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Willis to Sponsor Brooklyn Nets Arena; Joe Plumeri Looking Forward to Working with Jay-Z

Just days after Aon officially unveiled its new, marque sports sponsorship, rival insurance broker Willis has announced one of its own. OK, it hasn’t aligned with the most popular soccer team in the world like Aon. But Willis has partnered with the arena that will soon be home to the worst team in the NBA …

… so there’s that.

All kidding aside, though, partnering with the the Nets future home, the Barclays Center, should be a good move for Willis.

Sure, the New Jersey Nets finished with the worst record of any professional basketball team last season, but they are on the rise and will soon be moving to Brooklyn (likely by 2012). For a company that has been reinventing itself and quickly expanding its reach over the past few years — first with a game-changing acquisition of HRH in 2008 and then in buying the world-renowned Sears Tower in 2009 — this is just another targeted get-the-name-out-there move.

New York is the world financial capital and, now, Willis will have a presence alongside what is sure to be a major headline-grabbing organization for years to come. When it comes to the big three professional sports leagues in the United States (the NFL, MLB and NBA), there hasn’t been a new franchise in the city since the New York Mets were founded in 1962. And Brooklyn hasn’t had its own team since the Dodgers left for California in 1958. Although there is some major opposition to arena that Willis will be putting its name within (mostly due to a corporate, revenue-seeking stadium being put square in the heart of the borough and displacing many long-time residents), there is little doubt that the NBA team that plays there will also be embraced by many others. Within its first few weeks there — even if the team is not great — the Brooklyn Nets will become one of the toughest tickets to get in all of New York. There will be buzz aplenty about the Barclays Center.

So it’s no wonder that Joe Plumeri is excited to team up with the Barclays Center, the future home of the Nets.

“Brooklyn is a great global brand that’s reaching new heights with the Barclays Center. The borough has earned a storied place in sports mythology, from the heroics at Ebbets Field to being the birthplace of legends such as Vince Lombardi, Joe Torre and Joe Paterno,” said Joe Plumeri, Chairman and CEO of Willis.

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“Willis helps manage the world’s most complex risks, and we look forward to both helping the Barclays Center through its multi-faceted construction process and, when the arena is opened, to working with Mikhail Prokhorov, Bruce Ratner, Brett Yormark, Jay-Z and their team to carry Jackie Robinson’s legacy forward and bring a new generation of champions to Brooklyn and New York.”

Yes, that’s right.

Plumeri is looking forward to working with rap mogul Jay-Z, who is a minority owner of the team.

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 It seems fitting, then, that just a few years after we published an article about Jay-Z’s enormous endorsement power, Joe is now signing on to sponsor a team Jay (sorta) owns. Maybe he can get Mr. Z to rhyme a few songs about insurance broking?

Crazier things have happened.

Jay-Z-Prokhorov-BluePrint

Along with minority owner/rap legend Jay-Z and real owner/Russian billionaire Mikhail Prokhorov, Willis is joining the Nets Brooklyn blueprint for greatness by partnering with the Barclays Center that will become the team’s home.

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7 Potential Disasters Worse than the BP Spill

If forecasters were attempting to gauge the worst disasters that could happen, a major oil spill gushing for some 90-plus days into the Gulf of Mexico would probably have rated fairly high. By some estimates, this whole mess will cost BP around $60 billion. (Other, more conservative estimates have it costing closer to 1/10th that number.)

But while this might seem like the one of the worst things that possibly could happen on American soil, it isn’t. Forbes, in its latest issue, has a list of seven other incidents that could be even more catastrophic. Here’s a recap of their list.

nuclear plant

1. Nuclear Meltdown

Depending on the severity and location, a disaster at a major plant could wreak unfathomable carnage. Writes Forbes:

The industry has $19 billion set aside to pay for accidents. But what would a Chernobyl-type release of radioactive gases into the air do to death rates and the habitability of some large area? The Institute for Policy Studies says a spent-fuel fire could cost hundreds of billions of dollars.

