Examining the Risk Management Environment

Half of the risk managers who responded to a recent survey believe that the insurance market is softening and that premium rates will reach their lowest point in 2007 and 2008.

Property and casualty rates are anticipated to drop more significantly than D&O and workers compensation, but despite this optimism, only about a third of those surveyed believe that their insurance spending will decrease in 2005 and 2006.

The study, commissioned by London-based Miller Insurance Services, was conducted of senior risk managers from Fortune 750 companies in March. Corporate governance and D&O insurance issues continue to dominate the boardroom while operational risks, particularly in the areas of the supply chain and outsourcing, were the next highest priority.

Risk managers reported an average total risk management budget for their companies of $21.5 million each year, with $10.6 million of that earmarked for annual insurance premium spending.

Overall, risk managers were pleased with the performance of the insurance industry. Nearly three-quarters agreed that insurance companies and underwriters were delivering the right products for the risk that their companies face.

Many risk managers have also found that their role within the company is changing and expanding, particularly with regard to supporting the board in implementing Sarbanes-Oxley Section 404. Other changes cited included a higher profile at the board level and throughout the company, a higher degree of analysis of risks to be addressed, a need for more centralized information and systems to support this analysis, and a need for more formalized documentation to ensure adherence to best practices.

Morgan O'Rourke - managing editor of Risk Magazine

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