Contigency PlanningEnterprise Risk ManagementInsurance
Five years after 9/11, companies are thinking more about catastrophic risk, but there aren’t many new tools to help them cope with it
By Russ Banham
There was a time when scenarios involving terrorists imploding the World Trade Center, global pandemics, the flooding of major urban centers or even the melting of polar ice caps were relegated to the stuff of epic disaster films and our worst nightmares. Unfortunately, that is no longer the case. Today, the threat as well as the reality of such natural and man-made catastrophes seems to be increasing in number, complexity and cost—forcing companies and the insurance industry to develop real mitigation and risk transfer strategies for what was once the unthinkable. Little wonder why catastrophic risks have become the first, rather than the last, topic that CFOs, treasurers and risk managers want to discuss with their insurance brokers.
But five years after 9/11, is the global business community any more ready to take on these unthinkable risks—or worse still, the possibility of more than one of these disasters striking at once? And do the insurance and reinsurance markets possess the capital strength to absorb the potential unprecedented losses? Treasury & Risk Management’s senior contributing editor Russ Banham recently sat down with the CEOs of the world’s biggest insurance brokerages —Marsh, Aon and Willis— to discuss and evaluate the state of preparedness for catastrophic risk.
BRIAN STORMS, CEO AND CHAIRMAN, MARSH INC.
In September 2005, Storms was named chairman and CEO of Marsh Inc., the risk and insurance services subsidiary of Marsh & McLennan Companies Inc. (MMC). Prior to the appointment, Storms had served as president and CEO of MMC subsidiary Mercer Human Resource Consulting. Storms has spent more than 25 years in financial services management positions in the U.S. and overseas, building an expertise in such areas as business development, client relations, marketing, operations, product development and international financial services management. Prior to joining MMC as vice chairman of Mercer in August 2004, he served as president and CEO of UBS Global Asset Management, Americas.
JOSEPH PLUMERI, CHAIRMAN AND CEO, WILLIS GROUP HOLDINGS LTD.
Plumeri has been group executive chairman and CEO of the Willis Group since October 2000 and has been a member of the board of directors since early 2001. Before that, Plumeri spent 32 years as an executive with Citigroup Inc. and its predecessors, most recently overseeing the 450 North American retail branches of Citigroup’s Citibank division. Previous posts include vice chairman of the Travelers Group of Insurance Companies; chairman and CEO of Travelers Primerica Financial Services division, a direct sales company with more than 150,000 independent agents; CEO of Citibank North America; president of Smith Barney Shearson; and, before that, president of Shearson.
GREGORY CASE, PRESIDENT AND CEO, AON CORP.
Case comes to Aon following 17 years of service at McKinsey & Co., where he last headed up the international management consulting firm’s financial services practice. Previously, he was responsible for the firm’s global insurance practice. Prior to joining McKinsey, Case was with the investment banking firm of Piper Jaffray & Hopwood and the Federal Reserve Bank of Kansas City. He brings worldwide experience to Aon, having worked extensively in Continental Europe and the U.K. as well as North America.
T&RM: The most significant unexpected disaster we have had to face, without much benefit from previous experience, was probably the terrorist attacks on the World Trade Center and the Pentagon on Sept. 11, 2001. Is the insurance industry any more prepared in the area of terrorism? What will happen when the Terrorism Risk Insurance Act (TRIA) sunsets at the end of next year?