While nuclear energy very may well be a good option in a country (rhetorically) trying to slow climate change and wean itself off of foreign oil, the possibility of a meltdown can be sobering — even when you realize that it has thus far been very effective and safe in some parts of the world for the past several decades.

gasland

2. Liquefied Natural Gas Explosion

With supertankers out there carrying some 100,000 tons of liquid methane, the explosive potential of a single ship is equivalent to the blast that would occur if two billion sticks of dynamite went off. The last major tanker explosion killed 128 people in Cleveland in 1944. The next one? Well, it would likely be much, much worse.

And anyone who has seen the controversial — and terrifying — documentary Gasland knows that there may be other, more subtle risks involved in natural gas extraction that deserve the attention of regulators and the industry.

Bhopal Union Carbide

3. Chemical Plant Explosion

The Bhopal disaster was the worst industrial accident in history. Recently — and very controversially — seven involved officials were sentenced to two years in prison and fined $2,000 for negligence more than 25 years after the 1984 Union Carbide leak of poisonous gases (mostly methyl isocyanate) that killed some 15,000 people directly (and up to 23,000 by some estimates) while also leaving another 500,000 with injuries and ailments related to exposure. Human rights groups, victims and Bhopal locals were outraged at the leniency given, particularly since proper clean-up efforts were never conducted and that the $470 million settlement paid by Union Carbide in 1989 now looks laughable by any standard.

If something like that were to occur today, it’s almost impossible to predict how much such a politically charged incident with so many casualties would end up costing. But Forbes lists a hypothetical plant explosion in Houston that kills 600 people as totaling $20 billion, according to Risk Management Solutions.

hoover dam

4. Dam Failure

I have never done any research into a major dam failure, but it sure doesn’t sound good at all.

One of the worst scenarios would be a cascading series of failures in the Columbia River Basin of the Pacific Northwest, where the dams start in Canada, pass the Department of Energy’s Hanford Reservation, with its 50 million gallons of plutonium-laced waste, and include the 6.8-gigawatt Grand Coulee Dam, the largest hydroelectric plant in the U.S. The odds of such a catastrophe are extremely low, but the costs would quickly exceed the $85 billion tab for cleaning up Hanford.

Hopefully, someone is looking into lowering the threat for all “one-third of the 80,000” U.S. dams that FEMA claims pose at least a “high” risk.

long island express 1938

5. Category 5 Hurricane Hits New York

A few years ago, I wrote an in-depth feature article for Risk Management about the hurricane potential for New York. Honestly, I’m not really sure a cat 5 hitting NYC is even close to likely over, say, the next 100 years or so, even if ocean sea-surface temperatures continue to rise to alarming extents. But a category 3 storm hitting the area is not only likely — it’s inevitable.

In 1938, the “Long Island Express” raced up the Atlantic coast at a breakneck pace, inundating Long Island, Connecticut and, particularly, Providence, Rhode Island, with floodwaters and storm surge that, while devastating even back then when the areas were sparsely developed, would lead to well over a $100 billion in losses today. The loss of life in this densely populated, frightening unprepared region could be even worse.

Here’s an excerpt from the piece I wrote about “The Northeast Unthinkable”:

Given its geography, population density and general affluence, New York’s Long Island in particular faces a tremendous risk. When the Long Island Express hit in 1938, it was eastern Suffolk County that endured the greatest winds, storm surge and flooding, resulting in approximately 50 deaths. According to 1940 census data, the population at the time was just under 200,000. Today, nearly 1.5 million people live in Suffolk. And another 1.34 million reside in the neighboring Nassau County compared to the roughly 400,000 there in 1938.

