FM Global

Last updated
FM
Company typePrivate
Industry Insurance
Founded1835;189 years ago (1835)
Founder Zachariah Allen
Headquarters Johnston, Rhode Island, U.S.
Key people
Malcolm Roberts (President and CEO)
Number of employees
5,500
Website fm.com

FM (formerly FM Global) is an American mutual insurance company based in Johnston, Rhode Island, United States, with offices worldwide, that specializes in loss prevention services primarily to large corporations throughout the world in the Highly Protected Risk (HPR) property insurance market sector. "FM" is the communicative name of the company, whereas the legal name is "Factory Mutual Insurance Company". FM has been named the "Best Property Insurer in the World” by Euromoney Magazine. [1]

Contents

The company employs a non-traditional business model whereby risk and premiums are determined by engineering analysis as opposed to historically based actuarial calculations. [2] This business approach is centered on the belief that property losses can be prevented or mitigated. FM engineering personnel regularly visit insured locations to evaluate hazards and recommend improvements to their property or work practices to reduce physical and financial risks if a loss occurs. [3]

History

During the depression of 1835, Zachariah Allen, a prominent textile mill owner, attempted to reduce the insurance premium on his Rhode Island, USA, mill by making property improvements that he believed would minimize the damage in case of fire. At that time, insurance premium increases for losses were shared among all insureds, regardless of individual loss history. The concept of loss prevention and control was virtually unheard of at the time. To Allen, a proactive approach to preventing losses made good economic sense.

After making considerable improvements to his mill, Allen requested a reduction in his premium, but was denied. He called upon other local textile mill owners who shared his loss prevention philosophy to create a mutual insurance company that would insure only factories with lower risks. This approach should result in fewer losses and smaller premium payments. Whatever premium remained at the end of the year would be returned to policyholders in the form of dividends. The group agreed, and by year's end, formed the Manufacturers Mutual Fire Insurance Company, the oldest predecessor of FM.

During the company's first 14 years, the mill owners and mutual policyholders of Manufacturers Mutual enjoyed an average 50% reduction in premiums compared with the premiums of other insurance companies. The fire prevention methods they developed, monitored by regular fire inspections for mill policyholders, resulted in fewer losses. Despite its initial success, one problem remained for the pioneer mutual insurance company: a single mutual insurance company could not withstand the financial cost of the loss of an entire plant. More insurance capacity was needed. In 1848, Allen formed Rhode Island Mutual.

Expansion

In 1850, Boston Manufacturers Mutual Fire Insurance Company, the third-oldest FM Global predecessor, was created when Allen convinced a Boston merchant with significant cotton-mill ownership to form his own mutual insurance company with like-minded Boston mill owners. Throughout the next 20 years, other mutual insurance companies were added to the group roster. Together, these companies and the ones that later evolved soon became known as the Associated Factory Mutual Fire Insurance Companies, or the Factory Mutuals, for short.

Loss information helped identify specific industry hazards and was used in developing loss control recommendations for policyholders in similar industries. Such information was shared among all the Factory Mutual (FM) insurance companies, and was utilized by the inspection teams. As the FM companies grew, the inspection workload became difficult to manage. By 1878, the FM companies formed a dedicated unit to handle the collective inspection activities for all the FM policyholders. This unique group of loss control specialists initially provided only inspection services. The group later began performing appraisals and adjustments, loss analysis and research activities associated with preventing fire and other hazards to benefit the mutual insurance company owners and their policyholders. Today, all of these services remain components to FM in the form of engineering and research.

The FM companies' main interests in the late 19th century and early 20th century remained focused on researching and developing products or techniques that would help mitigate property risks and advance the efforts of property conservation. In 1874, a revolutionary form of loss control entered the loss prevention scene: the fire sprinkler. While the invention was originally designed outside the realm of FM, FM's further development and promotion of the sprinkler head aided in its eventual widespread use and acceptance.[ citation needed ]

FM constructed a training and meeting space in Norwood, Massachusetts that is branded as a Four Points by Sheraton hotel. The facility includes convention/meeting spaces, guest rooms that are available to be booked by the public when not in use by FM, and an on-site restaurant, the One Bistro.

20th century

The beginning of the 20th century brought significant change to the FM companies. Where once the mutual insurance companies focused primarily on the familiar business of textiles primarily within the Northeast region of the US, new companies began to form that sought business beyond the traditional geographical boundaries. These mutuals began branching out into other industries, such as shoe and rubber manufacturers, foundries and light, gas and power companies, while still maintaining their preference for low-risk properties.

During the next 75 to 80 years, the need for more comprehensive policyholder coverage grew, forcing a series of consolidations among the FM companies. By 1987, 42 separate mutual insurance companies had become three: Allendale Mutual Insurance Company, Johnston, R.I., USA; Arkwright-Boston Manufacturers Mutual Insurance Company, Waltham, Mass., USA; and Protection Mutual Insurance Company, Park Ridge, Ill., USA. The three separate organizations found it difficult to deliver competitively priced, value-added engineering services in a marketplace full of increasing competition and a demand for more challenging property protection programs. The three companies were sharing the resources of an inspection group, yet were competing with one another for customers. To reduce competition and costs, in 1998 the CEOs announced their intent to merge the three companies to create FM Global. The merger was completed in 1999.

