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Figures Lie On Cost-Of-Risk Trend

Although the “2001 RIMS Benchmark Survey” shows that the cost of risk declined 7 percent last year, risk managers should take this number with the proverbial grain of salt, one of the authors of a report on the survey warns.

A major change in one key variable–the survey sample itself–skewed the result, while events in 2001 have changed the cost of risk outlook entirely for this year and next, noted Steve Lawrence, national practice leader with Ernst & Youngs Insurance Risk Management Practice in New York, co-producer of the report. “Whats going on now is increases, even though on an aggregate basis [cost of risk] went from $5.20 [per $1,000 of revenues in 1999] to $4.83 in 2000,” he said.

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