Risk Insider: Jack Hampton

The Relevance of Lloyd’s

By: | November 20, 2017 • 3 min read
John (Jack) Hampton is a Professor of Business at St. Peter’s University and a former Executive Director of the Risk and Insurance Management Society (RIMS). His recent book deals with risk management in higher education: "Culture, Intricacies, and Obsessions in Higher Education — Why Colleges and Universities are Struggling to Deliver the Goods." His website is www.jackhampton.com.

Would baseball be the same without Babe Ruth? Or New York City without Manhattan or Thanksgiving without turkey? Of course not. The same can be said for the world of insurance without Lloyd’s.

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Imagine if you will, someone comes up to you and says,”I am sending a wooden sailing vessel from Canary Wharf in London to Kolkata in India. It is a journey of 11,500 miles making a 192-day, round-trip voyage at a speed of five miles per hour. The satellite global positioning system is not operating and hostile pirates line the route. If the vessel disappears, we may never know what happened. How much would you charge to insure it?

This kind of decision 300 years ago was the start of modern insurance. Ten shipowners agreed around a coffee table that each would accept 10 percent of the risk of loss of each other’s vessels. Ten ships depart. Nine come back with riches that are shared. Except for the loss of life, it doesn’t matter whose ship never returned or what happened to it.

Cyber risk management is like watching the departure of a sailing vessel with limited navigation or communication capabilities. A loss can occur with a breach of the walls of computer or communications systems. It can happen through doorways penetrated by hackers, mischief by rogue employees or careless actions by authorized system users.

What can go wrong? Everything. When can it go wrong? Immediately or never. How much of a loss will occur? No one knows.

An argument can made that we need a modern Lloyd’s to act as the focal point for cyber risk avoidance, reduction and transfer.

In such an environment, we can reflect about Lloyd’s morphing from a coffee house to a powerful global marketplace for insurance. Information about a loss would make its way back to London where details were shared to help reduce future loss. This worked so well that Lloyd’s established agencies in foreign ports, building an expansive information-sharing network further reducing losses even as its syndicates reimbursed them.

Another feature of Lloyd’s was the presence of speculators — parties who sought profits from accepting unpredictable possibility of loss. Insurance agreements were backed by the entire personal wealth of thousands of individuals who could lose everything following a catastrophe. As recently as the ’90s, dozens of Lloyd’s “Names,” as they were known, were forced into bankruptcy as they failed to meet their commitments to the insurance syndicates where they were members.

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An argument can made that we need a modern Lloyd’s to act as the focal point for cyber risk avoidance, reduction and transfer. It can act as a clearinghouse where risk managers, brokers, and carriers can quietly exchange confidential information and encourage all parties to enhance electronic systems to reduce loss. It can bring in the capital markets where speculators are willing to accept the possibility of extreme loss of unpredictable nature.

Risk managers should be encouraged to visit Lloyd’s and have this discussion, as I did in October. Just remember one thing — if you are a male, you must wear a tie. Don’t worry about a jacket. Lloyd’s has a room full of them for visitors who do not need a guarantee that one will match their tie and pants.

Tradition dies hard at the totally electronic, paperless, computerized Lloyd’s of today, even as the genius of its past and present may help meet tomorrow’s cyber risk needs.

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Pinnacle Entertainment’s VP of enterprise risk management says he’s inspired by Disney’s approach to risk management.
By: | November 1, 2017 • 4 min read

R&I: What was your first job?

Bus boy at a fine dining restaurant.

R&I: How did you come to work in this industry?

I sent a résumé to Harrah’s Entertainment on a whim. It took over 30 hours of interviewing to get that job, but it was well worth it.

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

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The Chinese citizen (never positively identified) who stood in front of a column of tanks in Tiananmen Square on June 5, 1989. That kind of courage is undeniable, and that image is unforgettable. I hope we can all be that passionate about something at least once in our lives.

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

Cyber risk, but more narrowly, cyber-extortion. I think state sponsored bad actors are getting more and more sophisticated, and the risk is that they find a way to control entire systems.

R&I: What is the riskiest activity you ever engaged in?

Training and breaking horses. When I was in high school, I worked on a lot of farms. I did everything from building fences to putting up hay. It was during this time that I found I had a knack for horses. They would tolerate me getting real close, so it was natural I started working more and more with them.

Eventually, I was putting a saddle on a few and before I knew it I was in that saddle riding a horse that had never been ridden before.

I admit I had some nervous moments, but I was never thrown off. It taught me that developing genuine trust early is very important and is needed by all involved. Nothing of any real value happens without it.

R&I: What about this work do you find the most fulfilling or rewarding?

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Setting very aggressive goals and then meeting and exceeding those goals with a team. Sharing team victories is the ultimate reward.

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

Disney World. The sheer size of the place is awe inspiring. And everything works like a finely tuned clock.

There is a reason that hospitality companies send their people there to be trained on guest service. Disney World does it better than anyone else.

As a hospitality executive, I always learn something new whenever I am there.

James Cunningham, vice president, enterprise risk management, Pinnacle Entertainment, Inc.

The risks that Disney World faces are very similar to mine — on a much larger scale. They are complex and across the board. From liability for the millions of people they host as their guests each year, to the physical location of the park, to their vendor partnerships; their approach to risk management has been and continues to be innovative and a model that I learn from and I think there are lessons there for everybody.

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

We are doing a much better job of getting involved in a meaningful way in our daily operations and demonstrating genuine value to our organizations.

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

Educating and promoting the career with young people.

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

Being able to tell the Pinnacle story. It’s a great one and it wasn’t being told. I believe that the insurance markets now understand who we are and what we stand for.

R&I: Who is your mentor and why?

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John Matthews, who is now retired, formerly with Aon and Caesar’s Palace. John is an exceptional leader who demonstrated the value of putting a top-shelf team together and then letting them do their best work. I model my management style after him.

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

I read mostly biographies and autobiographies. I like to read how successful people became successful by overcoming their own obstacles. Jay Leno, Jack Welch, Bill Harrah, etc. I also enjoyed the book and movie “Money Ball.”

R&I: What is your favorite drink?

Ice water when it’s hot, coffee when it’s cold, and an adult beverage when it’s called for.

R&I: What does your family think you do?

In my family, I’m the “Safety Geek.”

R&I:  What’s your favorite restaurant?

Vegas is a world-class restaurant town. No matter what you are hungry for, you can find it here. I have a few favorites that are my “go-to’s,” depending on the mood and who I am with.

If you’re in town, you should try to have at least one meal off the strip. For that, I would suggest you get reservations (you’ll need them) at Herbs and Rye. It’s a great little restaurant that is always lively. The food is tremendous, and the service is always on point. They make hand-crafted cocktails that are amazing.

My favorite Mexican restaurant is Lindo Michoacan. There are three in town, and I prefer the one in Henderson as it has the best view of the valley. For seafood, you can never go wrong with Joe’s in Caesar’s Palace.




Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]