HONOLULU--Spending for loss control services increased or remained flat for most organizations in the past year, while money spent was up from 2003 in areas such as disaster preparedness and catastrophe management, according to an online insurer's survey.

Those were among the findings in the Chubb 2006 Loss Control Spending Survey, released here yesterday by the Chubb Group of Insurance Companies at the Risk & Insurance Management Society's annual conference.

"We had 95 percent of respondents indicating that loss control spending had gone up or stayed the same," Steven D. Hernandez, senior vice president of Chubb & Son, said in an interview.

Mr. Hernandez, who is worldwide loss control services manager for Chubb Commercial Insurance, said: "With inflation running at about 3 percent and overall business spending at about the same percent, I think that in today's environment, saying spending for loss control in 95 percent of organizations was up or flat and overall spending was about 7 percent is pretty significant."

He continued that spending has increased in several areas including disaster preparedness and catastrophe management.

Other areas of spending increase include cyber-security. He said a challenge for risk managers is balancing today's risks with the risks of yesterday and tomorrow. "I think it becomes a dilemma that presents a complex proposition for risk managers to balance because they have to continue to manage risks such as workers' compensation and property, but now you throw in terrorism and catastrophe management."

Mr. Hernandez said the survey indicates that "in today's world risk managers have to be effective in balancing all of those dimensions," because in the future other issues and threats that need to be managed will take precedence.

In a statement his company released Mr. Hernandez said: "Organizations need to strike a balance between what has happened in the past with what may emerge in the future. They should be careful not to neglect traditional areas such as workers' compensation and product liability, which represent significant long-term exposures."

Fifty-two percent of survey respondents indicated that loss control spending remained the same in the past year. Forty-three percent said spending increased, while only 5 percent said spending decreased. Overall, spending for loss control services rose an average of 7 percent in the past year.

The survey results are in line with the findings of a similar poll that Chubb conducted in 2003. The 2003 survey indicated that 53 percent of organizations increased their loss control spending in the prior year, and 41 percent kept flat loss control budgets.

The areas that most often experienced increased loss control spending were disaster preparedness planning (59 percent), catastrophe management (51 percent), security (47 percent), corporate governance (47 percent) and business continuation services (46 percent). Areas in which loss control spending remained mostly flat included employment practices liability at 83 percent; product liability at 79 percent; and workers' compensation at 61 percent, according to the survey.

The threat of natural disasters was cited by 15 percent of the respondents as a reason for changing their loss control spending in the past year. In 2003, nearly a quarter (24 percent) cited the threat of terrorism as a factor; this year, 5 percent cited terrorism.

Mr. Hernandez said many organizations reacted to events when it came to loss control spending.

"This is apparent in the increased spending for disaster preparedness and catastrophe management, which, based on the impact of Hurricanes Katrina, Rita and Wilma and predictions for a severe hurricane season in 2006, was anticipated," he noted.

"In 2003, risk managers were implementing loss control strategies in the wake of the [Sept. 11, 2001] terrorist attacks, so security and disaster preparedness were at the top of their agendas," he said.

In addition, 17 percent cited legal/regulatory compliance as a factor for changing loss control spending in the past year, which may explain why 47 percent of those surveyed increased spending for loss control services related to corporate governance. "It's clear that Sarbanes-Oxley and recent corporate scandals are having an impact on how organizations budget their loss control funds," Mr. Hernandez said.

"Together, the 2003 and 2006 surveys highlight the challenges faced by risk managers--compounding risks with increased complexity," Mr. Hernandez said. "The primary goal for organizations today should be to balance the myriad critical risks facing them."

Chubb said the survey was conducted over the Internet in April 2006. More than 125 risk management professionals, primarily from the United States, responded to the survey. Respondents answered 29 multipart questions and represented both publicly and privately held companies in all types of industries, government institutions and nonprofit organizations.

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