London - In order to better manage risk in an insurance business cycle fraught with uncertainty over market conditions and pricing, carriers in the U.S. and abroad should invest in the latest risk management tools, says a new report from Lloyd's, "Managing the Insurance Cycle." Lloyd's, which provides specialist commercial insurance coverage to customers in more than 200 countries and territories, published the report as part of its 360 Risk Project, an initiative to generate discussion on how best to manage risk in today's business environment. The report warns of "considerable uncertainty remains over prices and conditions in the commercial insurance market following last year's record hurricane season." Among other suggestions, it cautions underwriters to beware of the tendency to follow on market trends, and reminds them that "disciplined insurers... are prepared to walk away from markets when prices fall below a prudent risk-based minimum." Investing in state-of-the-art risk management and measurement tools, says Lloyd's, will support insurers' ability to create the best possible pricing models, as well as their ability to update them regularly to reflect the latest scientific evidence. "The models should more easily permit sensitivity analysis to show the impact of the many assumptions that are being made by the modellers on the insurer's behalf," notes the report. Lloyd's report cites "seven key steps for ensuring that the industry becomes less unpredictable and underwrites on a sustainable basis for the benefit of both policyholders and insurers," including: -- Don't follow the herd. -- Invest in the latest risk management tools. -- Don't let surplus capital dictate your underwriting. -- Don't be dazzled by higher investment returns. -- Don't rely on 'the big one' to push prices upwards. -- Redeploy capital from lines where margins are unsustainable. -- Get smarter with underwriter and manager incentives. More information onLloyd's report is available at www.lloyds.com/360. Source: Lloyd's

New York - Driven in part by increased demands from regulatory and rating agencies, enterprise risk management (ERM) has become integral to insurers' business processes around the world. Sixty percent of survey respondents explicitly factor risk management considerations into their decision-making, according to the fourth biennial survey of risk and capital management practices among insurers worldwide by the Tillinghast business of Towers Perrin. Conducted in summer 2006, the study of executives from more than 200 insurance and reinsurance companies around the world focuses on a number of issues, including risk measurement, quantification competencies, how companies calculate and use economic capital (EC), risk reporting and areas where the global insurance community is seeking to improve their risk management capabilities. In addition, a special section has been included that focuses on the impact of Solvency II on the European community. Key findings from the study: * External pressures are raising the bar for risk management globally. While most companies globally (78%) cite "good business practice" as the principal driver for their current risk management efforts, rating agency considerations are a significant factor for North Americans (72%) whereas changes in insurance solvency regulations are a major driver for European Union insurers. * Two-thirds of the insurance industry globally uses EC as a risk quantification tool. This is a significant increase over 2004 where only half of the respondents indicated they were using EC. * A further 19% of the participants indicated they are considering the use of EC. * Insurers are using a diverse set of risk metrics. Insurers assess the impact of risk on their capital, value and earnings in a variety of ways, with 63% using at least three differing measures. The most common are statutory or regulatory capital and surplus (56%), economic value (42%) and GAAP or IAS measures (38%). "Companies are clearly more disciplined in their use of ERM today than ever before, as catastrophic events, capital efficiencies and competitive pressures have driven companies to adopt less of a 'seat-of-the-pants' approach to risk issues," said managing director Tricia Guinn, who oversees both the Tillinghast and Reinsurance businesses of Towers Perrin. Risk Management Raises Its Profile "As risk issues have gained importance, so has the role of the chief risk officer," said Prakash Shimpi, Practice Leader with global responsibility for ERM. "Insurers are not only examining risk more closely, but they are also holding executives more accountable for the results." Almost half of the respondents (43%) report having a chief risk officer (CRO) with primary responsibility for risk management, up from 39% in 2004 and only 19% in 2002. The study also indicates that risk management is gaining importance in board rooms, with nearly all respondents (92%) reporting on risk to their board of directors at least annually, up from 84% in the 2004 survey. 53% of all respondents report at least quarterly to their board. Risk reports to senior management have become a common practice, with 39% reporting monthly and another 35% reporting quarterly. Risk reporting varies regionally: * Bermudian (89%) and Canadian (82%) insurers are more likely than U.S. or Asia/Pacific companies (53% respectively) to report quarterly on risk to their boards. * European life insurers (65%) and p/c insurers (60%) are twice as likely to report to senior management monthly as their North American counterparts (31% respectively). Solvency II Shapes Risk Management European insurers generally agree that the new Solvency II regime will require significant improvements to their risk management capabilities, including enhancements to risk quantification capabilities (63%) and enhancements to actuarial and accounting tools (59%). However, there are markedly different results between continental Europe and the U.K. in their approaches to Solvency II which is not surprising given the U.K.'s ICAS regime: * Enhance risk quantification capabilities (76% continental Europe, 41% U.K.) * Enhance risk governance and organization (61% continental Europe, 19% U.K.) * Improve risk identification capabilities (52% continental Europe, 15% U.K.) "U.K. insurers clearly feel better placed as a result of regulatory changes introduced by the FSA in advance of Solvency II. Their focus is now on developing the right tools to suit the new environment," said Ian Farr, principal. "The increased risk sensitivity and flexibility of Solvency II provides will trigger greater product innovation, more innovative capital management, capital raising and financing structures." Room for Improvement While ERM has made significant progress in recent years, there are still growing pains: * Most respondents (77%) are highly focused on improving risk measurement and quantification processes to enhance their overall ERM efforts, particularly in the U.K. (97%) and Japan (95%). * Respondents are generally not satisfied with their current capabilities in many of the risk management areas they see as important. They are significantly dissatisfied with their ability to quantify operational risks and their ability to reflect risk in performance measures. "Insurers now recognize the potential impact a single event like a security breach or systems failure can have on their operations, as well as on their financials. Operational risks can be complicated and difficult to quantify, so many are turning to scenario analysis to achieve meaningful results," said Shimpi. "We expect operational risk modeling and management practices to steadily improve over the next few years." Economic Capital as a Key ERM Tool The survey also found that many insurers are moving toward the use of economic capital (EC) as a risk management tool. As stated previously, nearly two-thirds (65%) of all respondents calculate EC and an additional 19% said they are considering calculating EC, implying that it may soon be a universal tool. EC use is already at 99% in the U.K., where the FSA requires companies to perform an Individual Capital Assessment. Almost all respondents (89%) are planning to make further improvements to their EC modeling capabilities. More information is available at www.towersperrin.com/tillinghast Source: Towers Perrin

