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New York, NY (CompNewsNetwork) – Speaking at the annual dinner of the Association of Insurance and Risk Managers (AIRMIC) on Wednesday, Joe Plumeri, Chairman and CEO of Willis Group Holdings (NYSE: WSH), the global insurance broker, said that risk managers have never been more important than they are today in helping their companies evaluate risk and access capital.
Plumeri's keynote address to more than 650 risk managers and members of the insurance industry at the Royal Lancaster Hotel in London focused on “finding the silver linings in the financial clouds.”
“In the current economic environment, risk managers will emerge as heroes,” said Plumeri. “The failure of investment banks and capital markets means that today insurance may be the only capital available for risk. Companies are quickly realizing that strong risk management can help them gather that insurance capital at a lower cost. There will also be a renewed appreciation of Enterprise Risk Management with CEOs wanting to know what's on their balance sheets and where all the risks in their business are.”
In times of crisis, the insurance industry has an opportunity to shine, Plumeri said, encouraging the audience to be proud of their profession. “The only stable capital has been insurance capital,” he said.
Plumeri went on to say that another two key positives to come out of the financial crisis will be increased transparency and regulation. “If everyone was transparent, off balance sheet issues, Structured Investment Vehicles and Credit Default Swaps would have been found. Financial institutions and insurance companies will now have to be transparent. That's a good thing because you can feel secure about where you put your risk,” he said.
Praising the FSA's stance on mandatory contract certainty - the timely delivery of policies to clients, Plumeri called on the US to follow the UK example. “This is the only industry I know where you shake hands before deciding what you have agreed on.”
Looking forward to 2009, Plumeri predicted that insurance capacity and rates will probably stay static but added that due to a lack of money in the credit and stock markets, the rates will have to go up eventually. “In a recession, there is a gradual upswing of rates instead of a sharp increase like that which occurred in 2002 after the World Trade Center attacks,” he said, encouraging insurers not to push their rates up too quickly to the detriment of small to medium sized businesses. “If the market is hardening it should be on a slow basis to give people a chance to afford it.”
The strongest companies will get stronger by right sizing and sticking to their core business, Plumeri predicted. An overall positive to emerge from the crisis is the fact that the world is now working together to solve the problem, he observed.
Plumeri concluded by saying that the stock market will bounce back and that this typically happens about five months before the end of a recession. “I've always admired the resiliency and the courage of the British people and have no doubt that we will all get through this crisis. As an industry we need to see the opportunities in the adversity and make a parade out of a financial riot by getting ahead of the game and capitalizing on these opportunities.”
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 400 offices in nearly 120 countries, with a global team of approximately 20,000 Associates serving clients in some 190 countries.
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