FM Global: Everything you need to know
Consolidated net income in 2017: US$254 million
Consolidated net premium earned in 2017: US$4.1 billion
Employee retention rate: 94%
Average employee tenure: 12.5 years
The FM Global Group is a family of companies focused on property insurance that include FM Global, AFM, FM Approvals, FM Global Cargo, Mutual Boiler Re, and Emergency Response Consultants. FM Global is a mutual insurance company based in the US that has offices around the world and specialises in loss prevention services, with a focus on large corporations throughout the globe in the highly protected risk property insurance market sector.
Additionally, AFM offers commercial property insurance for mid-sized businesses; FM Approvals specialises in third-party certification; FM Global Cargo provides cargo coverage, risk engineering services, and claims handling; Mutual Boiler Re offers breakdown treaty reinsurance and other support services for mechanical, electric and pressure systems; and Emergency Response Consultants delivers emergency response training to a variety of teams in this area, such as fire brigades and confined-space rescue teams, among others. FM Global and AFM together are the source of 95.4% of the Group’s overall premium in force.
A history with prevention in its roots
FM Global has its roots in the mill business when in 1835, a Rhode Island textile mill owner named Zachariah Allen made improvements to his mill to reduce the chance of fire loss and increase his mill’s resilience to this element, but when he went to his insurance company and asked for a reduced premium, he was denied. In response, Allen recruited other mill owners to create a mutual property insurance company, Factory Mutuals, which would insure “good risk” factories, and provided incentives to policyholders by returning the premiums remaining at the end of a policy term to them.
Over time, the company became a beacon of proper fire prevention methods and inspections, and other companies across the US signed on to work with Factory Mutuals. In 1987, 42 mutual companies merged into three companies to offer clients comprehensive coverage and loss prevention resources. In 1999, FM Global was created to provide greater insurance capacity, followed by the opening of the FM Global Research Campus in 2003, which today is one of the most sophisticated centres with an eye on advancing the science of property loss prevention.
FM Global’s product offerings range from cyber resilience solutions to business interruption coverage, cargo insurance to captives and captive cells. Its services include predictive analytics, claims, cyber risk assessment, business risk consulting, supply chain risk management, appraisal as well as other key services.
Global research campus
FM Global’s research campus is devoted to preventing physical threats from evolving into catastrophes in the real world. Its four laboratories focus on fire technology, natural hazards, electrical hazards, and hydraulics, and run experiments that develop understanding around the risk via experiments. The fire technology lab, for example, allows researchers to learn about the causes of structural failure, the speed at which fire spreads, and sprinkler protection systems. The natural hazards lab can simulate hurricane-force winds and hailstorms, the impacts of earthquakes, and even the effects of the sun’s UV radiation on building materials. Researchers in the electrical hazards lab, meanwhile, test equipment to check if it will ignite dust or other types of gas during both normal operations or under faulty conditions. Finally, the hydraulics lab replicates companies’ fire protection systems to ensure that these systems are installed and functioning properly.
With its focus on loss prevention and risk mitigation, it makes sense for FM Global to be a thought leader in the catastrophe preparedness space. A recent whitepaper from the company focused on why CFOs have to initiate preparations for natural catastrophes in 2019 and beyond to mitigate against weather-related damage to properties and business interruption losses. FM Global analysed the 10-K filings of around 100 public companies that were affected by Hurricanes Harvey, Irma, or Maria in 2017. The mutual insurance firm discovered that CFOs should be allocating more capital to reduce the financial consequences of natural disasters, “or risk facing volatile balance sheets and other potential consequences of their inaction.”
“Board members, shareholders, investors, and analysts during quarterly earnings calls will increasingly want credible information on the company’s preparedness for the next big one. And that requires the CFO to ask tough questions and undertake thoughtful cost-benefit and return-on-investment analyses for capital allocation purposes,” stated Kevin Ingram, the chief financial officer at FM Global, in the whitepaper.
The report featured insight from business risk analysts alongside examples of actual losses, such as a New York-headquartered conglomerate that reported net catastrophe losses of US$256 million from the three hurricanes in 2017 and the wildfires in California.
“If the CFO doesn’t lead the charge to invest in reducing natural-hazards exposures, they will be the ones that stakeholders hold accountable for not properly addressing the risks,” said Ingram, who is also the executive vice president at FM Global.