By CYRIL TUOHY is managing editor of Risk & Insurance®.
When was the last time the Risk and Insurance Management Society Inc. met in the wake of a $60 billion loss reported by the world's largest insurance company, American International Group Inc? Never.
Which is why this year's annual RIMS conference in Orlando, Fla., beginning April 19 should be one of the more interesting conferences held in recent years.
RIMS organizers, to their credit, have saved the best for last. Noted author Roger Lowenstein will deliver the breakfast keynote address titled "The Liquidity Trap: From Long-Term Capital Management to Lehman," on Thursday, April 23.
Lowenstein, author of "When Genius Failed: The Risk and Fall of Long-Term Capital Management," a hedge fund packed to the gills with finest minds billions could buy at the time, will discuss how and why risk managers put too much faith in liquidity and what alternatives are available to risk managers.
Many of the discussions scheduled to take place at RIMS, to be held at the Orange County Convention Center, will, not surprisingly, include how risk management failed the financial services industry.
A year can make a big difference--indeed a shocking difference--in the fortunes of some insurance companies.
On May 1, 2008, as risk managers were in the midst of their refresher courses at last year's RIMS conference in San Diego and the subprime crisis was beginning to filter through into the front pages of the mass media, AIG's stock closed at $48.15.
Nearly a year later, on Feb. 19th, 2009, AIG's stock closed at $0.59 cents, and this despite a $150 billion infusion from Uncle Sam last fall. To be sure, AIG wasn't alone, far from it, as just about every insurance company in the country's been hit hard by the recession and, as it turns out, some pretty questionable risk management practices.
The Hartford reported a full-year 2008 loss of $2.7 billion, compared with a profit of $2.9 billion in 2007. ACE Ltd. saw its profits drop to $1.19 billion last year, down from $2.57 billion in 2008, and CNA also reported 2008 losses of $299 million compared with a net profit of $851 million in the year-ago period.
Swiss Re swung to a loss of $739.34 million for the full-year 2008, down from net income of $3.55 billion in 2007.
The travails of the financial services sector in 2008 are certainly not lost on RIMS' in-house magazine, which in its cover story running in its first issue of 2009, admits to the "colossal risk management failure of the financial sector."
Critics of ERM have used 2008 to show that ERM is an expensive corporate distraction, while supporters have pointed to ERM as the reason many other companies have weathered the recession in relatively good shape.
Either way, there's never been more reason to discuss the merits of risk management and insurance. RIMS this year might even contemplate a temporary name change: The Risk for Insurance Management Society Inc.
Which is a good reason for risk managers to pack their bags and head down to central Florida and sit in on the conference's sessions on enterprise risk management (ERM) in particular.
RIMS Executive Director Mary Roth, says her organization is well aware of the key role RIMS plays in helping its members, particularly this year.
"We've organized a conference filled with opportunities to guide you through today's challenging business environment with an eye toward emerging risk practices and standards," says Roth, in an introductory video to this year's RIMS conference posted on the organization's Web site.
The "challenging business environment" is expected to put more pressure than ever on companies' loss control strategies. So RIMS this year, is offering eight sessions on the subject.
Accidents in New York City in the past two years involving cranes have prompted RIMS to put "A Risk Management Update on Safe Crane Operations" on the agenda for Tuesday, April 21.
The session will feature William B. Noonan, vice president, risk management, Structure Tone Inc., Michael Pankonien, director, risk control, Frank Crystal & Co., and Stanley Rosen, vice president, AIG Consultants.
Every risk executive knows that one of the simplest ways to cut costs is by preventing accidents in the first place and so RIMS has seen fit to host a session titled "Play it Safe--Establishing a Safety Culture."
The session will be hosted by Catherine D. Bennett, president, Cost Control Concepts Inc., Daniel H. Kugler, assistant treasurer, risk management, Snap-on Inc., and David C. Rydeen, national director, safety and security, Papa John's International Inc.
Once again this year, RIMS is offering sessions on hurricane preparedness. It's expected to be a popular topic, particularly in Florida which this year is hosting the RIMS show this year, and given the fact that the 2008 hurricane season was one of the most expensive on record.
Claims management will feature prominently, with eight sessions as well devoted to that subject, including one to be offered Tuesday, April 21, on how to mine claims data in the public and private sectors.
The session will be hosted by Curtis J. Collver Sr., assistant vice president, data resource management, with GAB Robins; Daniel H. Kugler; and Douglas Rinaldi, workers' compensation program manager with the state of Connecticut.
On Tuesday, April 21, risk managers might also want to attend the session titled "Gotcha! Top Ten Litigation Traps for Risk Professionals," which will deal with the intricacies of complex coverage claims.
Panelists will include John G. Buchanan III, partner at Covington & Burling; Mary Craig Calkins, partner at Howrey; Lori Jorgenson, senior director, finance, Microsoft Corp.; and William P. Lyons Jr., vice president, risk management, PETCO Animal Supplies Inc.
RIMS leaders, aware of the subdued mood and tighter reins on spending, are coming to Orlando prepared to insert a little levity into the discussions as well. The added stress this year is the reason for the pep talk to be delivered Monday, April 20, by the luncheon keynote speaker, author and humor therapist Elaine M. Lundberg, according to Joe Restoule, president of RIMS.
"To lighten the mood midweek, learn how to manage stress and incorporate humor into your day with humor therapist Elaine Lundberg," writes Restoule, in an introductory letter to risk managers in the 2009 RIMS Conference Program. Lundberg's address is titled "Laugh for the Health of It."
Risk executives looking to spread the risk management gospel on the cheap throughout their organization should think about sitting in on at least two new sessions this year.
One of the sessions, "Spin a Winning Website--Put Risk Management at the Fingertips of Your Organization," is designed to teach managers about the technological, budgetary and political pitfalls of how to use a Web site and the Internet to serve the needs and the interests of risk management.
Hosted by the RIMS Santa Clara Valley Chapter, Holly H. Daley, director, global risk management for Hitachi Data Systems Corp., will be the featured panelist.
A second session, "Blogging--Risk and Reward of User-Generated Content in the 21st Century," will cover the risks and rewards of this new activity which can, fairly or unfairly, determine the commercial fate of a product or service in the marketplace.
This session is also expected to cover slander and libel laws, along with the protections afforded bloggers by the First Amendment.
It will be hosted by Mark M. Flannery, workers' compensation manager for Caterpillar Inc.; Andy P. Steggles, chief information officer, RIMS Information Technology; and Christopher Sloan, assistant vice president and senior corporate counsel, Liberty Mutual.
With companies laying off tens of thousands of workers as the economy continues to shrink, risk managers are also expected to deal with higher employment liability risk, and RIMS is offering five sessions to help risk managers deal with the new employment environment.
Among the sessions is one titled "The Human Element--Mitigating Employee Risk," to be held Wednesday, April 22. It will focus on risks from recruiting to post-termination, and how risk managers can develop "prudent and legally defensible" strategies for their employers.
The session will feature what companies have done to avert losses and what they've done once investigations have been launched against them, and how technology can help companies protect themselves.
Hosted by the RIMS Delaware Valley Chapter, the session will feature Robert Allen, managing partner of Willis of Florida; Laurence J. Glasser, risk manager, AmeriJet International Inc.; Bradford J. Sandler, partner at Benesch, Friedlander, Coplan; and David Yarnall, president of IT Acceleration.
April 1, 2009
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