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Staking a Claim

Low client loads per employee and a focus on claims advocacy are helping Iridium Risk Services' Valerie Cusano carve out a piece of the lucrative Alberta energy market

Val Cusano, president at Iridium Risk Services

Iridium Risk Services Inc., an independent Calgary-based brokerage, wrote $74 million in annual premiums for some of Alberta’s largest energy companies last year. It may seem like small potatoes in a market dominated by big international brokerages. The oil and gas industry is, after all, claims-intensive with annual premiums ranging from tens of thousands to tens of millions of dollars each year. Daily risks associated with drilling include everything from pollution liability and third-party property damage to evacuation coverage and business interruption insurance. A single mishap can easily lead to simultaneous claims by multiple parties in the hundreds of millions of dollars.

“Exploration is by its very nature a high risk activity,” explains Iridium president Valerie Cusano. “As soon as a firm incorporates and starts raising funds they need a directors and officers’ (D&O) liability program in place. Once they start acquiring land and hiring subcontractors, a general liability package to cover off pollution liability, as well as third-party liability risks is imperative, as is a policy to protect against property damage that may ensue because of oil operations.”

It’s estimated large firms like Marsh, Aon, JLT and Willis write approximately 80 per cent of the billions of dollars in energy premiums in the province each year. But Cusano has made a name for her firm as a boutique player with a valuable edge over the competition: exceptional client service.

“There’s a perception out there that if you have this huge brokerage you have all these resources to tap into,” says Cusano. “The reality is that these brokers each handle many accounts, too many in most cases.”

And insurance in the energy industry is far from transactional. Each claim may involve a number of stakeholders. One of Cusano’s specialties is helping clients to contractually mitigate and manage their transfer of risks and to ensure that their insurance programs are structured accordingly.

Iridium maintains low account loads per employee relative to its competitors, and Cusano has a reputation as a detail-oriented client advocate. She has also created a strategic web of partners and colleagues with niche expertise across the industry. The firm has grown 20-fold in employees since it was created in 2005, and has recently established Palm Captive Consultants in Barbados to help clients set up and strategically grow captive insurance programs. Cusano intends to surpass this pace of growth within the next decade.

From Lawyer To Producer

Fifteen years ago, Cusano was not technically in the insurance business at all. She was a twenty-something, fresh-faced lawyer, following in her father’s footsteps, carving out her own specialty in insurance defence litigation. With her background in biology, Cusano had a keen eye for detail and she came to understand the nuances of the both the energy and insurance industries very quickly.

“Insurers would come to us and give us the files for all the claims. We would defend these claims and determine whether the client should pay or not,” says Cusano. “I enjoyed it, the litigation work in particular. But it was fairly paper intensive.”

Cusano soon found her interest in insurance overtaking her love of litigation.

“I also wanted to focus on getting married and having children, and I mistakenly believed if I moved into the insurance industry I would have less work and more time for these things. But I maybe underestimated my own career ambition.”

In 1996 Peter Redmond, then of Marsh Canada, came knocking. Marsh was looking for a claims manager for its Western Canada office in Calgary, and Redmond said they were looking for something “a little different.”

“The goal was to change the focus of the claims department to more of an advocacy group for clients,” says Cusano. “Peter Redmond—who’s now a director in my company and the president of Purves Redmond in Toronto—gave me carte blanche in how I could grow the claims department with this mandate.”

Within six years Cusano transformed the department, building a team focused on client service and advocacy. In 2002, on the heels of handling “a very large hurricane loss” for an energy client, the client asked that Cusano handle every facet of their account, one of the five largest in the office.

“I probably should have had some formal training,” Cusano says with a laugh. “I didn’t. But I had really good mentors.”

Soon after, something happened that shook the industry to its core. In the autumn of 2004, then New York Attorney General Eliot Spitzer launched a massive probe into contingency compensation. Marsh was eventually targeted in a lawsuit.

Large brokerages necessarily began sifting through corporate policies with a fine-toothed comb, examining and executing procedures extremely carefully while under Spitzer’s watch.

“The share price plummeted, people that had been fun to work with and were my mentors were leaving, and the company became very internally focused on process and compliance,” says Cusano. “And the service factor was a huge issue. The client would be sitting there with a new broker every six months because the turnover was so enormous. The problem was that the client would be educating the broker, while paying the broker.”