21st century

FM is an international property insurance and loss prevention engineering company with US$5.3 billion of in-force premium (FY2016), US$11.9 billion in policyholders' surplus (FY2016), with clients in more than 100 countries and 5500 employees. [4]

FM awarded its largest ever membership credit in 2016 of US$407 million, intended to allow clients to share in the benefits of their risk improvement efforts, totalling nearly US$2.1 billion in total premium reduction via membership credits since 2001. [4]

In 2014, Shivan Subramaniam resigned from his role as FM Global's CEO, but remained on the company's board of directors. His role was assigned to the company executive Thomas Lawson. [5]

In 2021, FM appointed Malcolm C. Roberts as its president, effective August 1. Roberts will also become CEO, on January 1, 2022, following the retirement of chairman [6] Thomas A. Lawson as CEO. [7]

Research Campus and FM Approvals

FM's 1,600 acre (648 ha) Research Campus in West Glocester, Rhode Island, USA, conducts testing in fire and explosion hazards, hazards detection. These tests range from witnessing the difference in how products burn to how construction components perform in hurricane conditions. [8]

In 2004, FM entered into a Cooperative Research and Development Agreement (CRADA) with Sandia National Laboratory (US). [2] The CRADA will develop advanced diagnostics and modeling of catastrophic fires.

See also

Related Research Articles

<span class="mw-page-title-main">Insurance</span> Equitable transfer of the risk of a loss, from one entity to another in exchange for payment

Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect against the risk of a contingent or uncertain loss.

<span class="mw-page-title-main">Life insurance</span> Type of contract

Life insurance is a contract between an insurance policy holder and an insurer or assurer, where the insurer promises to pay a designated beneficiary a sum of money upon the death of an insured person. Depending on the contract, other events such as terminal illness or critical illness can also trigger payment. The policyholder typically pays a premium, either regularly or as one lump sum. The benefits may include other expenses, such as funeral expenses.

<span class="mw-page-title-main">Earthquake insurance</span> Form of property insurance

Earthquake insurance is a form of property insurance that pays the policyholder in the event of an earthquake that causes damage to the property. Most ordinary homeowners insurance policies do not cover earthquake damage.

In insurance, the insurance policy is a contract between the insurer and the policyholder, which determines the claims which the insurer is legally required to pay. In exchange for an initial payment, known as the premium, the insurer promises to pay for loss caused by perils covered under the policy language.

<span class="mw-page-title-main">Norwich Union</span> Defunct British branch of Aviva

Norwich Union was the name of insurance company Aviva's British arm before June 2009. It was originally established in 1797. It was listed on the London Stock Exchange and was once a constituent of the FTSE 100 Index.

<span class="mw-page-title-main">Liberty Mutual</span> American multinational insurance company

Liberty Mutual Insurance Company is an American diversified global insurer and the sixth-largest property and casualty insurer in the world. It ranks 71st on the Fortune 100 list of largest corporations in the United States based on 2020 revenue. Based in Boston, Massachusetts, and featuring the Statue of Liberty on its logo, it employs over 45,000 people in more than 900 locations throughout the world. As of December 31, 2021, Liberty Mutual Insurance had $156.043 billion in consolidated assets, $128.195 billion in consolidated liabilities and $48.2 billion in annual consolidated revenue.

Liability insurance is a part of the general insurance system of risk financing to protect the purchaser from the risks of liabilities imposed by lawsuits and similar claims and protects the insured if the purchaser is sued for claims that come within the coverage of the insurance policy.

<span class="mw-page-title-main">Pool Re</span> Former reinsurance firm

Pool Reinsurance Company Limited, also known as Pool Re, was set up in 1993 by the insurance industry in cooperation with the UK Government in the wake of the IRA bombing of the Baltic Exchange in 1992.

Flood insurance is the specific insurance coverage issued against property loss from flooding. To determine risk factors for specific properties, insurers will often refer to topographical maps that denote lowlands, floodplains and other areas that are susceptible to flooding.

A mutual insurance company is an insurance company owned entirely by its policyholders. It is a form of consumers' co-operative. Any profits earned by a mutual insurance company are either retained within the company or rebated to policyholders in the form of dividend distributions or reduced future premiums. In contrast, a stock insurance company is owned by investors who have purchased company stock; any profits generated by a stock insurance company are distributed to the investors without necessarily benefiting the policyholders.

<span class="mw-page-title-main">Zachariah Allen</span> American lawyer

Zachariah Allen was an American textile manufacturer, scientist, lawyer, writer, inventor and civil leader from Providence, Rhode Island. He was educated at Phillips Exeter Academy and at Brown University, where he graduated in 1813.

