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IFIRMA members furnish country reports.

The International Federation of Risk and Insurance Management Associations has asked its members to furnish reports on developments in their respective countries at the association's biannual meetings. What follows is culled from reports submitted at IFRIMA's recent meeting in New Orleans.

According to the Association of Insurance and Risk Managers in Industry and Commerce in the United Kingdom, whose report was based on Post Magazine accounts, 1990 saw a dramatic rise in British claims volume, particularly due to storms in January and February, a midyear drought and the worst fire losses since record keeping for these losses began in 1958. Gross fire losses for the year exceeded E800 million, and related business interruption losses are likely to top 1 billion [British pounds]. The rise in fraudulent and arson-related fire claims has prompted the establishment of the Arson Prevention Bureau, which is being funded and operated by the Association of British Insurers (ABI) and the government's Home Office.

On the liability front, several legal decisions have affected British insurers. The Liverpool High Court held that nine people who watched televised accounts of the Hillsborough football disaster in April 1989 and who had family members at the game are entitled to sue for damages related to posttraumatic stress disorder, as is a fan who from the stands watched his two brothers being crushed to death. In another case, four firefighters were awarded damages for posttraumatic stress they suffered while battling a London subway fire, marking the first time emergency service personnel have received such compensation. In two other cases, children who sustained brain damage at birth were each awarded damages close to 1.2 million[British pounds].

In November, the United Kingdom passed the Environmental Protection Act, which provides industry with an impetus to improve risk management procedures. Many insurers responded by restricting their pollution liability coverage to sudden unintended and unexpected events, as recommended by the ABI, which also suggested wording for a broader coverage known as the Single Event Pollution Trigger Insurance Clause. SEPTIC, providing coverage up to an aggregate limit per period, requires an insurer to be responsible for all claims arising out of a risk once an insured becomes aware of it and notifies its carrier. Most insurers do not believe SEPTIC will be widely available, and the extent to which insurers will employ the unintended and unexpected restriction in a competitive market remains uncertain.

Directors' and officers' liability coverage has become increasingly popular not only because directors and officers are more aware of their responsibilities and duties, but because the Companies Act was amended to allow firms to pay D&O premiums. In the past, D&O coverage was voidable, and directors had to buy the insurance in their own names at their own expense.

In France, according to the Association Professionnelle des Charges de la Gestion des Risques et des Assurances des Entreprises Francaises (ACADEF), 1990 was a record loss year, with a 30 percent increase over 1989 helping to create an industry combined ratio of 104. Nevertheless, January 1991 renewals were accompanied by intense competition among brokers and insurers.

Mergers and acquisitions continue to affect the French market: Allianz's French subsidiary and Via have merged, making Allianz France a significant local player; Zurich France and Saltiel, an industrial risk underwriter previously linked with Royal, have also merged; and UAP recently acquired full control of Royle Belge.

ACADEF membership increased 30 percent to 202 during 1990, a sign of heightened interest in risk management in France and a recognition of the association's role within the risk management community. The association is working on defining the role of French risk managers. With the support of the French Ministry of Transport, it is also trying to bring loss prevention techniques to corporate automobile fleets.

Another French association, Groupement des Assures du Commerce et de l'Industrie, reported that it is working with a French broker association to develop a plan to determine appropriate broker responsibilities and remuneration.

The Risk and Insurance Group of Federation of Swedish Industries (SIRF) reported progress on a product liability act. The Swedish government has narrowed the gap between its proposal and the European Community's directive by reducing the limitation period for personal injury and amount for property damage compensation and by removing liability from manufacturers that can prove that a product defect is due to complying with government regulations. SIRF also reported that beginning this month a group of companies may be able to participate in banking and insurance activities, although no single firm may engage in both.

The European Association of Risk Managers (AEAI), an umbrella group of nine associations from Italy, France, the United Kingdom, Spain, Germany, Belgium, the Netherlands, Switzerland and Denmark, is trying to improve European risk management education. In January, AEAI sponsored a meeting in Brussels that brought together academics from five countries and risk managers from seven countries to address the topic. A working group is expected to develop the core program for a risk management course that can be adapted in each country to local needs and uses.

