Brier Grieves March 15, 2016 No Comments

White House Announces Cybersecurity National Action Plan

The White House recently announced its Cybersecurity National Action Plan (CNAP)—a sweeping, $19 billion initiative designed to strengthen the country’s cyber defenses. CNAP includes a number of provisions designed to both strengthen and regularize governmental safeguards against cyber threats, as well as provisions to educate and partner with the private sector to help better protect businesses and consumers.

Major Provisions

According to a White House press release, CNAP will use its proposed $19 billion budget to pursue a number of objectives:

  • Form the Commission on Enhancing National Cybersecurity. The commission will bring together top thinkers from the private sector to recommend actions that will strengthen cyber security in the public and private sectors, as well as ways to protect privacy. The commission will also be tasked with devising strategies for maintaining public safety and national security; fostering the development of new technical solutions; and bolstering the relationships between federal, state, and local governments and the private sector.
  • Modernize government information technology (IT). The plan to modernize government IT contains two major provisions. First, the White House has proposed a $3.1 billion Information Technology Modernization Fund, designed to replace and modernize the aging and unsecure IT infrastructure currently in use. In addition, the White House will be creating a new position, Federal Chief Information Security Officer (CISO), to oversee and implement these changes.
  • Expand and invest in programs and training. The Department of Homeland Security will be expanding its EINSTEIN and Continuous Diagnostics and Mitigation programs, as well as increasing the number of federal civilian cyber defense teams to a total of 48. Additionally, CNAP’s proposed budget would invest $62 million in the following:
    • Establishing a CyberCorps Reserve program
    • Developing a Cybersecurity Core Curriculum
    • Strengthening the National Centers for Academic Excellence in Cybersecurity program
    • Enhancing student loan forgiveness programs for cyber security experts
    • Encouraging investment in cyber security education through the President’s Computer Science for All Initiative
  • Increase the use of multi-factor authentication. The government will be encouraging the increased use of multi-factor identification – safeguards that use things like fingerprints or codes sent via text message in addition to a password – to better protect data. To that end, the government will launch a National Cybersecurity Awareness Campaign that aims to educate the public and promote multi-factor authentication.
  • Develop partnerships to secure data and financial transactions. The government will partner with companies like Google, Facebook, DropBox and Microsoft to help keep data more secure, and it will work with companies like MasterCard, Visa, PayPal and Venmo to make sure financial transactions are more protected as well.
  • Curb identity theft. The government is looking for ways to reduce its use of Social Security numbers as an identifier for citizens. Additionally, the Federal Trade Commission recently launched IdentityTheft.Gov as a resource for victims of identity theft to more easily report the crime and get the resources they need to recover.
If you need some assistance with your cybersecurity action plan please contact us today.
Brier Grieves February 18, 2016 No Comments

The Insurance Pricing Cycle

Most industries are cyclical to some extent, and insurance is no exception. As an insurance buyer, it’s important to know what factors determine the cost of coverage. But understanding the market cycle is only half of the pricing equation; since you can’t control the market, it’s equally important to know what you can do to ensure you are always securing the best price– whatever market conditions prevail.

Property and Casualty Insurance Cycle

The insurance industry pricing cycle alternates between periods of soft and hard market conditions. In a hard market, coverage is harder to place and premiums grow. A soft market indicates premiums are stable or falling, and insurance may be more readily available.

A variety of factors influence the price of insurance, including economic downturns, catastrophic events, insurers’ claim reserve dollars, and supply and demand. Supply is tied to the amount of policyholder surplus in the industry, and demand is the appetite of the insurance-buying community to transfer risk.

Pricing cycles can also vary between lines of coverage and geographic location, creating both hard and soft market conditions depending on what type of commercial insurance is involved and how exposures to loss have changed. For example, the pricing and underwriting approach for property coverage for businesses based in hurricane-prone areas is much different than for businesses located elsewhere.

Risk Management Considerations

Buyers can take steps to ensure they are always getting the best price. Although premiums vary due to market pressure, your true cost of price is determined by your claims history. The key to controlling price is to control losses through instituting safety prevention programs, managing claims efficiently when you have a loss and employing cost containment strategies.

Brier Grieves Agency has the resources to help you employ cost reduction strategies to limit exposures and reduce premiums through both risk transfer and non-risk transfer solutions. Our consultative approach includes the following steps:

  • Identifying your exposures to loss
  • Recommending loss control solutions
  • Improving your disaster response potential by helping you to create or update a business contingency program
  • Assisting in building a culture of safety
  • Providing claims management to keep costs down
  • Seeking continuous improvement
  • Reviewing and recommending coverages to ensure your protection

Those who approach risk financing through sustained long-term cost control and claims management measures, instead of just riding the insurance pricing cycle’s wave, are always in a better position to secure coverage at the best price.

The market may fluctuate, but our goal–to be your broker of choice–never wavers. To review your risk management strategies, contact us today at (813) 876-4166.

