By Liying Gu
The ACI-NA Risk Management Committee kicked off the New Year with its 13th annual Risk Management Conference held in the warm and sunny New Orleans with close to 140 attendees, up more than 30 percent over last year’s attendance.

The first session Thursday highlights the current airport insurance market and its emerging trends of domestic liability, property, and professional coverage/employment practices liability.

John Geisen, Senior Vice President, AON Risk Services Central Inc., provided a review of the aerospace insurance market with a focus on airport market capacity and the outlook for 2012. The airport and air traffic control sectors ended 2011 with a 7 percent premium reduction much as they did in the past three years. This continued softening is driven by surplus capacity. Geisen is predicting that 2011 could be the bottom and prices in the sector might start to rise if passenger numbers recover but all evidence suggests a flat 2012.

On the property market, Richard Terlecki, Area Senior Vice President, Arthur J. Gallagher Risk Management Services, delivered some bad news. There were 12 losses that exceeded $1 billion in 2011 with a total of $70 billion catastrophe losses in just the first half which was the second worst in history. On top of the losses, interest rates are at historic low which translates to low investment returns. All this means that insurers are being forced to reassess exposures which would lead to reduced capacity on the property side.

In contrast to the liability market, there is relatively limited underwriting capacity for public officials’ liability, according to Simon P. R. Hodge, Managing Director of Wells Fargo. Finite number of insurance carriers restricts competition with pricing and terms driven by broader Directors & Officers and Errors & Omissions insurance markets. There remain significant opportunities, however, to enhance coverage quality.

By Nelson Lam
Rob Swift, Mike Gardner, and Forrest Artz presented Thursday at the 13th Risk Management Conference presented about business interruption coverage.  With natural disaster occurring spontaneously and without notice, does your airport have a continuity plan and will your business interruption income be covered?

Granted that your airport does purchase business interruption coverage, the first thing all three speakers mentioned was read your policy.  As a number one rule of risk managers, never assume; read the fine prints – know the definitions as they may be defined differently in your policy.  Swift mentioned, know your return time objective – understand when you need to have your business back up and running, and build your strategy in accordance to it.  Additionally, know the return point objective – how much data can you afford to lose before the point of no return.

Do you have property insurance that goes with your business interruption coverage?  Well even so, there are many points to consider.  If you have water damage coverage for your property, does that coverage cover mold damages as well – know the exclusions of the coverage and once again read your policy.  For your equipment, are they all covered or just the high value dollar items?  As a risk manager purchasing such coverage, do consider that every small dollar value item not on the balance sheet can add up exponentially.

As mentioned by Gardner, for a business interruption claims, talk to your insurers, your assessors, and peers right away.  Understand the situation that you are in.  Document, document, document as there will be large discussions amongst the risk managers and the Insurers of what the income loss is as a result of business interruption; the documentations will come in handy.  Lastly, if you need help, hire or ask for help.  Include additional professional fee in your business interruption coverage to ensure you can hire help when you need it.  Nothing is worse than to be in a troubled situation where you lack the knowledge or experience, and you have no resources to go to.  The risk managers and all the risk professionals here at the Risk Management Conference are here to help.