Topic 1. Introduction

							Topic 1. Introduction
                    Bus 200
Introduction to Risk Management and Insurance
                  Jin Park
              Overview
• Course Syllabus
• September 11, 2001
  –   Terrorism coverage
  –   Reinsurance
  –   Liability Issue
  –   Contingency planning
  –   September 11 and globalization
      Course Syllabus
• Course syllabus
• Articles
    September 11, 2001
• Was terrorism covered?
  – Yes.
  – Insurance companies started adding terrorism
    exclusions.
     • Largest catastrophic loss
     • $15 billion in real estate transactions were put on
       hold due to difficulty in obtaining insurance.
  – Terrorism Risk Insurance Act of 2002
     • November 26, 2002 to December 31, 2005
     • Certified Act of Terrorism - the Secretary of the
       Treasury must certify
       Top 10 Catastrophic
         Property Losses
1   Terrorist    2001   $20.7 b   6 Midwest,         2003 $3.1 b
    Attack                          South Tornado
2   Hurricane    1992   $19.9 b   7 Tropical storm   2001   $2.5 b
    Andrew                          Allison

3   Northridge   1994   $15.2 b   8 Hurricane Opal 1995     $2.5 b
    Earthquake
4   Hurricane    1989   $6.1 b    9 Midwest,         2001   $2.2 b
    Hugo                            South Tornado

5   Hurricane    1998   $3.3 b    1 Northeast        1993   $2.2 b
    Georges                       0 Winter Storm
         Reinsurance
• Private insurers 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.
        Liability Issues
•   Owners of the property
•   Employers
•   Airline companies
•   Airport authority
•   U.S. Government
•   Osama Bin Laden, Al Qaeda ?
       Contingency Planning
• Individual             • Company
   –   Premature death     – Property losses
   –   Disability          – Business interruption
   –   Unemployment           • Loss of income
   –   Property loss          • Loss of customers
   –   Healthcare          – Example
                             Larry Silverstein
                             Kensey Nash
Globalization
                          Next
•   Chapter 1, pp. 10 – 13, 18 – 20
•   Chapter 3, pp. 44 – 64

•   The Three Faces of Risk Management, Business Finance,
         December 2000.
•   Top Cops of Risk, CFO Magazine, September 1, 2000.
•   Small Businesses Suffer the Most from U.P.S. Strike, New York
         Times, August 9, 1997.
•   Risk Management: Understanding the Process, Contingency
         Planning and Management, May 2000
•   Avoiding the Domino Effect, Best’s Review, February 2001
•   Assessing risk systematically, Risk Management, January 1995