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International Exploration | Canadian Insurance

International Exploration

As the business environment in Alberta evolves, Paul Constance is building Lloyd Sadd's Calgary office into a global player

Risk transfer doesn’t often involve royalty. But there have been times in his career when Paul Constance has had some high-ranking help taking on global perils. When one client—an energy service company—landed a contract in a self-declared country without full international recognition, the lack of recognized laws or regulations made it hard for even an alpha house broker to find coverage.

But Constance had help. A contact in a neighbouring Middle Eastern country had connections with the royal family and the government, the president of Lloyd Sadd Insurance Brokers’ Calgary office, recalls. Their guidance “got us the coverage that the client couldn’t get from other brokers.”

It’s not about having friends in high places, but partners in the right places, according to Constance. “That helped us in this situation,” he says. That perspective has also helped him build the brokerage’s Calgary operations up from scratch over the past two years. And as more Canadian energy firms expand outward into places like Kazakhstan, Algeria and the Democratic Republic of the Congo, he’s determined that it will be the cornerstone of the firm as it grows along with them.

New International Mindset

International expansion is a game changer for any energy company. The same applies to its insurance programs, too. While physical operations abroad might mirror those in Canada, they come with a host of new issues: a shipment going through the Indian Ocean faces piracy risk, and any oil company doing business in Colombia faces a stringent risk assessment by the government to ensure its legitimacy.

“You can prove yourself more by growing a firm from the ground up versus coming into an established firm. You’re able to establish the footprint of the organization.”

“That adds a whole new dimension to the risk that you’d face drilling oil or servicing a well in Saskatchewan,” Constance says.

A huge part of the new risk stems from the paperwork required to allow oil sector players or manufacturers to operate outside their home turf. Governments in newer oil-rich regions are putting new emphasis on insurance law and taxation, Constance says. “It’s really changed the format and how you look at designing a multi-national insurance program.”

That scrutiny requires brokers to pay close attention to transfer payments, taxes and related financial complications. “It’s been a major shift in the last few years,” he says.  “You see a lot of multinational insurance companies, accounting firms and legal firms trying to figure out the right structure. It’s different for every client and every country and that makes it a challenge on all counts.”

Trade sanctions are another big issue. “That’s been a big push for us,” he says. His team works with clients’ boards of directors and executives to ensure governance standards are met.

And, there are the added perils—and questions—that come with political and economic turmoil. “How are they setting up their kidnap and ransom? How are they setting up joint ventures, and what kind of protection can we give them?”

As global perils shift, he is confident that the Calgary branch of Lloyd Sadd is in the best position to meet them head on. As a newer—and leaner—operation, it doesn’t have to pivot as sharply as a larger, more entrenched firm might to meet new risks, Constance argues. It also has the benefit of growing in step with the industry it serves. “[The oil and gas sector] has been globalizing for the last ten years,” he says. “We’ve seen this trend so we’ve built for it.” 

Creating a Footprint

Constance didn’t begin his career with far-flung risks in mind.  He completed the business insurance program at Calgary’s Mount Royal University, but wanted to be a stockbroker. His dean had other plans, referring him to Renfrew Insurance in 1995.

“I told them I’d give them a year and if I didn’t like it, I’d go to the financial side,” he says. But he stayed, eventually becoming a partner at Renfrew in 2000, and helped to build up the firm before the eventual sale of a majority stake to Noraxis Capital Corporation (which is in turn owned by RSA’s holding company Roins Financuial Services Limited). Post-sale, he remained as an executive vice president and board member until 2011.

That year marked a crossroads. He’d sold his interest in Renfrew, and began talks with Marshall Sadd, Lloyd Sadd’s CEO. Their plan: open a Calgary office for the Edmonton-based construction and manufacturing specialist. The challenge appealed to him. “You can prove yourself more by growing a firm from the ground up versus coming into an established firm,” he says. “You’re able to establish the footprint of the organization.” 

Since opening its doors in 2011, the Calgary branch has expanded beyond that initial footprint—doubling its staff to 10 people. It has also reaffirmed Lloyd Sadd’s “total cost of risk” consulting approach. “You can’t be a generalist anymore,” Constance notes. That focus helps clients see risk from a strategic standpoint—assessing financial, strategic and operational risk and then bringing down those costs.

That often takes a client review—site tours, personnel interviews and audits—that cover not only safety policies and claims history, but human resources practices and contracts as well. The end result, says Constance, is a plan that sets out mitigation initiatives and a detailed timeline of activities to implement them.

Typical measures might range from alternative risk management strategies and policy procedures to risk financing and loss control management.  And it’s not just about rate or premium changes, he says. Constance encourages clients to use the assessment as a yardstick to gauge how risk-related costs are changing compared to other key measures, like revenue or its asset base. “It’s been shown to improve the financial position, improve loss performance, add to the stability of operations and reduce costs.”

