Roger Crombie

If, as Dorothy Parker said, the two most beautiful words in the English language are "check enclosed," then the two most horrible words would be "claim denied."

Yet more horrible words were added to the lexicon in Bermuda in July, however, after the electricity supply failed throughout the island. The COO of the sole electricity provider for 800 miles in ally direction said, "We have no back-up plan." Those are words you don't want to hear from your power supplier.

Which prompts the question: How sophisticated is risk management in the world's risk capital?

Before the elders of Bermuda carry me outside for the thrashing I so richly deserve for discussing this in public, it's worth pointing out that several of the senior staff of Lloyd's, which coincidentally insures Bermuda's electric company, also resigned in July. The news of the resignations, however, had been mysteriously kept out of the headlines for five weeks at this writing, and perhaps longer by the time you read this. The only reason for Lloyd's not taking command of so potentially damaging a situation, one imagines, is that it had no back-up plan either.

Before Lloyd's collects what's left of me from Bermuda and dishes out the beating I so richly deserve for discussing this in public, here's another question: How sophisticated is risk management in the world's whatever-Lloyd's-is capital?

It is a truth universally acknowledged that the cobbler always goes without shoes. The world's great communicators are divorced by spouses who claim they never communicate; televangelists who preach the importance of morality are revealed to have little of their own; and magazine columnists, whose stock-in-trade is words, can't spell. But, loath as I am to admit it, the world's security probably does not rely on magazine columnists as much as it does on the insurance industry.

Bermuda recovered from the total loss of its power-generation facilities in double-quick time. Only a couple of days of business were lost, in a nonrenewal season. The major Bermuda reinsurance companies have back-up plans. Similarly, Lloyd's probably won't have gone out of business by the time you read this.

You wonder, though, how these markets can sell their expertise when they apparently don't buy it themselves. Are their emperors strutting around uncovered?

The departures at Lloyd's followed a disappointing settlement with the Central Fund, and Bermuda's power outage followed the catastrophic failure of a critical switch. So you would probably think that, following these calamities, contingency anticipation, the snooty name for back-up planning, would be high on everyone's agenda.

In defense of Bermuda and Lloyd's (I may yet head off those thumpings), I think hardly anyone, anywhere, has a back-up plan for anything.

We're human beings. We don't want to learn from the past. We don't want to think about the future. We want to drive automobiles, whose operation is entirely unclear to us, at ridiculously high speeds, and as we roar into a massive pile-up during thick fog, we cry: "Why me, Oh Lord?"

No one nowadays takes responsibility for his or her own actions. If it can't be my fault, why should I have a back-up plan? Why shouldn't I just have a gin and tonic, instead? And when everything goes to hell in a handbasket, why shouldn't I shrug my shoulders and intone the modern holy trinity: "Who could have imagined this would happen?" "It's not my fault," and "We have no back-up plan."

ROGER CROMBIE is a regular columnist for Risk & Insurance% He can be reached at riskletters@lrp.com.

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