“What really drives significant catastrophe losses is a major event hitting a major metropolitan area,” says Clark. “Otherwise, you can have a lot of activity, but you’re not going to have a lot of losses. It’s those chance occurrences where you have major events hit Galveston, Houston, New Orleans, Tampa, Miami, the Mid-Atlantic or the Northeast—those are the real areas where you’re going to get the mega-catastrophes.”

According to a study by AIR, there is some $4.4 trillion worth of commercial exposure and $3.4 trillion in residential property from New Jersey to Maine. And with almost a million households in Long Island alone, this 1,200-square-mile strip of land accounts for over $1 trillion in combined commercial and residential exposure.

It is with this boom in population and wealth in mind that Roger Pielke, Jr., director of the Center for Science and Technology Policy Research at Colorado State University, set out to formulate new projections for the scale of destruction a replay of the Great New England Hurricane would cause now.

In today’s dollars, the 1938 storm caused over $4 billion in insured losses alone. But this adjusted figure only accounts for the elevated currency values and ignores 68 years of regional growth in population, infrastructure, industry and commercial enterprise. “You can’t adjust for the damages that never occurred,” says Pielke.

As someone who lives in New York, this — even more so than terrorism — is the possible disaster that disturbs me the most, in part, because I believe there is actually some sort of official developed to react to the next terrorist attack. I doubt there is any comprehensive, inter-county plan at all that will be effective in the days leading up to an following the category 3 hurricane that will someday hit.

sydney opera house

6. Ferry Capsizing

This one honestly sounds less plausible as a “worse than BP disaster” for the United States than it does elsewhere, but here’s what Forbes wrote:

Ferryboats and riverboats are extremely stable because of their wide, flat design, but they also often travel in dangerous waterways with lots of passengers. As many as 4,300 passengers and crew died after the Philippine ferry MV Dona Paz collided with a tanker, caught fire and sank in 1987.

I suppose that could happen anywhere, but it seems less likely than the others listed in the developed world — especially when compared to this last, but certainly not least, one…

volcano

7. Supervolcano

Forbes quotes a Lloyd’s report that volcanoes pose an $85 billion risk “including disruption and air travel” and includes Mount Vesuvius in Italy and Mount Rainier outside of Seattle as two of the scariest locations for a major eruption.

$85 billion sure is a lot of money, but anyone who has seen the History Channel’s “Mega Disasters” episode on what will happen when the Yellowstone Caldera blows probably has worse fears on their minds. Were this thing to erupt, the only adjusters and insurers left to tally the total will likely be roaches and reptiles.

You’ve been warned.

Snowfall’s Impact on the Economy

blizzard

Snow days are fun for most everyone and maybe that’s because people don’t immediately realize the economic impact of snowfall on the areas hardest hit. Let’s take D.C. for example. The area is still digging out from snowstorms that dumped a total of 54.9 inches of snow (as measured at Reagan Airport) — breaking a record last set in 1899.

As one could imagine, when a major city shuts down almost completely for more than four days, the financial repercussions are far-reaching. Washington, D.C.’s Office of Personnel management has said each snow day costs taxpayers $100 million in lost productivity from federal workers, not to mention lost productivity for state and local governments.

Then there’s the cost of removing the snow.

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Maryland, Virginia and D.C. will likely ask for emergency federal aid to cover the cost of the massive cleanup. Though it’s too early to put a number on the cost of the cleanup, we can compare it to the 1993 blizzard that struck the East Cost and cost more than $6 billion. As for New York City, Mayor Michael Bloomberg has said that each one inch of snowfall this week cost the city $1 million.

And as thousands of flights were cancelled due to the storm, an untold number of business meetings were also nixed, representing a loss of potential business. And it almost goes without saying that grounding planes for an extended period of time also hurts the airline companies’ bottom line.

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These points have been floating around the news since the snow began to fall on the East Coast in December. But what has not been mentioned quite as much is what happened recently at Dulles airport that has the potential to severely affect the aircraft insurance market. Saturday’s heavy snowfall in the D.C. area caused a roof collapse at a Dulles Airport hangar.

