Richard Storey Global risk and insurance executive, RMC Group [manufacturers of building products and materials such as concrete and cement]
How has your view of risk and your role as risk manager changed over the past year?
Protecting a company against risk has become a lot more expensive in the past year. This has forced us to look at all areas of insurance and other aspects of the cost of risk. We have had to make some difficult decisions as to how much we can afford to transfer to third parties and how much of our risk we can manage ourselves.
What are the most difficult risks for you to place in the insurance market?
Natural catastrophe, particularly Californian earthquake; machinery breakdown; product liability; and specialist cover for our industry, called 'rip and tear'.
Has alternative risk transfer (ART) become more important to you in the past year? What methods are you using or considering using?
No. Our risks are more traditional and we are still not confident that there are sufficient mainstream deals that are suitable for us. But we are constantly reviewing the possibilities, particularly as capacity dries up.
Are you more concerned about insurer solvency than you were last year?
Yes.Do you feel that the insurance market is able to meet your risk management needs?
No. The pace of development is still slow. The insurance market is adequate for traditional risks, but we haven't seen any evidence of it being able to deal with the wider holistic risk solutions.
Has your relationship with your insurers changed over the past year?
Yes. In these difficult times it has been necessary to have a more comprehensive dialogue with insurers. This has been positive. Insurers have been able to understand better our risk profile and we have gained a clearer idea of what drives our insurers' strategies and decision-making. I think we understand each other better.
Do you feel insurers are doing enough to develop long-term relationships and long-term solutions with you?
No. A lot of insurers talk of long-term relationships. I am highly sceptical of that. Insurers have to look to their shareholders and make money. The realities are that it may be more profitable for them to pick up business in good years and drop it in bad years.
People want to develop long-term relationships on both sides, but not at any cost. Most people have a sense of reality. There will be times when it will be necessary to re-assess the relationship.
Does your company have a disaster recovery plan?
We have a one for certain areas of the business. For heavy risk areas we recognise the importance of planning. It is an ongoing exercise to identify the areas of risk.
Gary Marshall Group risk manager, Polestar Group [printing company]
How has your view of risk and your role as risk manager changed over the past year?
No real surprises. It is important to know your own business, and the opportunities and threats which can operate within and without.
What are the most difficult risks for you to place in the insurance market?
Property and UK employers' liability.
Has alternative risk transfer (ART) become more important to you in the past year? What methods are you using or considering using?
We are exploring all alternatives. We are not using ART at the moment, but a captive is a possibility.
Are you more concerned about insurer solvency than you were last year?
No. The collapse of Independent Insurance was a bolt from the blue. But with insurers' margins improving, hopefully we are over the worst. The sting in the tail could be more asbestos claims though.
Do you feel that the insurance market is able to meet your risk management needs?
It is important to have good lines of communication with insurers, even before day one, to set out expectations and service standards. Even so, we buy risk management in addition to that which our insurers provide.
Has your relationship with your insurers changed over the past year?
They are much tougher on risk management. It is also more difficult to judge their expectations – they sometimes appear to be contradictory.
Do you feel insurers are doing enough to develop long-term relationships and long-term solutions with you?
Generally no – but hope springs eternal. It is about short term realism at the moment.
Does your company have a disaster recovery plan?
Broadly yes. We are a 24-7 just-in-time business. We have to be able to print. Our customers won't accept anything else.
Geoff Taylor Director of risk management, Nike EMEA
How has your view of risk and your role as a risk manager changed over the past year?
This is a little difficult to answer accurately as I moved jobs in Feb 2002, so there is a great deal of change in my own personal situation. However, in a general sense, I believe the need for risk management has continued to grow since the various major events that have occurred in the past few years. These include the collapse of Enron, WTC and more frequent weather related losses.
This is impacts all areas of risk management from business continuity, security, health and safety and, of course, insurance. I believe there is more understanding that risk management is about the process and that insurance is just a subset of the process.
What are the most difficult risks for you to place in the insurance market?
I am not directly responsible for insurance globally.
Has alternative risk transfer (ART) become more important to year in the past year? What methods are you using or considering using?
If by ART you mean non-insurance risk financing such as finite, captives and blended programmes, the answer is the same as I have always maintained. None of these options is exclusively a solution to the risk financing needs of a corporation. We all need a mixture of financing tools, both on and off balance sheet. The most important discussions are around the prevention programmes, risk management techniques and then retentions and self funding.
Are you more concerned about insurer solvency than you were last year?
Insurer solvency has always been an issue. There is no point placing long or short term insurance with an entity financially weaker than yourself. Its cost of capital is higher and thus it cannot be efficient. If you want claims paid now or in the future you need an insurer that will still be there.
Do you feel that the insurance market is able to meet your risk management needs?
Yes. From time to time they let themselves down by withdrawing irrationally from a sector, only to creep back in a different guise.
How has your relationship with your insurance companies changed over the past year?
I feel that our relationships have improved, however we have always made the effort to engage with our underwriters and explain the risks as we see them.
Do you feel your insurers are doing enough to develop long-term relationships and long-term solutions with you?
Yes. Our relationships continue to grow and if you select partners objectively for financial strength and stability then it avoids misunderstandings.
Does your company have a disaster recovery plan?
Yes.
Clive Smith Risk manager, Orange
How has your view of risk and your role as a risk manager changed over the past year?
My role as risk manager has evolved during the past year reflecting, in part, the demands of a hardening insurance market and our internal efforts in rolling out our risk management strategy across the group.
While from an insurance perspective the hardening market presents challenges, the day job of a risk manager is not limited to just the purchase of insurance. Key is the management of risk. There have been some important developments in thinking about risk management such as the risk management standard issued in the UK. The role and focus of risk management is changing due to the drive of shareholder assurance and internal control from regulation and corporate governance through to the increasing recognition of risk.
Much of my effort over the past 12 months has focused on how we as an organisation build a consistent risk management culture, so that we manage risk across the organisation in the right way to achieve our objectives.
What are the most difficult risks for you to place in the insurance market?
While we have seen a hardening insurance market, our brokers and many of our key insurers have worked hard to support us in providing solutions to place our risks. What has been more problematic is achieving real value from the insurance transactions.
Has alternative risk transfer (ART) become more important to year in the last year? What methods are you using/considering using?
ART has not become more important to us.
Are you more concerned about insurer solvency than you were last year?
Insurer solvency has always been important to us and will continue to be.
Do you feel that the insurance market is able to meet your risk management needs?
The insurance market has maintained capacity for my organisation to meet many of the risks that have traditionally been insured. In terms of meeting risk management needs by either risk financing or expertise, I do not believe that the insurance market is there. However, is this what they are trying to achieve?
How has your relationship with your insurance companies changed over the past year?
No comment.
Do you feel your insurers are doing enough to develop long-term relationships and long-term solutions with you?
I recognise that insurers have focused on their internal short-term challenges and needs must. It is to insurers' and brokers' credit that for many buyers a liquid insurance market has been maintained. As for long term solutions and relationships this to my mind has taken second place to dealing with insurers' challenges presented by the issues causing the hard market.
Does your company have a disaster recovery plan?
Yes of course.