A reciprocal inter-insurance exchange or simply a reciprocal in the United States is an unincorporated association in which subscribers exchange insurance policies to pool and spread risk. For consumers, reciprocal exchanges often offer similar policies to those offered by a stock company or a mutual insurance company. Notable reciprocal exchanges are managed by USAA, Farmers, and Erie.

QBE Insurance Group Limited is an Australian multinational general insurance and reinsurance company headquartered in Sydney, Australia. QBE offers commercial, personal and specialty products and risk management products. The company employs around 13,500 people in 27 countries.

Expatriate insurance are insurance policies that are designed to cover financial and other risks incurred specifically by expatriates while living and working in a country other than one's own. The insurances that expatriates need are similar to individuals living in the country but may be more complex to arrange because they are not native. There may also be specific risks for high-risk areas of the world where specialty insurance can provide coverage for war and terrorism, kidnap and ransom.

Professional liability insurance (PLI), also called professional indemnity insurance (PII) but more commonly known as errors & omissions (E&O) in the US, is a form of liability insurance which helps protect professional advising, consulting, and service-providing individuals and companies from bearing the full cost of defending against a negligence claim made by a client in a civil lawsuit. The coverage focuses on alleged failure to perform on the part of, financial loss caused by, and error or omission in the service or product sold by the policyholder. These are causes for legal action that would not be covered by a more general liability insurance policy which addresses more direct forms of harm. Professional liability insurance may take on different forms and names depending on the profession, especially medical and legal, and is sometimes required under contract by other businesses that are the beneficiaries of the advice or service.

Insurance in the United States refers to the market for risk in the United States, the world's largest insurance market by premium volume. According to Swiss Re, of the $6.782 trillion of global direct premiums written worldwide in 2022, $2.959 trillion (43.6%) were written in the United States.

<span class="mw-page-title-main">Hartford Steam Boiler Inspection and Insurance Company</span>

The Hartford Steam Boiler Inspection and Insurance Company (HSB) is a global specialty insurer and reinsurer headquartered in Hartford, Connecticut. It was founded in 1866 and is the largest provider of equipment breakdown insurance and related inspection services in North America serving over five million commercial locations.

Insurance in Serbia refers to the market for risk in the Republic of Serbia. Insurance, generally, is a contract in which the insurer, agrees to compensate or indemnify another party for specified loss or damage to a specified thing from certain perils or risks in exchange for a fee.

Ohio Mutual Insurance Group is a group of property and casualty insurance companies based in Bucyrus, Ohio. The group is composed of three affiliates: Ohio Mutual Insurance Company, United Ohio Insurance Company and Casco Indemnity Company. As a mutual insurance company, Ohio Mutual Insurance Group is not a stock company but one that is mutually owned by its policyholders. A board of directors and an appointed president and chief executive officer manage the company.

The effects of climate change on extreme weather events is requiring the insurance industry in the United States to recalculate risk assessments for various insurance policies. From 1980 to 2005, private and federal government insurers in the United States paid $320 billion in constant 2005 dollars in claims due to weather-related losses while the total amount paid in claims annually generally increased, and 88% of all property insurance losses in the United States from 1980 to 2005 were weather-related. Annual insured natural catastrophe losses in the United States grew 10-fold in inflation-adjusted terms from $49 billion in total from 1959 to 1988 to $98 billion in total from 1989 to 1998, while the ratio of premium revenue to natural catastrophe losses fell six-fold from 1971 to 1999 and natural catastrophe losses were the primary factor in 10% of the approximately 700 U.S. insurance company insolvencies from 1969 to 1999 and possibly a contributing factor in 53%. From 2005 to 2021, annual insured natural catastrophe losses continued to rise in inflation-adjusted terms with average annual losses increasing by 700% in constant 2021 dollars from 1985 to 2021.

References

  1. ↑ http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080424006052&newsLang=en FM Global named "Best Property Insurer in the World” by Euromoney Magazine
  2. 1 2 "Sandia establishes CRADA with FM Global" Archived 2016-03-04 at the Wayback Machine , Sandia National Laboratory press release, June 24, 2004
  3. ↑ "Archived copy" (PDF). Archived from the original (PDF) on 2007-07-05. Retrieved 2007-06-17.{{cite web}}: CS1 maint: archived copy as title (link)- RIMS: FM Global Finds Engineering Study Superior to Actuarial Predictions
  4. 1 2 https://www.fmglobal.com/about-us/our-business/financial-health/annual-report
  5. ↑ Grimaldi, Paul (2014-12-29). "FM Global CEO Subramaniam stepping down after 40-year career". providencejournal.com. Retrieved 2020-01-23.
  6. ↑ Lucas, Paul (2021-01-13). "FM Global introduces another major name to its board" . Retrieved 21 September 2021.
  7. ↑ "Commercial property insurer FM Global appoints Malcolm C. Roberts as president". Providence Business News. 2021-07-08. Retrieved 21 September 2021.
  8. ↑ FM Global Test Center Archived 2006-09-30 at the Wayback Machine - FM Global's Research Campus
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.