Risk Managers Disagree On Market Conditions; Air Pet Peeves

Matthew Lupa, risk manager for Raytheon Company in Lexington, Mass., said he is seeing a similar situation. On a "composite basis," he said his companys premiums have doubled.

Janet Breen, director of risk management for Boston Properties in Boston, said that short of terrorism coverage, the commercial market is "flattening out of premium pricing."

She also said that the organizations quotes for coverage came in on time or early, noting that carriers that were not on time were blocked out of the program.

"All indications are that the property market is softening," she said.

Steven Etheridge, director of risk management for Iron Mountain Inc. in Boston, said he has not yet seen the market softening, but there are some "positive signs."

Michael Lipcan, risk manager for Olin Industries in Norwalk, Conn., said he is not optimistic about the market yet because "D&O is terrible" and the coverage has taken a significant hit because of the scandals surrounding Enron and WorldCom management.

Mr. Lipcan said his company was hit with increases for renewals on the premium and the deductible side.

"Umbrella [coverage] was better," he said.

On the positive side, Mr. Lipcan added that there is a renewed interest in loss prevention. "We spend time seeing what is happening [in the companys plants]," he said. "When the recommendations are given, they may not be welcome, but they are addressed."

In a discussion about underwriting, Mr. Etheridge said buyers need to have direct contact with underwriters. "If you rely on brokers, you put a filter on that process," he said. "You need a face-to-face meeting at least once a year."

Ms. Harder agreed. "You cant have a close enough relationship with your underwriters," she said. "Respect the job they do. Its important that they understand what you are doing and why you are different."

When asked about "pet peeves" with underwriters, Mr. Etheridge said his pet peeve is when agreed deadlines for quotes "get pushed back to the last minute."

Ms. Harders pet peeve was underwriters who "give a rate increase that doesnt apply."

"We are a retail business. Medical malpractice [and] tobacco risks dont apply to us. [Underwriters] need to look at the risk they are rating and apply it closer to home."

Mr. Lipcan said his company provides underwriters with "a lot of information, some of it meaningless."

"We dont mind providing the information if it has value and if the risks are evaluated on their own merit," he said.

In a discussion about brokers the panel members agreed that their brokers are very importantoften like an extension of their own staff.

Mr. Lipcan said his company faces a reduction in staff. Brokers, he said, provide valuable services such as certificates of insurance, loss prevention, claims and underwriting.

Ms. Harder, whose company has 53,000 employees and operates in eight countries, said that seven years ago she "took a chance and went to a regional broker. They are still with us."

She said she depends heavily on her brokers and has 24-hour contact when necessary.

"I havent let the fact that there are two major brokers [firms] affect me," she said.

Mr. Lupa said his firm works with a "top-three" brokerage. "We need our brokers to get to the marketplace," he said. "The top three have very good resources."

Ms. Breen said her organization also depends heavily on brokers. "When I hear my colleagues complain that theyre not getting what they want [from the brokers], its usually a risk management problem," she said.

Of the five risk managers, four said their organizations had established captive insurers and one said her company is investigating starting up a captive.

Two said their captives were domiciled in Bermuda, while two said their captives were domiciled in Vermont and one said her organization is considering Vermont.

The risk managers said their organizations use their captives for hard-to-place programs including environmental and California earthquake coverages.

The meeting was part of a semi-annual business tour that the young Lloyds executives take to learn about different facets of the insurance industry in different locales.

The tour of Bermuda and the U.S. East Coast was hosted in Boston by a number of companies. The risk management panel session was put on by the Robins, Kaplan, Miller & Ciresi law firm.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, May 26, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved. Copyright in this article as an independent work may be held by the author.