Its negative connotation is deserved. For insurance companies, a data breach spells instant trouble-the least of which is potential loss of reputation, brand and revenue. If a court of law rules the insurance company is negligent, a data breach has the potential of ultimately shutting the carrier's doors.Recent research by the Chief Marketing Officer Council, Palo Alto, Calif., revealed that a company loses, on average, from 0.63% to 2.10% value in stock price when a breach is reported-equivalent to a loss in market capitalization of $860 million to $1.65 billion per incident.

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.

According to a survey conducted by Fierce-Wireless-Bluefire Wireless Security this year, more than 80% of financial services respondents say their organization's use of handheld devices had increased over the past two years. Meanwhile, 87% say they are concerned about the security of e-mail access to corporate server-based accounts and of remote access to corporate networks, and 85% say that access to Web-based e-mail had become a significant security concern.

TOOL HELPS EMPLOYEES MANAGE THEIR BENEFITSPlanAdvisor, a benefits management tool from Milwaukee-based Zywave Inc., features a Plan Selector module to enable employees to review their own health costs. PlanAdvisor generates management reports without carrier data feeds, analyzes the effects of changes in the plan design and calculates projected plan costs, based on trend and claims information. It also offers benchmarking, modeling, and analysis to allow brokers to deliver information based on industry comparison data and actuarial factors, which can help clients make informed decisions.

CAPITOL SELECTS STG BILLING SYSTEMMiddleton, Wis.-based Capitol Insurance Cos. chose Renaissance Billing Solution from New York-based Systems Task Group International Ltd.'s (STG) to support billing and accounts receivable operations. The system will replace Capitol's existing billing systems and will enable the consolidation, centralization and the streamlining of Capitol's cash management and accounting operations. It will provide Capitol with advanced technology support, flexibility and configurability.

Needham, Mass. - In 2007 and beyond, the global financial services industry will increasingly grapple with three major strategic shifts: reinventing financial services at its core; repurposing financial services relative to the global diversity of a changing customer base; and helping restore confidence in an uncertain world, according to a series of research reports from Needham, Mass.-based TowerGroup.The reports examine the top business drivers, strategic responses and technology priorities that will fuel core sectors of the global financial service industry in 2007.

Sydney, Australia - Insurance Australia Group Ltd. (IAG), announced its intention to make its global operations carbon neutral within five years."As an insurance company we have been very concerned about the risks and impact of climate change on our community for a number of years," says Mike Hawker, IAG's CEO. "We have been working on ways to reduce our own CO2 emission footprint, alerting the community about the risks of climate change, and researching opportunities for our customers to benefit from CO2 reducing activities. We are furthering our efforts, by announcing our intention to be carbon neutral within the next five years."

