BI and supply chain products ‘not fit for purpose’ claims Marsh’s Davies

As a consequence the role of the risk manager is becoming ever harder to define, which presents a challenge to the profession but also an opportunity as the risk function continues to rise in importance, he added. Marsh meanwhile is working hard to ensure that solutions to risk, in particular emerging threats, are fit for purpose, he continued. In particular Mr Davies criticised recent attempts by insurers and brokers to help risk managers and their companies deal with business interruption and supply chain risk. The products and policy languages are not currently fit for purpose, he said. And brokers should ensure that they supply tailor-made solutions to risk, rather than peddling off the shelf products, he added.hide“The debate is beginning to move from pure risk identification to areas such as resilience and reaction to an event,” said Mr Davies. “People are looking more at who is responsible for resilience and disaster recovery, who is going to speak with the media, who is going to speak with stakeholders and how quickly project plans can be put in place to protect key revenue streams and critical infrastructure sites post-event.” Whilst risk identification plays an ongoing role in company pre-event strategy, they must ensure that there is someone responsible for key revenue streams who has an absolutely clear line of site to the board post-disaster or event, said Mr Davies. The definition of the role of the risk manager in this process is the biggest challenge for the profession today, he added. “There is not one job description that is seemingly fit for purpose. If you are head of legal or tax or are a chief operating officer you know your job description. But is risk management just about looking at insurable risk or uninsurable risk or is it the full risk officer role? In reality it is a blend and therefore the uncertainty of how all of the adjacent parts work, as risk touches every single one of these areas mentioned, is a debate that is not yet finished,” explained Mr Davies. The role is more complicated than ever because it is now involved in risk governance at the very highest level, not just in terms of an identification and mitigation structure but right down towards the bottom end of an organisation, he added. It is, however, clear that the risk management role is becoming more important every single year, he said. “That is a constant, and I do not think we will see any change in that at all. That curve is arguably accelerating.” There is a school of thought amongst risk managers that less of the risk their companies face is insurable than has previously been the case and that insurers and brokers are pushing off the shelf products rather than addressing their individual needs. Marsh’s Risk Management Practice seeks to address these concerns, said Mr Davies. In particular it focuses on business interruption risk, which has been criticised for excluding non-damage interruption, amongst other things. “I do not think the business interruption product has had the focus that it should have had, not only from the broking community but also from underwriters. I do not believe that it is a fit for purpose product to protect revenue stream. Claims payments are taking far too long to come through and then when they do there are often surprises in terms of a lack of understanding of what the product was meant to do,” said Mr Davies. “We are spending a lot more time on this in terms of defining the need to protect revenue streams, whether there is a real focus on non-damage elements to do that and how that feeds through into a pricing structure let alone a contract term structure,” he added. Marsh is trying to drive ‘fit for purpose’ content based on clients’ needs, in favour of homogenous products, he continued. “We have a raft of content but making sure that it is relevant and adding value to the stewardship or the transaction is where we are concentrating our time.” Mr Davies admitted that Marsh has faced ‘lots of very fair product push-back’. No consultant or advisor in the large accounts space should spend any time selling a product line direct to a client, he said. Driving content is one of the key services that brokers should be offering to clients, said Mr Davies. The others are client stewardship and policy transaction. The brokerages are talking at length with customers to prepare them for a hardening of the market that Mr Davies feels will inevitably occur. “How quickly and how hard it will go is anybody’s guess,” he added. Currently pricing is under pressure for large UK-based multinationals with natural catastrophe exposures, said Mr Davies. “There is no doubt that it is moving,” he said. “With not quite the immediate impact from the recent spate of natural catastrophes we thought we would see, but it is certainly firming.” If natural catastrophe exposure is excluded, however, and a company has not tendered or carried out a marketing exercise for their insurances for the last three years there is still some downside movement on rates, he continued. For those organisations that have aggressively brokered their business, Marsh sees a flattening out of rates. “The motor results are awful, which has historically been the thin end of the wedge that leads to a more general hardening. We are seeing a stabilisation of rating on both liability and property,” Mr Davies said.

BI and supply chain products ‘not fit for purpose’ claims Marsh’s Davies

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