What types of reality shows spur the most insurance claims?
LM: Many times it’s more of the “walk and talk” shows as opposed to those with stunts that spur the most claims. Audience members are often hurt while being moved in and out of the auditorium. With stunt-laden productions, producers and networks are extremely cautious, and often will hire outside loss control professionals to ensure safety protocol is at its best. Every precaution is taken to make sure the stunts are dangerous looking, but not TOO dangerous to perform. As walk-and-talk programming seems so simple, sometimes safety hazards are overlooked.

Are any stunts or activities uninsurable?
LM: The quick answer is no, with the exception of intentional acts; the right broker can find a quote for anything a producer wants to do. Usually it comes down to pricing, and how much they have in the budget for insurance. The right broker doesn’t hear the word “no” from insurers. They find a way to get coverage.

How are contestants insured? Or are they?
LM: There are many ways that producers look at mitigating their risks when it comes to contestant injuries. Many times, it will depend on requirements from the networks, and how much they are allocated for insurance. But most, if not all, production companies have participants/contestants sign liability releases, which hold them harmless in the event of injury to the participant while they are filming the show. Production companies have a general liability policy, which would protect them from bodily injury claims, in the event a contestant decided to file a suit. There are other ways that production companies can provide coverage, including accident medical policies and short-term disability. These might be an option for production companies who wish to offer some type of coverage for the participants if they are hurt, while helping to keep their GL policies claims free.

What keeps show producers and risk experts up at night?
LM: Concerns that they might not be able to film the production the way they want to. And, if insurance is the reason that things are held up, that is a huge problem. As an experienced broker, you get to the point where you can almost proactively imagine what the production companies may want to do on a certain show, and you can go to the marketplace and request quotes for various options to present to the producer. That way, they have some options up front, and can create a budget that will allow them to do the shoot they want to, since they’ve been able to plan for it.

What is the biggest mistake producers can make when choosing their insurance programs?
LM: Picking a broker who has little experience and is unable to get the producers the coverage and pricing they need to get their production made.

What should producers be aware of in their agreements with the networks?
LM: The networks all require indemnification from the producers. Sometimes the networks will require the producers to also use the networks’ own insurance program. At the point an uncovered or under-covered claim happens, it could leave a producer bare of coverage, but still forced to indemnify the network. A producer should always carry their own insurance as well, to protect themselves at all times.

Aon recently documented as much in its report on the state of risk management in construction. The broker surveyed industry professionals and received at least one encouraging result: overall preparedness for the threats identified as the top 10 risks has risen from 60% in 2009 to 67% in 2011.

What are those risks? These.

Aon points out one major change over the past two years.

Damage to reputation/brand has risen significantly in ranking from 11th in 2009 to third in 2011. This change is likely to be caused by the challenges that the industry is facing in maintaining a client base in an increasingly competitive environment. Where construction firms are working hard to replace diminished backlogs, the temptation to bid work at or below cost increases. With these practices, the risk of completing the job on time and on budget also rises. This can have a negative impact on reputation. This is not indicative of the entire sector, but the pressures on margin and the ability to remain viable as the economy continues to falter will have a negative impact.

By and large, preparedness has increased across the board. With one notable, major exception: capital availability/credit risk. That isn’t so surprising, however. The industry has been crippled by the housing collapse, so profits and, thus, cash holdings are going to be low.

Perhaps more troubling is the other risk that companies are now less prepared for than they were two years ago: third party liability. I’m not smart enough to deduce the reasoning for this drop-off, nor does Aon offer any analysis, so I’ll leave it to you to speculate. Not a positive trend obviously, though.

In an ideal world, this improvement would be coming solely because everyone is finally realizing just how wonderful risk management is. But theoretical value only has so much utility in changing behavior. Instead, the economy and pressure from customers and regulators have been the driving force.

Oddly, however, construction respondents say that “natural weather events” are less of a factor than other industries do. Perhaps this is because the construction industry is more experienced when it comes to disaster losses? And it has already addressed disaster preparedness and is now “past” catching up more so than other industries? They learned the lessons of Katrina and the 2004 hurricane season and they adjusted?

I don’t know. But it strikes me as odd that construction companies haven’t felt increased pressure of late to improve in this regard following the most devastating first-half disaster-year in history. 8% seems low. But, again, I guess the economic factors trump everything.

For those that still have more preparedness to do — hint, everyone —  the Department of Labor is here to help. To promote safety, it developed a series of safety videos.

The one below centers on not getting backed over by a giant truck. Don’t let that happen is, I believe, the takeaway message they’re going for.

