Greg Berg, head of enterprise risk at The Hartford Financial Services Group (NYSE:HIG), told a large group of attendees at the Risk & Insurance Management Society's (RIMS) national conference yesterday that "insurers and risk managers have a joint responsibility to manage risk in a changed environment. It requires collecting and modeling more data while looking at new ways to protect assets."

Insurers must collect and analyze information in new ways, especially to calculate the concentration of exposure in a particular site or area, Berg told more than 200 session attendees. "We're looking at total exposure in a particular place and across the various lines of business -- all of the workers insured for worker's compensation, all of the property insured in a building or a zip code, all businesses insured for business interruption" he said. "For multi-line insurers, this also includes all of the lives the company would insure with life insurance. Insurers must become more sophisticated in their underwriting -- particularly since they currently lack the security of federal back-stop legislation."

The responsibility and added burden to change is not just on insurers. "Risk managers should already be collecting additional data and more-complex data," he said. "This may include the number of employees and their payroll by location, rather than company-wide. Even the term 'location' may be changing from the traditional fire insurance definition of adjacent or contiguous buildings to include buildings in close proximity that may be impacted by the same event. They'll need to be able to furnish specific information that can be modeled in many different ways."

Berg noted that analytic organizations are already developing new tools to analyze terrorism exposures, just as tools were developed to model hurricane exposures after the substantial losses of Hurricane Andrew. Brokers will likely use these tools for their large clients prior to submission to insurers, and insurers will use them to underwrite and reserve for their exposures. Insurers also may be required to provide this type of information to reinsurers.

Since most states don't allow terrorism exclusions for workers' compensation insurance, Berg expects the residual market to assume a lot of workers' compensation business. He also expects rising prices and availability issues will spawn increased growth in other alternative markets, including captives and various types of group self-insurance pools.

"Insurers value their long-term relationships, and many will continue to add value to those relationships by supporting their clients' use of alternative markets," he said.