Brier Grieves February 17, 2016 No Comments

What Everybody Ought to Know About Risk Management for Directors and Officers

While a senior executive position brings many rewards, it also carries significant risks that put your financial net worth at stake. Expect that every decision you make as a director or officer has the potential to be scrutinized by clients, employees, shareholders, and other directors and officers, and stakeholders may file a lawsuit if they believe a decision you made adversely affected their best interests.

The risk of litigation deters some from seeking an executive management position all together; and those who do may be nervous to make decisions due to the threat to their personal assets and professional reputation. What can be done to mitigate these risks?

One significant loss control strategy is to maximize protections, such as through indemnification and directors & officers (D&O) liability insurance, provided by the company. Before accepting a position, it’s best to review that these protections are in place, but this can also be done during renegotiation. This article briefly discusses three risk management strategies to consider before signing or renegotiating your contract.

  1. Seek Out a Corporate Structure Most Favorable to Directors and Officers

How much do you know about the company you are going to work for? Reviewing the company’s corporate governance practices to ensure they are sound is a good strategy for anyone seeking an executive position.

To determine if a company’s corporate structure is solid, consider the following:

  • What kind of orientation, training and education does the company provide for new directors and officers?
  • Does the company have internal policies that define its ethical standards and legal guidelines?
  • Who are the various people involved with the company and what areas of liability do they pose?
  • Does the company have a history of D&O lawsuits?

It’s important to learn as much as possible about the company before you accept an appointment. Balancing the interests of various company stakeholders— employees, customers and shareholders—can be difficult. No matter how new to a position, directors and officers may be held personally liable for poor decisions. Claiming ignorance is usually not a viable defense in these instances.

  1. Request Indemnification Provisions in Your Contract

Nearly all companies offer indemnification to their directors and officers. Indemnification means that the organization compensates a director or officer for losses incurred during his or her defense in a D&O lawsuit. Usually governed by the law in the state in which the company incorporated, some firms choose to expand their indemnification coverage beyond what is required by the state statutes. Well-written indemnification clauses attract talented directors and officers, as they are confident to make decisions knowing the organization will absorb the cost of defending their honesty and integrity.

Located in a company’s bylaws or articles of incorporation, indemnification clauses generally state what defense expenses are covered. The language of an indemnity clause is important. Be aware that many companies haven’t reviewed their indemnification provisions in years, and be careful that the clause is not “boilerplate.” If the company does provide the advancement of defense fees, this should be explicitly dictated in your contract or in the bylaws. In some cases, judgment and settlement costs may also be reimbursed.

Verify whether the company would advance expenses on a permissive (discretionary) or mandatory basis:

  • Permissive. Permissive indemnification means that the organization has the power, but not the duty, to indemnify its directors and officers, and each case is reviewed by the board of directors on a case-by-case basis. Typically, this is only provided when the director or officer acts in “good faith.”
  • Mandatory. Mandatory indemnification means that the organization is required to indemnify its directors and officers. The indemnified individuals do not need to demonstrate that they acted in good faith or that they were free from wrongdoing, only that the claim against them was defended successfully.

While indemnification is steadfast protection for directors and officers who act in good faith, it has two limitations:

  1. Shareholder derivative lawsuits. If a director or officer is found liable in a shareholder derivative suit, he or she is not indemnified because the corporation would be paying itself.
  2. Insolvency also prevents a company from honoring indemnification obligations.
  3. Assess the Company’s D&O Insurance Coverage

Settling lawsuits—even if found innocent—can be costly, and can bankrupt a company, or an individual director or officer. Many companies also choose to purchase D&O insurance to protect their executives from legal expenses and personal liability exposures not covered by indemnification.

Unfortunately, D&O insurance doesn’t come in a one-size-fits-all policy. If a previous organization you worked for had D&O insurance, it’s not safe to assume your new employer will have the same extent of coverage.

Your foremost consideration should be: Does the company even offer D&O insurance? D&O insurance covers non-bodily injury claims, such as employment practices and misappropriation of funds. Consider that Commercial General Liability and Umbrella policies usually do not cover management liability lawsuits.

If the company does have D&O insurance, then analyze the extent of the coverage. What are the monetary limits of coverage? Are there exclusions in the policy? Many D&O policies do not cover employment-related claims; separate Employment Liability Practices insurance must be purchased to cover those risks. Along the same lines, Fiduciary Liability is an additional type of insurance that protects executive management from exposures related to the Employee Retirement Income Security Act (ERISA).

Preparing for Your Position

A company can offer you all of the necessary protections in the event of a lawsuit, but it’s a best practice to exercise personal risk management. This includes the following:

  • Upholding your fiduciary responsibilities every time you make a decision
  • Engaging shareholders with consistent communication
  • Knowing the ins and outs of the appropriate regulations, such as the Dodd-Frank Act, the Sarbanes-Oxley Act and the Foreign Corrupt Practices Act, that impact your company

Contact Brier Grieves Agency today to discuss D&O risks and how to protect yourself.