One of the biggest risks facing the risk management and insurance industry was summed up very well yesterday by Joanne Wojcik (@BusInsJWojcik) on Twitter: There is “only one risk manager entering the profession for every five who are retiring.”

The last decade has seen a tremendous growth of the discipline from an intellectual standpoint. What was formerly little more than insurance buying is now closer than ever to becoming ingrained into strategic business planning. After 9/11 and Enron and Katrina and H1N1 and Lehman Brothers and Haiti and Japan, the concept of risk management is now almost mainstream.

Given this, it is somewhat surprising and certainly not helpful for the industry that it is losing many more people than it is recruiting. And while the one-to-five rate cited above by Wojcik is troubling for risk management, the same problem exists in insurance, a sector that may have even greater trouble if it can’t attract more young talent.

To their credit, both higher education and the insurance sector are now making concerted efforts to stem the tide and encourage an influx of talent into the market.

Here’s another tweet from Joanne Wojcik of BI.

University of Colorado-Denver to launch risk management curriculum, perhaps pumping new blood into the industry!#RIMS2011

And here’s a comment on Gallagher’s efforts from IRMI President Jack P. Gibson (@UGAJack)

Gallagher has 150 student summer interns as part of its effort to bring young people into the business says CEO Pat Gallagher @ #RIMS2011.

This morning, I also got the chance to speak about all these matters with Russ Quilley, the Calgary-based national broking director for Aon, who served on the RIMS 2011 panel “Recruiting and Retaining Risk Management Talent for the Millennium” yesterday. He has been integral in helping Aon acquire those “millennial generation” employees that will eventually replace those entering retirement and has a much more positive outlook on the situation than I do.

Part of this is because he seems to think his company is on the vanguard of these efforts. And another key reason he sees this as much of an opportunity as a concern is due to the energy, ambition and capabilities he is seeing from those students he helps integrate into his company. Aon plucks Canadian interns and recent graduates for a program it calls The Wheel. This consists of an 18-month rotation in which students complete three six-month stints in different parts of the company. The first gets their feet wet. The second tries to place them somewhere aligned with their skill set. After this, their performance is evaluated, and the broker moves them onto a third rotation during which they learn from their managers as well as independent mentors who try to teach them all about the industry.

The most encouraging aspect for Quilley is how technological savvy this generation is. He is routinely impressed with how this group can find new solutions to problems and not just rely on how things have been done in the past. And he believes this technological and cultural influence will be invaluable to making his firm more efficient in the future.

“It is really interesting to see a group that sees no hurdles,” said Quilley. “I like to challenge the status quo and they like to challenge the status quo.”

Another positive benefit is that these millennials will be very effective dealing with customers in the future. “Ten years from now they’re going to be our mid-level [brokers and managers],” said Quilley. “But they’re also going to be our clients. And this group will able to talk to clients and be very well-versed in their demands.”

This stuff is all great, and many other companies and universities are making similar efforts. Even so, there are not enough young, future insurers and brokers being churned out by academia, according to Quilley.

“I still don’t think there are enough of them coming through,” said Quilley. “If you look at the programs, there’s a 90% hiring rate. Not a lot of industries have levels that high. That’s a great indication that there aren’t enough to meet industry demand.”

To me, the whole industrywide effort to recruit young talent feels a little bit like trying to create energy independence in the United States by starting to drill offshore today; it sounds helpful and some day it certainly may be — but it’s going to be a long time, we’re talking at least a decade, before the work being done now will pay off. And considering that the talent that insurers and brokers are losing consists of graybeards with perhaps 20 or more years of experience in risk and insurance, even if the industry can get closer to a one-out/one-in ratio, it’s still not exactly an even trade when you replace a retiring, battle-worn executive who has been through multiple market cycles with an eager, 22-year-old who has a bachelor’s degree in actuarial science, an iPhone and a smile. That fledgling risk manager or future underwriter can one day be just as knowledgable and wise as the VP she is replacing, but it takes time. Experience can’t be taught and all that.

Frankly, the insurance industry is simply late to the game.

This is a major strategic risk for many companies — and one they have known about for years — yet many have still failed to really start addressing it seriously until now. The financial crisis and economic slowdown didn’t help. Hiring lagged, and now there must be a renewed urgency for insurers to find, train and retain young talent.

“I don’t think [the insurance industry has] the reputation among that young group that you can have an interesting career in insurance,” said Quilley. “We need to do a better job promoting that. You have to be aware of the demographics of your staff and have a plan in place. And starting now is key.”

With all the great institutions now educating the youth of America about risk and insurance, there is no doubt that the future of the industry is in good hands.

But the hand-off of the baton might be a little sloppy.

Let’s just hope it doesn’t get dropped.

