Topic 1. Introduction Bus 200 Introduction to Risk Management and Insurance Jin Park
Overview September 11, 2001 –Who suffered a loss? –Who’s liable? Hurricane Isabel Similarities and dissimilarities between them.
September 11, 2001 Who suffered a loss from the attack? –Owner of the WTC –Tenants of the WTC –Survivors –Business owners around the WTC and in NY City –NY City and US as a whole –Insurance Companies – Primary insurers and reinsurers –Other economies in the world
Globalization
September 11, 2001 Why did insurance companies suffer? What happen to real estate industry and why? Terrorism Risk Insurance Act of 2002 November 26, 2002 to December 31, 2005 Certified Act of Terrorism - the Secretary of the Treasury must certify
Reinsurance Private reinsurers are not willing to provide coverage due to the catastrophic nature of terrorism. In 2001, Swiss Re posted a loss for the first time in its history. Pooling among insurers.
Top 10 Catastrophic Property Losses 1Terrorist Attack 2001$20.7 b6Midwest, South Tornado 2003$3.1 b 2Hurricane Andrew 1992$19.9 b7Tropical storm Allison 2001$2.5 b 3Northridge Earthquake 1994$15.2 b8Hurricane Opal1995$2.5 b 4Hurricane Hugo 1989$6.1 b9Midwest, South Tornado 2001$2.2 b 5Hurricane Georges 1998$3.3 b1010 Northeast Winter Storm 1993$2.2 b
Liability Issues Owners of the property Employers Airline companies Airport authority U.S. Government Osama Bin Laden, Al Qaida ?
Hurricane Isabel Insured loss is about –$600M from wind-related losses –$1B from flood-related losses Similarities and Dissimilarities
Next Risk and Terminology –Chapter 1, pp. 10 – 13, 18 – 20 –Risk Management: Understanding the Process, Contingency Planning and Management, May 2000Risk Management: Understanding the Process –What’s Your Risk Metric?, CFO.com, July 12, 2001.What’s Your Risk Metric? –Enterprise Risk Management at Wal-Mart, Risk Management, December 2003.Enterprise Risk Management at Wal-Mart –Changing times – Changing demand, Rural Communications, May-June, 1999.Changing times – Changing demand