CATASTROPHE MANAGEMENT IN A CHANGING WORLD: THE CASE OF HURRICANES

This article features a presentation and discussant comments on hurricane and wind insurance organized by Richard A. Derrig for the American Risk and Insurance Association (ARIA) 2007 Annual Meeting in Quebec City, Quebec, Canada. The moderator, Richard A. Derrig, is President of OPAL Consulting LLC, Providence, RI. Richard formed OPAL after retiring in 2004 from the Auto Insurers and Insurance Fraud Bureaus of Massachusetts. He has published numerous articles on auto insurance, fraud, and other important insurance issues in risk and insurance and actuarial journals. The principal presenter is Jay S. Fishman, Chairman and Chief Executive Officer of The Travelers Companies, Inc., a Fortune 100 company with assets in excess of $100 billion and revenues in excess of $25 billion. Travelers offers a wide range of property and casualty insurance products and services to businesses, organizations, and individuals in the United States and selected international markets. Mr. Fishman was named President and Chief Executive Officer of Travelers in 1998 and Chairman in 2000. From early 2000 until October 2001, he also served as Chief Operating Officer of Finance and Risk for Citigroup, as head of Citigroup's global insurance businesses and head of its consumer business in Japan and Western Europe. Mr. Fishman is an alumnus of the University of Pennsylvania, having graduated with a bachelor's degree in economics, magna cum laude, in 1974 and with a master's degree in accounting from the Wharton School, also in 1974. At the University of Pennsylvania, he is a member of the Board of Trustees, the Board of Overseers of the Graduate School of Education, and the Industry Advisory Board of the Financial Institutions Center for the Wharton School. He serves on the Board of Directors of the National Academy Foundation. Also, he is an active member of the Business Council, a Vice Chairman of the Kennedy Center Corporate Fund Board in Washington, D.C., and a past Chairman of the American Insurance Association. Our two discussants are Professors Joan Schmit and Martin Grace. Joan holds the American Family Insurance Chair in Risk Management and Insurance at the University of Wisconsin-Madison, where she has been on the faculty since 1988. Currently, she is Chair of the Actuarial Science, Risk Management, and Insurance Department in the School of Business. She also holds a visiting appointment with the University of St. Gallen. Dr. Schmit has been active in several important professional associations. She has been an academic moderator for the International Insurance Society and on the Research Committee of that organization. She is a past President of ARIA, the Insurance Society, and the Risk Theory Society. She has served on the board of the Griffith Foundation and is a Research Fellow at the China Center for Insurance and Social security Research at Peking University. The second discussant, Professor Grace, is currently the Associate Director of Research at the Center for Risk Management and Insurance at Georgia State University. He is an Associate in the Andrew Young School of Public Policy Studies and holds a law degree and a Ph.D. in economics from the University of Florida. Dr. Grace's research focuses on public policy, regulation and taxation, and his research has been published in many economics, insurance, and public policy journals. He is a former President of the Risk Theory Society and a current Associate Editor of the Journal of Risk and Insurance. Richard A. Derrig (Moderator): The focus of today's discussion concerns the tail of loss distributions. The tail is associated with catastrophes, or cat risk, such as the devastation from Hurricanes Katrina, Wilma, Andrew, and others.1 Catastrophes such as these are not just a U.S. issue, but an international issue. Jay Fishman will provide his perspectives on the effect of wind in catastrophic losses while Professors Schmit and Grace will follow with discussions that put wind catastrophes in general insurance contexts. …