But out of the rubble came opportunity for Cusano, when Redmond, who had left Marsh to create Purves Redmond in Toronto, came knocking on Cusano’s door for the second time in her career.

Redmond had decided to partner with a strong independent energy brokerage in London, Newman Martin & Buchan, in an effort to create an independent broker in Calgary that could compete with the multinational brokers who had previously dominated. “He said ‘we’d like to start up an independent retail brokerage in Calgary, we want you to run the company and be the president, and you’ll get a significant equity piece in the company,’” recalls Cusano.

“The day it started, July 27, 2005, it was just me,” says Cusano. “But I had a fairly good idea of who I wanted to bring on as partners.”

Within 30 days, Roger Swierstra, a colleague of Cusano’s at Marsh, became her first partner at Iridium.

“The biggest challenge was setting up the company operationally,” Swierstra recalls. “We were just three people and we shared office space with a small energy firm. But we knew that there was an opportunity to create a company that was focused on clients, moving away from the transactional nature of the business that had been created in the post-Spitzer environment.”

Claims Focus

News of Cusano’s venture quickly spread. Nexen, one of the largest independent energy firms in Canada, came on board as Iridium’s first client.

“Val had been our broker at Marsh and we were so impressed with her that when she decided to go out on her own, we followed her,” says Mark Roberton, director of risk and insurance at Nexen. “She is very talented at the things we’re interested in, which is claims and D&O. She’s the best there is.”

Other clients soon followed, including small start-up oil and gas companies, service contractors and large, integrated exploration and production companies operating in Canada and abroad.

Cusano’s small team of partners and staff devote unprecedented time to their clients. They are on-hand to counsel clients on every aspect of business that impacts their insurance programs, whether the client is collaborating with other firms, making acquisitions and sales, or requires advice for their boards on risk management and risk retention.

“For an account the size of ours, we’re in touch with Val daily,” says Roberton. “We’re a global company and there are things happening every single day. Val’s legal background has brought enormous value to Nexen.”

On the claims side, Cusano’s background in claims management and litigation means she and her staff are able to process claims quickly and effectively, with a clear idea of where to draw the line in the sand when multiple stakeholders are involved.

“If a hurricane blows through the Gulf of Mexico and hits 15 platforms, there is property damage and business interruption loss at every single one of those platforms,” explains Cusano. “We have to look at direct and contingent business interruption exposures, analyze multiple players, platforms and pipelines. This means working with a variety of accountants, environmental experts, advocating with multiple insurance companies and adjusters. The dollar value could exceed $200 million and we want to be sure our client is deriving the maximum benefit from its coverage and that the claim is paid out as quickly as possible.”

Iridium now employs 20 people and has 120 clients as part of its Calgary office.

“We’re growing because we have a number of advantages that can’t be replicated by our competition,” says Swierstra. “Number one, we’re an employee-owned company, so the people that work at our firm are very motivated. And Val’s approach to everything is highly collaborative, so everyone has a stake in decision-making.”

The other benefit Iridium offers to their energy clients is the ability to broker on behalf of myriad overseas insurers, wholesalers and mutuals.

“We don’t have any legacy issues,” explains Cusano. “If our client wants to use one brokerage in Nairobi and another in London, we don’t have to use a broker that doesn’t meet our clients’ service standards just because we share the same name.”

The firm’s ten-year plan established collaboratively last year is to keep Iridium doing what it’s doing, but faster and on a bigger scale.

“We have what some call a BHAG: a big, hairy, audacious goal,” says Cusano with a laugh. “You have to have one of those really if you’re going to create an industry-changing company. Our goal is to knock down that 80 per cent and become the dominant broker in the industry.”

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Advice for young brokers

While there can be a desire to “jump into the fun stuff” associated with a broker’s role, Cusano advises young brokers eschew senior roles.

“There’s nothing wrong with pushing through paper and analysing polices and doing the grunt work for a few years. It gives you a really good understanding of the business,” says Cusano. “At the end of the day, the client doesn’t care how many rounds of golf they played with you that summer. The client sees the value when they have a loss, and they are under tremendous stress and tremendous pressure, and they’re saying ‘help me out and get my claim paid as fast and easily as possible.’ That’s when your value as a broker becomes truly obvious to your clients.”

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Copyright 2011 Rogers Publishing Ltd. This article first appeared in the June 2011 edition of Canadian Insurance Top Broker magazine.

 

Transcontinental Media G.P.