Magazine article Risk Management

Virginia Chapter Discusses Industry Trends

Magazine article Risk Management

Virginia Chapter Discusses Industry Trends

Article excerpt

Many of the problems corporate risk managers face today are too complicated for an immediate solution. Yet risk management is a dynamic field and trends are constantly emerging, as evidenced by the educational conference in Richmond, VA, Oct. 3-5 sponsored by the RIMS Virginia Chapter.

Insurance markets have become less provincial and now more commonly span the globe, said john Sinnott, president of Marsh & McLennan Inc. "Risk managers need to create an insurance program that reflects these new realities," he said. "Global capacity is a matter of self-preservation."

Mr. Sinnott said the European insurance market should be viewed as an aggressive marketplace looking to become increasingly global. European companies such as Zurich and Allianz, for instance, are searching for opportunities to expand into other markets.

Another area where new trends are emerging is in the regulation of company benefits. "There is a trend in Virginia away from mandated benefits because of the escalating costs of health insurance," said Stephen Foster, insurance commissioner for the commonwealth of Virginia. "A lot of employers can't afford the threshold of benefits required by law."

Mr. Foster also addressed the problems associated with regulating the insurance industry, such as exempting certain lines from rate filings and keeping a close watch on insurer solvency. "There are more than 50 sovereign jurisdictions attempting to regulate a national--now global-industry," he said. "We have to change the way we're regulating."

"We're learning from the savings and loan crisis," Mr. Foster said. "There are a lot of similar problems with a system of regulation where the federal government sits on the outside and looks in. The insurance industry does not want to repeat those mistakes." However, Mr. Foster added, "There will be insolvencies, corrupt people and mismanagement no matter what law we put on the book."

Insurer Volatility

The increasing volatility of insurers' loss ratios is another timely topic. "Insurers' 1989 results were not good because of natural disasters," said Dennis Kane, president of CIGNA's special risk facilities. "But 1990 results are poor because of clients opting for larger and larger deductibles."

"Catastrophe losses will always be there, but we are now seeing a shortage of capital," Mr. Kane added. "The two great capital reservoirs of the 1980s-Germany and Japan-are running dry. A united Germany is taking all its capital in terms of availability."

As fast as benefits costs rise, so does the cost of workers' compensation insurance. In 1984, according to Mr. …

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