Farella's Insurance Recovery Group lawyers regularly collaborate with and learn from different players and functions within the insurance industry. To provide more value to our readers, we have reached out to a series of insurance brokers to create the Insurance Broker Series Q&A.
Our latest installment is with Michael Ferraro, Partner & Senior Vice President with Woodruff-Sawyer & Co.
How long have you been in the insurance industry?
22 years total (18 years at Woodruff Sawyer)
How did you get into the insurance industry?
I was a business management major in college and also worked for a money manager during my college years. I was always interested in the world of finance and the thing I find most exciting about being an insurance broker is it gives me a window into different industries and business models as well as the opportunity to build long term relationships with clients.
What trends are you seeing in the insurance industry or markets?
Federal Securities Class Action Litigation for publicly traded companies (which impacts a company's D&O insurance) hit a 10 year high in 2016 with 2017 on pace to exceed last year. Recent IPOs account for a significant percentage of these cases in addition to litigation from the biotechnology, technology and manufacturing industries. D&O insurance underwriters are trying to push up pricing in a market that, despite some insurance company consolidation, still has an abundance of capital in most industry segments.
What advice are you giving to clients looking to purchase or repurchase insurance?
Take a step back and look at the big picture. Is your insurance program aligned to address your company's biggest exposures? Looking beyond risk transfer, how robust is the protection for directors and officers under the company's indemnification agreement, and what training can Woodruff Sawyer provide to avoid potential pitfalls for C-Suite leadership and the board? Topically, the discussion needs to be both a discussion about risk transfer and other best practices.
What 2 – 3 questions do you wish your clients would ask you?
- What tools, resources and expertise can Woodruff Sawyer provide me to make my company a better risk?
- For prospective clients, why should we hire Woodruff Sawyer?
How are insurance products in today's markets changing?
As industries evolve or as new industries are created, the insurance market must continually be challenged to meet the changing demands of its clients. In these instances, the best brokers will identify issues that traditional insurance products do not address and create solutions with the help of the insurance carrier to provide a customized fit for their clients.
What is the key issue you are facing as it relates to insurance products / policies today?
The insurance market is a lot more sophisticated than many clients realize. Too often it's an afterthought. The problem is rarely created as a result of an insurance product or policy as opposed to the level of engagement with clients. Our best results occur when the client and broker are both fully engaged at the beginning of the process.
What risks should clients be using insurance products to mitigate that they may not know they can use insurance for?
A coverage that has quadrupled in use in the last few years is Reps and Warranties insurance. At its heart it is breach of contract cover for the representations and warranties given by the seller to the buyer in a sale or merger agreement. While either the seller or the buyer can be the insured both parties get protection when the insurance is used. The seller can reduce or remove escrow and the buyer can get as much coverage as they want for up to six years without having to force the seller to give more than they want. They can compete at auction and, in the event there is a problem post-close, they don't have to get into a difficult fight with their new management team. It saves time, money and stress in a sometimes difficult process, and both parties walk away with a better deal.
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