The bill to general aviation from last weekend’s massive snowstorm on the east coast could hit tens of millions of dollars and most of that could come from the partial collapse of one building at Dulles International Airport. As we reported Saturday, part of the roof of Dulles Jet Center came down under the weight of the snow. At the time, all that was known was that there were aircraft inside but photos provided to AVweb by a reader show a scene that is enough to make any insurance executive shiver. Two Bombardier Global Express jets and a Gulfstream 550 appear to be in takeoff attitude inside the hangar, their tails pushed to the floor under the weight of the crushed structure of the building. It’s not immediately known whether they can be repaired and it might be tricky getting them out from under the twisted steel.

For an already tight and volatile aircraft insurance market, the incident at Dulles will undoubtedly severely affect premiums as millions in claims are paid out for this incident.

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And as more snow is expected to blanket the East Coast once again early next week, the total economic loss continues to add up.

Risk Management Links of the Day … Featuring Security Dogs on Vacation

security dog philadelphia airport

  • Three bomb-sniffing dogs at the Philly International airport failed their recertification tests and have been relieved of duty. While laying off security dogs may sound like overkill, even in the new climate of airline security sensitivity, one expert notes that “these dogs are not ornamental. They are there for a purpose. If the purpose is not being satisfied, that’s a serious issue.” There is a “built-in redundancy” at the airport so other screening methods can be used in the meantime until new dogs can be brought in. As for the dogs who failed … Do they just get to go on vacation and relax playing billiards like the pup above? Nope. It’s back to school for them: “TSA spokesman Greg Soule said the agency could not comment on the status of its dogs. He said, however, that the rigorous nature of yearly certification tests means that some of the nation’s 700 TSA-led dog teams deployed in air, marine and mass transportation systems may not pass and must go through a remedial program.”
  • A scary-to-think-about report was released today from the Sector Risk Research Programme stating that risks that are poorly understood and thus not addressed properly by the commercial insurance sector could “prompt a new phase of the financial crisis.” More specifically, the report states: “Parallels can be drawn between large property and casualty insurance institutions today lacking the ability to fully understand changing risk exposures and more publicised past failures of financial institutions to understand risks assumed. While loss impacts naturally lag economic changes by several years, turmoil in commercial insurance is expected as a latter phase of the financial crisis.” Jeez. Let’s hope not. (via Risk & Insurance)
  • The 4th quarter of 2009 set a record for cat bond issuance volume. “More companies have put their toes back in the water after a slow start in 2009,” said Robert Stone, director with the RMS dedicated ILS team, RiskMarkets.
  • This is a little dated at this point, but I read it over my holiday break and was just reminded how much I enjoyed Vanity Fair‘s extensive look at Goldman Sachs. The article breaks down the disconnect between “the way Goldman Sachs sees itself (they’re the smartest) and the way everyone else sees Goldman (they’re the smartest, greediest, and most dangerous).” It seems like the further we get away from September 15, 2008, the more interesting the stories become about what actually happened between Wall Street and Washington during the market meltdown, and Bethany Mclean of Vanity Fair peels back a few more revealing layers of the onion here. They also devised this sweet chart illustrating that “Goldman’s influence is ubiquitous in the highest echelons of global political power.” That sure is a ton of former Goldman employees in a ton of the world’s most influential financial positions.
  • Speaking of political power over the financial system … David Leonhardt is asking “If the Fed Missed This Bubble, Will It See a New One?” in the New York Times. “The fact that Mr. Bernanke and other regulators still have not explained why they failed to recognize the last bubble is the weakest link in the Fed’s push for more power. It raises the question: Why should Congress, or anyone else, have faith that future Fed officials will recognize the next bubble?” Fair question, it would seem.

Find an interesting link? Email me any stories, videos or images you come across. Or just follow me on Twitter @RiskMgmt to pass along the news.