Friday, January 20, 2012 Risk Management and Insurance Blog
The Eurozone Crisis Hits Allianz, Others; RMI MBA Students Totally Get It

The UW-MBA industry-specific model is unparalleled in the opportunities it provides students to learn not only from the school’s exceptional school faculty but also from visiting industry leaders. This gives UW MBA graduates a significant advantage over their peers at other schools in keeping up to date about key industry topics, trends, and industry culture.

Take the current Eurozone crisis, for instance.  According to a 12/20/11 article in Business Insurance, the rating agency AM Best is now less confident in Allianz’ ability to pay its senior financial obligations debt, downgrading the German insurer’s issuer credit rating from aa to aa- due to concern for the  insurer’s holdings in Italian and Spanish sovereign bonds as well as European bank securities.  Allianz is not the only insurer to be downgraded by Best in light of the ongoing Eurozone crisis but it is one of the largest.  Industry analysts such as Bob Hartwig, president of the Insurance Information institute, do not expect the crisis to have a significant impact on insurers. Should the unlikely occur, though, where restructuring or default of debt reaches 50% write-down levels, Swiss Re predicts that the insurance industry “would lose up to €143 billion ($190.48 billion)

Instead of simply reading articles or case studies to understand the implications of industry-specific  events such as the one above, this past semester we were:

  • Challenged on our Accounting final exam to discuss the financial statement impact of various strategies to decouple high risk assets from a financial institution’s balance sheet.  Insurers may likely use these same strategies to decouple the European sovereign debt and bank securities from their own balance sheets.
  • Introduced to investment management strategy as taught to us by the  Chief Investment Risk Officer of CUNA Mutual
  • Discussed product development and company culture at Allianz with a former Allianz product manager
  • Attended an industry conference in San Diego to listen to and meet Bob Hartwig (see the link above) who discussed the threats facing the insurance industry today