The Ideal Risk Manager

Richard Sarnie, risk manager at Engelhard Corp. in Iselin, N.J., served as the voice of the corporate insurance buyer at our event–which included a top broker and agent, an economist and rating agency analyst, along with representatives of Zurich in North America (the corporate sponsor of the Roundtable as well as the May 16 NU "State Of The Market" survey report, which drove our discussion).

While far too many risk managers effectively delegate a good chunk of their jobs to brokers, Mr. Sarnie always makes it clear that he is in charge.

His broker is a valued member of his risk management team–a no-brainer given the fact that despite working for a Fortune 500 company doing business in over 25 countries, his department consists of only himself and an assistant risk manager. However, that does not mean he hands over his most important responsibilities to his deeper-staffed brokerage partner.

Mr. Sarnie depends on his broker to identify potential markets, check over coverage differences and facilitate meetings with underwriters, but he makes the final buying decision–and not just off paper bids. The decision over which insurer to partner with is made only after a face-to-face meeting–not with a junior underwriter, but with a senior company official.

Another must for Mr. Sarnie is to be underwritten on his own company's loss history, not generic marketwide trends. Should the private market remain unresponsive to his needs, he is quite willing to arrange for an alternative. (The last hard market gave him the ammunition he needed to form a captive as a safety valve. He has no intention of folding his tent now just because insurers are ready to aggressively bid for his business again.)

As for compensation, Mr. Sarnie says he doesn't begrudge his broker (or insurer, for that matter) an honest profit. However, he insists on paying his broker a negotiated fee for service. He doesn't leave it up to his coverage supplier–the insurer–to pay his intermediary. This way, there's no question over whether his broker might be steering business to a favored carrier to trigger a lucrative contingency fee deal.

Even on a scary coverage such as terrorism, Mr. Sarnie is not counting on the insurance industry to bail him out. Should Washington foolishly allow the Terrorism Risk Insurance Act to expire at year's end, he has no intention of automatically paying through the nose for private coverage.

Although a standalone policy remains an option, he intends to look at potentially more effective uses of those extra premium dollars in terms of loss control and security, and his captive always remains an option.

This is the example all risk managers should follow. Had more buyers been this vigilant with their brokers and carriers, New York Attorney General Eliot Spitzer might never have had any abuse to uncover in the commercial insurance business.

Editor-In-Chief

""Had more risk managers been this vigilant with their brokers and carriers, Eliot Spitzer might never have had any abuse to uncover in the commercial insurance business."