AMRAE leaders herald new era based on solid risk management foundations – comment

French risk and insurance management association AMRAE is gearing up for what will be one of its biggest and liveliest annual conferences for a while, with discussion about the long-awaited new national budgetary measures to promote onshore captives and other self-insurance mechanisms in France top of the agenda.

The French government’s decision to agree to AMRAE’s proposals to make life much easier for French firms, both large and small, to prepare more effectively for the next crisis as the commercial insurance market takes an increasingly cautious approach to systemic risks such as pandemics, cyber and natural hazards, is remarkably sensible.

Most national governments in Europe and around the world bowed to pressure from business and the insurance lobby to discuss this critical topic at the height of the Covid-19 crisis when it became clear that traditional business interruption coverage was not the answer.

Risk managers and the insurance industry in Europe gained important support from supervisors in the form of the European Insurance and Occupational Pensions Authority (Eiopa), which also recognised something had to change to promote greater resilience without forcing insurers down the road to ruin, or simply relying on taxpayer handouts each time a crisis hits.

Unfortunately, efforts to find risk management and loss prevention-based solutions backed by a combination of excess insurance cover and state reinsurance at manageable levels, using existing mechanisms such as Pool Re in the UK and Extremus in Germany, ultimately came to nothing.

To be fair, Russia’s invasion of Ukraine did take centre stage before the lessons of the pandemic could be fully digested.

The exception, however, is France. It seems to have somehow managed to not drop the ball and move on to something else in a panic, and actually finish the job.

AMRAE and its partner national business bodies deserve great praise for keeping up the pressure and momentum during a highly stressful political and economic period.

Basically, the French government has agreed to raise the level of provisions allowed to cope with future disasters, making the creation of onshore captives in France and repatriation of existing captives from domiciles such as Luxemburg much more attractive than in the past.

Critically, as AMRAE’s impressive president Oliver Wild, who is also group chief risk and insurance officer at Veolia, pointed out during an interview with Commercial Risk in Paris, these measures are not just aimed at large corporations such as his own.

The French government is also keen to see medium-sized and smaller firms take advantage of the new measures and ensure they become more risk aware and resilient in the future too.

Wild said that he has already heard of discussions among industry groups such as artisan wood workers about potential group captive options.

Such small firms would never have dreamt of such a concept in the past but now it looks like this could become reality for the benefit of all: individual firms, sectors, the private economy as a whole and the nation state.

If combined with a serious effort to take the broader risk management message to the wider business community, as AMRAE plans, then this could be a significant step forward for France in terms of risk management and resilience.

Interestingly, we have also recently witnessed the creation of the first risk manager-led mutual for years in the form of MIRIS. The Brussels-based cyber mutual has 12 large corporate members and a strong French and Belgian influence, including Airbus, Michelin and Solvay.

MIRIS looks like a serious effort to tackle an insurance capacity shortage and improve the cyber risk identification, measurement and management efforts of its members through a proper member-vetting process and subsequent collaboration, benchmarking, peer reviews and solution sharing.

In this sense, the new cyber mutual looks more like a protection and indemnity (P&I) club than a short-term reaction to a capacity crisis.

As Wild and other leading risk managers at an AMRAE press conference pointed out, these are positive efforts to seek solutions to big risk challenges rather than simply relying on the insurance sector or nation state to bail industry out when the next big crisis strikes.

Yes, the insurance sector needs to re-double its efforts to respond to rapidly changing customer needs in key areas such as cyber.

Yes, governments across the world need to take a look at what the French are doing by actually investing in the future resilience of its national economy and society as a whole by potentially forgoing some short-term tax income.

But, perhaps above all, everyone in the European risk and insurance management community has to recognise that we have entered a new risk paradigm that needs a new approach and way of thinking about corporate risk management and risk transfer.

This is not a them-and-us game with the key determining factor being price.

Captives and mutuals such as MIRIS should not be regarded as some kind of mortal threat to the future of the insurance industry.

These and other potential solutions such as parametric covers and the use of insurance-linked securities beyond nat cat risk actually have risk management at their core and enable everyone to move forwards to a more resilient future.

As Wild stressed, the key is to build from the bottom with a solid foundation of risk identification, analysis and measurement. Then you can make real progress, whether through a captive or mutual, in partnership with the commercial insurance market and potentially with state backing.

With these important subjects topping the agenda at AMRAE this year, the wider European risk and insurance management community would be well-advised to take note of what is discussed at the association’s annual conference in Deauville, Normandy from 1 to 3 February.

We look forward to bringing you all the big stories through our pre-event report and live daily coverage.

* To register for AMRAE conference please go to www.amrae-rencontres.fr