February 2025 Volume 7

Large Deductible – when we say “large” we mean deductibles starting at $100,000 per occurrence and many of these programs are typically at $250,000 per occurrence. Of the lines of insurance, you are likely to see this type of program presented to you is your property insur ance. Large deductibles provide you with the opportunity to lower your fixed cost (i.e., premium) by taking on additional risk. Captive Insurance – captive insurance is insurance where a company or group of companies form their own insurance company to insure their risks. There are numerous types of captives from single parent to 831(b) and group captives. The benefit of a captive is a more customized insurance product for your operations and lower net costs. The risk is if your opera tions cannot control claims, then a captive OPERATIONS & MANAGEMENT

Figure 3: The United State 2023-billion-dollar weather and climate disasters are shown. (Artwork courtesy of NOAA – National Oceanic Atmospheric Administration)

Reinsurance Dilemma Reinsurance, a critical component of the property insurance market, has faced substantial challenges. The standard market property insurance reinsurance outlook has shifted dramatically from 2022 to 2023, with carriers reducing their reinsurance capac ities. For instance, Carrier X’s reinsurance capacity decreased from $50 million to $30 million, highlighting the tightening reinsur ance market. In 2024, we saw softening in the reinsurance market especially towards the latter half of the year. Even though market indexes predict further relief, we are not expecting a tidal shift towards a lower rate per $100. Key Reasons Forging Finds Insurance Challenging Higher Hazard Factors Several factors contribute to the higher hazard classification of forgers compared to other industries. These include the lack of sprinklers, high total insured values at each location, furnace exposures, construction types, protection classes, geographical locations, business continuity challenges, and chemical storage risks. Types Of Insurance Programs To Research As a buyer of insurance for your forge, there are several types of insurance programs to choose from. Please discuss in more detail with your insurance broker. Here are a few to consider and pros and cons of each: Guaranteed Cost – this is still the insurance many operations are familiar with and have experienced in the past. Guaranteed cost insurance is a type of insurance where the insured pays a fixed premium for a period (usually one year) and regardless of the number or amount of losses that occur, the insurer agrees to cover all losses up to the policy limits.

could cost you more money than a traditional program. Further, if you are considering a group program, you will also be risk sharing among the other owners – so it is imperative to know who your partners are going to be. Proactive Risk Management Steps Are Critical to Change the Narrative for the Forging Industry Essential Proactive Measures So, the question is what can you as a forge operation do to put you in the best possible light for insurance? Forgers should consider a more proactive risk management approach to enhance their insurability. Underwriters love it when they hear your story about what you and your team are doing to make your operations safer. Key considerations include: 1. Responding to Loss Control Recommendations: Addressing and/or responding to recommendations has never been more critical. If a recommendation cannot be accommo dated, it is helpful to have open dialogue with the broker and risk engineer to explore alternative solutions. These reports have a long shelf-life, and underwriters want to see that you are making your facility safer. 2. Chemical Storage Management: Ensuring safe storage and spill containment of chemicals is scrutinized closely by the insurance carriers. Use of IBCs, and insurance companies expect best in practices concerning preventing losses espe cially considering many of these IBCs contain flammable liquids. 3. Infrared Scanning (IR): Regularly (i.e., yearly) conducting IR scans to detect potential electrical issues is viewed favor ably by insurance carriers.

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