The Loss Experience

I remember sitting next to the head of a major broking house not that long ago and we were discussing how surprising it was that the Gulf of Mexico hadn’t experienced a major hurricane since 2008, which then led onto a discussion of the frequency of major claims.

The line that really stood out for me was: “there will always be unexpected claims”. As if to prove his point, only a few weeks later the (re)insurance market was hit by the decidedly unexpected super storm Sandy, one of the latest forming major US storms to cause substantive damage in recent memory.

I’m writing about this because in recent days here in the UK market we’ve once again been given a terrible reminder of just how unexpected some claims can be. The shocking crash of a police helicopter into a popular Glasgow pub on 29 November, late on a Friday night, must register in anyone’s mind as a galling tragedy and our thoughts and prayers are with all those affected by such a peculiar disaster.

Two days later we had another costly reminder of unexpected claims with the train crash in the Bronx area of New York in which four people were killed and more than 60 injured. The 5:54 from Poughkeepsie to Grand Central Station derailed as it went into a bend in the railway line near Spuyten Duyvil station.

One is never immune to the human cost of such tragedies, of course, but as a market, whether broker, underwriter or claims professional, we have to learn to expect for and model such non-standard risks, whether they come from the aviation, rail or other specialised markets. At Russell this is very much our space, operating outside of traditional risk management boundaries and taking the best from modern risk modeling techniques.

The Glasgow helicopter crash here and the New York railway crash are brutal and costly reminders that as a wider (re)insurance market we need to continue to think outside of standard claims.