ERM, SRM Gaining Ground with Risk
Managers; Reinsurers Leading the Way
Identifying existential business threats becomes a ‘must-do’
ENTERPRISE RISK management con- tinued to move more toward the mainstream in Corporate America
this year, with its implementation being
driven by anxious boards and by CEOs
more acutely aware than ever of the need to
understand and mitigate existential threats.
This increasing stature of the concept,
especially at Fortune 1000 firms, is
good news for risk managers: It means
greater recognition of the strategic
contributions they can make, and ERM’s
growing acceptance should open up more
opportunities for risk managers to consult
with a company’s top decision-makers.
In our own insurance industry, ratings
agencies are helping push the practice of
ERM further up the C-suite “Must Do” list.
In fact, reinsurance giants are not only
leading the charge on ERM within the
insurance sector—they are so advanced
that they can serve as models for almost
any company considering a program.
While many small to midsize companies
in the U.S. believe there is something to
be gained through ERM practices, they are
still moving slowly toward building an
infrastructure for it, says Stefan Holzberger,
A.M. Best’s vice president of rating criteria
and regulatory-policy development.
One element of ERM, and an emerging
discipline in 2011, is strategic risk
management (SRM), which was defined
and recognized by the Risk and Insurance
Management Society at its annual
conference this May.
SRM, a central component of ERM,
focuses on the biggest and most likely risks
to shareholder value. This process helps
risk managers identify and assess those
issues that could most severely impair
an organization’s ability to execute its
business strategies. NU
ENDING A five-month, multiparty bidding war—with Warren Buffett as one of the belligerents—
investment holding company Alleghany Corp.
recently reached a deal whereby reinsurer
Transatlantic would become its independent subsidiary in a $3.4 billion deal.
The battle for Transatlantic began on June
12 when the company and Swiss-based Allied
World Assurance Co. Holdings announced a
$3.2 billion merger deal that executives said
would create a global specialty insurer and
reinsurer operating in 18 countries on six
continents. But one month later, Bermuda-
7
Bold-Faced Buyers Battle
The long, winding road to $3.4B deal
filing a lawsuit in Delaware alleging that
Validus had made false and misleading
statements to Transatlantic’s stockholders
through tender-offer materials.
to Acquire Transatlantic
In August, yet another player entered
the game as Berkshire Hathaway’s National
Indemnity Co. put in a competing bid.
Validus then filed suit against Transatlantic
and the board, arguing that the board had
not given sufficient reason for refusing to
consider Validus’ offer.
Days before a scheduled Sept. 20 vote
on their planned merger, Transatlantic
and Allied World announced they had
ended their attempted deal. Transatlantic
was left to consider bids from Validus,
National Indemnity and an “undisclosed
third party.” Ultimately, in November,
Alleghany and Transatlantic announced
their transaction, which is expected to be
finalized during 2012’s first quarter. NU
Photo by Thinkstock
based Validus Holdings Ltd., led by CEO
Edward J. Noonan, made an unsolicited,
competing $3.5 billion offer of its own
to acquire Transatlantic. The companies
sparred throughout July, with Transatlantic
E WARREN BUFFETT E EDWARD J. NOONAN