Brazil's Associacao Brasileira de Gerencia de Risco reported that the country's monopolist reinsurer continues to ease its prohibition on all risk policies by permitting the issuance of a policy to a pulp and paper company, the first non-aluminum industry risk. The poor performance of the Brazilian insurance industry has been the by-product of a recession, but it can also be attributed to obsolete insurance regulations, high rates and the reinsurer's monopoly. The Consumer Protection Act, approved in late 1990, is expected to have a substantial impact on the insurance marketplace.

The Society of Risk and Insurance Management (SRIM) of the Philippines reported market hardening for disaster coverage due to claims from a July earthquake and a typhoon last year that will exceed 2 billion Philippine pesos. Previously, this coverage was usually added to the policy without additional premium, but since the disasters, this free "add-on" is becoming rare.

Meanwhile, more Philippine brokers are speaking out against licensing brokerages owned or controlled by banks and other non-insurance financial institutions. If a bill backed by the Association of Insurance Brokers of the Philippines is passed, lenders will be prohibited from requiring borrowers to place collateral insurance with particular brokers or insurers. Considering the large number of new brokers owned or controlled by non-insurance entities, this bill will have a major impact. Another bill seeks to increase the minimum capitalization of insurance companies from 10 million pesos to 25 million pesos to encourage small insurers to merge and increase their financial strength.

SRIM also announced that it expected about 200 attendees at its second national conference in mid-May.

The Association of Risk and Insurance Managers of Australia reported that a product liability act similar to the European model is close to being adopted. The act states that if a manufacturer of a faulty product is found negligent, it is liable for damages. Contingency fees are not likely to be adopted.

The number of lawsuits against directors and officers by shareholders continues to rise, as insurance capacity for this risk remains tight. In addition, Australian companies are responding to vigilant environmental enforcement and diminished insurance capacity by monitoring and cleaning up pollution exposures.

The Public Risk Management Association and the Risk and Insurance Management Society, with members in the United States and Canada, also updated IFRIMA members. Like IFRIMA and the academic group American Risk and Insurance Association, PRIMA wants to elevate the risk management profession through colleges and universities. PRIMA is seeking to have risk management programs offered in schools of public administration. To increase public and academic awareness of the field, the association has created a risk management video and bibliography and is sponsoring a survey of existing risk management course offerings. In addition, PRIMA's Center for Public Risk Management is working on surveys related to the state of the profession and risk financing.

RIMS reported on its opposition to the National Association of Insurance Commissioners' proposed model anti-fronting law, as well as developments tied to solvency, punitive damages and state guaranty funds.

Europe Reflects Changes Worldwide

Changing economic conditions in Europe are affecting the economy worldwide, including insurance conditions, according to speakers at a recent International Insurance Council roundtable in New York.

"Control is the factor that drives success," said Kenneth Zeigler, president of the marine and international group at Continental Insurance. "In insurance, control is taking the form of strategic alliances and joint ventures, and it is changing the makeup of the field. With banks getting involved, everyone is trying to protect market share."

Gary Parr, managing director of Wasserstein Perella & Co., pointed to another shift in the world economy affecting insurance conditions: the tremendous growth of market capitalization of Japanese institutions in the last 10 years vs. the decrease of capitalization in Europe and the United States.

He added that merger activities have grown dramatically in recent years, especially among European companies. "In monetary terms, the number of merger and acquisition activities are $2.5 billion for Japanese acquisitions, and $18 billion for European transactions," Mr. Parr said. However, he said, "a large portion of these transactions are partial and take the form of alliances and affiliations."

1990 was a record year for foreign companies buying into the United States, Mr. Parr said. "The flow of capital is coming from Europe into the United States," he said. "Over time the majority of transactions have been toward diversification."

Yet, Mr. Parr explained, the reverse trend-U.S. firms buying into Europe-has not occurred. "The United States will play a small role in the new Europe in terms of capitalization and market share," he said.

Regarding employee benefits in Europe, John Wencelblat, assistant director of international insurance of American Home Products Corp., said, "There is no benefits uniformity in European countries. Contributions to taxes are increasing, and benefits are being reduced. The social security system in many countries is in financial difficulty."

He said a more educated work force, the establishment of a common retirement age for men and women and a declining birth rate are likely to inspire additional benefit changes, such as the recent switch in many European firms from defined to defined contribution plans.
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Title Annotation:International Federation of Risk and Insurance Management Associations
Author:Oshins, Alice H.
Publication:Risk Management
Date:Jul 1, 1991
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