Effort to build insurance program starts at beginning: Who Silverstein Properties is and what it does
Posted On: Apr. 10, 2016 12:00 AM CST
Shari Natovitz wasn't around to see the insurance market's reaction to Silverstein Properties lnc. in the immediate aftermath of the Sept. 11, 2001, terrorist attacks that destroyed the World Trade Center towers.
But, said Ms. Natovitz, who joined Silverstein in 2005 and who is now the company's senior vice president and director of risk management, “based on the programs I inherited and based on the response I got from the market at the time, I believe it was extremely difficult for Silverstein during the years immediately following 9/11 to secure markets that were enthusiastic about supporting Silverstein.”
And it wasn't just 9/11 — it was a combination of that and “the way we were purchasing insurance, and the latter was a formula for failure,” she said. “Silverstein needed to create an identity in the insurance marketplaces.”
The company lacked a master insurance program, she said, and each building was treated independently. The insurance purchase was essentially framed by the agreement reached with the lenders, and the insurance buyer was not involved in the negotiation, Ms. Natovitz said.
“While the placements resembled each other with similar terms and carriers, the first named insured was the building ownership entity and there was no common expiration or group marketing,” she said.
When she became responsible for the operational insurance in late 2005, she and her broker, Willis of New York Inc., “agreed that this needed to be a master program, a suggestion that had previously gotten no traction here.”
“We needed to overcome some onerous wording in the lending agreements as respects use of a blanket limit or shared limit, and we did so by supplying the various lender groups — each was a consortium, so a single building might have five to 10 financial institutions that all needed to approve the change —with modeling of the catastrophic perils showing the overall impact of all the buildings in the portfolio in a single event,” she said. “This process and the subsequent discussions with each lender's insurance consultant took almost a year to complete.”
“The lack of a master program and a single identity in the market eliminated any opportunity for the markets to see what a significant buyer we were,” she said.
“The markets didn't know us,” she said. The underwriters she called congratulated her on the new position but said “basically they would never write anything for Silverstein. I knew if they knew us, other than through tabloid headlines or as courtroom adversaries, they would want to do business with us,” she said.
“It became very clear in the first week or so after I took the job that relationships that I had assumed would become an integral part of the future World Trade Center program were not materializing without a significant change in the way we were doing business with the market,” said Ms. Natovitz. “Nobody wanted to play with me.”
The most critical function, she said, was reintroducing Silverstein to the marketplace, which she did with the help of her broker, Willis of New York Inc. This involved face-to-face interactions with insurers.
“We invited underwriters and senior management of carriers to 7 World Trade Center,” she said. “We sent them an invitation that included two crucial things.”
One was a video featuring Joseph J. Plumeri, who was then chairman of Willis Group Holdings P.L.C., and Silverstein's WTC division president as well as the company's heads of design and construction.
The second crucial element was an introduction to Silverstein with resumes of all the key people dedicated to the rebuilding.
“We showcased their experience on other major projects and presented our management process, which was an active hands-on approach with our staff, including qualified architects, engineers, project managers and estimators, to establish the experience and expertise we were investing as our commitment to a "hands-on' approach to managing the projects,” she said.
Inviting underwriters to 7 World Trade Center was also critical, said Ms. Natovitz. This not only allowed Silverstein to introduce its entire team, including Chairman Larry Silverstein and Janno Lieber, president of the World Trade Center Division, “but we could use 7 WTC to showcase the first completed tower and underline our ability to effectively deliver these towers,” she said.
“We said nothing about insurance,” said Ms. Natovitz. “We asked them to come meet with us so we could talk about the future of downtown and Silverstein's part in it.”
She said Silverstein held meetings at 7 World Trade Center because “that gave us a very visual part of our presentation” and is the prototype for the other new World Trade Center buildings. “The building has all the same life safety and robust physical protections built into it.”
Silverstein's enhanced life safety and other protections featured in the new buildings include a reinforced concrete core; beams, anchors and columns that are above building code requirements; multiple paths for egress and enhanced firefighter access; and enhanced security features such as bollards.
“We could take them on a tour and show them those features and show them we knew exactly what we were doing because we had already successfully built the first tower,” she said. “We got an extremely positive response from that.”
Silverstein took the approach a step further, saying the company would like to work with the underwriters in putting a program together but could not release information before its potential insurers signed confidentially agreements for technical reasons.
“That was to protect the information, and we felt if they took the time to read and sign the agreement, that would be a good measure of their interest in writing the program,” said Ms. Natovitz.
The approach worked. More than 90% of the underwriters Silverstein spoke to said, “Let's continue on, let's have a discussion about this,” said Ms. Natovitz.
“After receiving signed confidentiality agreements from all the markets, we sent them a technical submission about the project with information ranging from security to geotech surveys to safety programs to specific construction means and methods,” she said.
“There was not going to be one single carrier,” she said.
Silverstein needed two groups of underwriters: those writing the operations coverage and those writing the WTC coverage.
“In many cases, the same carriers participated on the construction coverages and also as part of the operational program, but typically there were different divisions and capacity involved,” she said.
“Both required the same thing — the time to sit down with the senior leadership and talk about how we did business,” she said. “Willis and I did that together. Willis created the access. We operated from a platform of transparency. We explained where we felt we were the "best in practice' and where we were committed to becoming best in practice.”