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Spring 2023A PROFESSIONAL JOURNAL BY THE INSTITUTES CPCU SOCIETYRenew your 2023 membership today. CPCUSociety.org | MemberResources@TheInstitutes.org | (800) 932-2728 The CPCU Society is a sound investment of time and resources for all industry professionals and leaders. If you’re in the risk and insurance industry and not already an active part of the Society, get started today and watch your career trajectory soar. -Paul J. Krump Vice Chairman, Chubb Group Global Underwriting and Claims NETWORKING | LEADERSHIP | EDUCATION The Institutes CPCU Society keeps getting better, especially with you at our side. We want to continue to be your go-to resource for insurance industry education, networking, leadership development, and more. Renew your membership today and continue to access exclusive perks: `Unlimited, free monthly webinars; a complimentary subscription to Insights, our quarterly professional journal; and a free quarterly online course from The Institutes. `Free enrollment in Facilitated Study Groups. Get the guidance and support you need to pass core CPCU ® courses. `Instant access to our online community, member directory, Mentor Match program, and volunteer opportunities. `Local chapter benefits and eight special interest groups. `Access to Career Center tools and resources. `Exclusive member discounts on Society events, including In2Risk ® , In2Leadership, and more! CPCU is a registered trademark of The Institutes Designations, LLC. All rights reserved. In2Risk is a registered trademark of The Institutes. All rights reserved.Volume 10, Issue 1 What do you think? Send us your feedback on this issue, along with thoughts on what topics you’d like to see in the future: CPCUSociety.org/Insights. Alternative Risk Financing: Options for the Commercial Market 6 Run for Cover! Strategically Rethinking Reservation of Rights Letters by Kevin Quinley page 15 Is Your Organization Making the Most of Its Data? by Bryan Tedford and Lou Bonanno page 20 Liability for Gun Violence by Joseph S. Harrington page 25 Fronting Business: A Tutorial by David Reale page 32 CPCU View The Art of Ethical Negotiations by Michael Koscielny page 38 Committee Corner A Closer Look at the CPCU Society Ethics Committee by Jim Jones page 42 by Elise M. Farnham and Faith Cring2 | INSIGHTS | Spring 2023 The Institutes CPCU Society offers its appreciation and extends sincere thanks to the Technology & Innovation Committee; Ethics Committee; Legal, Coverage, Regulatory, Education, & Witness (L’CREW); Reinsurance & Excess Surplus Lines; and Risk Management & Loss Control interest groups, which contributed to this issue of Insights. THANK YOU! The Institutes CPCU Society is a motivated community of risk management and insurance professionals committed to lifelong learning and the highest ethical standards. Society membership supports all professionals on their unique paths, including pursuit of the CPCU® designation, additional Institutes’ designations, and other personal and professional development goals. To learn more about the CPCU Society, visit CPCUSociety.org. Statements of fact and opinion are the responsibility of the authors alone and do not imply an opinion on the part of officers, individual members, or staff of the CPCU Society. © 2023, The Society of Chartered Property and Casualty Underwriters. CPCU is a registered trademark of The Institutes Designations, LLC. All rights reserved. In2Risk is a registered trademark of The Institutes. All rights reserved. The Institutes CPCU Society Publications Committee Chair: Laroux Whitman, CPCU Erie Insurance Group Vice Chair: Heather Blevins, CPCU State Farm Committee Members: Marcella Beasley Capital Insurance Group Louis Bonanno, CPCU Arch Insurance Group Abi Potter Clough, CPCU AbiLeads LLC Stephanie Doss, CPCU The Hanover Insurance Group Joseph S. Harrington, CPCU Self-employed Michael W. Koscielny Jr., CPCU Born2Lead, LLC Frederick R. Parcells, CPCU Arch Insurance Group Brian K. Taylor, CPCU Tredessa Travers, CPCU Atlantic Casualty Insurance Company Michael Vahldick, CPCU Liberty Mutual Liaisons: Victoria Cahn The Institutes CPCU Society Kelly McAnally The Institutes CPCU Society Michele Schrotter, CPCU Marsh McLennan Agency Through Insights, a professional journal by The Institutes CPCU Society, you can: •Share your expertise on leadership and soft skills •Keep members informed about emerging industry issues and hot topics •Publish in-depth, relevant