Question

1. Harry is a risk manager of a global chain of clothing stores. The chain is very successful, with annual revenue of $1 billion in 2001. After the record hurricane seasons of 2004 and 2005, his renewal of insurance coverages became a nightmare. Why was renewal so difficult for him?

Answer 1

After the hurricane season, many insurance companies has booked losses in theri bottomline due to massive insurance claims done by the customers in the affected area. As a part of this to mitigate risk, the insurance companies have adopted many measures like increasing insurance premium, giving insurance to credit worthy customers etc.

Here the renewal is difficult due to a policy called selective non renewals where insurance companies only renew applications selectively based on area where risks are high or shops where chances of damages are high. For example if in a hurricane risk area there are 2 factories, one manufacturing factory with heavy equipment and other cloth shop, the chances of damage is more for cloth shop as when an hurricane the cloths in the shops easily gets damaged.

Due to such scenarios, he might be finding difficult to get the renewal.