NU Online News Service, June 9, 2:50 p.m.EDT

ORLANDO, Fla--Public entity risk managers are being subjected todrastic cuts which can compromise their effectiveness, requiringsharpened loss control techniques and communication with peers,industry experts said.

Cuts will be made, according to Patricia H. Roberts, presidentand chief executive officer of Genesis Underwriting ManagementCompany, but risk managers should come forward with information forpositive benefits.

At a panel discussion during the Public Risk ManagementAssociation's annual conference held here, Ms. Roberts said thatrisk managers should also be clear with underwriters and speakspecifically about where cuts have been made.

Ms. Roberts noted that, due to the economic downturn, there ismuch potential for loss. She said risk managers often must delaypurchases, which can increase and add pressure to risks. She addedthat expectation for services can be higher for citizens who arepaying more in taxes.

She also warned risk managers to guard against cuts that impactkey drivers of loss.

Patrick M. Gallagher, managing director of worldwide propertyand casualty with Gallagher London, said that with jobs going awayand a resulting upswing in claims, "Don't cut your [employmentpractices liability]."

Ms. Roberts, Mr. Gallagher and Michael F. Klein, senior vicepresident of business insurance and president of Travelers MiddleMarket Business, also observed that public entity risks areimproving due to better management, but at the same time, publicentities are becoming more of a litigation target.

Crises and disasters, such as some of those being seen atschools and universities, are highly publicized, which can lead tomore lawsuits, Mr. Klein said.

To stem the tide, he said, caps and immunities are needed intort laws.

Panel moderator Ron Hays, outgoing president of PRIMA and riskmanager of the Calcasieu Parish, La., school board, asked aboutfraud, because it has been speculated that the financial recessionwould spike fraud claims. All three panelists said they have notseen significant spikes in fraud claims so far.

Asked whether the creation of a national insurance office wouldhelp or hurt the industry, Mr. Gallagher and Mr. Klein agreed thefunction of such an office might be a positive force. Mr. Gallagherobserved that the London market is "comfortable with the concept ofsome form of government oversight."

He added that the lack of knowledge of the insurance industry bysome state insurance commissioners and even at the federal level is"astonishing in some cases."

Ms. Roberts, however, said she is the "blinking yellow light" onthe issue, claiming that while the current system is creaky in someways, "I'm nervous to think about what we might get. It could bejust another layer of regulation," which might drive up costs.