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 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

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 –Premature death –Disability –Unemployment –Property loss –Healthcare Company –Property losses –Business interruption Loss of income Loss of customers –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 Top Cops of Risk, CFO Magazine, September 1, Small Businesses Suffer the Most from U.P.S. Strike, New York Times, August 9, 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