If the sprinters in this photo were industries, insurance would be from Poland.

With five straight months of improving employment numbers across the nation, it seems as though real economic recovery is fully underway. Overall, the consensus among economists believes that the U.S. GDP will grow 2% in 2011. Throw in the continued growth for emerging market powerhouses like Brazil, Russia, India and China, and the worldwide picture looks a lot rosier than it did just 12 months ago.

Still, for executives across the world, a sluggish economy remains the greatest risk they see for their organizations. It ranked first for the nearly 1,000 business professionals from 58 countries surveyed for the 2011 Global Risk Management Survey that Aon unveiled yesterday at RIMS 2011 Vancouver.

The top ten included several other familiar threats on the rise during the past few years (regulatory risk, commodity prices, liquidity), but it also seem to reflect a strategic risk outlook that was surfacing just before the economic crisis monopolized the world’s attention in 2008. Specifically, the worries over failing to attract top talent (which, in the graying-by-the-minute insurance industry at least, I presume includes attracting young talent) and failing to innovate involve looking at the far-off risks a few years down the road that the company must navigate not just to improve its bottom line for 2011, but to ensure the company can retain — and increase — market share in the future. The newspaper and music industries, to name two, are probably wishing they had put “failing to innovate” on their radar screen around the turn of the millennium.

Here’s the full list:

1. Economic slowdown
2. Regulatory/legislative changes
3. Increasing competition
4. Damage to reputation/brand
5. Business interruption
6. Failure to innovate/meet customer needs
7. Failure to attract top talent
8. Commodity price risk
9. Technology failure/system failure
10. Cash flow/liquidity risk

I’ve been seeing these top ten risks lists for the past seven years, and it’s always interesting to note how they change over time. Some concerns never leave (like technology risk) while others have appeared with increasing frequency and continually moved higher up on in the rankings (like reputation risk).

Based upon all the conversations I’ve had so far in Vancouver, I would be willing to bet good money that supply chain risk cracks the 2012 list. And, hopefully for everyone’s sake, the threat of economic slowdown is one that seems much less likely.

One of the world’s largest beverage companies has successfully embraced the somewhat modern practice of funding employee benefits through captive utilization.

Coca-Cola recently began reinsuring some of its international pension liabilities through its Dublin-based captive, Coca-Cola Reinsurance Services Ltd. The captive reinsures about $400 million in annuities written by insurers for benefits provided to enrollees in three Coca-Cola pension plans in the United Kingdom and Ireland.

After years of operating their own captive, Coca-Cola Reinsurance Services Ltd., to fund a portion of their employee benefits, the beverage giant will now cover international benefit liabilities through a captive.

Coca-Cola had been handling “quite significant” property/casualty risks in its captives for “quite some time,” said Stacy Apter, senior global benefits consultant with Coca-Cola and a panelist at the conference. “Why would we not be taking advantage of the same efficiencies on the employee benefits side when they are more predictable risks?”

Apter stated that medical coverage, as an example, is similar to a cash flow operation, in that it is not difficult to predict yearly costs. It seems that employee benefit captives would be a good move most sizable companies, though only a handful have fully embraced it.

A few online resources for learning more about the world of employee benefit captives:

• Captive.com — “Using Captives for Employee Benefits” covers why employers are using their captive for employee benefits, who has done it so far, how existing transactions have been structured and the primary issues that employers need to evaluate.
• TowersPerrin.com — “Employee Benefits: Captive Manager’s Key Roles” explores the importance of having the right external partners when choosing a captive and how to ensure appropriate coordination among the internal and external parties involved.
• Aon.com — “Employee Benefit Captives: Their Role in Managing Enterprise Risk” is a concise reference that can serve as a reference for further examination of the business issues involved in the placement of employee benefits risks in captive insurers.

While I think most would agree that diversity of all types is improving not just in risk and insurance, but in most all industries, the corporate world by and large remains the domain of white, heterosexual males. Don’t get me wrong, there are obviously countless others of different backgrounds who are thriving in all sectors, but the mold of the typical power exec has not really changed since the days of Mad Men.

That’s why all signs of progress are encouraging.

And for the insurance industry, the 2011 Corporate Equality Index from the Human Rights Campaign (HRC) is a great sign that the industry really is advancing in terms of encouraging diversity in its workforce. A full 18 companies in the industry, including power brokers Aon and Marsh & McLennan scored a perfect 100% as a Best Place to Work for their “support equality for lesbian, gay, bisexual and transgender employees,” according to HRC. (via PropertyCasualty360.com)

Kudos to all those on the list.

