Q&A with Lukas Bubb
AIG Europe – Major loss adjuster, financial lines
In an exclusive interview with Who’s Who Legal Lukas Bubb speaks about his role at AIG Europe, recent developments for financial lines with the insurance market, and his key requirements when instructing external counsel.
AIG Europe is part of the American International Group (AIG), a leading global insurance organisation serving customers in over 100 jurisdictions. AIG’s customer base ranges from institutional to commercial and individual, and the organisation is known for its vast and innovative range of insurance products.
Among AIG’s many products and services is its financial lines covering areas such as directors’ and officers’ (D&O) liability insurance, financial institutions, PrivateEdge, cyber liability and professional liability. This field of work has seen a sharp increase in activity in recent years, with claims brought against directors across Europe at an all-time high according to AIG’s Strategic Risk Guide to D&O Liabilities white paper.
Within this department sits Lukas Bubb, a major loss adjuster. A graduate of Zurich University’s law school, he took an early interest in the area of D&O liability, writing papers on D&O penal risks of operating a company in distress and the significance of the efficiency defence in Switzerland and European merger controls. After an internship with Wuersch & Gering LLP in New York he became a financial lines underwriter with Chartis Europe in Zurich. He has been handling claims for AIG in Switzerland and Austria for four years. In addition to this, he is an armour officer and former company commander, ranking Captain in the Swiss Armed Forces. He currently serves on the Swiss Army staff for Law of Armed Conflicts, teaching junior officers the basics of international humanitarian law.
Tell us about your role as a major loss adjuster at AIG Europe.
When a claim notified under an insurance policy triggers a high monetary exposure or thematic criteria such as regulatory, bankruptcy or antitrust proceedings against our insured, we consider it a major loss. When such an event takes place, it is my responsibility that AIG makes good on the promise made in the insurance policy. It is also my responsibility to ensure that the loss reserves adequately reflect AIG’s exposure for these events.
I handle a claim in the same way that I would manage a project. Usually a lot has happened by the time the insurer is involved, so my first task is to assess the legal and factual situation. This is where I work out which individuals within the various stakeholders must be informed or consulted, in order to bring a claim to resolution. The broker who placed the policy, the insured and in many cases a third party (ie, a claimant in a liability claim, a regulator, the police or the perpetrator of a crime against our insured who may still have recoverable assets or information) play an important role and it is a key responsibility to have their respective buy-in for the resolution plan I have developed. Some may already be represented by lawyers. This is also the first time I consider appointing outside counsel, either for AIG’s benefit as coverage, monitoring or investigative counsel, or for the insured’s benefit as defence counsel in a regulatory proceeding or in a liability claim.
After a preliminary assessment of the situation, I will agree on a resolution plan with the insured and, if feasible, the other stakeholders, outlining the expected time frame and respective responsibilities required to bring the claim to closure.
Describe a typical day at AIG.
A typical day begins in the office with starting my computer – everything else is impossible to predict. With an average of 100 open files in any possible state, it is impossible to plan a day in advance because any case may require immediate attention on short notice.
After analysing a case and reaching a conclusion, the most time-consuming aspect of my position is to get the different stakeholders’ buy-in for the decisions I make. A lot of this is done by circulating the essence of a case by e-mail and leading the subsequent discussions on a conference call if required. I spend about 20 per cent of my time outside the office, meeting with our clients’ legal counsels to discuss the legal positions of a case, negotiating with claimants and their attorneys or sharing claims experiences with brokers or potential clients.
What criteria do you use when deciding which firms or lawyers to use when looking to instruct external counsel?
