The best risk manager in the entire animal kingdom isn’t Advocate Health Care’s Scott H. Beckman, recently anointed as the risk manager of the year by one industry publication.
Nor is it former Risk and Insurance Management Society Inc. president Lance Ewing, vice president of risk management for Harrah’s Entertainment Inc. Neither is it RIMS president Janice Ochenkowski, managing director at Chicago real estate and investment powerhouse Jones Lang, LaSalle.
In fact, the best risk manager who ever lived isn’t a member of RIMS, or the Federation of European Risk Management Associations, or any risk management organization at all – never has been and never will be.
This über-risk manager shuns the stoplight, and you won’t find this superstar sitting at RIMS video booths holding court on enterprise risk management. The world’s best risk manager scoffs at lifetime achievement awards, keynote addresses and Powerpoint presentations. In fact, the world’s No. 1 risk manager’s never even been to school, can't even read.
That’s because the best risk manager who ever lived is an ugly beast that goes by the name Crocodylus Niloticus, otherwise known as the Nile crocodile, according to South African author and naturalist Gert Cruyagen, the keynote speaker on the closing day of the annual RIMS convention.
Crocodylus Niloticus is the complete risk management package, in the eyes of Cruyagen. He, or she, has camouflage, speed and agility, knows how to fight back, works well with others, is armed to the teeth in thick, tough body armor, overwhelms adversaries, knows when to retreat to safe havens, and sits at the top of the food chain with no predator to worry about.
Crocodylus, who was around during the time of dinosaurs, can weigh more than a ton. They can live to more than 100 years old.
Now what risk manager wouldn’t want Crocodylus as a mentor? Forget bestowing risk manager of the year titles to the industry's usual suspects. Crocodylus Niloticus deserves to be the only risk manager of the year, every year, forever.
Friday, May 2, 2008
Session: INS Private Equity. HCR ManorCare, Claims and the Carlyle Group
General liability and workers’ compensation claims have not increased since the private equity firm Carlyle Group took over HCR ManorCare, according to Bruce Helberg, risk management director of HCR ManorCare.
“We’re early in the process but I’ve not seen an increase in incident reports from a general liability or workers’ compensation standpoint at all,” said Helberg.
Carlyle took over the 60,000-employee hospital chain in July 2007 for $6.3 billion. It borrowed heavily to do so, and Carlyle ordered a review of the HCA ManorCare’s insurance programs.
The transaction serves as a cautionary tale for other private equity deals and their implications for risk management.
Now that HCR ManorCare, an operator of nursing homes and rehabilitation centers, is a private company, it is still not clear what kind of risk compliance documentation, for example, the company is responsible for releasing.
“No one had a clue as to what could be released and when, so we had to work with the underwriters and keep them at a comfort level. and we’re still not comfortable as to what we can release to underwrites,” said Helberg. “That causes issues with self-insured workers’ comp states.”
Helberg also said that HCR ManorCare, which is self-insured in nine states, has had high self-insured retentions for about eight years. The company was likely to stick with that strategy for the moment,” he said.
“Where the captive came into play on the excess layers, we did go out and buy reinsurance for those layers, and we’ll continue the captive this year but we’ll probably lay off more (risk).”
Whether the HCR ManorCare deal deserves more or less attention from risk managers remains to be seen. But one trend is clear, and it is that private equity deals are more popular than they used to be because they are very profitable for investors, said James R. Lash, executive risk practice leader for Hylant Group Inc.
In the first quarter of this year, there were a total of 221 completed buyouts in the United States and a total of 355 completed buyouts worldwide. Last year, there were a total of 1,162 completed private equity buyouts in the United States and 2,155 buyouts worldwide in 2007.
Not all private equity takeovers succeed, of course, and the landscape is littered with the remains of busted deals: Alliance Data, Harmon International, Advanced Semiconductor, Clear Channel, Sallie Mae and United Rentals.
When that happens, it’s up to the broker to help sort out the insurance programs, the experts said. “If you’re a broker, you’ve got your work cut out for you when these deals happen,” said Lash. “There are a whole bunch of things that affect the broker side.”
Lash said most of the private equity takeovers are friendly, as was the case with HCR ManorCare.
There are more than 1,700 private equity firms operating in the United States. Among the best known are Blackstone Group, Carlyle Group, KKR, Bain Capital and Cerberus, which took over Chrysler last year.
“We’re early in the process but I’ve not seen an increase in incident reports from a general liability or workers’ compensation standpoint at all,” said Helberg.
Carlyle took over the 60,000-employee hospital chain in July 2007 for $6.3 billion. It borrowed heavily to do so, and Carlyle ordered a review of the HCA ManorCare’s insurance programs.
The transaction serves as a cautionary tale for other private equity deals and their implications for risk management.
Now that HCR ManorCare, an operator of nursing homes and rehabilitation centers, is a private company, it is still not clear what kind of risk compliance documentation, for example, the company is responsible for releasing.
