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.
Showing posts with label Hot Topics. Show all posts
Showing posts with label Hot Topics. Show all posts
Friday, May 2, 2008
Wednesday, April 30, 2008
Hot Topics: Hot Parcels
Now, doesn’t that just burn you up!
Last October, when the San Diego area sustained more than $1 billion in insured losses from seven deadly wildfires, managers with a Texas-based company by the name of The First American Corporation, called up one of its largest clients, Citibank, with an urgent bit of news.
Citibank, the First American managers said, had about 1,200 properties at risk from the fires that scorched parts of San Diego County, according to David Rogers, marketing director of First American.
The number, large as it was, wasn’t about to threaten the company’s quarterly earnings, not when the company had a subprime lending crisis on its hands and it’s former CEO, Chuck Prince, was about to step down.
But within weeks of the fires, said Rogers, Citi got another call, this time from its insurance carrier. The carrier, according to Rogers, told the bank it was holding mortgages of as many as 14,000 properties at risk of damage in the so-called burn polygon.
How was such a large discrepancy – about 12,800 properties – possible? “They were going by the zip codes in areas supposedly affected by fires,” said Rogers. The carrier simply didn’t have the granularity of First American, he said.
In itself the discrepancy may not have amounted to much. But the only way to check whether a house had suffered any damage was to send inspectors in a car, at the cost to Citibank of $50.00 per property.
Cost of inspections to Citi based on 1,200 properties: $60,000. Cost of inspections to Citi based on 14,000 properties: $700,000.
OK, we’ll admit that First American is getting good press in this blog post. But hear me out as to why First American deserves some attention here.
For decades, the company’s been supplying mortgage lenders with property data, down to the latitude and longitude of the location of a home. As a result, the company has what it believes is the most accurate property data in the nation because drills down to the very parcel on which the property stands.
But it’s only in the past two or three years that information at the parcel levels has been available, in part because of geospacial information systems. So now, looking to expand into new markets, First American will soon release what it calls its Riverine Flood Risk Score.
The tool, a sort of FICO score for homes and businesses, will help underwriters pinpoint how much a property is exposed to potential flooding.
The model applies hydrological principles to risk data, according to Kevin Madden, senior vice president of business development for First American, and provides a more accurate understanding of property risks faced by homes and businesses in and around flood zones.
Data quality has always been an issue among the carriers. Many use data supplied by the Federal Emergency Management Agency to determine the exposure of properties to flooding, but that data isn’t always up to date.
“With insurance carriers, you may not know how current the data is,” said Rogers. “So there’s billions of dollars in unrecognized exposure out there because tools have not existed.”
There are other data vendors who assess the risk of flooding, of course, and some of them buy the data from others like First American. But what makes First American different is that it has spent decades compiling data on individual properties. It will soon own data on more than 100 million of about 114 million land parcels in the U.S., Rogers said.
Last October, when the San Diego area sustained more than $1 billion in insured losses from seven deadly wildfires, managers with a Texas-based company by the name of The First American Corporation, called up one of its largest clients, Citibank, with an urgent bit of news.
Citibank, the First American managers said, had about 1,200 properties at risk from the fires that scorched parts of San Diego County, according to David Rogers, marketing director of First American.
The number, large as it was, wasn’t about to threaten the company’s quarterly earnings, not when the company had a subprime lending crisis on its hands and it’s former CEO, Chuck Prince, was about to step down.
But within weeks of the fires, said Rogers, Citi got another call, this time from its insurance carrier. The carrier, according to Rogers, told the bank it was holding mortgages of as many as 14,000 properties at risk of damage in the so-called burn polygon.
How was such a large discrepancy – about 12,800 properties – possible? “They were going by the zip codes in areas supposedly affected by fires,” said Rogers. The carrier simply didn’t have the granularity of First American, he said.
In itself the discrepancy may not have amounted to much. But the only way to check whether a house had suffered any damage was to send inspectors in a car, at the cost to Citibank of $50.00 per property.
Cost of inspections to Citi based on 1,200 properties: $60,000. Cost of inspections to Citi based on 14,000 properties: $700,000.
OK, we’ll admit that First American is getting good press in this blog post. But hear me out as to why First American deserves some attention here.
For decades, the company’s been supplying mortgage lenders with property data, down to the latitude and longitude of the location of a home. As a result, the company has what it believes is the most accurate property data in the nation because drills down to the very parcel on which the property stands.
But it’s only in the past two or three years that information at the parcel levels has been available, in part because of geospacial information systems. So now, looking to expand into new markets, First American will soon release what it calls its Riverine Flood Risk Score.
The tool, a sort of FICO score for homes and businesses, will help underwriters pinpoint how much a property is exposed to potential flooding.
The model applies hydrological principles to risk data, according to Kevin Madden, senior vice president of business development for First American, and provides a more accurate understanding of property risks faced by homes and businesses in and around flood zones.
Data quality has always been an issue among the carriers. Many use data supplied by the Federal Emergency Management Agency to determine the exposure of properties to flooding, but that data isn’t always up to date.