Supporting that aim: dedicated in-house risk specialists, including transportation and property risk managers. “You never used to see that kind of in-house expertise in independent firms,” he notes. “That’s a clear sign things have changed.”

New Vantage Point

Lloyd Sadd’s 360-degree approach gives Constance—and his clients—a good vantage point to spot risks upstream, according to Michael Baldwin, senior vice president,  finance, and CFO at Trican Well Service Ltd. in Calgary.

Baldwin’s firm is particularly wary of new liability risks in both domestic and international field service contracts. For decades, it’s been accepted anything above ground is the service company’s responsibility, while oil and gas companies take responsibility for operations below. As more legal teams try to transfer below-ground risks to service companies, that’s become a liability “grey area,” he notes.

Constance’s team has helped gather evidence to keep that risk firmly on the other side. And his engagement with Trican’s people—everyone from legal and safety executives to those in the field—has made him a valued part of Trican’s team, says Baldwin.

“If you walked in and talked to the top 30 or 40 managers, I bet 75% of them know who Paul is. That’s a huge benefit,” he says. Another advantage: the Lloyd Sadd proactive approach to risk, which has helped create risk litmus tests for potential expansion. Trican recently acquired a business in Norway, and while they aren’t planning a big offshore push right now, having Constance’s team helps to lay the foundation. “We’re using it as a precedent-setting study so see how we’d approach risk on an offshore basis.”

Lloyd Sadd’s “ten steps ahead” positioning distinguishes them—and Constance—from the rest of the pack, says Mary Robichaud, underwriting manager at CNA Canada in Calgary. “They do their research,” she says. “They gather all the necessary information on coverages and restrictions before their client even goes into foreign countries.”

That prevents 11th hour coverage crises, she says. “The majority of the time,  [the call for coverage] comes when the client is going into that country that day [and] it’s a big scramble. But you have a lot of lead time with Paul.”

And the gains aren’t just for clients. “They’ve become a prominent partner with us,” she notes. “We continue to build upon an already strong relationship with Paul and his team.” 

On the Ground

Expertise and risk forecasting aside, Constance credits his various partners as his most valuable assets. There’s the network of like-minded independent brokerages his firm is linked to through the Globex International Group, along with other independents outside the network, too. “South America, the Middle East and Africa are key areas for the energy sector, and ties to brokerage and specialists there “gives us a leg up,” he says.

They also help establish the lay of the land in specific regions: “What will we need, what are the complications for that country? How do we structure? And how do we work together as a team when we go into these countries?”

Those ties are unique, he points out. “One of the benefits we have as an independent is to choose brokers we want [to partner with],” he notes. “We’re able to go in and find out who is the best in that area, who understands this country, who has the political or legal connections to confirm that we’re setting up the program correctly.”

But even having trusted representative in Kazakhstan or Colombia doesn’t rule out a first-hand look. That’s something Constance has stressed since his days at Renfrew, when one client’s expansion spurred a trip to a fracking operation in Western Siberia. His advice to other brokers: “Go meet the local people, who’s on the executive team, who’s on the ground,” he says. “You need to see the risk to provide management and to find out how things operate and to continue to build a relationship with the country and your partners there.”

Constance is open to advice from others, too. One of his strong points is his willingness to bring in outside expertise, notes Baldwin. When Trican expanded into the US, Constance brought in partner broker McGriff Seibels & Williams Inc. to make sure that all aspects were covered. “He let McGriff take the lead, but he still worked on our behalf,” he says. “As a result, we got a US program that’s tailored to our business and our culture.”

And in his own career, Constance acknowledges guidance from various mentors. He considers the late Chuck Matson, former owner of Superior Oilwell Cementers, as both a life and business mentor, and includes Renfrew executives Bill Jeffray, Norman Cochrane, Doug McIntosh and the late Doug Hughesman among those who’ve offered support and inspiration along the way.

At present, he relies on a local entrepreneurs’ organization for broader support from fellow business owners. The monthly forum meetings the organization holds allow entrepreneurs from various industries to trade ideas, problems and solutions. “It’s like our own personal board of directors,” he says.

Their advice will prove useful as his office continues its upward climb: there are plans to build additional verticals for manufacturing and construction and the recent acquisition of Calgary brokerage Quadrant Insurance Services—which services architects, designers and surveyors—fits the ongoing sector specialization.

And it also fits his central mission: “If you partner with the right people, that gives you a comfort zone,” Constance says. “That way you know your client is being looked after.”


Copyright 2013 Rogers Publishing Ltd. This article first appeared in the August 2013 edition of Canadian Insurance Top Broker magazine.