ART can help blend risk transfer solutions as insurers stick to silos
Insurers urged to think holistically to help tackle interconnected risks
The insurance industry must start thinking about risks more holistically and back alterative risk transfer (ART) solutions that can help risk managers blend solutions for complex and interconnected threats, said speakers at the recent Brokerslink Conference.
Risk managers attending the Risk Manager Forum at the event agreed that insurers are not helping their clients manage the myriad of interconnected polycrisis risks by working in separate lines of business.
“Insurance companies work in silos and don’t have this philosophy of interconnected risk and risk accumulations. For me, that is the big problem with the insurance market,” summed up one risk manager.
He was speaking at the forum session focused on how to tackle the polycrisis. The risk professionals heard how the polycrisis has created an unprecedented challenge for risk managers and requires many to change their approach to risk identification and mitigation in the face of mounting interconnected threats.
Maurizio Castelli, who heads Brokerslink’s risk management practice and lead the discussion, said that financial risk transfer is clearly an important part of an integrated risk management approach. He said insurance remains “part of the solution in the polycrisis but has a lot of limitations”.
However, as the risk transfer gaps widens and insurers operate, on the whole, in silos, attendees at the Brokerslink conference were offered some hope in the form of ART and captives.
“ART can blend multiple single lines of business and risks that are difficult to insure in one integrated structure via the captive with insurance, or reinsurance companies sitting behind that. That is a step forward,” said Loredana Mazzoleni Neglén, CEO at SRS Altitude, the first managing general underwriter (MGU) in Europe fully dedicated to ART solutions and part of Strategic Risk Solutions’ group.
“I think the insurance industry needs to work together, upskill and embrace this holistic approach. It is still not doing this on the magnitude it is required. Companies are so focused on the interconnectedness of their risks and need insurers to look as a whole rather than in silos,” she added.
Neglén praised insurers, though, for their attempts to “democratise” data and models to help risk managers better manage risks and understand the interdependencies.
“Insurers are providing platforms where you can plug in your data and exposures. They are then able to show you all the interdependencies that you might have as a result of climate change, for example. This data can be very granular. I think this technological advancement can help the risk managers to take full control of their risks, see better their interdependencies and ultimately optimise their risk management strategies,” she said.
Neglén hopes the next step will see insurers provide more capital for some of these difficult and interconnected risks, as they become more confident that clients have properly understood them in the first place and improved risk mitigation.
