The case for insuring with a large carrier; access to capital, expertise and peace of mind bolster the case for using a brand name player - point/counterpoint

When it comes to managing risk, insurance companies have a lot to offer. The management and transfer of risk is a complex undertaking in which every organization must balance options along the spectrum from complete retention to full transfer. The selection of products and services to fit a company's needs in managing the risks they face is not a one-size-fits-all undertaking.

Over decades, insurance companies have developed financial tools, technical knowledge and service expertise to assess an organization's exposures, prevent losses and manage claims. They have also developed the financial resources to assume significant risks. Working with an insurance company offers a wealth of advantages, the first of which is access to capital and credit markets.

Even if you belong to a cash-rich organization, you won't be able to recruit a top-notch board of directors, or even hire good talent, without access to directors' and officers' insurance, health, disability, and other personnel-related coverages. In the operational arena, lack of property/casualty insurance will have a serious impact on an organization's presence and may even preclude it from business opportunities.

Insurance companies help to maintain earnings stability, resulting in peace of mind for both management and investors. Just as volatility in the marketplace can strike at any time, so can disruptive and expensive losses. Big companies help to maintain a focus on business challenges by placing an organization's risk in someone else's hands. Excessive volatility affects earnings, and hence stock prices, which can ultimately damage a company that retains too much risk.

Insurance companies can go beyond the routine management of exposures and claims, using reinsurance to spread larger risks to the larger global insurance market. Self-insured organizations do not have such tools available to them.

We're the experts. Insurance companies work with a variety of clients in many sectors. This breadth and depth of experience allows for a rich perspective, providing analysis and foresight beyond the reach of an individual business. In such diverse realms as legal advice, managed care services or loss prevention engineering, insurers have experience and expertise.

The use of insurance as a risk transfer vehicle may yield tax advantages and allow for greater leverage of available capital. Additionally, use of a licensed insurer assures compliance with compulsory insurance laws and can help a company to satisfy external obligations.

Many insurers use sophisticated catastrophe management tools, and are happy to share the results with their clients to help them deal with low-frequency or high-severity exposures. The protection of critical locations, and analysis of single-source supplier exposures are just a few more reasons to look to an insurance company when dealing with risk.

It's simple really. When you have a legal problem, you go to a lawyer. When your company needs an audit, you seek an auditor. And when looking to protect your organization--from assets and financial results to operational capability or reputation--against the uncertainty of losses, an insurance company has the skills, resources and answers you need.

Thomas Kaiser is president of Arch Insurance Group's Property, Energy, Marine and Technical Risks division.

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