insurance articles that promote further conversation Please support our efforts to educate and engage. Learn more at CPCUSociety.org/Insights. Then submit your article by email to CPCUPublications@CPCUSociety.org. See Your Content Featured in an Upcoming Edition! You can receive CPCU in Good Standing credits for reading the Insights articles in this issue! Start accruing credits today by accessing this material through The Institutes CPCU Society Knowledge Center: TheInstitutes.org/GoodStanding. Did You Know?Greetings, Fellow CPCU Society Members: It is an incredible honor and privilege to be your 2023 CPCU Society president and chair. I want to take the opportunity to thank you, our members and volunteer leaders, for your continued commitment and support of our global CPCU Society. This year, I challenge each of us to extend our reach by building upon our past success and providing avenues of continued growth—both personally and professionally. “You can do what I cannot do. I can do what you cannot do. Together, we can do great things.” This quote from Mother Teresa is one of my favorites regarding leadership. It simply states how we can execute our strategies, address our challenges, and become better each and every day. Together, we will do great things! One of the opportunities for continued growth that I am particularly passionate about is our newly revitalized Mentor Match program. It has never been easier to share your expertise as a mentor or gain valuable insights as a mentee. I encourage you to participate, make meaningful connections, and support each other’s goals through a mentor/mentee relationship. The opportunities this year are plentiful. For example, we can grow together as leaders at In2Leadership, taking place March 28 and 29 in Tampa, Florida, in collaboration with our education partner, Thunderbird School of Global Management. For those of you (and there are many) who are committed to continuing your education, the Reinsurance & Excess Surplus Lines Interest Group is pleased to bring back its virtual symposium May 10 and 11. Join us for four exciting panels aimed to support our growth in navigating new realities. Visit CPCUSociety.org/NavigatingNewRealities for more details. I know you are excited as I am for 2023! Through balance, strength, focus, and leadership, we will surely extend our reach: •Balance will be attained by having strong brand identity along with continued commitment from the many companies and individuals represented within our Society. •Strength will be achieved through increased membership and success in Society activities. •Focus will exist in our desire to always strive to do what’s right for our global society, local chapters, all members, and the communities we serve. •Add to that strong leadership, and we are positioned to thrive, add value, and continue to be recognized as the premier community of risk management and insurance professionals and thought leaders. We, the Leadership Council, look forward to serving you. Please don’t hesitate to reach out. Meanwhile, please enjoy the latest issue of Insights—yet another way we learn together, as a means to the end of doing great things. Sincerely, Brett Clausen, CPCU, CIC, FLMI President and Chair, CPCU Society Leadership Council Letter From the President INSIGHTS | Spring 2023 | 3 Contributors Want to see your company’s ad in Insights? We are now including members’ ads in Insights! Choose from a menu of options to reach fellow go-getters in the most effective and cost-conscious way for you. To learn more, contact Adam Lachowicz at Lachowicz@TheInstitutes.org or (610) 251-2738. ADVERTISE HERE! Elise M. Farnham is president of Illumine Consulting. She is an internationally acclaimed speaker, educator, author, and expert witness with more than 45 years of experience in risk management and insurance claims. Farnham is a member of the Dallas CPCU Society Chapter; the Legal, Coverage, Regulatory, Education, & Witness (L’CREW) Interest Group; and the Risk Management & Loss Control Interest Group. She was also the Southwest regional governor of the CPCU Society and past president of the Atlanta Chapter of the CPCU Society. Kevin Quinley, CPCU, AIC, ARM, is the principal of Quinley Risk Associates LLC. He has 45 years of insurance claims experience and has served as an expert in over 140 cases, in state and federal courts, for policyholders and insurers. Quinley helps clients improve outcomes through expert evaluation and testimony