“No one had a clue as to what could be released and when, so we had to work with the underwriters and keep them at a comfort level. and we’re still not comfortable as to what we can release to underwrites,” said Helberg. “That causes issues with self-insured workers’ comp states.”
Helberg also said that HCR ManorCare, which is self-insured in nine states, has had high self-insured retentions for about eight years. The company was likely to stick with that strategy for the moment,” he said.
“Where the captive came into play on the excess layers, we did go out and buy reinsurance for those layers, and we’ll continue the captive this year but we’ll probably lay off more (risk).”
Whether the HCR ManorCare deal deserves more or less attention from risk managers remains to be seen. But one trend is clear, and it is that private equity deals are more popular than they used to be because they are very profitable for investors, said James R. Lash, executive risk practice leader for Hylant Group Inc.
In the first quarter of this year, there were a total of 221 completed buyouts in the United States and a total of 355 completed buyouts worldwide. Last year, there were a total of 1,162 completed private equity buyouts in the United States and 2,155 buyouts worldwide in 2007.
Not all private equity takeovers succeed, of course, and the landscape is littered with the remains of busted deals: Alliance Data, Harmon International, Advanced Semiconductor, Clear Channel, Sallie Mae and United Rentals.
When that happens, it’s up to the broker to help sort out the insurance programs, the experts said. “If you’re a broker, you’ve got your work cut out for you when these deals happen,” said Lash. “There are a whole bunch of things that affect the broker side.”
Lash said most of the private equity takeovers are friendly, as was the case with HCR ManorCare.
There are more than 1,700 private equity firms operating in the United States. Among the best known are Blackstone Group, Carlyle Group, KKR, Bain Capital and Cerberus, which took over Chrysler last year.
Thursday, May 1, 2008
Tradeshow Floor: Onward and upward, risk managers
Risk managers, from the sounds of it, you'll need sunglasses for your future. The insurance market is as soft as the bed in my hotel room that I haven't slept in for a week. It's a "responsible" softness, said James Swanke Jr., a managing principal with Towers Perrin, whom I spoke with a couple days ago in the narrow meeting room in the bowels of their showroom booth.
Whether you buy into the insurers saying that they're not cutting prices willy-nilly (like they've done every soft market before), the opportunities are such that risk managers are coming to Swanke asking how they should take advantage of them while they are here.
But possibly the most important point from Swanke: risk managers need to know how to take advantage of these opportunities. How? By being able to communicate their advantages to their bosses. Speak, in other words, in the language of finance instead of insurance.
Part of the reason that Swanke brought up the topic was to promote a new tool from his firm that will help risk managers crunch numbers on cost of capital and produce figures that CFOs can really chew on.
Whether or not you need a mathematical tool to do this is up to you. Whether not Towers Perrin folks now read our blog because I mentioned their new tool is up to them. But what caught me about what Swanke was saying was that I was hearing the same thing everywhere in San Diego. Over a cold beer and an NBA playoff game, the leaders of the Towers Perrin insurance group told me much of the same.
Risk managers need to think, talk and act like business people.
Richard Meyers, in the RIMS special session on the job market on Wednesday afternoon, made the point of saying that 68 percent of risk managers report to finance, whether they work at private, public or nonprofit organizations.
To get the credit you think you deserve for this reporting -- and not just be considered a highly paid clerk or purchaser -- risk managers need to pick up business skills, especially the "soft" ones -- the ability to communicate, persuade, negotiate, collaborate, listen, act important, etc.
Throughout the week, I've heard people complain about the quality and depth of sessions at RIMS. About the traffic on the showroom floor. About their feet throbbing. I've heard people gush about San Diego and the restaurants, parties, weather and people. (The natives, by the way, seem a bit jerky to me. But I'm from the City of Brotherly Love.)
But what really caught my ear here, what really made me appreciate the value of an event like RIMS, was the message that seemed to be mixing with the oxygen in the air, risk managers breathing it in whether they knew it or not -- you are important. Act like it.
Whether you buy into the insurers saying that they're not cutting prices willy-nilly (like they've done every soft market before), the opportunities are such that risk managers are coming to Swanke asking how they should take advantage of them while they are here.
But possibly the most important point from Swanke: risk managers need to know how to take advantage of these opportunities. How? By being able to communicate their advantages to their bosses. Speak, in other words, in the language of finance instead of insurance.
Part of the reason that Swanke brought up the topic was to promote a new tool from his firm that will help risk managers crunch numbers on cost of capital and produce figures that CFOs can really chew on.
Whether or not you need a mathematical tool to do this is up to you. Whether not Towers Perrin folks now read our blog because I mentioned their new tool is up to them. But what caught me about what Swanke was saying was that I was hearing the same thing everywhere in San Diego. Over a cold beer and an NBA playoff game, the leaders of the Towers Perrin insurance group told me much of the same.
Risk managers need to think, talk and act like business people.
