that can make it difficult to deal with issues like a defective products and employment practices. There is also a short statue of limitations compared to the rest of South America, which can make it tricky to find time to deal with issues that must be addressed quickly.

In at least a few sectors, however, these are all mere inconveniences compared to the wealth of opportunity.

The agriculture industry has been booming in recent years, and this is only likely to increase. Sugar cane is especially enticing given the growth of the ethanol market.

The expansion of Petrobras, a Brazilian oil conglomerate that Forbes lists as the world’s 20th-largest company, may present even more chances for foreign companies to cash in. It is estimated that the nation will spend some $250 billion on contracts after the massive off-shore oil deposits discovered a few years ago, said Tedford. There will be a ton of new rigs and construction projects to be had.

There is also a tech boom. Brazilians are one of the largest purchasers of mobile phones, tablets and electronics among the emerging markets, says Tedford. This surging demand means more IT jobs and more infrastructure.

They also have another tendency: responding to direct-mail marketing offers. Brazil has a very good postage system, and it is helping move some of the economy outside of the cities. Companies in on the secret are able to make direct sales and raise brand awareness.