Mike Lehner | Valiant Workforce Management Solutions

Protecting Your Family and Home from Hurricanes and Severe Windstorms

If you own a house that is located along the ocean, bay or within a coastal county, your home may be vulnerable to wind damage caused by a hurricane or Nor’ Easter. It is important to take preventative measures to help protect your family, home and possessions. Here are some things you can do: Continue Reading…

March 22nd, 2011 by Mike Lehner

Insurance Stocks Take a Battering

The damage has also triggered a debate about whether the earthquake will be a market-changing event for the insurance sector.

Since the start of the year natural disasters, including the Queensland floods and the quake in New Zealand, have wreaked havoc on the insurance and reinsurance industries, leaving the sector exposed to more than $50 billion in damages since January 1.

With so many catastrophes, the expectation is that prices will be pushed higher in the July 1 reinsurance renewals. If prices rise, general insurers will be forced to pass them on in higher premiums.

The insurance industry has been suffering from a so-called soft market in recent years. That happens when their prices come under pressure as insurers and reinsurers have lots of spare capital and compete more for business.

Lloyd’s of London syndicates will no doubt be doing due diligence on their exposure.

A spokeswoman said: "It is far too early for us to comment on any potential business impact but, as ever, our efforts will be focused on dealing with claims quickly and helping people and businesses recover."

QBE Insurance is one of the biggest writers of Lloyd’s insurance.

Andrew Chester, managing director at Bowring Marsh, insurance broker Marsh’s specialist international placement broker, said it was too early to determine whether it was a market-changing event. He said that because of the Chile and New Zealand earthquakes, and the Australian floods, there was an increasing focus on catastrophe risks and the prices markets were willing to charge for those events.

Jamil Samaha, a global macro portfolio manager at CQS, the $US10 billion multi- strategy asset management firm led by Michael Hintze, said there would be a hit to the economy in the short term, but more growth later.

"The commercial impacts are potentially very significant. Historically, we have seen insurance and reinsurance companies take significant one-off hits by these types of extreme natural phenomena, but they are typically able to recoup these losses through sharply higher premiums."

March 8th, 2011 by Mike Lehner

Overcapitalization & New Insurers Keeping Business Insurance Market Soft: Report

The property/casualty insurance market is overcapitalized to the tune of $74 billion and will remain in the soft market phase of the pricing cycle until that difference between supply and demand is brought into balance, according to a new report from Advisen Ltd.

The overcapitalization largely is the result of the growth of policyholders’ surplus as stock markets rebounded from the financial crisis, along with reduced demand for insurance capacity resulting from the Great Recession as business activity decreased and property values fell.

"One unprecedented mega-catastrophe, or several very large catastrophes in close succession, could destroy the excess capacity and trigger a turn in the market," the Advisen report said. But, the consulting firm said, a more likely course is a "slow, painful hemorrhaging of capital as deeply eroded rate levels take their toll."

While property/casualty insurers’ recent results have been bolstered by the release of prior-year reserves, their ability to do so going forward has been diminished, Advisen noted. Meanwhile, the low-interest-rate environment will put additional pressure on insurers’ results, Advisen said.

How does this relate to the Security Guard, Investigation and Electronic Security Industries? Workers Compensation Rates continue to rise because of state rate increases largely associated with increases in loss costs or claim expense. Primary liability, Employment Practices, Crime, Property and Business Auto Liability are trending downward in 2011 only for firms who’s claim experience and operational profile justify a cost reduction. The crystal ball is unclear on 2012 or 2013. Bottom Line; Expect workers compensation rate increases of between 2 and 17% depending on your state while seeing up to a 5% decreases in insurance cost on other lines only if claim experience and operational platform justify the decrease.

» Click here for the full report from Advisen

October 28th, 2010 by Mike Lehner

Is the security guard industry growing in a down economy?

I am often asked to comment on whether the security guard industry is growing or shrinking in a down economy. It is a difficult question to answer because payroll growth in the security guard industry has been largely a result of increased prevailing wage rates. What we are seeing in 2010 are dramatic increases in workplace theft losses which are more than likely the result of reduced coverage at sites. Over the last 22 years we have witnessed physical security staffing cycles and expect the current cycle to trend as follows;

1. Moderate growth of 1-2% nationwide. I expect the Arizona, Texas and Southern California markets for physical security services to increase dramatically over the next 3 years in support of our nation’s borders.
Reaction to event; workplace violence shooting, terrorism alert or natural disaster temporarily increases security guard billable hours dramatically only to see those hours decrease gradually over a 6 to 12 month period
Economy; During recession, security guard hours are cut to levels that do not adequately support security services at client sites.
Losses; occur at client sites and client restaff to pre-recession levels and growth of 1-2% continues

While technology is certainly expanding there are very few better visual deterrents than a human being. Feel free to contact me at mlehner@mechanicgroup.com if you have a comment about this blog or simply wish to further discuss its contents.

Mike Lehner is a principal with The Mechanic Group, Inc. a leading insurance, risk management and consulting firm to the security industry.

August 18th, 2010 by Mike Lehner

Insurance Purchasing 101

Over the last 5 years security, investigation and electronic security agency insurance costs have been in a soft or down market cycle. This soft market differs from past soft markets in that costs insurers are providing to security agency businesses appears to be market capacity driven not claim experience or profit driven. Unless insurers plan on denying or disclaiming claims it may be hard for the current pool insurers to make any kind of underwriting profit at current market pricing levels.

To prepare your business for the next hard market (market when insurance costs go up) we have learned over the last 20+ years that professionally completing an insurance application can and usually does lead to a favorable result when the market for insurance is trending cost upward.

Underwriters want to see fully completed applications, claim reports with summaries, supplemental information relating to quality control, training and pre-employment screening and the background owners have in the security industry. Taking the time to fully complete an application for insurance will help you protect your business and your bottom line by giving your broker or agent the information they need to evaluate your exposures to loss and match up insurance coverage to your exposures. It also tells insurance company underwriters that you are serious about your business and protecting it from lawsuits, employee injuries, auto accidents and employment related grievances.