Richard Meyers, in the RIMS special session on the job market on Wednesday afternoon, made the point of saying that 68 percent of risk managers report to finance, whether they work at private, public or nonprofit organizations.
To get the credit you think you deserve for this reporting -- and not just be considered a highly paid clerk or purchaser -- risk managers need to pick up business skills, especially the "soft" ones -- the ability to communicate, persuade, negotiate, collaborate, listen, act important, etc.
Throughout the week, I've heard people complain about the quality and depth of sessions at RIMS. About the traffic on the showroom floor. About their feet throbbing. I've heard people gush about San Diego and the restaurants, parties, weather and people. (The natives, by the way, seem a bit jerky to me. But I'm from the City of Brotherly Love.)
But what really caught my ear here, what really made me appreciate the value of an event like RIMS, was the message that seemed to be mixing with the oxygen in the air, risk managers breathing it in whether they knew it or not -- you are important. Act like it.
Sessions: INS208: The dangers of the last session
Speaking in the last session on the last day of RIMS is not for the faint of heart, or the boring. At the start of INS208 (about the perils of online advertising), the RIMS rep who introduced the speakers stressed just how important, cutting edge and interesting the session would be. He cited how only one in 10 session ideas submitted to the RIMS conference organizers gets chosen to be developed into an actual session. Being one in 10, INS208 just had to be good, he was implying, so please stick around until 1 p.m. and the end of the session, he was pleading.
Then he left.
As can be expected, not all of the audience listened to him. Some of us fled. Those of us who stuck it out appeared to be listening all the way through. Maybe my fellow audience members have the unique talent of sleeping with their eyes open. I have tried to learn this skill, and have attended workshops in India with a yoga master who possesses complete control over all his bodily functions, but I am a failure at it.
The speakers, Martin Myers of HellerEhrman LLP and Chad Milton of Marsh, did their best to battle through the audience's unavoidable last-day malaise, and through an Internet connection that was so slow that it could have been dial-up. Maybe it was.
That was probably one of the biggest downfalls of the session. It was, after all, about online adverts, so Myers' efforts to show some examples of said online ads -- streaming video of user-generated Pepto commercials, for instance, or even just the homepage for American Apparel -- were frustrated by the crapitude of the convention center IT system.
It's a shame. The session focus was something I'd never really seen discussed before anywhere else -- how the legal and liability vagaries of the Web can and are affecting advertising in blogs, social networking sites, user-generated video and other content, and other video games. Cool stuff. (Too bad if you left the conference a day or two early.)
It turns out, though, advertisers have much of the same exposures and lack of protections that online content generators have. For instance, when a corporate Web site allows its employees or visitors to blog or post comments, they might be liable for those contents. The ISP might even be liable. Same holds true for companies that create ads from user-generated content.
And the insurance situation is similar too. CGL does not touch this stuff. But E&O underwriters are trying to.
Or as Milton put it, "The E&O underwriters are crawling all over themselves to show they understand this."
Now that I'm rehashing the PowerPoint details of the session, it does seem like some pretty heavy slogging for the last session on the last day of RIMS. To those of you in the audience with me until 1 p.m., and especially to Martin and Chad, I salute you.
Then he left.
As can be expected, not all of the audience listened to him. Some of us fled. Those of us who stuck it out appeared to be listening all the way through. Maybe my fellow audience members have the unique talent of sleeping with their eyes open. I have tried to learn this skill, and have attended workshops in India with a yoga master who possesses complete control over all his bodily functions, but I am a failure at it.
The speakers, Martin Myers of HellerEhrman LLP and Chad Milton of Marsh, did their best to battle through the audience's unavoidable last-day malaise, and through an Internet connection that was so slow that it could have been dial-up. Maybe it was.
That was probably one of the biggest downfalls of the session. It was, after all, about online adverts, so Myers' efforts to show some examples of said online ads -- streaming video of user-generated Pepto commercials, for instance, or even just the homepage for American Apparel -- were frustrated by the crapitude of the convention center IT system.
It's a shame. The session focus was something I'd never really seen discussed before anywhere else -- how the legal and liability vagaries of the Web can and are affecting advertising in blogs, social networking sites, user-generated video and other content, and other video games. Cool stuff. (Too bad if you left the conference a day or two early.)
It turns out, though, advertisers have much of the same exposures and lack of protections that online content generators have. For instance, when a corporate Web site allows its employees or visitors to blog or post comments, they might be liable for those contents. The ISP might even be liable. Same holds true for companies that create ads from user-generated content.
And the insurance situation is similar too. CGL does not touch this stuff. But E&O underwriters are trying to.
Or as Milton put it, "The E&O underwriters are crawling all over themselves to show they understand this."
Now that I'm rehashing the PowerPoint details of the session, it does seem like some pretty heavy slogging for the last session on the last day of RIMS. To those of you in the audience with me until 1 p.m., and especially to Martin and Chad, I salute you.
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