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A new course in crime; captive use rising.

A new course in crime; captive use rising

As the world becomes a more dangerous place to do business, risk management is making headlines. Here in the United Kingdom, two such headlines recently crossed my desk. The first is a new course in crime risk management at the master of science level for managers in the public and private sectors. The second is a survey of property insurance trends conducted by the British Association of Insurance and Risk Managers in Industry and Commerce.

The British Post Office is providing a grant to establish and develop a new department at the Cranfield Institute of Technology. Post Office Chairman, Sir Bryan Nicholson, has announced a major initiative by the corporation, a leading British university and the public services.

Aimed at managers in the public and private sectors, "Crime Risk Management" will start in October. It is being designed by major institutions representing insurance, information technology and finance.

The main thrust of the course will be on research, development and the application of analytical skills through advanced teaching in such areas as crime risk assessment, security, design, financial and personnel management. Targeted to managers who tackle specific crime risk management problems, the course will be full-time for 12 months, with a major part of that time directed to project work on behalf of the student's employer.

Professor Jim Hughes, who directs the School of Policy Studies, has stressed that the Centre for Crime Prevention Studies will focus on practical solutions to a range of criminal risks, prevention of damage and the welfare of their workforces.

As some types of business crime frequently go unreported, the extent to which the police can intervene is limited. They have difficulty investigating every management structure, administrative system and aspect of financial control.

The new Centre for Crime Prevention Studies will place the task of reducing crime in the context of risk analysis and risk management. It seeks to bring together the techniques of industry, analytical methods and the insights of criminology in a new partnership aimed at "managing out crime."

In 1987, crimes against business that were reported in the United Kingdom accounted for losses estimated to exceed 3 billion [pounds]. Undoubtedly, risk managers have not paid enough attention to crime losses, in particular, fraud. Now the danger could be in losing this sphere of authority as academia focuses on middle and senior management.

A Survey Shows

As for property insurance trends, the British Association of Insurance and Risk Managers in Industry and Commerce has completed a market survey. Much interesting information has come to light.

For example, looking at pricing over the period 1985 to 1988, not surprisingly, 60 percent of survey respondents experienced price increases, but as anticipated, over 50 percent indicated that the repricing was not in effect a consequence of their own loss experience.

Perhaps most surprising is the pattern revealed by respondents. In the United Kingdom about 43 percent of surveyed companies are satisfied with deductibles of less than 1,000 [pounds] on their fire coverage. However, those companies with European, United States and other interests operate differently: Only 28 percent in Europe had deductibles under 1,000 [pounds], while in the United States the level dropped to about 21 percent.

Paradoxically this low level pound-swapping goes hand in hand with an increasing use of captives by British risk managers. About 37 percent of companies use captives on their United Kingdom program and over 66 percent expect to increase their reliance on captives in the future.

The method of funding deductibles seems to tie in with the low level of retention in most companies. Forty-two percent of companies in the United Kingdom fund their deductibles through the subsidiaries causing the losses, which roughly corresponds with the 43 percent who support a less than 1,000 [pounds] deductible. But whatever the explanation of why Britain's risk managers are doing what they do, there seems to be no justification for the virtual 100 percent transfer of risk to insurers of so many companies. Unless it is the survey's recorded 79 percent level of satisfaction with the insurance industry's response to risk managers' needs.

This level of satisfaction is, however, difficult to reconcile with the intention to increase use of captives and the survey's own comment that, "The instability of the conventional market should provide an impetus for development of captives." Can so many buyers be satisfied with an unstable risk financing mechanism?

This only reminds me of the saying that "The operation was a complete success, but the patient died." The survey provides a wealth of interesting information on various topics, but altogether leaves me feeling that I know less about what makes risk managers tick. The fault, I am sure, is mine.

Chris F. Best is the editor of Foresight, a London-based risk management and insurance journal published by Risk and Insurance Group Limited.
COPYRIGHT 1989 Risk Management Society Publishing, Inc.
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Copyright 1989 Gale, Cengage Learning. All rights reserved.

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Title Annotation:risk management in Great Britain
Author:Best, Chris F.
Publication:Risk Management
Article Type:column
Date:May 1, 1989
Words:811
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