We've been lucky this year - after being told to brace for another catastrophic hurricane season, we felt the ocean breezes grow calm and saw storm-related losses remain at a minimum.The insurance industry dealt with an estimated $61.8 billion in losses from Katrina and other storms in 2004-05. Yet surprisingly, many companies have rallied with record earnings. How? Some carriers asked for record-setting rate increases to offset what they believed would be more dire catastrophe-related losses for 2006. Many insurers reacted by shrugging off new business along the coasts. Some attributed their good fortune to technology that reduces claims leakage, some pointed to "underwriting discipline," some to expert predictive modeling systems that support improved rating. Some said it's simply a matter of expert reserve management.

No one in the industry wants to face another record year of natural catastrophes. And one mild hurricane season and its related healthy earnings does not sooth the souls of P&C carriers with significant risk in the path of future storms.

Allstate and State Farm are among the carriers asking the federal government to provide a catastrophe "backstop" that would be similar to the terrorism bill except that it would protect commercial insurers' solvency should another Katrina-like storm occur. Carriers that don't provide as much coverage in those areas want the government to stay out of it. On and on it goes.

I had an opportunity last month to ask Steve Forbes, president and editor-in-chief of Forbes magazine, how, in light of all the catastrophe-related discordance being exhibited by stakeholders on both sides, P&C carriers might best approach future risk management policies.

"Don't panic," he said. "This is just another opportunity to innovate."

Huh? Forbes cited the mainframe as an example. Mainframe computers were first used successfully by the army in World War II to predict where shells would likely land. IBM built several of the then-new machines after the war but initially could not give them away. When IBM approached Sears, for example, the retailing giant's executives asked, "Why would we need to know where shells are going to land?"

Enter Sam Walton, who decided the mainframe's predictive models could apply to his distribution network-kind of a "where would the merchandise land" idea. Wal-Mart's success is history.

Hearing Forbes' answer, I still must have worn that "huh?" look on my face, because he then explained how the idea applied to insurance. "Use technology in ways not originally intended," Forbes said. "Then regroup and re-evaluate processes that will improve risk management, and apply the resulting products, pricing and services to stay a step ahead of the competition."

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