Magazine article Risk Management

The Risk Manager's Dilemma

Magazine article Risk Management

The Risk Manager's Dilemma

Article excerpt

Renewing coverage and negotiating premiums was never much fun to begin with. Given the post-September 11 hard market and strained capacity of the insurance industry, it has now become a nightmare. Risk managers and insurers are pleading for governmental assistance, but the government has made a request of its own: Provide us with evidence proving your claims of financial hardship. To those risk managers facing doubled premiums and slashed coverage this does not seem difficult; but the risk managers who will attest to these higher prices are hard to pull into the public spotlight. For some reason, few are willing to talk.

One risk manager in a major Southeastern city, who spoke only on the condition of anonymity, tells a renewal story that is probably common to most. According to her, all renewal quotes that were on the table prior to the company's October 1, 2001 renewal deadline were quickly withdrawn after September 11. The deal that was finally worked out involved ten underwriters and left the company with 25 percent of the coverage it previously had and premiums that jumped from $1.5 million to $4 million. The company's carrier of over thirty years eventually offered to cover the first $10 million at what the risk manager described as an "astounding" premium. The company declined the offer.

Bill Hoyt, risk manager for the Metropolitan Airports Commission, tells a post-September 11 story that involves a 280 percent jump in the company's aviation liability premium, excluding war risk which was offered back to the company with $50 million in limits and a $1 million premium of its own. Only one underwriter would even offer a quote for the owner and operator of the Minneapolis-St. Paul Airport and six other smaller airports in the area. The aviation industry carries obvious high-risk potential, but Hoyt believes that in areas such as directors' and officers' and professional liability, underwriters are making unwarranted claims of increased risk to justify increased premiums.

Jim Crockett, a risk manager for the water utility company Denver Water, saw his premiums increase 53 percent om $88,000 to $135,000) after Septer 11. And because his primary carrier could not obtain reinsurance, he could only get $1 million of terrorism coverage this year versus $250 million in, 2001. Crockett received a letter from his carrier claiming September 11 was a "major factor" in the rise in premiums. His property and casualty consultant, Marsh, also advised him that water utilities were considered high in the at-risk category, although his carrier never said as much. …

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