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

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

Cuts will be made, according to Patricia H. Roberts, president and chief executive officer of Genesis Underwriting Management Company, but risk managers should come forward with information for positive benefits.

At a panel discussion during the Public Risk Management Association's annual conference held here, Ms. Roberts said that risk managers should also be clear with underwriters and speak specifically about where cuts have been made.

Ms. Roberts noted that, due to the economic downturn, there is much potential for loss. She said risk managers often must delay purchases, which can increase and add pressure to risks. She added that expectation for services can be higher for citizens who are paying more in taxes.

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

Patrick M. Gallagher, managing director of worldwide property and casualty with Gallagher London, said that with jobs going away and a resulting upswing in claims, "Don't cut your [employment practices liability]."

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

Crises and disasters, such as some of those being seen at schools and universities, are highly publicized, which can lead to more lawsuits, Mr. Klein said.

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

Panel moderator Ron Hays, outgoing president of PRIMA and risk manager of the Calcasieu Parish, La., school board, asked about fraud, because it has been speculated that the financial recession would spike fraud claims. All three panelists said they have not seen significant spikes in fraud claims so far.

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

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

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

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