Rocky Mountains, 1957
When the topic of alternative risk transfer programs comes up in conversation I am politely reminded by the other party that we are in the midst of a soft market and now is not the time to be dragging all that captive stuff out for clients who aren’t feeling any insurance pain. After all, captives are the stuff of hard markets.
Let me beg to differ by telling a little story from my past. Let me say that this story is the substance of serious family lore. Outside of weddings and reunions the whole story has never been told, up until today. While I was a participant in the events I have had to rely on my father for the details. He was quite a story teller so the exact facts may have been stretched a bit, although my mother, who often corrected the exaggerated details of my father’s tall tales, had little to say about this story in particular. They have both passed on so the details are now etched in stone.
I grew up an Air Force brat and for those of you that have never been in a military family what that means is that your life is turned upside down every couple of years as you move from one base to another. I learned this lesson at a very young age when we were transferred from my birthplace of Loring AFB in Limestone Maine to Clark Field in the Philippine Islands. My father was to fly from Sacramento to Manila to report for duty while my mother and I were to follow by Navy ship from San Francisco (that’s another story!). It was the spring of 1957 and we packed up the 1952 Mercury Monterrey and started the Maine to California trek. Remember, this was long before most of the Interstate Highway system as we know it was completed. This was the Ultimate Road Trip.
The weather during our cross country trip was unseasonable warm and while the Monterrey was a comfortable ride with a powerful 8 cylinder engine it did not have air conditioning. After several days on the road I wasn’t feeling too well and the hot car ride just wasn’t helping. Remember, this is 1957 and that means cloth diapers. You know, the kind you save in a bag and then wash and reuse. Let your imagination wander a bit here. Hot car, sick baby, soiled cloth diapers piling up in a bag.
My father was not a patient man, and even less so as the day went on. Somewhere in the mountains of Colorado on a twisting and turning section of road he reached his limit. “Get rid of those dirty diapers”, he boomed. “What do you want me to do with them?”, asked my mother. “I don’t care, throw them out the window, just get rid of them!” My mother reached into the bag and grabbed the worst offenders and rolled down the window. My father, looking in the rear-view mirror said, “OK, toss them.” and just as my mother’s fingers lost their grip on the rolled up cloth he yelled, “STOP!”. A car had come round the bend right behind us and my father watched in horror as the dirty diapers hit the windshield of the car and stuck there. The shocked driver turned on his wipers, making matters worse as the diaper, apparently hung up on the wiper, smeared its contents across the windshield. Timing is everything!
My father pulled the overdrive lever on the Mercury and we sped away as quickly as he could negotiate the curves and didn’t stop until we reached that night’s motel. I am convinced that somewhere in the world there is a reciprocal story being told around the tables of family gatherings about the day some lunatic with Maine plates nearly caused grandpa to drive off the road when a dirty diaper hit his car! What a day it would be to meet that person!
Timing is everything!
So the point of this story, other than perhaps to make you smile, is that timing is everything. If we wait until a hard market to pull out the hard market solutions, then its really too late. If hard markets were like hurricanes, tornadoes or dirty diapers (we know they happen but not when and where) then we could be satisfied with a reactionary solution, but history tells us that insurance pricing moves in a cycle, its predictable, and we know that while in the depths of a soft market is exactly when we need to be making plans for the next hard market.
If you are a risk manager or an agent/broker, don’t get enamored with the insurance market pricing and conditions you have today. Take advantage of them, but at least look to the future and decide how you will handle the changes that we know are sure to come and then put into action a plan to start to develop those solutions today. A captive insurance initiative may be the solution you need.