A risk manager friend called me yesterday for advice on how to handle a problem. A consultant hired by his CFO boss had advised against having any direct contact with their underwriters. The consultant asserts that such contact is the broker's job and their becoming involved will just interfere with the process.

Wow! I thought that kind of thinking went out of style 20 years ago! Who can better explain a company's business and shed light on its risk profile than the management team of the company? And how do you establish a trusting personal relationship without meeting face to face? Communication and relationships are particularly important in this type of firming market. I think risk managers should insist on the opportunity to sell their companies to underwriters.

So what do you think? Is this consultant living in the dark ages? How important is it for management to meet with underwriters? Is there ever a time when such meetings should be avoided? [See reader comments].

Best wishes for a happy and healthy holiday season.

Jack

Jack P. Gibson
President
IRMI

Risk Tip

Check Your Debris Removal Limit. A property insurance issue that has come to light in the wake of the September 11 attacks is the adequacy of debris removal coverage limits. Virtually all commercial property policies cover the expenses of removing debris of covered property that is damaged in a covered loss. Some simply subject this coverage to the applicable policy limit. However, the debris removal coverage in the current ISO forms and many insurer forms is subject to a debris removal coverage sublimit.

When the unthinkable happened to the World Trade Center, the general lessee (who was responsible for purchasing the insurance) was faced with a total loss of the buildings, a huge resulting business income loss, and debris removal expenses of staggering proportions. Reportedly, the applicable limit of insurance is not adequate to fully reimburse for the direct property and business income loss. There will be less than nothing left to pay for the expenses of debris removal. (Fortunately, it appears that the government is picking up the tab.)

For those who arrange or buy property insurance, the debris removal expense aspect of the disaster underscores the need to consider debris removal expenses in establishing limits of insurance and, for policies that impose debris removal sublimits, the need to evaluate the adequacy of those sublimits as well. To estimate debris removal expenses with a reasonable degree of accuracy, it may be necessary to ask some construction and demolition firms for estimates of the probable costs of clearing the site in the event of a worst-case scenario. Up until now, this step was seldom taken, probably on the assumption that there wouldn't be much debris remaining in the event of a worst-case scenario. The World Trade Center disaster has shown us that isn't necessarily so.

By: Linda G. Robinson, CPCU
Senior Research Analyst
International Risk Management Institute, Inc.

Suggest a Risk Tip. Send us a practical tip (less than 300 words) for identifying and managing risks, buying insurance, managing claims, or filling gaps in insurance coverages. We'll give you credit for your contribution.

New Expert Commentary

There are now 222 articles on IRMI.com, and many more are in production. Below you'll find summaries of some recent additions with links to the articles.

Political Risk in Asia: Fact or Fiction?—Rather than assuming that a negative media report automatically implies a corresponding increase in political risks, the international business community would be wise to separate fact from fiction. Daniel Wagner explains.
Problems with Arbitration in Design-Build—In this article, Kent Holland explains that when arbitration is the main means of dispute resolution under a design-build contract, why it is so important for all parties to a design be subject to a single arbitration action.
Provisions in the Proposed Bankruptcy Reform Act of 2001 of Interest to Sureties—In 2000 more than 1.2 million people filed for bankruptcy—an increase of nearly 70 percent from 1990—and more are expected with the recent economic downturn. Marilyn Klinger examines those provisions of the Act that may be of interest to a surety in connection with its principal’s or indemnitor’s bankruptcy filing.
Wholesalers: Who We Are—Who We Are—In his first column on wholesale distribution issues, the president of the AAMGA, Baron Garcia, explains the role of the wholesaler in the industry, the benefits they provide, and tips on selecting a good one.
Bonding Tips and Tactics: Contractor Default Insurance—In this article, Rolf Neuschaefer examines default insurance—a recent development designed as a substitute for the traditional surety performance guarantee—and discusses its shortcomings from a surety producer's perspective.
The Chilean Insurance Market—With a real annual average growth of 10.5 percent between 1990 and 2000, Chile's insurance market has experienced remarkable growth. George Keller and Juan Pablo Bragadin explain Chile's insurance market—its structure, regulatory environment, how various coverage lines are handled, and its profitability.
Politics Is More Important to Technology Than You Realize—E-mail and Web-based customer call centers have dramatically improved communication between insurers, agencies, and customers. Steve Anderson examines possible political and governmental impediments to Web-based technology.

New IRMI Insights

What's New in the 2000 Edition ISO Commercial Property Forms: CP 10 10, CP 10 20, and CP 10 30 —This article reviews the changes made in the 2000 ISO editions of the causes of loss forms: the basic, broad, and special causes of loss forms. A summary of the changes to these forms appears at the end of the discussion.

Broader Covered Perils Leaves Gaps in Covered Losses under EPL Policies—Despite the expansion of covered perils found within current EPLI forms, there remain a number of provisions that restrict the scope of covered damages. This article suggests policy modifications and actions that can mitigate a policyholder's exposure to such uninsured losses.

IRMI Construction Risk Conference

Construction Risk Conference Audiotapes Make Learning Easier—Nineteen workshops and seminars from the 21st IRMI Construction Risk Conference are now available. Learn about completed operations exposures, OCIPs, what's going on in the surety market, additional insured issues and trends, and much more during your daily commute! At only $12 each, they are very affordable and you even have access to the session handouts!

IRMI Products & Services

Professional Liability Help―The D&O, EPLI, professional, and E&O liability insurance lines are firming along with the more traditional coverages. Do you know which coverage provisions are indispensable and which insurers provide them? Do you need some additional markets to look at a tough account? The coverage analyses, policy comparison charts, and market directory in our three-volume reference, Professional Liability Insurance, will help you dot your "i"s and cross your "t"s―and succeed―in the changing marketplace.

Training & CE

Get Your CE Credit before the Year-End Crunch!—Year-end is coming fast and the hard market is making January 1 renewals especially time-consuming. Do you or your colleagues need continuing education (CE) credit to renew your producer licenses? Get fast and hassle-free CE credit from IRMI.com.

In most states you can read (or print) the study materials directly from our website and even take the test online. You can also order printed materials, and a test that we will send you. And you can't beat the price―you can get all the credit you need in most states for under $50. Check it out today!

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IRMI Update—Issue #29

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