Dealing with downturn: Jeffrey Burchill, vice president of finance and chief financial officer at FM Global, discusses how the economic downtown is affecting risk managers--and how the insurance industry can help provide peace of mind.
It's going to be a long-term recovery. There's not going to be any quick fixes. There's going to be a lot of government intervention as the new administration informs policy. It's not going to be a first or second quarter recovery. This is a pretty deep recession and it's going to take some time to recover from it.
Will the financial crisis drive a convergence of financial risk management and operational risk management?
It's already started. There has been some convergence in the enterprise risk management discipline. There has been a lot of volatility in the insurance markets, specifically with AIG, and we've seen a lot of committees and boards of directors tell risk managers and treasurers that if it can happen at AIG, what about the rest of our portfolios? And they're not just looking at insurance risk--they're looking at financial risk. If they do have an event, will that carrier be able to respond? They are looking at more of the traditional transfer of risk than some of the convergent issues of credit risk and liquidity risk about carriers. And they're looking at more financial risk on their own balance sheets--supply chains, things like that.
What regulatory developments are most likely?
The National Association of Insurance Commissioners has said they want more of a global reach, but that has yet to play out because no one knows the direction that the new administration is going to take. From FM Global's standpoint, we view ourselves as being regulated by 50 states as opposed to the one 800-pound gorilla of federal regulation. We don't perceive one to be better than the other. The worst case would be if we had both, because their priorities might be conflicting.
What can the insurance industry do to help its clients right now?
The industry needs to be able to meet its obligations. It needs to provide terms and conditions that are financially responsible yet meet the customer needs. Our product is a financial promise to pay if a condition within the policy happens. The best thing we can do for the insurance community is perform, because even though all of us have less capital today with the economic meltdown, we still have the same underwriting exposures to our capital, and we have to plan for those exposures as if they're going to happen. There's nothing to say that another Hurricane Katrina or World Trade Center type of event can't happen in 2009. The best thing we can do is provide that type of protection to our customer base in a responsible way.
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|Title Annotation:||Fore front|
|Comment:||Dealing with downturn: Jeffrey Burchill, vice president of finance and chief financial officer at FM Global, discusses how the economic downtown is affecting risk managers--and how the insurance industry can help provide peace of mind.(Fore front)|
|Date:||Mar 1, 2009|
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