Risk Management

The Profession

David Hornaday knows risk managers have to be more fluent and competent in the financial world. Just procuring insurance isn’t enough anymore.
By: | August 3, 2016 • 4 min read

082016_Profession
R&I: What was your first job?

Working as a signalman for Consolidated Rail Corp. I did that for about a year and a half before I got my first risk management job as a claims agent for ConRail. That was a self-insured company, so they administered their own claims.

R&I: How did you come to work in risk management? 

ConRail got acquired by two different railroads and was split up, so I had the opportunity to either go with one of the railroads or look outside for another position, and I wanted to do more than just work with claims. I wanted to be exposed to the corporate risk management side of things. So I found a job as a risk manager for Suburban Propane in Whippany, N.J.

R&I: What is the risk management community doing right?

Advertisement




We’re working closely with brokers and underwriters and communicating internally to bring the insurance expertise to companies that need it.

R&I: What could the risk management community be doing a better job of?

Risk managers should be aware of non-traditional risks and focusing on ERM, versus just the traditional insurance procurement function. That’s where the future of our profession is going.

R&I:: What was the best location and year for the RIMS conference and why?

This is a little self-serving, but I thought Vancouver in 2011 was great because I had never been there but always wanted to go.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

Risk managers have to be more fluent and competent in the financial world. Just procuring insurance isn’t enough anymore. You have to have a basic level of financial knowledge to communicate with not only internal treasury and CFOs, but also with underwriters and insurers.

R&I: What emerging commercial risk most concerns you?

Advertisement




Social engineering. The onslaught of fraudsters is relentless. Companies have to be vigilant. But the coverage surrounding that sort of risk is also emerging, so risk managers will have to pay close attention to that and keep up with that evolving coverage.

R&I: What insurance carrier do you have the highest opinion of?

We had a major loss recently and there was a handful of insurers who paid on that claim which I thought were exceedingly professional: ACE (now Chubb), Ironshore and XL (now XL Catlin).

R&I: How much business do you do direct versus going through a broker?

We use a broker for everything.

R&I: Is the contingent commission controversy overblown?

It probably was a little bit overblown, but I think it’s good that things are more transparent now.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

I’m probably a little more pessimistic than optimistic. I just don’t see signs of strength out there. There are still companies with tons of cash outside the U.S. which can’t really bring it back in a way that makes sense. U.S. oil production is way down since the price of oil is so low.  Of course, the lower gas prices help the average consumer and lowers overhead costs for businesses, so it’s a little bit of a mixed bag.

R&I: Who is your mentor and why?

My mentor in this business is Joe Racansky. He was the director of risk management and my boss at CyTec Industries, and I learned as much from him as anybody in my career.

R&I: What have you accomplished that you are proudest of?

Successfully resolving claims stemming from the Lac-Megantic train derailment in 2013.

R&I: How many e-mails do you get in a day?

I’d say about 100.

R&I: How many do you answer?

All the important ones.

R&I:: What’s the best restaurant you’ve ever eaten at?

Advertisement




Prime 112 in South Beach, Miami. It was the freshest tuna I’ve ever had, and it was with the team from Aon, so it was great food and great company.

R&I: What is your favorite drink?

Gin and tonic.

R&I: What is your favorite book or movie?

My favorite movie is “Bull Durham.” It’s a baseball movie.

R&I: Who’s your favorite baseball team?

The Cincinnati Reds.

R&I: What is the most unusual/interesting place you have ever visited?

Key West, Fla., is pretty interesting. My wife and I have been there a few times and you always see something different.

R&I: If the world has a modern hero, who is it and why?

I was moved by the Chris Kyle story. I thought his life and story were inspiring.

R&I: What do your friends and family think you do?

I think they think I just buy insurance, when it’s really more comprehensive than that. They don’t know about meeting with underwriters and contract review and working on M&A deals.




Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

2017 RIMS

Resilience in Face of Cyber

New cyber model platforms will help insurers better manage aggregation risk within their books of business.
By: | April 26, 2017 • 3 min read

As insurers become increasingly concerned about the aggregation of cyber risk exposures in their portfolios, new tools are being developed to help them better assess and manage those exposures.

One of those tools, a comprehensive cyber risk modeling application for the insurance and reinsurance markets, was announced on April 24 by AIR Worldwide.

