Given the state of the economy today, I recommend taking these three primary considerations into account when setting risk management renewal strategies–both long- and short-term.

o Do not shop on price alone.

The insurance market is hardening due to the financial crises. Weigh the strengths of quotes provided by your broker based on price-per-risk transferred/mitigated, and not on price alone.

When looking at risk holistically, retain more risk (for example, raise deductibles and self-insured retentions), but don't retain risks unless the premium differences (savings) reward you appropriately.

Don't compare last year's prices to this year's. Instead, gauge the benefits: “I am retaining more risk, but I am saving the difference in premiums.” Weigh that return (savings) relative to the additional risk retained, just as you would assess any risk-taking strategy per its benefits received.

o Continue to use and trust multiple brokers.

Risk managers typically use one broker for casualty risks and another for property. The brokers work for you, and not the market. They want you as a client. They are suffering from the same financial crises as their customers.

They also wish to retain and satisfy their clients now more than ever. It is important to continue to pool risks, and by using multiple brokers, more hedging is built into your processes.

o Use an actuary to help assess, compare and analyze renewal strategies.

Insurance deals can be complicated at times, due to the nature of covering risks that are uncertain and dealing with timing and confusing tax advantages, as well as tax disadvantages relative to premiums. Risks are also correlated (bad events tend to happen in concert) in various degrees, and realizing their interconnectivity is essential.

An actuary's skill includes extensive expertise in these domino-affected risks. Actuaries in large brokerage firms advise brokers and their customers on renewals. Their standards of practice and codes of conduct are consistent with providing the best advice to customers. Plus, the costs are relatively inexpensive relative to benefits.

Special Reports /

Actuary Offers Advice On Buyer's Renewal Strategy

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