Blue Bell, Pa. - Almost one in every three of the more than 1,700 senior-level corporate and technology leader respondents in a new international survey do not trust their companies' own abilities to handle private or sensitive information, and that same number are either unsure or don't believe that most of their business partners consider them to be trusted enterprises.These and other findings are part of a broad research project from Blue Bell, Pa.-based Unisys Corp., called the Unisys Trusted Enterprise Index, a survey designed to measure the importance, impact and influence of trust, privacy and security within the corporate world. Conducted in partnership with the Ponemon Institute, an Elk Rapids, Mich.-based privacy research organization, the study also found that despite a growing awareness of risk management and security issues in the corporate world, more than one-third of companies polled do not task senior leaders with protecting the trust that customers, investors and even their own employees have in those companies.

Orlando - The latest release of ISO HomeValue, a residential replacement cost estimator, now allows personal lines insurers to assess catastrophe risk for individual properties using Boston-based AIR Worldwide Corp.'s (AIR) industry standard catastrophe models. The goal, says the companies, is to provide access to essential catastrophe risk data from a single web-based application, ISO HomeValue enables improved underwriting decisions. "After the large hurricane losses of 2004 and 2005, companies were reminded of the importance of assessing a property's catastrophe risk as part of the underwriting process," says George Davis, vice president at AIR. "However, most personal lines insurers have historically had very limited and inefficient ways to assess the catastrophe risk for individual properties. Now, ISO HomeValue provides residential underwriters with immediate catastrophe risk information at the individual property level in a seamless manner." By accessing AIR's catastrophe models from within ISO HomeValue, underwriters can generate real-time estimates of catastrophe risk, as characterized by the estimated average annual loss. Insurers can use this assessment of the catastrophe risk to automate, for example, simple issue/decline decisions, rating plan selection, and price adjustment under consent-to-rate procedures. ISO HomeValue captures a variety of property characteristics necessary for catastrophe modeling, including location, construction, building type, and year built. Additional property characteristics that may mitigate damage-such as storm shutters for hurricane risk-can also be entered to assess rate credits for such structures. In many cases, basic property data can be automatically pre-filled using the ISO PushPin database. ISO PushPin contains specific and detailed data on key building features for more than 50 million residential properties in the United States. Agents, underwriters, and inspectors can enter additional property information into ISO HomeValue to enhance the completeness of the data. "By employing ISO HomeValue to gather and maintain high quality property data, insurers can obtain more reliable estimates of an individual property's catastrophe loss potential, in addition to its replacement cost," continued Mr. Davis. Source: AIR Worldwide Corp.

Waltham, Mass. - Results of a study analyzing the actual compliance-training records of more than 2.5 million employees (working at approximately 350 companies) who completed online ethics and compliance courses cite financial integrity as the respondents' number-one compliance issue. Insurers represented 10 of 350 companies studied, or roughly 153,000 employees, notes study author Integrity Interactive, a Waltham, Mass., provider of Web-based tools for managing and mitigating corporate ethics and compliance risk. The study reveals the top-12 ethics and compliance training topics addressed by major companies in 2006. Leading corporations have begun to address compliance risks proactively instead of waiting to react after problems arise, say the findings. The Integrity Interactive study quantifies which ethical violations companies fear most, identifies emerging compliance risk-management trends, and provides concrete examples of how top compliance-training topics map to corporate governance scandals dominating business headlines today. Financial integrity is the top compliance-training topic covered by major corporations today. Financial integrity has been among the Top-3 most-popular course topics every year since 2000, and also tops the most-popular list for the present decade, reflecting the persistent determination of many companies to proactively prevent compliance violations such as backdated stock options and inaccurate financial reports. Proper use of computers ranks second on the list of ethics and compliance topics, reflecting the desire of companies to protect their leaders, employees, and themselves from embarrassing, inappropriate, or even illegal uses of computers, the Internet, instant messaging and related information technologies. Four new concerns surfaced in the study: Sarbanes-Oxley & internal controls (ranked #6) and data safeguarding (ranked #8) appear in the top-12 list for the first time. The popularity of these course topics reflects corporate efforts to respond to important legislation adopted in recent years at the national and state levels. Human rights (ranked #10) and privacy (ranked #12): These two also appear on the top-12 list for the first time and constitute powerful evidence of senior management's desire to respond to broader values-based concerns gaining traction in society as a whole. Another aspect of the study revealed that company size influences risk-management priorities. Very large corporations (90,000+ employees) have made financial integrity their leading priority. Large (10,000+ to 90,000 employees) and mid-sized (1,000 to 10,000 employees) companies cite mutual respect as their top priority (closely followed by proper use of computers). And mutual respect appears among the top-3 most-popular training priorities for companies in all size buckets (mid-sized, large and very large). The near-universal applicability of the mutual respect course explains its popularity with companies of different sizes. Antitrust (a risk-area of particular concern to sales and marketing personnel) is another compliance-training topic popular with companies of all sizes. Source: Integrity Interactive Inc.

