A level of change that not all companies can keep up with

The role of risk and insurance management has definitely gained a higher profile since the social, political and economic volatility of the last two to three years, says Stephanie Ogden, managing director, UK and Ireland at HDI Global. “Companies are thinking more about their own sustainability, and one only has to see the number of vacancies advertised on forums like LinkedIn to appreciate the increased demand for risk managers,” she says.

It is not just that risk management teams have got larger for many of HDI Global’s clients. In addition, the annual meetings between corporates and insurers now involve more senior management and not just the risk manager in isolation, says Ogden. “That shows the increased value companies are placing on risk management.”

That said, Ogden believes that the risk and insurance industry should be doing more to address a potential skills shortage.

When she was appointed as managing director, Ogden was the youngest person within HDI Global to take on such a role. “There is no doubt the insurance industry has given me tremendous opportunities,” she says. Ogden joined the industry through a university graduate programme, but she believes the industry should go further in its recruitment efforts.

“How do you entice people into the insurance industry at the very start of their careers? We have looked to address this through apprenticeships and internships. We are looking to bring in more school-leavers but also cover a wider demographic,” says Ogden.

ESG high on the agenda

Ogden sees three main risks facing corporates in the UK. The first is ESG and understanding the transition that companies will have to make – what investment will be involved and what the company will look like in the future.

The economic environment is the second major risk, says Ogden. “The economic environment is here to stay, so we have to accept the changes. Inflation might drop but there will still be volatility and only the strongest companies will survive,” she says.

The final factor is everything to do with cyber and artificial intelligence (AI). “This is the scariest of all the risks because it remains a new area and we don’t know what we don’t know,” says Ogden. “There is a level of change that not all companies can keep up with.”

Cyber insurance is developing, particularly in terms of the additional services available, which makes it a far more effective product in terms of support for clients. AI has the potential to make the insurance industry and its various processes more efficient but there are wider implications in terms of how far the technology may go and what impact it could have on the world of work, says Ogden.

Geopolitical unrest

In terms of emerging risks, geopolitical unrest is the obvious issue to monitor, continues Ogden. “We have had the war in Ukraine for more than a year, but risk managers should be asking themselves where the next conflict may be. The Ukraine conflict did not arise out of nowhere and we see tensions currently in Sudan and Taiwan. So, companies should be looking at where they have international exposure, and we should be looking at how we can support our clients in this area.”

ESG is on every single agenda with both clients and brokers, says Ogden. “It is an area of mutual interest. Clients are now more focused on what we are doing in terms of ESG. It really has to be a partnership based on respect for and investment in the ESG agenda.”

HDI is changing its underwriting profile to something more sustainable in the long term, says Ogden. “For example, we do not provide coverage for any new coal-powered business projects in the UK. But it will ultimately require investment and it will take time. We have to support our clients in the transition and make sure we understand their plans over the next three to five years.”

One example is ‘HDI TH!NX’ – an HDI ‘start-up’ company designed to support clients’ investment in ESG-themed technology. “We do a lot of research and development in this area – for example, a tool to detect water leaks and water damage. It goes straight to the heart of the problem,” says Ogden. “As an insurer with a background in the German industrial and engineering industry, it is important that we are able to support clients’ ESG transition and not just provide a black and white response.”

HDI Global has also sought to address the changing risk landscape by placing less importance on the one-day-a-year renewals process and focus more on regular engagement throughout the policy’s lifecycle. “Not only does this enable us to be informed of clients’ short-term and long-term plans but it also gives the clients the opportunity to know what we are doing,” says Ogden.

One area of real interest to clients and brokers is international insurance programmes, a subject that sees Ogden return to her theme on talent. “Yes, you need the right partners around the globe, but it is also about having the right people and skill sets in place.” By their nature, international programmes are complex – and that complexity continues to increase due to ever-evolving local legislation, taxation, cultures, and different sanctions and embargoes around the world.

“International programmes are very complex in our changing world, although we at HDI have an advantage due to our global footprint, specialist knowledge and robust processes that can really deliver on the ground.” This advantage is also confirmed by hard facts: With around 5,000 lead international insurance programmes worldwide, HDI Global is one of the leading providers. “There are currently a maximum of six industrial insurers on the global market with a worldwide functioning network,” states Ogden, “and HDI Global is one of these key players.”

In terms of the loss environment, Ogden has seen a move from high frequency/low impact losses to low frequency/high impact claims, which has hit capacity and prices. “It was no surprise that the recent reinsurance renewals were tough, particularly around locations or businesses exposed to nat cat,” says Ogden.

But even with that in mind, prices in the UK’s industrial insurance market are no longer rising as steadily as they were previously. “It may be too strong to say that the market is softening but, in general, there is a great degree of pressure on prices and that is being felt by insurers and brokers,” says Ogden.

A relationship business

Consequently, this may result in insurers being more selective about the clients they take on and what they demand from risk managers. “As we go into 2024, companies that can demonstrate good risk management and a stable and consistent claims experience will be rewarded.”

HDI Global is working with clients in areas like property where there has been an increase in rates to ensure adequate capacity.

This is where the relationship between clients and their insurers is so important, says Ogden. “While there may be an expectation of a softening market, the reality is that the economic environment is not getting any easier. And you do not need to go too far back to see that insurers have not made huge profits in the last ten years. It is important for clients to look at the long term and not just chase capacity, going from one insurer to another.”

The final priority for HDI Global is investment in technology, which will then allow the insurer to optimise its greatest asset – its underwriters, its own claims handlers and risk engineers. “Our technical experts really understand the business but what we need to do is make sure our experts are spending time doing what they do best. Insurers need to invest in IT and technology so that the experts are out in the field and talking to clients, not stuck at the desk doing administration.”