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Michael D. Horvath prevents losses with predictive analysis

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A core concept Michael D. Horvath has institutionalized as senior vice president of risk management at Simon Property Group Inc. is that preventing losses is far less expensive than minimizing their cost after they happen.

But effective risk mitigation for a company of Simon Property's scale requires regular predictive analysis of prior losses and claim histories at the corporate, regional and local levels, something Mr. Horvath said was sorely lacking prior to his arrival. “At the time I took the job, we weren't analyzing our losses very well as a company. We were very responsive, but not very proactive,” Mr. Horvath said.

To understand the root causes of the company's property and casualty losses, Mr. Horvath and his team developed and implemented a series of proprietary, companywide incident reporting protocols.

They include regular property risk assessments, loss prevention reports and incident summaries, all designed to catalogue each property in the company's portfolio by its exposure to adverse weather conditions, supply chain disruptions and time-element losses, level of emergency preparedness, open maintenance recommendations, and incident and loss history, among other metrics.

Similar assessments and reporting protocols were implemented to track the company's general liability risks and losses, primarily patron and worker safety hazards.

“I've had insurance carriers tell me that they've never seen an account with underwriting data that's as concise and clear and detailed as Simon's,” said Paula Maxwell, a senior vice president at Boardman, Ohio-based Donald P. Pipino Co. Ltd. “We make it a point to know everything we can about every single property.”

The reporting protocols have blossomed into a network of informational pipelines between Simon Property's risk management department and its other divisions. The data collected quarterly, annually and on an ad hoc basis adds up to what Mr. Horvath refers to as the “Simon Story.”

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“We can sit in front of the insurance markets, and if they give us the chance and really embrace our "Simon Story,' then they see that we're the type of risk that they're going to want to write,” he said.

The company's third-party risk and safety engineers, Global Risk Consultants Corp. and Carrington Risk Consulting Inc., use those various reporting mechanisms to inform risk mitigation recommendations. By acting on those recommendations, Simon Property has reduced its loss expectancies by an estimated $47.4 million dollars in the past 18 months.

“Mike has used a ton of that information to drive down costs within the company,” said Jim Gallagher, managing director of national accounts at Hartford, Conn.-based Travelers Cos. Inc., Simon Property's primary casualty insurer and one of 11 of its primary property insurers.

“Mike has used a ton of that information to drive down costs within the company,” said Jim Gallagher, managing director of national accounts at Hartford, Conn.-based Travelers Cos. Inc., Simon Property's primary casualty insurer and one of 11 of its primary property insurers.

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