in high- stakes disputes. In addition, he has written over 700 articles and 10 books on claims, litigation, and risk management. Faith Cring has more than 40 years of experience in the insurance industry and holds degrees in risk management, insurance, finance, and law. She recently retired from GROWMARK, Inc., where she directed risk management and managed an independent insurance agency and two captive insurance companies. Cring is a member of the Risk Management & Loss Control Interest Group.INSIGHTS | Spring 2023 | 5 Michael Koscielny, MBA, CPCU, CIC, ARe, AIC, API, AIS, AINS, is founder and chief executive officer of Born2Lead, LLC. He has more than 40 years of experience creating effective teams and innovative processes for underwriting and pricing. Koscielny previously served as president of the CPCU Society Leadership Council and of the Underwriting Executives Council, as well as in these roles for the CPCU Society: member of the Leadership Council, chapter governor, chair of the Champions Advisory Committee, chair of the Interest Group Task Force, and president of the Cincinnati Chapter. Bryan Tedford, CPCU, ARM, has over 30 years of experience in underwriting and risk management for global property-casualty exposures. He currently serves as vice chair of the CPCU Society Technology & Innovation Committee and is a member of the advisory board for the University of Georgia Department of Risk Management and Insurance and of the New York CPCU Society Chapter. Tedford is past vice president of the CPCU Society, past president of the European CPCU Society Chapter, and past chair of the Insurance Council of New Zealand. Lou Bonanno, MBA, CPCU, AIDA, APA, ARe, ARM, PMP, is assistant vice president of property underwriting at Arch Insurance Group. He is responsible for program data feeds and corporate and business unit reporting and also serves as the business unit representative for the data transformation team. Bonanno has held positions in claims, premium audit, accounting, consulting, and ceded reinsurance throughout his career. He is also a member of the CPCU Society Technology & Innovation Committee. An experienced reinsurance contract professional, David Reale is lead manager, reinsurance contracts, with Clear Blue Insurance Group. He has handled business, including developing fronting arrangements, from both the assumed and ceded sides. Jim Jones is chair of The Institutes CPCU Society Ethics Committee. He serves as executive director of the Katie School of Insurance and Risk Management at Illinois State University, where he teaches classes and conducts ethics workshops for undergraduate students and industry professionals. His research explores ways to help advance insurance and risk management solutions to poor and underserved markets. Jones is also co-editor-in-chief of the Journal of Insurance Issues. Joseph S. Harrington, CPCU, ARP, is an independent writer specializing in property-casualty coverages and operations. He has been an active member of the CPCU Society for most of his insurance career and continues to serve on the Society’s publications committee.6 | INSIGHTS | Spring 2023INSIGHTS | Spring 2023 | 7 Increasing insurance premiums have significantly affected the commercial insurance market. This article discusses why premiums are increasing and addresses alternative solutions that risk managers can consider when developing an insurance portfolio. Alternative Risk Financing: Options for the Commercial Market By Elise M. Farnham and Faith Cring W ith insurance premiums escalating at unprecedentedlevels, many organizations are searching for alternative ways to finance their risks. Historically, hard and soft markets have occurred approximately every three to five years. While the market cycle can be driven by any number of issues, it often results from monetary pressures or increasing uncertainty. In a soft market, premiums are low, surplus is high, and insurers are willing to take on more risk through higher limits or broader coverage. Conversely, in a hard market, premiums increase, surplus lowers, and insurers are less willing to offer broad coverage or high limits. Some insurers even exit specific coverage lines during a hard market. Increasing Premiums After the terrorist attacks of September 11, 2001, the historical market cycle changed. The market hardened suddenly and significantly in late 2001, but began to soften as soon as 2003. It then stayed soft for an extended period—until 2016.Next >