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Member, Beacon International Group, Ltd.
Driven primarily by increased property insurance costs, the total cost of risk increased 1.7% during the past year, according to the 2012 RIMS Benchmark Survey released last week.
The survey by the New York-based Risk & Insurance Management Society Inc. shows the total cost of risk for participating companies increased to $10.19 per $1,000 in revenue this year from $10.02 per $1,000 in revenue last year.
The contribution of property insurance premiums to the total cost of risk increased nearly 9%, according to the survey, rising to $2.92 per $1,000 in revenue this year from $2.73 per $1,000 in revenue last year.
“The cost of risk did increase a bit, but really not very much,” said Dave Bradford, president of Advisen Ltd.'s research and editorial division and editor-in-chief of the survey. “The biggest thing pushing up the cost of risk was the increase in property insurance costs, and that was almost guaranteed as a result of the natural catastrophe activity in 2011.”
“We did see a little bit of an increase in administrative costs, the cost of operating risk management departments,” he said.
Advisen produces the annual survey.
About half of those surveyed said they use total cost of risk as a metric in their day-to-day risk management operations, Mr. Bradford said. Those who don't use the measure said they lack the necessary internal resources.
Among topical issues examined in this year's survey are risk managers' concerns about the potential risks social media might pose to their organizations.
“There emerged a fairly significant concern from a lot of risk managers, and a lot of that is around reputation risk,” Mr. Bradford said.
Asked to assess reputational risks posed by social media on a one to five scale, with five being the most severe, the average response was 3.34, he said.
This year's survey includes data from more than 1,000 companies, according to RIMS. Survey participants receive the book for free; others can purchase it at www.RIMS.org/book.