“With insurance carriers, you may not know how current the data is,” said Rogers. “So there’s billions of dollars in unrecognized exposure out there because tools have not existed.”
There are other data vendors who assess the risk of flooding, of course, and some of them buy the data from others like First American. But what makes First American different is that it has spent decades compiling data on individual properties. It will soon own data on more than 100 million of about 114 million land parcels in the U.S., Rogers said.
Monday, April 28, 2008
Hot Topics: Fireman's is Windmilling
Fireman’s Funds' John Barnwell has got a gleam in his eye and it is mostly green. The New York-based vice president and ocean cargo product executive has made it a priority to expand the company’s business in Delay-in-Start-Up coverage.
DSU, as many of us may know, is coverage should a manufacturer or some other entity fail to realize the income it had planned for due to delays in the delivery of the parts needed for a particular enterprise. The niche seems to expanding and becoming attractive at this time for several reasons.
The establishment of an ever-increasing global supply chain being one of them, and the tendency of U.S. companies to locate manufacturing facilities and other pieces of their operation overseas being another.
In particular, Barnwell and Fireman’s are focusing on those alternative energy projects that companies across the globe are getting into in the race to outrun the global warming that many say is the chief threat, not only to our economy, or human civilization, but much of the rest of the planet.
As global energy companies construct wind farms, nuclear power plants, coal refuse plants, ethanol plants and solar panels as fast as they can make them, they are increasingly exposed to the risks that the parts they are ordering from around the planet might not arrive quickly enough for the plant or project to produce revenue in the timeframe that its investors need it to.
“Obviously the wind farm aspect of it is attractive to us. That’s green, that’s kind of what we’re trying to do, Allianz (Fireman’s parent) is trying to do that too. So, yeah there are a lot of projects that are happening now even though the economy is constraining. And this is a global play, it’s not a U.S.-only, this is people who have projects in the Far East, the Middle East, anywhere.”
Anywhere and everywhere, that’s where Fireman’s wants to be in DSU, helped by capacity from its German parent, Allianz AG.
“So this is an area that we are going to expand into and kind of rejuvenate and say now we are a market and we can offer $100 million of capacity which not many other players can really do.”
Although Fireman’s has U.S. competitors in this business, most notably AIG and Liberty Mutual, Barnwell says this type of business has traditionally been something found in the London market, not the U.S. and certainly not traditionally with Fireman’s Fund.
“What historically happened with this type of business was that it would go to London because they could build huge capacity for the coverage. The U.S. market is not so much a quota-share market where everybody signs and takes a piece, it’s more of a ‘Hey I’ll write the whole thing.’ The London market is more like everybody takes their little piece and you can build huge capacity, so a lot of U.S. business would migrate over to the London market. And the London market is good at this, but most of them don’t have the in-house loss prevention team that we do. So our thought was this is a niche that isn’t as affected by the soft market and we have all of the ingredients to do this.”
In a soft market, Fireman’s, like many, is looking for places to expand business without damaging profitability and DSU is Barnwell’s pet project.
“It’s pretty exciting. If I had to categorize which of my initiatives I wanted to push from a marketing and also from growth potential this year, this is it. There is other stuff that we have that we’re working on but this is the one that I could see has the biggest payoff,” Barnwell said.
Fireman’s parent company Allianz is doing all it can to get in covering green building and other earth-friendly projects, according to company spokesman Atle Erlingsson, who joined Barnwell and I on a day when those very ocean-going carriers Barnwell works to insure plied the bay behind the San Diego Marriott Hotel and Marina.
Barnwell says projects like wind farms have big exposures to startup delays, and with the growth in alternative energy projects worldwide, the premiums might line up in sizable quantities.
“You’re not talking about $50,000 premiums, you’re talking about premiums that could get upwards of seven figures. You could have big chunks of premium, big exposures, but big chunks of premium depending on the size of the project.”
DSU, as many of us may know, is coverage should a manufacturer or some other entity fail to realize the income it had planned for due to delays in the delivery of the parts needed for a particular enterprise. The niche seems to expanding and becoming attractive at this time for several reasons.
The establishment of an ever-increasing global supply chain being one of them, and the tendency of U.S. companies to locate manufacturing facilities and other pieces of their operation overseas being another.
In particular, Barnwell and Fireman’s are focusing on those alternative energy projects that companies across the globe are getting into in the race to outrun the global warming that many say is the chief threat, not only to our economy, or human civilization, but much of the rest of the planet.
As global energy companies construct wind farms, nuclear power plants, coal refuse plants, ethanol plants and solar panels as fast as they can make them, they are increasingly exposed to the risks that the parts they are ordering from around the planet might not arrive quickly enough for the plant or project to produce revenue in the timeframe that its investors need it to.
“Obviously the wind farm aspect of it is attractive to us. That’s green, that’s kind of what we’re trying to do, Allianz (Fireman’s parent) is trying to do that too. So, yeah there are a lot of projects that are happening now even though the economy is constraining. And this is a global play, it’s not a U.S.-only, this is people who have projects in the Far East, the Middle East, anywhere.”