Emerging nanotechnol-ogies have the potential to influence and change our lives in ways we could not have imagined as recently as a decade ago. A generic term for applications at the molecular level, nanotechnology will eventually influence every aspect of our lives; from the way we communicate to the methods used to diagnose and treat illness. Nanotechnology will improve efficiencies in energy, computer storage capacity and data processing, security, clothing, food, and shelter.The potential of nanotechnology is reflected by the amount of revenue currently projected for these technologies, between $1 trillion and $2 trillion within the next 10 to 15 years. And just in time, because according to World Resources 2000 and United Nations press releases, within the next 50 years-less than one lifetime-the world population is expected to grow by 50%, world economic activity is expected to grow 500% and world energy and materials use is expected to grow by 300%.

Insurance has always been about risk, and insurance companies, armed with actuarial tables and reinsurance, have generally handled it well. But there are risks that go beyond the ordinary-storms that wipe out a city's worth of houses and businesses and create enormous correlative exposure; lawsuits that result in liability where none existed before, or threaten to remove exclusions. These sorts of risks can drain capital reserves and put the entire company in jeopardy.To protect themselves, insurance companies increasingly step back and take a holistic, enterprisewide view of risk, and align their reserves to meet not just everyday actuarial and financial risk, but risks that cross organizational silos.

When it employees at Cincinnati-based Great American Insurance Co. got wind late last year that their new CIO would be Piyush Sing, former CIO of the Peoria, Ill., multi-line P&C carrier RLI Systems, they probably took a deep breath-rightly assuming that big changes would be coming in how the company uses technology to conduct its specialty commercial lines business. Sing's reputation for building front-end technology to match his previous company's unique requirements (RLI's motto was to provide "Fundamentally Sound Innovation" to the insurance industry) preceded him.As expected, Sing came to Great American Insurance with a similar plan, and a vision to overhaul the 130-year-old company's front-end applications for insurance processing with a service-oriented architecture (SOA) and Web services approach. Especially critical to Sing's vision: the ability to manage the appointments, interactions and state-by-state compliance requirements of a U.S. distribution network comprised of 8,000 active agents.

HARTFORD TEAMS WITH TECH GROUPThe Hartford Financial Services Group Inc., Hartford, Conn., is working with the largest technology trade association in Washington State to offer policies designed for the technology industry. The insurer will market the insurance to members of the Seattle-based WSA (formerly the Washington Software Association) through brokers and independent agents. Nationwide, the Hartford insures more than 50,000 technology companies.

WHITEHILL SOFTWARE HELPS CREATE POLICIESWhitehill Technologies, Moncton, New Brunswick, has shipped a new release of the InSystems product line, which helps create insurance policies. IStream Publisher 3.2 simplifies production of insurance documents by managing the process from the first draft of the contract language through the issuing of the policy. The software also supports service-oriented architecture (SOA), which increases IT agility, and includes predefined services for retrieval, assembly, rendering, delivery and storage.

Insurance Networking News asked David Pedersen, senior vice president at Insurity, Hartford, Conn., to explain how a data integration project can evolve from an enterprisewide objective to a successful way of life.INN: Do most insurance companies have a data strategy, and why is it important?

Liability Insurance Administrators (LIA), Santa Barbara, Calif., was drowning in paper and all the costs associated with generating it, filing it and keeping it around. With an average of 15,000 to 20,000 active existing insurance policy underwriting files, the firm, which provides error and omissions policies to real estate appraisers, found itself having to hire new clerical staff to handle processing, as well as finding new space for all the documents."In the beginning, we just had one clerical person who would answer phones, do the filing, issue quotes, and do all other clerical work," says Robert Wiley, LIA assistant vice president. "As the company grew year after year, we had to start divvying up those duties to stand-alone positions, receptionist, clerical staff and filing staff. Eventually we had to keep increasing our filing staff, and we're now at the point where we're an office of about 29 people. And we have four full-time file staff and three part timers."

CAT CLAIMSCustard Insurance Adjusters, a Norcross, Ga., independent loss adjusting company, contracted with Marshall and Swift/Boeckh (MSB), New Berlin, Wis., for MSB's IntegriClaim tool for field estimating and for its IntegriClaim Administrator, which provides a paperless, Web-enabled work environment, for use in Custard's catastrophe and home office claims divisions. The technology package will send claims seamlessly from the carrier to independent adjusters.