The most-watched sporting event of the year is upon us. This Sunday, the Packers will take on the Steelers in a battle of brawn. But such a large event undoubtedly poses serious risks to everyone in attendance, including vendors, teams and spectators. To understand how the NFL and the stadium handle such threats, I contacted Chris Rogers, director of risk control for Aon Risk Solutions’ national entertainment group with a few questions.

RM: For an event the size of the Super Bowl, there are bound to be concerns regarding the safety of fans, vendors and the facilities used. How does the NFL and Cowboys Stadium go about protecting these assets?

Chris Rogers: As with any event of this nature, the sponsors and promoters are very concerned with fan and participant safety. All responsible organizations spend a large amount of time in the planning and preparation phases necessary to put on such a grand event. Safety and security will be at the forefront of all deliberations during decision-making times. These plans and preparations will have begun virtually the same day that it was announced when and where the Super Bowl would be played and continues right up to, and during, the game itself.

Today, most of these plans will follow the basic outline of the National Incident Management System (NIMS) and their model of Incident Command Structure (ICS), which provides for a structured approach to coordinating all the various entities that will be involved. Using this system, risk and threat assessments will be completed that attempt to identify what threats may be posed and how best to eliminate or mitigate them. These plans will also incorporate the training needed by safety and security personnel working the event.

RM: Does the league or the stadium incorporate weather policies and procedures into the overall emergency planning process. If so, how?

CR: Weather is a large factor in the planning and preparation process. Using historical data and assistance from public and private weather services, various scenarios will be mapped out and preparations will be made for response personnel. These plans would include situations before the game as well as during. Plans will also be reviewed regarding “Sheltering-In-Place” procedures should that be required. Weather-trained experts will be on site during the game for immediate consultation and assistance.

RM: What types of events could cause a cancellation of the game? How would that be managed?

CR: The events that might be cause for an event of this nature to be canceled would include: severe weather situations (lightning, earthquake, flooding, tornadoes, etc), civil disorder, major fire, terrorist attack, structural collapse, major news events (assassination of a political figure, outbreak of war), as well as pandemic illness (SARS, flu, etc.).

Each of these situations will have to be addressed by risk and security personnel to determine how likely the event might be as well as how severe it might be. In other words, they will conduct a risk assessment for each during which they will address the likelihood of occurrence and how well prepared they are to handle such a situation as well as what the consequences might be if the event occurs. After this assessment, they will begin to decrease their vulnerability by outlining current controls and capabilities as well as a plan for reducing those vulnerabilities wherever they can. These reductions could involve the ”hardening” of the venue with new barriers (additional perimeter fencing, additional security personnel, additional lighting, etc.) as well as implementing new restrictions on deliveries and access to the venue or providing additional training for staff and response personnel.

Another aspect of this will be who will be responsible for deciding when and if a cancellation is needed. This will be decided well beforehand and would include procedures for advising all participants that a cancellation is in effect. These procedures will obviously vary depending upon when the decision is made (before the event, just prior to the event or during the event) as each will have unique challenges associated with it.

RM: How does the stadium work to prevent possible terrorist attacks. What types of security measures are taken inside and outside of the stadium?

CR: The potential for a terrorist attack is an ongoing threat that any stadium hosting an event must be prepared for. For several years now, large public assembly venues have been “hardening” themselves as a target in order to discourage an attack or at least make it as difficult as possible for someone to do harm. This hardening includes structural changes (additional barriers, increased security patrols, new access control systems, closed circuit TVs, etc.) along with procedural changes (employee and vendor background checks, training, delivery appointments, etc.).

There will also be many meetings with law enforcement agencies to review any known or suspected threats. Pictures of any known threats will be circulated and discussions held regarding possible scenarios that might be an issue. And if the event should be designated as a Special Security Event (SSE), additional military and government personnel and capabilities will be made available as well.

RM: Who do you think will win? Why?

CR: As for who will win, GO PACKERS. As for why, because they have a quarterback with a great last name (even though he spells it differently).

As for D&O securities class action claims activity, Aon found that, for the second quarter of 2010, the average D&O securities class action settlement was $39.87 million (excluding settlements of $1 billion or greater). This is an increase of almost 28% from the preceding three-year average settlement value of $31.18 million.

The report makes an interesting point in terms of mitigating factors for D&O pricing.

We all know that D&O pricing and the stock market are inversely correlated. Meaning, when the stock market goes up, securities class action litigation tends to decrease, and D&O prices go down.

But have you heard of the presidential election year cycle and its effect on the stock market (and thus, D&O pricing)?

The report cites Mark Hulbert, founder of the Hulbert Financial Digest, as saying that, on average, the third year of a presidency is the most bullish of a president’s term. Hulbert researched yearly returns for the Dow back to 1896 (the year the Dow Jones Industrial Average for founded).