First, I will look for an expert in the specific field and the specific jurisdiction. However, this usually doesn’t provide for an adequate short list yet. Depending on what I want to do with a claim, I will need a different character to help me reach my desired outcome. After screening by expertise, I will therefore select the lawyer best suited by their personality. For example, in the seldom case where the relationship to the counterparty is deemed irrelevant and the stakes are high, I will hire the toughest fighter I can get. When the relationship is more complex and a subtle approach is warranted, we will appoint a conciliatory lawyer who may have mediation experience. AIG caters to all industries. Dealing with a professional liability claim in the private banking sector requires a completely different tonality and style than a management liability case of a steel manufacturer. Most lawyers will primarily advertise with their technical expertise and underline it with chic interior design, expensive paper and an elegant internet appearance. While these elements can provide an insight into how a law firm would like to see itself, what I am really interested in is the lawyer’s values.
In the insurance industry, how would you describe the competition in the legal marketplace? Is there a lot of choice for clients such as yourself? How can firms distinguish themselves?
Any reader will agree that the number of lawyers claiming to be experts in “commercial law”, “corporate law” and “insurance law” in any given jurisdiction is very high. It seems that these areas pay well and are therefore deemed compulsory listing for any practising lawyer. Frankly, such “expertise” laundry lists are not helpful for me and shed a poor light on the firm advertising their “generalist experts”. Unless I know a lawyer by reputation or from previous cases they have handled for us or for a counterparty, I will always look at academic papers they have published.
Claims can occur in any part of the world, and so local expertise is crucial. I find that many large law firm networks don’t use the potential in cross-country cooperation. Small and medium-sized law firms can be just as effective with informal networks, where the lawyers are personally acquainted.
What made you decide to work in-house?
Starting at Chartis/AIG was a coincidence. I had just finished company commander training in the military and was actually looking for a position with a law firm in Zurich. What attracted me to AIG was the employee empowerment on all levels. I appreciate the ownership I have of my cases and the freedom to take decisions and proactively pursue resolutions. Unlike my colleagues at law firms, I don’t account for my work hours towards a client. I like that I can focus my energy on the cases that interest me professionally. I determine whether a case requires an outside counsel to assist me, either as a sparring partner to get an outside view, or as a representative of AIG.
Tell us about any recent projects that your team has been working on. Which law firm(s) did you hire?
We won a high exposure professional liability lawsuit in 2015, and though costly, we convinced the court that the clients were sufficiently informed of the investment risks. Baudacci Nigg Stenberg monitored the proceeding on our behalf and enabled AIG to hold adequate reserves throughout the proceeding. With the current financial industry reforms I expect this type of claim to increase in Europe.
Also in 2015, we won coverage litigation with CMS von Erlach Poncet. Whilst we were very confident in our legal and moral position, the amounts at stake for us and the excess insurers combined aggregated about €100 million. They were outstanding, playing both on the technical, legal and the moral merits of our case.
What would you say is the biggest challenge facing the insurance market at the moment?
On a European level we have seen an increase in regulatory activism in the banking and finance sector, driven both by political pressure to ensure industry stability after the 2008 financial crisis events, an increase in consumer protectionism (MIFID 2, etc), and diminution of tolerance towards tax evasion. These trends lead to an increase in claims notified to us. Both as an insurer and a corporation, we are also very conscious of cyberspace threats.
How do you see the industry developing over the next five years?
Both financial and commercial institutions are increasing their risk management capacity within their own organisations. Compliance officers report to the CEO instead of the CFO, corporate risk managers manage sizeable teams where there was only an individual before, and compliance officers are increasingly senior employees. I suspect that this increase in internal costs may be one driver for our insureds’ heightened sensitivity for insurance premiums. New alternative insurance capital providers devaluate an insurer’s selling point of risk capacity provider for major events. The insurance industry is therefore increasingly focused on partnering with the risk managers of the insureds, providing risk engineering and legal know-how. I predict that this trend will continue.
One of the most prominent developments in the European insurance market this year has been Solvency II. Has the implementation of this programme affected the company/your own role and, if so, how?
This is currently being dealt with in our legal, actuarial and other departments. Within claims we don’t have much to do with these adjustments yet, but I expect regulators to look at this aspect more closely in the future.