Magazine article Risk Management

1,000 Attend Forum in Monte Carlo; Key Industry Players Wage a Philosophical War

Magazine article Risk Management

1,000 Attend Forum in Monte Carlo; Key Industry Players Wage a Philosophical War

Article excerpt

"It is suggested that the roles played by insurers, reinsurers and brokers are becoming increasingly blurred," said W.R. White-Cooper, deputy chairman of Sedgwick James Ltd. in London during the conference's opening session. "But are insurers now capable of performing risk control functions and providing direct service to industrial clients? Although reinsurers deal directly with clients via captive organizations, can they really eliminate the direct writing insurers?"

According to many conference participants, reinsurers are being squeezed as insurers retain more risk, forcing reinsurers to look for other ways to generate revenue. That includes creating or buying interests in primary carriers, as well as offering an array of loss control, claims management and other services directly to insureds.

But, according to Mr. White-Cooper, neither reinsurers nor insurers are effective in these areas. To dispense with the adventurous reinsurer, he quoted an article in May's International Insurance Report: "'Reinsurers seem only too willing to play the accommodating mistress, entering into all sorts of ruses to justify the relationship: setting up their own direct dealing insurance subsidiaries, encouraging the formation of captives and providing both the captive management and the captive reinsurance program, developing risk management services organizations to draw the buyer into the net.'"

Reinsurers throughout the conference, including one of Mr. White-Cooper's fellow panelists, took issue with such remarks. Hans-Kaspar Zulaf, senior vice president of Swiss Reinsurance Co. in Zurich, who participated in a reinsurers' roundtable discussion later in the conference, said, based on specialized know-how and experience, reinsurers are in a good position to help multinationals finance as well as manage their largest risks.

"We would like to become a partner of the leading insurance groups," Mr. Zulaf said, adding that reinsurers should also be involved with brokers during negotiations. Finally, he cautioned, "We want to bring capacity to the front where it is needed and where we are able to control it."

Insurers, too, as many are aware, have been entering the loss control business in record numbers. Contending that the business is in the brokers' domain, Mr. White-Cooper explained that insurers should not be providing such services because of conflicts-of-interest. "Independence and objectivity are essential in areas like claims and risk control," he said. "It hardly needs spelling out, but obviously, a risk control surveyor employed by an insurer owes his primary duty to his employer and, irrespective of how many Chinese walls may in theory be erected, is unlikely to recommend a course of action diametrically opposed to the interests of his masters."

Mr. White-Cooper explained that brokers, who should be called "independent risk advisers and insurance intermediaries" to clarify their role, are in the best position to offer risk management consulting services to clients. "Because these consultancy services can be provided piecemeal, or unbundled, I see no conflict with any client's in-house functions as the services can be purchased to complement a client's own resources and requirements," he said. Furthermore, because intermediaries are increasingly being paid on a fee basis, he said, they can be impartial whether or not they provide broking services to their clients. …

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