In an increasingly complicated economic world, providers of risk and insurance solutions are expected to offer highly specialised expertise.

A major force drawing risk managers and their risk management/insurance broking partners into a closer relationship is the application of specialist expertise to newly emerging client exposures. This development is vital in an economic world where new opportunities are inevitably accompanied by new risks.

Specialisation is nothing new, for certain. At the turn of the 20th century, Donald R. McLennan, one of the pioneers of Marsh & McLennan Cos, travelled on a railroad car for 30 consecutive days and nights to learn about the burgeoning railroad industry and the exposures it faced. As a result, he became probably the most authoritative expert of his time on railroad risk. Interestingly, our rail practice remains an important part of our transportation specialty. Today, there are many counterparts to the railroad of Mr McLennan's time. New risks relate to the deployment of new technologies and the use of e-commerce; globalisation, mergers and acquisitions, new product introductions, increased emphasis on corporate governance and the appearance of new liabilities. Each of these areas – and others – demand the application of highly specialised risk knowledge. At Marsh, we have responded to this imperative by developing and organising specialty practices that focus on all the major areas of risk exposures faced by our clients.

In addition, providers of risk and insurance solutions are expected to have in-depth knowledge of the business operations that their risk manager clients work for – in fields ranging from entertainment to high-tech to healthcare and all the other major industries that now make up the world of global commerce. This is why Marsh now is placing an emphasis on employing professionals who do not necessarily have extensive experience in risk and insurance, but have operating experience within the industries we serve.

Another approach to specialisation at Marsh reflects the way our clients want their risk solutions and services delivered. This factor generally reflects the size or type of the client organisation. Again, we have developed practices that focus on small, mid-sized and large organisations. We also have practices devoted to high net worth and affluent individuals, affinity groups, and professional associations. Each of these classes of clients has a distinctive buying style and wants us to work with them in different ways. Organising our operations into specialty practices enables us to respond effectively to these preferences. Rounding out our specialty focus based on the character of the client is our Guy Carpenter subsidiary, whose professionals focus on insurance and reinsurance companies.

Placement of client risks into the insurance and financial markets is another basis for our specialist strategy at Marsh. We have created the global broking practice, whose professionals work with the markets in close concert with our client executives and their clients. There is further specialisation within this organisation, with the brokers focusing on individual carriers, product lines and client industries. This approach provides unmatched insights into the worldwide markets and enables us to optimise programs to fit our clients' risk profiles.

Working in teams
In the real world, our specialty practices frequently work in teams under the co-ordination of our client executives. This enables Marsh to mobilise our specialists in innovative ways. Some cases in point:

  • Globalisation is a fundamental driver of business expansion today. While multinational operations and investment are not new, the areas into which corporations are now venturing are. Many initiatives involve emerging countries and former members of the Soviet bloc, for example. These economies are growing at a fast pace, but pose far higher risks than the developed world. As a result, our political risk and other specialists have developed a series of new solutions and programs to help risk managers deal with exposures related to credit issues, kidnapping, terrorism, confiscation, expropriation and even armed conflicts.

  • The explosion of technology deployments and the astonishing growth in use of the internet in just a few years has spawned the need for specialisation in the new risks of e-business. These exposures include not only network and website crashes and hacking, but also issues in areas such as intellectual property and copyright infringement. At Marsh, we have created practices and solutions focusing on these and related issues. Interestingly, this has required alliances with organisations such as law firms and technology security companies. The result has been to significantly reduce the risks associated with the use of technology and e-business.

  • The environmental area is another prominent example of how specialty risk expertise can be applied with impressive results. Many companies previously have been saddled with assets, principally land and old production sites, that have remain unproductive because the liabilities associated with cleaning up contamination simply were too great. Now, environmental risk specialists are able to reduce and quantify the liabilities in ways that rein in the exposures and permit remediation to go forward. Just recently, for example, Marsh was able to create an insurance program that paved the way for the clean-up of the most toxic Superfund site in the US.

  • Employee lawsuits against employers is one of the fastest growing areas of litigation. This used to be true principally for the US, but the trend has now spread to the UK and continental Europe. In the mid-1990s, Marsh became the first risk organisation to recognise the need to address this area on a large scale and began to organise specialised expertise and solutions for employment practices liabilities. Our professionals began working closely with underwriters, law firms and human resources consultants to develop a series of programs designed to help companies address, manage and mitigate their employment-related exposures. Similarly, on the client side, risk managers teamed with human resources executives and corporate counsel to examine their exposures to what was becoming a tide of lawsuits alleging harassment, discrimination, wrongful termination and other employment-related wrongs. As a result, there is now a full menu of risk identification, mitigation and transfer solutions available to deal with employee-related exposures.

  • Mergers and acquisitions have become a central theme within the international business community. Often, the issues associated with these business combinations go beyond traditional hazard and liability exposures to include a variety of financial and other risks. In response to the growing number of deal risks that can threaten the viability of the transaction, our M&A specialists have developed comprehensive solutions relating to tax risk, representations and warranties, due diligence and many other balance sheet issues. In these situations, there may also be a need to reconcile employee benefit programs, assess exposures associated with pension funding and deal with related issues. If so, Marsh joins with sister company William M. Mercer, Inc to tap into the expertise of their M&A specialists on behalf of our clients.

  • Similarly, our specialists in transportation and infrastructure projects have worked with Mercer Management Consulting, another sister company, to develop unique solutions to financing problems. In order to obtain revenue-backed financing for construction of a rail system, a client needed to guarantee that the system would be able to sustain specified ridership levels. An analysis by Mercer Management helped Marsh develop an insurance solution that guaranteed the projected revenue stream and satisfied the lending sources. The project moved ahead. The concept is being expanded to other industries that have demand-sensitive revenue streams.

  • Employee absenteeism in the US can mean expense to an employer that can exceed 20% of payroll. This is another example in which Marsh and William M. Mercer have teamed our complimentary specialist resources to address a growing problem. The solutions combine Marsh's risk consulting, insurance broking and claims management expertise with William M. Mercer's capabilities in designing and managing employee healthcare, disability and time-off programs.

    These are just a few of the ways Marsh's specialist risk expertise is being organised and applied, but they illustrate a fundamental business dynamic: as companies reach out to grasp new opportunities for growth, they inevitably confront new, more complex risks. Risk managers and their partners – particularly the risk specialists – are playing a central role in this economic scenario.