Here’s a snapshot of his findings:

Clearly, there is a big spike in the third year versus the others. If this theory holds true, then there may very well be continued downward pressure on D&O rates for at least the next 12 to 24 months, the report states.

In addition, Aon’s D&O Peer Benchmarking report, which was conducted jointly with NASDAQ, outlined six best practices for organizations to follow when looking to purchase or analyze their coverage:

1. Examine the D&O policy to determine corporate executive indemnification provisions
2. Question any generic worldwide coverage language in the D&O policy; it may be inadequate
3. Recognize what triggers a claim under the D&O policy
4. Scrutinize the limits of the excess policies
5. Understand how coverage under the D&O policy is affected by the wrongful acts of others
6. Know how the organization and the directors and officers are protected during a financial crisis

All in all, the information in the report bodes well for buyers of D&O insurance through the remainder of 2010, as the current soft cycle for D&O underwriting is expected to continue.

Here’s the first photo of what the new Manchester United uniforms (or “kits” as the footballers call them) will look like next year.

Pretty sharp. Digging the throw-back white collars. I would probably prefer white socks though.

For those who don’t know, the English soccer powerhouse used to be sponsored by AIG, but that contract ran out and — wouldn’t you know it — AIG didn’t exactly have a ton of surplus money lying around to throw at foreign soccer teams. But based on its recent $5 billion purchase of health care consultancy Hewitt Associates, it’s pretty clear that Aon does. I did an interview with one of the company’s PR reps a few weeks ago if you want to read more about the partnership.

Additionally, here’s a video Man U put together a while back to welcome Aon to the team, so to speak.

Five years ago, Lindsay Lohan seemed poised to be the next, big starlet in Hollywood. Now, years of legal trouble have led to her being sentenced to 90 days in jail and her acting career appears to be in serious jeopardy.

Still, there have been many other improbable comebacks to the silver screen by actors who were once counted out. Look at Robert Downey, Jr.’s triumphant return as Iron Man. But a little known fact about the movie business is that the insurance that covers the financial backing put up for films can sometimes play as big a part as the actors. And if an actor becomes “uninsurable” due to erratic behavior and run-ins with the law — as Robert Downey reportedly used to be — it makes any studio think twice about committing to him or her for a role.

I recently chatted with Douglas Turk, executive vice president of the world’s leading entertainment industry insurance broker Aon/Albert G. Ruben (which is currently celebrating its 50th anniversary and has insured these and many other movies), to find out if Lindsay’s time in jail will make her uninsurable for producers and just learn a little more about how the whole process works.

Jared Wade: Even before Lindsay Lohan was sentenced, studios were having trouble placing insurance on her. How about now? Will she be totally “uninsurable” once she gets out of jail?

Douglas Turk: The issue is more on assumption of risk and cost as opposed to insurability. Anything is insurable — it’s really a question of price. Producers will need to determine the cost/benefit for Lohan’s role in a production to determine if her involvement will yield a positive result even with the inevitable higher costs.

Wade: Why does Hollywood take out policies to cover actors?

Turk: For the most part, insurance is in place to protect the financing and investment of a film and to protect against the risks that could stop the production. Certain actors are considered essential elements of a film, which is saying that they are critical to the completion of a film. Without their involvement the film could not be completed. If one of the essential elements is unable to fulfill their requirements, it puts the film at risk and, eventually, the financing (debt and equity).

Wade: Generally, are policies taken out on all actors? If you become “uninsurable” does that mean you can’t work?

Turk: For most major productions, insurance covers the actors. If an actor is considered high-risk and cannot get insurance cover at a reasonable rate, a producer may still proceed with the production by retaining more of the risk themselves. It will become more difficult for actors to work, but not impossible.

Wade: Can this insurance cost become prohibitive enough that studios generally try to steer clear of “high-risk” casts? You’re essentially multiplying your risk of shooting interruptions with each problematic cast member, right?

Turk: Again, this goes back to the cost/benefit analysis of the producer and financiers. If the actor is too high-risk and costly, the producers will look to other actors to fill the roles. A group of high-risk actors may change the dynamic of the film with the financers and require re-casting if the risk is judged to be too high.

Wade: What types of triggers are insurers looking at when they make their underwriting decisions?

Turk: The underwriters have seen all the news stories and understand the history of high-risk actors, so they will proceed cautiously when reviewing the risk by asking very detailed questions about the production, location, cast and crew. Insurers will also require specific activities (risk control) that could include active participation on set to ensure that the actor fulfills his or her obligations. This would be complemented by specific exclusions on the policy as well.