If a company's preferred gauge of risk is the hit to earnings per share, says Scammell, a CFO might determine that the company could handle a 1 cent EPS drop if another attack occurs. If a business is insured for such a decrease, a CFO might want to cut the company's insurance costs by self-insuring or taking a higher deductible. Corporations are usually much less cautious than their insurance-buying habits indicate, he adds.
Still, most companies need at least some coverage, and new buying tactics might be needed now. Jack Gibson, a coverage expert and president of International Risk Management Institute in Dallas, thinks buyers should seek more debris-removal coverage under their property policies. Ramping up that sort of coverage seems like a good idea in light of the devastation at the World Trade Center. Debris-removal coverage is usually for a smaller amount than that of the entire policy.
Gibson also points out that companies — especially big companies with complex risks — need to start renewal negotiations with insurers very early. How early? ''At least 90 days, if not 120 days'' before the policy's expiration, says Gibson. ''I would ultimately ask for a commitment to provide renewal numbers at least 30 days before, but I would first ask for 60 days.''
Such a lead time gives a CFO a chance to draw up contingency plans and negotiate with other carriers when a deal falls through. Risk managers should also come prepared with detailed accounts of their companies' exposures, both to smooth negotiations and improve their bargaining positions, says Gibson.
Of course, none of those tactics would have aided Michael Leibowitz. For Leibowitz — and a lot of other corporate risk managers — buying insurance in the last month has been a maddening experience. Says Leibowitz: ''It's basically an exercise in begging.''
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