About Hilary Tuttle

Hilary Tuttle is the associate editor of the Risk Management Monitor and Risk Management magazine.

Hank Greenberg Shares Concerns for Insurance Industry at RIMS Canada Conference

Hank Greenberg RIMS canada

QUEBEC CITY, CANADA—Currently on the mend from Legionnaires’ disease, Maurice “Hank” Greenberg appeared via live video stream to deliver the keynote address to the 2015 RIMS Canada Conference. The chairman and CEO of the Starr Companies and former chairman and CEO of AIG gave a frank and diverse address highlighting a number of concerns about potential impacts to the insurance industry due to the current climate.

“We’re living in a very troubled time on a global basis,” he said, emphasizing geopolitical instability. While such geopolitical uncertainty demonstrates the need for political insurance, other widespread conditions do not necessarily have such favorable implications for the industry.

“Clearly commercial insurance rates are under pressure,” he said. “The absence of catastrophes has masked that rates have gone down so much, and that has allowed some companies to survive.”

He also noted that investment income is suffering because of interest rates, and expressed concern that many companies are turning to long-tail reserves for income. What’s more, he said, accident year results for many companies are turning negative, and many are finding their reserves inadequate, particularly as expense ratios are frequently increasing rather than remaining steady. Companies that aren’t very efficient will find it very hard to be competitive and show returns this year, he cautioned.

Further examining the industry, Greenberg criticized insurers for “not doing a very good job of training underwriters,” seeing a stark comparison to the rigorous, diverse experience previously customary in the London market, for example.

“It takes years of experience to train an underwriter—they are not just qualified because of a college degree,” he said. “It takes years of work and a lot of common sense to develop the wisdom to know what can be underwritten and at what price.”

When it comes to this talent concern, he noted, it is not a question of which companies are doing better, but a problem across the board. “I don’t think we have the discipline, as an industry, to do the job properly,” Greenberg said.

Greenberg also shared some of his political opinions, both international and domestic. Of China, the US-ASEAN Business Council chairman emeritus and vice chairman of the Council on Foreign Relations said he does not share the widespread dubious feelings on China. “They’ve had some missteps. What country hasn’t?” he said.

He spent some of his time addressing the burgeoning 2016 U.S. election. Greenberg noted Donald Trump’s campaign as part of what he views as growing dissatisfaction – and perhaps inadequacy – of the current political system. “People are fed up with the political system as it currently exists. Why else would somebody like Trump, who has no experience but is speaking about things people care about be doing so well?” he said.

He also told the crowd that Jeb Bush would personally be visiting him Wednesday. Greenberg does not yet endorse any particular candidate, however, and expressed some concern about the Republican party’s position amid acute socioeconomic changes and resulting political demands nationwide.

“You have to give people the opportunity to succeed—that’s the American Dream. That’s why people came here,” he said. “If we’re going to deny that opportunity, the Republican party will have to change its name.”

Risk Managers’ Role in Addressing Climate Change


QUEBEC CITY, CANADA—Salutations de la ville de Québec! At the first day of this year’s RIMS Canada Conference, climate change quickly emerged as one of the key challenges facing risk managers—and an area with tremendous potential for risk professionals to effect change.

Government clearly has a role to play, but the slower pace and greater number of obstacles they face lessen some of the possible impact. According to Tim East, director of risk management at the Walt Disney Company, that is where businesses come in. Every one of the Dow 30 companies has created environmental and sustainability initiatives, but only 12% of companies have a C-suite or other top-level executive charged with leading action on this front. The clear trend of embracing corporate responsibility stems from a moral obligation businesses all have, and corporations must take initiative in changing how people think, East said.

Addressing sustainability and other climate change concerns cannot be done in a silo, and efforts must focus on building resilience in all of the assets a business has: facilities, systems and people. Risk managers should be taking a leadership role, using their perspective of corporate objectives and performance to help identify and execute the most impactful change.

Risk professionals can particularly help drive this objective to boost awareness within the organization and in the broader community, while also ensuring the business itself is performing in line with sustainability goals. “Risk managers can help become part of the solution by helping to close the gap between the desires and intentions of our organizations and the performance and impact they have,” East said. “This is part of our moral obligation to reduce our impact on the environment.”

Why should companies act? “Not just because it’s good business—although it is, and not just because it’s profitable—although I think it is, but because it’s the right thing to do in the world and for the communities they serve,” East said.

To maximize the impact of these initiatives, East urges risk managers to set and pursue to reduction targets, otherwise they stand little chance of truly achieving change. Then, he advises they commit to a process of assessing, identifying opportunities, and measuring impact annually.

On the organizational level, changing mindsets extends beyond having employees recycle or monitoring water use. Business continuity planning is a critical task at Disney, East said, and they were always good at crisis management, addressing urgent problems over the course of a couple of days. Now, however, they are devoting more focus to planning for longer events. To that end, the company is working to delink events from their consequences—rather than focusing on discrete emergency situations, it is focusing on how the business will be impacted by the conditions that could stem from any of these specific scenarios, he explained.

Getting started and shifting to a long-term focus seem daunting, and the slow rate of observable change often means adaptation and mitigation are not top of mind for businesses, said Lou Gritzo, vice president of research at FM Global. But risk professionals cannot wait for the next disaster or policy change to prompt a more serious evaluation of exposure and strategy.

Getting started on—or further investing in—mitigation efforts may be best focused on one of the main changes we are already seeing: flooding. Existing data shows a clear increase in flooding, and due to sea level risk and increased rainfall and intensity of rainfall, there will only be more, Gritzo said. To manage this growing risk, he recommends risk managers take four key steps:

  1. Know your flood exposure
  2. Be above the water level, and ensure any new construction is as far above it as possible
  3. Have and exercise a plan for flood emergencies
  4. Keep water out – in the wake of Hurricane Sandy, a number of physical protection measures have been certified and made commercial available to guard against up to a meter of water

Building a Better Continuity Plan for Hurricane Season

According to the Federal Emergency Management Agency, 40% of businesses do not reopen after a disaster and another 25% fail within one year. As September is not only the beginning of hurricane season, but also National Preparedness Month, the Insurance Information Institute and the Insurance Institute for Business & Home Safety have released a new infographic highlighting some of the crucial steps businesses should be taking to fortify against natural disasters.

“Businesses that plan for a disaster have the best chance of surviving, and that starts with identifying the potential risks,” said Loretta Worters, a vice president with the I.I.I. “Large businesses have risk managers, but small business owners have to be their own risk managers and, working with their insurance professional, determine the right type and amount of insurance to be able to recover from a disaster.”

“It is also critical for small business owners to create and/or update their business continuity plan and work with employees so they are prepared for the potential effects of a disaster,” said Gail Moraton, business resiliency manager at IBHS. “Taking time to do this now will save money and time later.”

hurricane preparedness business continuity

Supply Chain Disruption Hits 76% of Businesses a Year

Almost a quarter of businesses reported annual cumulative losses of at least $1.05 million (CAD $1.4 million) due to supply chain disruptions, and 76% of businesses reported at least one instance of supply chain disruption annually, according to a survey conducted by the Business Continuity Institute and Zurich. The top causes of supply chain failure among businesses surveyed were ones that will likely get even more frequent in the coming years: unplanned IT outages, cyberattacks, and adverse weather.

As the supply chain continues to grow ever longer, adding more potentially disruptive risks along the way, businesses are learning some painful lessons about the financial and reputational damages that can result from failures to ensure supply chain resilience.

Check out the infographic below for some Zurich’s top insights on supply chain visibility, including the biggest sources of damage and key steps to mitigate losses:

zurich supply chains infographic