March Issue of Risk Management Now Online

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Faithful readers: the March issue of Risk Management magazine is now online. The cover story focuses on five labs and research centers that make the world smarter, safer and more resilient. Other features explore the Consumer Product Safety Commission, greenhouse gas emissions and aircraft products liability and insurance.

Our columns explore topics such as the possibility of a California superstorm, how to evaluate absence policies, data privacy rules around the world and an engaging Q&A with Howard Kunreuther, director of the the Center for Risk Management and Decision Processes at the Wharton School.

If you enjoy what you seen online, you can subscribe to the print edition to enjoy even more content.

Please let us know what you think in the comments below. And stay tuned to the blog for even more coverage in the future. Lastly, you can follow the magazine on Twitter, “like” us on Facebook and join our LinkedIn group.

Warren Buffett Urges More Insurance Underwriting Discipline, Fewer “Testosterone-Driven” Decisions

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When it comes to making good financial decisions, few people are more respected than Warren Buffett. So when the chairman of Berkshire Hathaway, a holding company that counts GEICO, General Re and BH Reinsurance among its revenue generators, gives the insurance industry some advice, many will take note.

Buffett made the following pointed statements in a shareholder letter, warning the industry against “testosterone-driven CEO[s]” that chase policy volume even if it means writing business at  “inadequate prices.”

“At bottom, a sound insurance operation requires four disciplines: (1) An understanding of all exposures that might cause a policy to incur losses; (2) A conservative evaluation of the likelihood of any exposure actually causing a loss and the probable cost if it does; (3) The setting of a premium that will deliver a profit, on average, after both prospective loss costs and operating expenses are covered; and (4) The willingness to walk away if the appropriate premium can’t be obtained,” the letter states.  “Many insurers pass the first three tests and flunk the fourth. The urgings of Wall Street, pressures from the agency force and brokers, or simply a refusal by a testosterone-driven CEO to accept shrinking volumes has led too many insurers to write business at inadequate prices. ‘The other guy is doing it so we must as well’ spells trouble in any business, but none more so than insurance.”

Such comments are not surprising from someone with a conservative risk appetite like the one that has famously made billions of dollars for the Omaha Oracle. The only question, then, is whether the industry will follow his advice and re-prioritize underwriting discipline.

The history of the insurance market cycle tells us that this will occur.

We just don’t know when.

Arkansas Earthquakes Due to Gas Exploration?

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Arkansas experienced a 4.7 magnitude earthquake last night, with two more (registering at 3.8 and 3.6) following soon after. And, according to Scott Ausbrooks with the Arkansas Geological Survey, the 4.7 magnitude earthquake was the largest quake to occur outside of the New Madrid Fault System since 1969.

But Arkansas is no stranger to quakes. Since 2009, a series of tremors have plagued the central region of the state, more specifically, the town of Guy, population 563.

Since the early fall, there have been thousands, none of them very large — a fraction have been felt, and the only documented damage is a cracked window in the snack bar at Woolly Hollow State Park. But in their sheer numbers, they have been relentless, creating a phenomenon that has come to be called the Guy earthquake swarm.

So what’s causing these continuous earthquakes? Many residents think the gas companies are to blame. A few years ago they arrived to drill for gas and, soon after, the town started shaking.

Though such swarms have occurred in the past, way before the gas companies arrived, researchers with the Arkansas Geological Survey say that while there is no discernible link between earthquakes and gas production, there is “strong temporal and spatial” evidence for a relationship between these quakes and the injection wells.

As natural gas exploration has exploded not only in Arkansas, but throughout the southern parts of the United States, we are left to wonder if the next “swarm” will hit Louisiana, or Texas, or Oklahoma.

The 10 Best Industry Blogs

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Bloggin’ ain’t easy. Doing it well takes commitment, research, accuracy and regular postings. And, of course, a knack for writing. The staff of Risk Management has a few favorite blogs that we visit on a regular basis for their insight, knowledge and timeliness. The following are 10 of our favorite risk management and insurance blogs:

  1. The Call: Foreign Policy magazine’s blog posts are authored by Ian Bremmer, president of the global risk research and consulting firm Eurasia Group. The blog uses political science to analyze the future of politics and the global economy. When it comes to industry blogs, this one is my personal favorite.
  2. Terms + Conditions: The Insurance Information Institute’s blog covers current disasters, risks, laws, regulations and market conditions, among other topics. Claire Wilkinson, vice president for global issues at III, has done a great job of posting timely articles first thing in the morning, and it seems she’s been joined recently by James Lynch, a veteran insurance professional and blogger.
  3. Clear Risk: The company itself works with organizations to help improve their risk management techniques and the blog, managed by Craig Rowe, covers the various aspects of risk management and insurance in a well-organized and easy to read manner.
  4. Schneier on Security: Bruce Schneier, a security technologist and author, manages this blog, which focuses on security and security technology. He has testified on security before the United States Congress and has written articles for some of the worlds biggest publications. Schneier, an opinionated tech man, knows what he’s talking about — and it shows in every post.
  5. Workers’ Comp Kit Blog: This blog covers (you guessed it) everything relating to the world of workers’ comp. It acts as a discussion forum for employers to learn about workers’ comp cost containment, techniques and strategies. The blog is managed by Rebecca Shafer, and attorney and risk consultant, and features posts by more than 30 other professionals. Though the format of the blog can be somewhat distracting (ads galore), the content is useful.
  6. GC Capital Ideas: The website, a part of reinsurance intermediary Guy Carpenter, refers to itself as more of a platform from which it disseminates information that has been published through reports, briefings and bylined articles. I refer to it as a blog and its information is has proved valuable to our team on more than one occasion.
  7. Calculated Risk: This blog offers a sophisticated analysis of economic data, from consumer sentiment to the mortgage and housing industry to the banking industry. Managed by Bill McBride, a full-time blogger with a background in finance and economics, Calculated Risk proves successful at turning complicated technical data into useful information for the masses. McBride publishes several posts per day.
  8. Political Risk Explored: Brian Hasbrouck, a man with a serious interest in the international political economy, manages this blog. PRE’s short and sweet posts pull from other publications or reports that the blog’s readers may have never come across on their own. The blog’s simple format makes it easy to navigate and read and the Twitter feed embedded on the right-hand side is an added bonus.
  9. Product Liability Monitor: This blog was created by attorneys in the Weil product liability practice and discusses key trends, developments and events that have shaped and are shaping the product liability landscape. The blog’s clean format is something to be imitated.
  10. The FCPA Blog: Its simple name leaves no guesses as to what it covers — news and views about the United States Foreign Corrupt Practices Act. Managed by Richard Cassin, the multiple daily posts gives readers a grim reminder of the oft-corrupt corporate world and analysis of the FCPA’s actions.

If you think we have left off an important blog related to the industry, please let us know in the comments section below.