Anywhere and everywhere, that’s where Fireman’s wants to be in DSU, helped by capacity from its German parent, Allianz AG.
“So this is an area that we are going to expand into and kind of rejuvenate and say now we are a market and we can offer $100 million of capacity which not many other players can really do.”
Although Fireman’s has U.S. competitors in this business, most notably AIG and Liberty Mutual, Barnwell says this type of business has traditionally been something found in the London market, not the U.S. and certainly not traditionally with Fireman’s Fund.
“What historically happened with this type of business was that it would go to London because they could build huge capacity for the coverage. The U.S. market is not so much a quota-share market where everybody signs and takes a piece, it’s more of a ‘Hey I’ll write the whole thing.’ The London market is more like everybody takes their little piece and you can build huge capacity, so a lot of U.S. business would migrate over to the London market. And the London market is good at this, but most of them don’t have the in-house loss prevention team that we do. So our thought was this is a niche that isn’t as affected by the soft market and we have all of the ingredients to do this.”
In a soft market, Fireman’s, like many, is looking for places to expand business without damaging profitability and DSU is Barnwell’s pet project.
“It’s pretty exciting. If I had to categorize which of my initiatives I wanted to push from a marketing and also from growth potential this year, this is it. There is other stuff that we have that we’re working on but this is the one that I could see has the biggest payoff,” Barnwell said.
Fireman’s parent company Allianz is doing all it can to get in covering green building and other earth-friendly projects, according to company spokesman Atle Erlingsson, who joined Barnwell and I on a day when those very ocean-going carriers Barnwell works to insure plied the bay behind the San Diego Marriott Hotel and Marina.
Barnwell says projects like wind farms have big exposures to startup delays, and with the growth in alternative energy projects worldwide, the premiums might line up in sizable quantities.
“You’re not talking about $50,000 premiums, you’re talking about premiums that could get upwards of seven figures. You could have big chunks of premium, big exposures, but big chunks of premium depending on the size of the project.”
Hot Topics: Is the Hot Streak Over?
Prices are soft, everyone knows that.
The property/casualty sector may well not be profitable in underwriting by the end of 2008, everyone knows that too.
But here’s a little something we may not know: It’s that there’s been an uptick in noncatastrophe-related risks.
Y’all may not have noticed, but it’s something to keep an eye on, according to Shivan S. Subramaniam, chairman and CEO of FM Global.
There were some nasty tornados in February and March, and the insured losses they caused were more than $1 billion. The spinners aren’t any more powerful than they used to be, but there are a lot more commercial properties standing in their way, whether they’re located in “Tornado Alley,” in Oklahoma, or in the more moist climes of the Southeast.
A billion dollars here and a billion dollars there isn’t quite enough to make much of a dent in the wallets of the property/casualty coffers, so the nasty spinners in themselves aren’t anything to get too bothered about.
But if you couple that with the normal frequency levels of natural catastrophes, then you’ve got a problem. “You combine all of those and you wonder that in 2008, it’s almost certain to have an underwriting loss,” said Subramaniam.
Oh yes, then there’s the subprime issue, but that’s a whole other story. Suffice it to say that after two very good years, 2008 could put a sudden end to the hot streak. Ouch. Taking a bite out of the bottom line might mean subbing in a pickup band for the A-list entertainment like Hootie and the Blowfish.
While it’s true the industry might swing to an underwriting loss, it’s still a little bit early to tell. Analysts, as we know, love “forward looking” thinking. But they’re often guilty of looking too far forward.
We’ll just have to wait and see.
The property/casualty sector may well not be profitable in underwriting by the end of 2008, everyone knows that too.
But here’s a little something we may not know: It’s that there’s been an uptick in noncatastrophe-related risks.
Y’all may not have noticed, but it’s something to keep an eye on, according to Shivan S. Subramaniam, chairman and CEO of FM Global.
There were some nasty tornados in February and March, and the insured losses they caused were more than $1 billion. The spinners aren’t any more powerful than they used to be, but there are a lot more commercial properties standing in their way, whether they’re located in “Tornado Alley,” in Oklahoma, or in the more moist climes of the Southeast.
A billion dollars here and a billion dollars there isn’t quite enough to make much of a dent in the wallets of the property/casualty coffers, so the nasty spinners in themselves aren’t anything to get too bothered about.
But if you couple that with the normal frequency levels of natural catastrophes, then you’ve got a problem. “You combine all of those and you wonder that in 2008, it’s almost certain to have an underwriting loss,” said Subramaniam.
Oh yes, then there’s the subprime issue, but that’s a whole other story. Suffice it to say that after two very good years, 2008 could put a sudden end to the hot streak. Ouch. Taking a bite out of the bottom line might mean subbing in a pickup band for the A-list entertainment like Hootie and the Blowfish.
While it’s true the industry might swing to an underwriting loss, it’s still a little bit early to tell. Analysts, as we know, love “forward looking” thinking. But they’re often guilty of looking too far forward.
We’ll just have to wait and see.
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