A risk manager can do so much to prevent damage

It is not easy being a risk manager, a job that typically requires a major disaster or significant insurance claim to demonstrate your worth to the company. However, the recent crises of war, pandemic and global inflation have at least provided risk managers with the opportunity to prove their value, says Sharon van Herel, managing director for HDI Global in the Netherlands.

“The role has not always been positioned well within a company and is sometimes perceived as a staff function that creates cost rather than generates revenue,” says Van Herel. “But if you’re well connected, well informed and have the ear of everyone across the company, a risk manager can do so much to prevent damage, reduce downtime through outages and loss of market share or reputation. I also think the role has been taken more seriously in the c-suite of companies in the last year.”

Biggest risks

When it comes to the most significant risks facing corporations in the Netherlands, cyber remains, somewhat frustratingly, at the top of the list, says Van Herel. “The threats have become ever more sophisticated but while a number of companies are well-prepared, I still see many companies that are unaware of the impact of a cyberattack, particularly in terms of reputation as well as operations.”

“There should be more simulations and stress-tests. Is there a crisis management plan? Has it been tested and practiced? Does everyone know their roles? Is there someone on retainer that can support the process and ultimately unlock the systems? Does someone have a bitcoin account just in case? Costs can escalate very quickly and cyber insurance can make a big difference prior to the cyberattack due to consulting and risk management services of the cyber insurer, and after the cyber incident when it comes to picking up the bill and providing the right services at a critical time,” says Van Herel.

Supply chain disruption was a huge feature of the pandemic and has remained so, even after Covid-19 receded. Meanwhile, staff shortages are evident across the board and not just within the risk and insurance industry, says Van Herel.

“Many people working in industrial jobs are choosing different careers and certain jobs are no longer attractive, and on top of that there is a retirement wave coming in western Europe. There are all these industrial companies with growth ambitions but where are they going to find the people with the right skills to fill the vacant roles? We are all struggling in this area and I do not see this changing.”

Escalating ESG

But if there is one topic that has increased almost exponentially in importance, it is ESG and sustainability. “The last 12 months has been all about ESG,” says Van Herel. Consequently, there has been a lot of dialogue between insurers and their customers, with an open exchange across various sectors from construction to recycling. “Everybody is finding challenges of their own and is eager to collaborate and learn from each other in this area,” says Van Herel.

One of these challenges is the impact of ESG on the risk landscape and the ability to find insurance to mitigate these new and emerging risks. “There is a realisation that any new developments can only be insured if there is the right sustainability approach or strategy or metrics,” says Van Herel.

This means that insurers, brokers and other critical service providers should be much more involved in initial plans for large or important business projects that could be impacted by various sustainability issues. “Now more than ever it is important that insurers are connected from the beginning and have a seat at the table to ensure that projects are viable and can be financed and ultimately insured because the risk management is optimal,” says Van Herel.

Insurers also face sustainability requirements and targets of their own, as well as the challenge of providing coverage in such a new area where little data exists. “It is a big challenge to provide the right capacity and we have to upskill ourselves because it requires a completely different mindset,” says Van Herel. “Primarily we have to extend our technical knowledge, especially in terms of transition technology and renewable projects like hydrogen, geo-thermal and circularity. We can’t step into a project when we know too little about the latest innovations and insights.”

The other big issue for clients is knowing whether their insurer will be there to support them in their transition to net zero, says Van Herel. “As an insurer that was founded by the industry for the industry 120 years ago, we are there to support clients in various sectors. We are currently developing our policies and intend to be a partner in the transition and not step away from clients. But our commitment will not be indefinite, and there will be a time and point when exclusion or divestment has to be considered.”

Market prices

When it comes to the price of insurance, Van Herel is hoping for a period of stability after the recent volatility in rates. “I don’t see a direct softening. The quite substantial price increase by reinsurers for nat cat exposed risks at the latest renewals might serve as an example. It should not be forgotten that we had had 17 uninterrupted years of soft markets until recently. So we still need to build up sufficient reserves to a healthy level and have continued dialogue where judgements are made on individual risk quality. We will continue to balance price and risk where necessary as part of the new normal.”

The relationship between clients, brokers and insurers has improved in the last six months, following the end of the pandemic, with fewer firms chasing the lowest premium. “It is incumbent on insurers to ensure that the market is healthy, and underwriting is based primarily on the risks on the table,” says Van Herel.

The other critically important area in the Netherlands market relates to service levels, she adds. “At HDI Global, we use NPS-scoring with our brokers and customers that assess our reachability, responsiveness, delivery and response times and how we compare to our peers. There are still issues over data quality as well as response time improvements to be made in the entire market. However, we at HDI are working very hard on these issues and are improving constantly.”

There is a significant project underway in the Netherlands to provide contract certainty and speed up the underwriting process in the co-insurance market, which is a business priority for HDI Global, says Van Herel. “We still have a lot to do to improve the co-insurance market as a whole. Ultimately it is about having your data and your systems in order and providing effective collaboration between all those in the co-insurance market so that clients get their contracts within the first quarter after their renewals, and no longer have to wait until after the summer holidays,” she says.

“The Dutch market has a unique association and online collaboration platform for brokers and insurers in the co-insurance market to do business. HDI Global is in the frontrunner group of further improving operational excellence in this area as part of the ambition to be the trusted advisor of choice,” she adds.