Many RMs Going Bare On Terrorism

By Sam Friedman

NU Online News Service, April 22, 3:44 p.m. EST, NewOrleans?Nearly one-quarter of Fortune 500 risk managers ina survey are "going bare" on their terrorism exposures, and thevast majority believe that the federal government should step in tofill the coverage gaps.

When asked what steps they were taking to address terrorismexposures, 22 percent said they were going without any insurancecoverage, according to a survey by RM Access, a Boston-basedinsurance brokerage that received responses from 45 of the Fortune500 risk managers to its wide-ranging survey.

Thirteen percent said they were using an excess-market facilityto cover terrorism risks, while 3 percent said they were setting upa self-insurance program.

Nineteen percent said they had made no change in their insurancecoverage as a result of Sept. 11.

However, a whopping 42 percent said they were seeking "other"options. "They're kicking the tires on insurance products in themarket," speculated John Ryan, senior vice president of RM Access,launched by Fidelity Investments to "focus exclusively on thelarge-account market," according to its promotional literature.

However, "a lot of risk managers are simply waiting for thefederal government to act," he added during a presentation on hissurvey findings here at last week's Risk and Insurance ManagementSociety's annual conference.

Seventy-six percent of those surveyed said the Feds "should beinvolved in terrorism insurance," while only 17 percent thoughtthat was a bad idea. Seven percent said they had no opinion.

Congress is still considering legislation to bolster the privatemarket for terrorism insurance. The bill being debated by theSenate would establish a federal quota-share reinsurance backstop,while the bill passed late last year by the House would giveinsurers loans to help pay off future terrorism claims.

Since Sept. 11, 93 percent of those surveyed said they had madeone or more changes in their company's approach to risk management.For example:

? Sixty-eight percent said they increased emphasis oncontingency plans.

? Sixty-five percent said they were requesting more analysis ofexposures.

? Sixty-one percent reported "increased interest in theoperational risk management program by senior management."

? Fifty-five percent reported "more loss control activities andemphasis."

? Twenty-nine percent said they were developing a disasterrecovery plan. (It was not clear whether the other 71 percentalready had such a plan in place, Mr. Ryan said.)

? Seven percent said they had made no changes in their approachsince Sept. 11.

"Despite mounting challenges in terms of terrorism coverage, thehardening insurance market, growing e-risk exposures and the like,this is still an optimistic time to be a risk manager," said Mr.Ryan. "The spotlight is on risk management, and that's a goodthing, because there's a recognition now of the value of what riskmanagers do. More attention is being paid and support being offeredby senior management."