COPING WITH CAT LOSSES : STRATEGY

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COPING WITH CAT LOSSES STRATEGY PRIORITIES
THE RM PERSPECTIVE

• 3rd Sep 2005
• p.chandrasekar_at_unilever.com

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CAT LOSSES

• CAT LOSS DEFINED
• THEORETICAL/CONCEPTUAL
• B/S IMPACTING
• POSSIBLE TO RECOVER NOT ALWAYS, NIOT ALWAYS IN
  TIME, NOT ALWAYS EFFECTIVELY, NOT ALWAYS
  COMPLETELY
• POSSIBLE KINDS OF CATS AON, AOM, REGULATORY,
  LEGAL MAY BE MIXED BAG
• 21ST CENTURY CATS

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VULNERABILITY ANALYSIS

• EXPOSURE-BASED
• PREMISES- SITE LAYOUT/ BUILDINGS/UTILITIES/IT
  PHONE NETWORKS/INFRASTRUCTURE
• LIVES EMPLOYEES/SUPPLIERS/CUSTOMERS/CONTRACTORS/
  VISITING OFFICIALS
• LACK OF ACCESS TO PEOPLE/PREMISES
• ACCESS AVAILABLE BUT NOT OPERATIONAL
• LIABILITY VULNERABILITY ASSESSMENT
• BUSINESS IMPACT ANALYSIS

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THE R M IMPERATIVES

• RISK NEEDS PERCEPTION
• RISK ANALYSIS
• RISK ASSESSMENT
• RISK MINIMISATION/CONTROL
• RISK IMPROVEMENT
• SHARE INDUSTRY EXPERIENCE
• SHARE INFO ON CHANGES - BOTH CURRENT PROSPECTIVE

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RISK APPETITE
Risk Seeker
Loss in utility
Neutral toward risk
Risk averter
Loss in Rupees
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RISK PERCEPTION
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• THE R M PROCESS

IS THERE A RISK ?
YES
NO- NO ACTION
IDENTIFY QUANTIFY
IS IT SIGNIFICANT OR CAN IT BE SELF-INSURED
NO, IT IS SIGNIFICANT
IT CAN BE ACCEPTED
CAN IT BE PREVENTED?
NO ACTION
YES
NO
COST THEREOF ACCEPTABLE?
CAN IT BE AT LEAST MINIMISED?
YES
COST ACCEPTABLE ?
PROCEED TO SPEND AND INSTAL
NO
THE PREVENTIVE MACHINERY/
YES-INSTALL
METHODS
IS RESIDUAL RISK ACCEPTABLE?
NO - INSURE
YES
(CARRY OWN RISK)
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RISK QUADRANT
Organisation
Physical /Fiscal protection
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HUMAN BELIEFS --A LIFE SPAN SEGMENTATION

• First there is a time when we believe everything
• then for a little while we believe with
  discrimination
• then we believe nothing whatever,
• and then we believe everything again - and,
  moreover,
• give reasons why we believe.
• G C Lichtenberg

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RISK CONTROL WHY?
Loss of reputation Lasting market loss /brand
damage Loss of Shareholder Value Loss of key
staff Management costs Insurance deductibles
Non-insured risks
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THE R M PERSPECTIVE

• GET ALL RISKS INSPECTED
• CONCEPTS OF EML/PML
• R M I S
• LOSS RECOVERY PROCESS
• SURVEY REPORT COPY
• LOSS MITIGATION PERSPECTIVE
• USE CHECKLISTS
• REGULATE/REDUCE TIME FRAMES
• USE INTERMEDIARIES
• BCP/DRP OTHER PLANS

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THE R M BEST PRACTICES ?

• INVOLVE ALL PLAYERS
• EDUCATE, CONTINUOUSLY
• INVOLVE CORE NON-CORE
• INVOLVE FINANCIAL PERSONNEL
• INVOLVE SAFETY PERSONNEL
• INVOLVE FIRE SERVICE PERSONNEL
• INVOLVE BUSINESS PARTNERS
• INTERACT, CONSTANTLY - PROACTIVELY

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THE RISK MANAGERS DOS

• ALWAYS ADDRESS CHANGE CONTENT MANAGEMENT AT
  ALL TOUCH POINTS REGULATORY/INSURER/INSURED/
  INTERMEDIARY/SURVEYOR
• ADDRESS DELAY POST-HASTE
• COMMUNICATE CONTINUOUSLY
• GET REAL NO EXAGGERATIONS/BLUFFING
• GET YOURSELF PROFESSSIONALLY RESPECTED
  CONTINUOUS EDUCTION

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EMERGING CAT EXPOSURES

• MOTHER EARTHS NATURE
• HUMAN NATURE
• CONVERGENCE OF SERVICES
• SHRINKING WORLD
• GLOBAL COMMUNICATION NETWORK
• GLOBAL DATA BASES
• PRIVACY ISSUES
• CORPORATE GOVERNANCE/C S R

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ALVIN TOFFLER

• ILLITERATES ARE NO LONGER THOSE WHO CANNOT READ
  AND WRITE, BUT THOSE WHO CANNOT LEARN, UNLEARN
  RELEARN

QUICKLY CONSTANTLY
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THE RISK SPECTRUM

• PROJECT RISKS
• STORAGE RISKS
• ERECTION MAINTENANCE RISKS
• OPERATIONAL RISKS
• STORAGE RISKS
• TRANSPORTATION RISKS
• OUTSOURCING RISKS

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THE RISK SPECTRUM cont

• ENIRONMENTAL RISKS
• STATUTORY RISKS
• LEGAL RISKS
• HUMAN ELEMENT
• NETWORKING RISKS
• MARKET RISKS
• TIME FACTOR

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ON EXCELLENCE
WE ARE WHAT WE REPEATEDLY DO

• EXCELLENCE THEN,

IS NOT AN ACT,
BUT A HABIT
--- ARISTOTLE
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SUGGESTED READING

• Climaterisk.co.uk
• Globalcontinuity.co.uk
• Lpc.co.uk
• lpaindia.org
• Cresta.org
• Nfpa.org
• Undp.org
• Unisdr.org
• Risk-engineering.com
• Fmglobal.com
• Globalriskconsultants.com
• Grmn.com
• Aon.com
• Munichre.com
• Swissre.com
• Sciam.com
• Ndmindia.nic.in

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issues ? queries ? THANKS !