Article
It has been nearly 200 years since FM founder Zachariah Allen, a pioneer of his time, championed a revolutionary approach to risk and loss prevention. Yet his rich legacy is still bearing fruit today for the company, proof that his mantra, "Look back to the past for instruction and forward to the future for improvement," still rings true in a modern, volatile world.
"Look back to the past for instruction and forward to the future for improvement"
— Zachariah
Allen, founder of FM
The story of FM, spanning nearly 200 years, can in many ways be encapsulated in one word: partnership.
1830s America was a very different place. Andrew Jackson was president, and the total US population was just under 13m across only 26 states. The country was moving westward with the first wagons crossing the Continental Divide on the Oregon Trail. The patent for the first US electronic motor was awarded, and the telegraph had its first public demonstration. The lightbulb, telephone and car were still over 50 years away. Invention, progress and profit were very much the drivers of the times.
Along the banks of the Woonasquatucket River, a Rhode Island textile mill-owner named Zachariah Allen embraced the notion of partnership, and quietly revolutionised business ownership―and risk―displaying a vision well ahead of the times.
Like so many great innovators, Zachariah had a long CV: scientist,
lawyer, writer,
inventor and civic leader. And like so many great innovations, Zachariah’s work
stemmed
from rejection.
The logic was sound. Instead of sitting back and letting fate run its course, he
began making
improvements and adjustments to his mill in the name of making it more resilient to
fire and reducing
the chance of loss.
Alex Tadmoury, executive vice-president with 34 years of service at FM, is an admirer. “In those days of manufacturing, losing an entire mill to fire was common. Allen built his with then unheard-of devices that were incredibly advanced for the time.” Along with stone construction, the mill included a sprinkler system, heavy fire doors, a hydrant, a rotary fire pump and a copper-riveted fire hose―the first to be used in a US textile mill. In addition, Allen built a heavy firewall separating the picker room―an area filled with highly flammable cotton fibres―from the rest of the mill. Finally, he roofed the structure with slate shingles set in mortar.
Naturally, he thought a reduction in his insurance premiums was, as they said in the French colonies, a fait accompli. To Allen’s astonishment, he was turned down.
Mr Tadmoury, who oversees operations for EMEA, Asia Pacific, Canada and specialty industries, as well as FM Affiliated, FM’s middle-market insurance division, adds: “The insurance industry of the early nineteenth century, much as is the case today, depended on the premiums paid by those considered to be good risks to subsidise those considered poor risks. There was no consideration of loss experience or potential in their determination of premiums.”
Zachariah had a
few choices in response. Appeal, get angry, or even surrender?
No, he
chose partnership.
Knowing he was not alone, he met and joined forces with other
like-minded mill-owners
in the area to establish a company that would provide insurance to “only those
manufacturing
facilities of the finest construction and the highest degree of maintenance and
quality”, according
to Allen.
The premise was simple, and in many ways has not changed to this day: work
collaboratively to mitigate
any risks, thus reducing future loss potential.
Each mill insured by his new firm was inspected annually, and working together all the mills installed every available modern device for protection against fire loss. Allen’s groundbreaking business model was a partnership, between insurers and insured in loss prevention, and established what became known as the Factory Mutual System, now known as FM.
Mr Tadmoury notes: “Interestingly, all this partnership also made excellent business sense. Client owners enjoyed an average 50% reduction in premiums compared with the premiums of other insurance companies―and suffered fewer losses.”
"Interestingly, all this partnership also made excellent business sense"
— Alex
Tadmoury, executive vice-president at FM
Fast forward to today, and FM has certainly moved beyond Rhode Island textile mills; it currently operates in more than 150 countries globally with over 5,500 employees. Its 648-hectare Research Campus in West Glocester, Rhode Island, and the recently opened FM Global Centre, a SGD$80m client-centred experiential risk-management facility in Singapore’s Science Park, conduct testing in fire, electrical, climate and explosion hazards. These tests range from witnessing the difference in how products burn to how construction components perform in hurricane, hail and other severe weather conditions. This is also where third parties can find resources for certification of their industrial and commercial products, under FM Approvals.
And the partnership and innovation continue, with the 2024 announcement of FM’s largest-ever membership credit of approximately US$1.4bn, along with 2023’s $357m FM Resilience Credit to support client investment in climate-resilience solutions. FM has now returned more than $6.5bn in membership credits to policyholders since 2001.
This year has also seen a makeover and updated look at FM , with a revised logo, bespoke fonts and vibrant colours. It’s a brand-new visual identity to unify the business and leverage the singular "FM"
name into the next chapters of what
the mutual stands for:
protection, progress―and, of
course, partnership.
While Mr Tadmoury is keen to highlight the past, he knows FM’s clients
are looking ahead.
“We’ve thoroughly addressed the risks of the 1830s, but businesses want to know,
what about
the 2030s?”
For starters, in May 2024 FM launched its Renewable Energy unit. This is in direct response to a growing industry and a rapidly changing risk landscape to support clients with one of the most significant challenges of our time―the transition from fossil fuels to renewable energy. By understanding loss, clients can take proactive steps to mitigate it. FM experts can leverage data from FM’s 70 years of experience in power generation to better understand key loss drivers in the transition to renewables, and how to minimise their impact.
Zachariah Allen probably couldn’t imagine the idea of cyber-security, but he would have approached it in the same way―with aggressive new tools and powerful new thinking. In the FM tradition of addressing risk head-on with science, engineering and research, the company takes an advanced, holistic approach to understanding cyber-risk. Clients want clarity, and FM is a leader in covering physical damage and time-element loss resulting from a cyber event.
Artificial Intelligence also plays a key role in FM’s never-ending push to service its clients. Mr Tadmoury adds: “It’s important to recognise that FM has been working with AI technology for more than a decade. Most of our predictive client-facing tools were developed using discriminative AI, long before it was cool.” Generative AI, such as ChatGPT, is a fast-moving development, and FM has teams devoted to actively exploring potential uses and technology implications. The use of discriminative AI is what sets FM apart, with location-based data helping with key decision points, such as making predictions about which locations are more likely to experience a large loss.
Zachariah Allen left this mortal coil long before he could see the full results of
his incredible
vision― a vision that changed the ideas of risk and resilience in business forever;
a vision of mutual
benefit, and of mutual progress. Mr Tadmoury, again: “It’s one of the great, mostly
unknown global
business success stories. How could it be in a world of daily, exponential change
that the basic
principles Allen established in 1835 would still be very much in play today?”
Partnership,
born of a hasty rejection nearly 200 years ago, on the banks of the
Woonasquatucket River.
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