I graduated with my BS in Business from Lake Superior State University in Sault Ste. Marie, MI. Located in the north-eastern most corner of Michigan’s Upper Peninsula, it is a place of serious winter and unless you figure out things to do when it’s cold out you will never venture far from your dorm for months at a time. The history of broomball is sketchy, but it is enough to say that it is one of those ideas that creative folks in cold places hatch to have fun in an otherwise hostile environment.
Broomball is played on the ice and has goals similar to hockey. The players wear tennis shoes and use what looks like a corn broom cut off at the stitches to direct a small ball into the goal. The action is much like hockey with one notable exception. Tennis shoes don’t get any traction on ice. That lack of precision in movement contributes to a need for planning plays that goes beyond anything in hockey. Beside the typical dynamics at play in any sport, now you have the reduced ability to execute precisely. You must introduce a “factor” into each play that actually causes you to execute before the precise moment you would normally execute the play because the ice is slippery. In order to figure out just how much anticipation is needed you spend a lot of time on your butt or sliding past the goal or shooting and missing altogether.
Sounds like the real world doesn’t it!
When you are planning risk transfer and risk financing mechanisms there are numerous financial, actuarial and catastrophic loss models that can help you to make sound decisions; but at the end of the day there is a lot which cannot be completely controlled. I call this the “Broomball Coefficient of Anticipation”.
The reason why insurance is a prime example of this coefficient in action is that its modeling is almost exclusively retrospective. Insurers price off of historic loss histories, expectations of future catastrophic loss are based on where they have happened in the past, essentially navigating forward by looking in the rear view mirror. Don’t get me wrong, since none of us have crystal balls to predict the future we have to have something to hang out hats on and, at least statistically, the past has been a pretty good indication of future events.
If we were operating in an environment where we had the sure footing of a manicured baseball diamond or the turf of a football stadium or the pitch of a soccer field we could execute our plays instantaneously and with precision. But in insurance we are playing on ice in our sneakers. One of the tenets of the “Broomball Coefficient of Anticipation” is that if you wait until all the scientific loss models show its time to execute, it’s already too late. That’s why you see the insurance industry as a whole constantly being reactive instead of proactive with just a few exceptions.
Of all the segments of the insurance industry, alternative risk is the most likely candidate to take the Broomball Coefficient and use it to best effect. Captive insurance companies are the most efficiently capitalized, agile and responsive insurance mechanisms in the industry. Because they are responsible for serving the needs of a single client or a very small clientele they can quickly execute on initiatives to meet strategic goals and can often do so in anticipation of need as opposed to in response to a need.
The only thing lacking to most captive insurers is a partner that knows how to execute while running full speed on ice in sneakers.
Email me at email@example.com if you would like to discuss this more.
Tags: actuarial, actuary, agent, alternative risk, alternative risk financing, alternative risk transfer, broomball, captive insurance, captive management, captives, Cedar Consulting, insurance, risk management, risk transfer, strategic planning