Printer Friendly

Virginia chapter discusses industry trends.

Many of the problems corporate risk managers face today are too complicated for an immediate solution. Yet risk management is a dynamic field and trends are constantly emerging, as evidenced by the educational conference in Richmond, VA, Oct. 3-5 sponsored by the RIMS Virginia Chapter.

Insurance markets have become less provincial and now more commonly span the globe, said john Sinnott, president of Marsh & McLennan Inc. "Risk managers need to create an insurance program that reflects these new realities," he said. "Global capacity is a matter of self-preservation."

Mr. Sinnott said the European insurance market should be viewed as an aggressive marketplace looking to become increasingly global. European companies such as Zurich and Allianz, for instance, are searching for opportunities to expand into other markets.

Another area where new trends are emerging is in the regulation of company benefits. "There is a trend in Virginia away from mandated benefits because of the escalating costs of health insurance," said Stephen Foster, insurance commissioner for the commonwealth of Virginia. "A lot of employers can't afford the threshold of benefits required by law."

Mr. Foster also addressed the problems associated with regulating the insurance industry, such as exempting certain lines from rate filings and keeping a close watch on insurer solvency. "There are more than 50 sovereign jurisdictions attempting to regulate a national--now global-industry," he said. "We have to change the way we're regulating."

"We're learning from the savings and loan crisis," Mr. Foster said. "There are a lot of similar problems with a system of regulation where the federal government sits on the outside and looks in. The insurance industry does not want to repeat those mistakes." However, Mr. Foster added, "There will be insolvencies, corrupt people and mismanagement no matter what law we put on the book."

Insurer Volatility

The increasing volatility of insurers' loss ratios is another timely topic. "Insurers' 1989 results were not good because of natural disasters," said Dennis Kane, president of CIGNA's special risk facilities. "But 1990 results are poor because of clients opting for larger and larger deductibles."

"Catastrophe losses will always be there, but we are now seeing a shortage of capital," Mr. Kane added. "The two great capital reservoirs of the 1980s-Germany and Japan-are running dry. A united Germany is taking all its capital in terms of availability."

As fast as benefits costs rise, so does the cost of workers' compensation insurance. In 1984, according to Mr. Kane, the assigned risk market share was 5.5 percent; in 1989 it reached 21.8 percent. Mr. Kane said the magnitude of the problem becomes clear when one considers that in other lines of insurance a 3 percent to 4 percent market share is considered large. He cited six states, Alabama, Florida, Louisiana, Rhode Island, Maine and New Mexico, as comprising the bulk of the problem.

"The dollar impact in 1989 of the assigned risk pool that companies contributed to amounted to $2 billion," he said. "In a state like Louisiana there are either self insureds or assigned risk policyholders. Why should insurers keep on paying the bills when there is no voluntary market share?"

Workers' compensation was seen by the panelists as one of the most contentious issues facing insurers today. "While medical costs are doubling every five years, the price of medical treatment for workers' compensation is going up twice as fast," said Mr. Kane.

He advised risk managers to carefully examine their cost containment programs and the companies managing them. "Companies are doing different things and affecting loss levels," Mr. Kane said. Determine the percentage of savings and the percentage of utilization and the impact on the total delivery system."

According to recent reports, said Edmund Kelly, president of the employee benefits division of Aetna Life and Casualty, a managed care plan can save 15 percent to 20 percent of benefits costs, and substance abuse and psychiatric programs can shave off up to 30 percent.

Defining RM

Risk management for a large corporation has become too complex for one department to handle, said Michael MacDonald, group director of corporate risk management for the Miami-based Ryder System Inc. Those sentiments were echoed by Mitchell Cole, vice president at Tillinghast in New York, who said the traditional definition of risk management is moving away from a focus on hazard risks and will in the future encompass financial, business and social risks.

The high stakes involved in protecting profit margins, small competitive differences between companies and mounting risk management pressures on an organization are all factors bringing about changes in the way companies perceive risk management.

Risk management will become more and more interwoven into the fabric of an organization, Mr. Cole said. This will come about, he said, as more companies use risk management for revenue enhancement.

He also expects companies to expand risk taking to cut costs and utilize new risk financing techniques, placing an emphasis on higher retentions.
COPYRIGHT 1990 Risk Management Society Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Risk and Insurance Management Society Conference; insurance
Author:Oshins, Alice H.
Publication:Risk Management
Date:Nov 1, 1990
Previous Article:International policies hampered by European obstacles.
Next Article:Superfund liability debated.

Related Articles
Overseas conferences give RM global color.
International RM conference set for Monte Carlo.
Canada's kaleidoscope.
CEO risk management mandate.
The rewards of mentoring.
Quest for quality: RIMS & QIC unveil industry scorecard.
Datebook: October 2008.

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters