Cost of Risk Increases Again for North American Companies
The average total cost of risk (TCOR) for North American companies, which is monitored annually by the US Risk Management Society (RIMS) and insurance intelligence group Advisen, moved higher in 2013 for the third year running.
‘RIMS Benchmark Survey’
shows that the average TCOR rose by 2%, from US$10.70 per US$1,000 of revenue in 2012 to US$10.90 per US$1,000 of revenue in 2013. The annual survey offers a single source of benchmark statistics with industry data for more than 52,000 insurance programmes from almost 1,500 organisations in the US and Canada.
Last year’s 2% rise follows a 5% increase in average TCOR in 2012 and a 1.7% increase in 2011, reflecting the influence of hardening insurance market conditions. However the contribution of property premiums to average TCOR showed a much sharper rise of nearly 15%, from US$3.09 per US$1,000 of revenue to US$3.54 per US$1,000 of revenue.
RIMS said that rising prices are influencing companies’ retention of risk. “While the RIMS Benchmark Survey monitors changes in insurable risk costs and financing methods, it also provides valuable insight into the range of significant losses that affect organisations including the Foreign Corrupt Practices Act [FATCA], environmental penalties, False Claims Act [FCA], and shareholder lawsuits,” added Jim Blinn, executive vice president (EVP) at Advisen.
“With the growth of enterprise risk management [ERM], understanding the breadth of exposures and their impacts becomes increasing important.”
RIMS president Carolyn Snow added: “The value of risk management and its impact on an organisation’s sustainability has emphasised the importance of developing comprehensive risk financing programmes. However, the task of developing such programmes has become more challenging as programmes become more complex.
“Benchmarking the total cost of risk gives risk managers an undeniable advantage when structuring their risk financing programmes, especially in today’s competitive insurance market.”