Advertisement




Last year at RIMS, AIR announced the release of the industry’s first open source deterministic cyber risk scenario, subsequently releasing a series of scenarios throughout the year, and offering the service to insurers on a consulting basis.

Its latest release, ARC– Analytics of Risk from Cyber — continues that work by offering the modeling platform for license to insurance clients for internal use rather than on a consulting basis. ARC is separate from AIR’s Touchstone platform, allowing for more flexibility in the rapidly changing cyber environment.

ARC allows insurers to get a better picture of their exposures across an entire book of business, with the help of a comprehensive industry exposure database that combines data from multiple public and commercial sources.

Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

The recent attacks on Dyn and Amazon Web Services (AWS) provide perfect examples of how the ARC platform can be used to enhance the industry’s resilience, said Scott Stransky, assistant vice president and principal scientist for AIR Worldwide.

Stransky noted that insurers don’t necessarily have visibility into which of their insureds use Dyn, Amazon Web Services, Rackspace, or other common internet services providers.

In the Dyn and AWS events, there was little insured loss because the downtime fell largely just under policy waiting periods.

But,” said Stransky, “it got our clients thinking, well it happened for a few hours – could it happen for longer? And what does that do to us if it does? … This is really where our model can be very helpful.”

The purpose of having this model is to make the world more resilient … that’s really the goal.” Scott Stransky, assistant vice president and principal scientist, AIR Worldwide

AIR has run the Dyn incident through its model, with the parameters of a single day of downtime impacting the Fortune 1000. Then it did the same with the AWS event.

When we run Fortune 1000 for Dyn for one day, we get a half a billion dollars of loss,” said Stransky. “Taking it one step further – we’ve run the same exercise for AWS for one day, through the Fortune 1000 only, and the losses are about $3 billion.”

So once you expand it out to millions of businesses, the losses would be much higher,” he added.

The ARC platform allows insurers to assess cyber exposures including “silent cyber,” across the spectrum of business, be it D&O, E&O, general liability or property. There are 18 scenarios that can be modeled, with the capability to adjust variables broadly for a better handle on events of varying severity and scope.

Looking ahead, AIR is taking a closer look at what Stransky calls “silent silent cyber,” the complex indirect and difficult to assess or insure potential impacts of any given cyber event.

Stransky cites the 2014 hack of the National Weather Service website as an example. For several days after the hack, no satellite weather imagery was available to be fed into weather models.

Imagine there was a hurricane happening during the time there was no weather service imagery,” he said. “[So] the models wouldn’t have been as accurate; people wouldn’t have had as much advance warning; they wouldn’t have evacuated as quickly or boarded up their homes.”

It’s possible that the losses would be significantly higher in such a scenario, but there would be no way to quantify how much of it could be attributed to the cyber attack and how much was strictly the result of the hurricane itself.

It’s very, very indirect,” said Stransky, citing the recent hack of the Dallas tornado sirens as another example. Not only did the situation jam up the 911 system, potentially exacerbating any number of crisis events, but such a false alarm could lead to increased losses in the future.

The next time if there’s a real tornado, people make think, ‘Oh, its just some hack,’ ” he said. “So if there’s a real tornado, who knows what’s going to happen.”

Advertisement




Modeling for “silent silent cyber” remains elusive. But platforms like ARC are a step in the right direction for ensuring the continued health and strength of the insurance industry in the face of the ever-changing specter of cyber exposure.

Because we have this model, insurers are now able to manage the risks better, to be more resilient against cyber attacks, to really understand their portfolios,” said Stransky. “So when it does happen, they’ll be able to respond, they’ll be able to pay out the claims properly, they’ll be prepared.

The purpose of having this model is to make the world more resilient … that’s really the goal.”

Additional stories from RIMS 2017:

Blockchain Pros and Cons

If barriers to implementation are brought down, blockchain offers potential for financial institutions.

Embrace the Internet of Things

Risk managers can use IoT for data analytics and other risk mitigation needs, but connected devices also offer a multitude of exposures.

Feeling Unprepared to Deal With Risks

Damage to brand and reputation ranked as the top risk concern of risk managers throughout the world.

Reviewing Medical Marijuana Claims

Liberty Mutual appears to be the first carrier to create a workflow process for evaluating medical marijuana expense reimbursement requests.

Cyber Threat Will Get More Difficult

Companies should focus on response, resiliency and recovery when it comes to cyber risks.

RIMS Conference Held in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]