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Effects of Economy Loom for Insurers Globally, Warns EMB

Direct and indirect effects of the financial turmoil, including increased claims frequency, mandate ERM strategies for P&C insurers to survive

San Diego, CA - February 10, 2009

EMB, a global property and casualty (P&C) consulting firm, today urged insurers worldwide to refine their enterprise risk management (ERM) strategies to be able to minimize the indirect yet threatening effects of the global economic meltdown. Having already endured a loss of capital from investments, a direct result of the economy, P&C insurers now face indirect effects, such as the rise in claims frequency including fraudulent activity that correlates with financial turmoil.

EMB warns insurers to look for certain red flags that might indicate increased fraud as a part of their ongoing ERM strategies. Specifically, insurers should be on the lookout for increased auto insurance claims and spikes in workers compensation claims – both historic early indicators of surges in insurance fraud.

Currently, fraud accounts for approximately 10% of loss payouts in the P&C industry, and that number is slated to rise as the downturn continues. As this increase occurs, the importance of ERM strategies becomes even more evident. ERM involves identification, assessment, mitigation, and monitoring of risk across a business, and these actions are imperative to discern fraud-related activity and avoid further losses of a rapidly depleting surplus.

Writers of Directors and Officers insurance – policies that cover employment liability – are affected legitimately and directly by an increase in claims resulting from the economic collapse. Other types of insurers, such as those covering auto, homeowners and workers compensation policies, are more inclined to be affected by the indirect impact of a poorly performing economy – increased fraudulent claims.

EMB continues to emphasize the need for companies to break down the silos in developing sound ERM practices. Actuarial, claims, and underwriting must all be on the same page while managing the financial impact of fraud and other claims frequency increases. While new techniques are allowing companies to identify with greater accuracy the types of claims likely to be fraudulent, companies will also need to have practical implementation options to assist with regulatory and consumer restrictions in a worsening economy.

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“2008 has been a tumultuous year for P&C insurers and reinsurers, beginning with high catastrophe losses, and then followed by a loss in investments resulting from the market turmoil,” says Tom Hettinger, managing director of EMB in the US. “However, the worst is not over, as the indirect effects of the economic meltdown have yet to hit. To remain profitable and competitive, insurers must revise their ERM strategies to prepare for the indirect effects of the slowing economy, such as increased incidents of fraud.”

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About EMB in North America

Established in 1993, EMB (www.emb.com) is a rapidly growing international consulting firm specializing in property and casualty (P&C) insurance. Its services cover personal lines, commercial insurance and reinsurance, which includes the London Market and Bermuda. EMB offers C-Counsel Business Consulting, Actuarial Consulting, Professional Development, Marketing Sciences and Software. Additionally, EMB pioneered the development and use of high-performance actuarial software, which allow businesses to perform tasks that would otherwise be impossible, impractical or hugely time-consuming. EMB employs more than 300 people around the globe covering Americas, Asia-Pacific and Europe, Middle East & Africa and clients include 28 of the top 30 P&C companies in the world.

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Louisa Harbage                                                        Dan Gaffney
EMB America                                                           LEWIS PR
+1 858-793-1425                                                     +1 617-226-8840
press-us@emb.com                                                embus@lewispr.com

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Effects of Economy Loom for Insurers Globally, Warns EMB

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