From the May 2010 issue of Treasury & Risk magazine

Watching the Insurers

The credit crisis, particularly the government's bailout of mammoth insurer American International Group, increased risk managers' concerns about the creditworthiness of insurance companies. Now brokerage Marsh has launched a Web-based service to help companies keep tabs on the solvency of their carriers.

Marsh Market Information (MMI) provides ratings, financial analysis, news updates and other information on 1,500 insurance companies. Risk managers, who access MMI through a secure Web portal, can assemble a list of insurers they work with and track an array of information about them, including the performance of the stock of an insurer's parent company and where its credit default swaps are trading.

Stacey Regan, deputy treasurer at General Electric, noted in a recent Web cast that while GE used to rely on insurers' ratings, now "we supplement those by diving much deeper into our insurers' financials." Among the elements GE considers are credit default swaps, regulated entity structure, and capital by regulated entity, she says.

"Since what happened with AIG in November '08, we have had a plethora of requests for this type of information," says Paul Sherbine, practice leader for Marsh's global market information group.

Risk managers have become much more interested in understanding how much money stands behind the policies they're purchasing, Sherbine says. MMI helps with that topic by tracking guarantees provided by insurers' parent companies, insurers' participation in intercompany reinsurance pools and the other types of businesses engaged in by parent companies.

"While a property/casualty carrier could be doing well on its own, bleed-out from affiliates could harm that carrier's ability," he says.

MMI also allows risk managers to track the credit ratings of insurers according to which layer of coverage each insurer provides and breaks out information about insurers' investment portfolios.

"The C-suite was a lot of the drive behind this," Sherbine says. "We're trying to provide [our clients] with more data and information that they can provide their senior management."

Karen Pauli, research director for insurance at consultancy TowerGroup, agrees: "Risk managers are being held more accountable now, so Marsh wants to give their risk managers tools." And by aggregating the information and letting risk managers access it whenever they need to, Marsh can save on people power spent delivering that data to clients. "It's very win-win," Pauli says. "It helps Marsh internally, but it helps their risk managers step up."

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