Buyer concern mounts over uninsurable risk as cover recedes

There is growing concern among insurance buyers that risks will become uninsurable as they report deterioration in cover for many key exposures over the last 12 to 24 months, finds Ferma’s Global Risk Managers Survey 2024. The survey of more than 1,000 risk and insurance managers from 77 countries reveals that 53% of respondents believe key business activities and locations will become uninsurable in the future, up from 41% when the poll was last carried out in 2022. Respondents cited climate change physical risks and natural disasters (73%) as the area most likely to become uninsurable. Cyberattacks comes next on 55%, supply chain disruption on 35%, digitalisation risk, including AI, on 33%, technological risks on 31% and other risks 16%. The other category notably included war, terrorism, and political risks, Ferma explained. In her opening speech at the forum, Ferma president Charlotte Hedemark encouraged insurers to start properly addressing some of these buyer concerns. “Troublingly… more than half of the risk managers fear that some risks or activities will become uninsurable in the near future. More than 50%! Just let that sink in,” she said. “Our insurance partners, many of whom are here at this forum, continue to support us and we are incredibly grateful for that. But let’s now move beyond dialogue into action on some of these critical risk areas to help to find risk transfer solutions. We can start this here, at the forum,” added Hedemark. Ferma CEO Typhaine Beaupérin said the fact that over half of respondents believe that critical business risks and regions may become uninsurable is of “significant importance”. “It is imperative that in an expanding and more volatile risk context, insurance remains a core component of organisations’ risk management strategies, she continued. “Our results, however, demonstrate that risk manager concerns are focused on many exposures that companies have traditionally relied upon insurance markets to cover,” she said. Concern over the ability to transfer risks in the future sits alongside what appears a worsening of cover across many lines. The survey respondents rank exclusions and wording changes as third and fourth most impactful insurance market trends, with the later issue up two places since 2022. The top two concerns remain rising premium costs and reduction in capacity. The survey reveals that 42% of respondents have had to deal with a reduction in nat cat cover. Just 10% reported an increase. In addition, 37% reported a reduction in cover for property damage and/or business interruption. with just 14% reporting better coverage. For product liability, 26% of insurance buyers say cover has decreased and 6% say it has increased. For environmental impairment liability, 20% report a decrease and 7% an increase. In errors and omissions/professional liability, 22% say cover has decreased and 6% increased. Thirty percent reported a decrease in cover for cyber risks, with 25% enjoying an increase. But there are signs that things are improving here. Just 14% reported cover increasing two years ago and just 8% have seen a large reduction in cyber coverage this time around, compared to 33% in 2022. “This trend indicates a stabilisation or re-evaluation of cyber risk strategies, with fewer companies experiencing drastic changes in their cyber risk coverage,” said Ferma. D&O is the only line of business where coverage seems to have improved, and even here it was a close run thing. Some 16% of risk managers report a reduction in coverage and 18% an increase. In response to the still-clearly challenging market conditions, buyers have, of course, been adapting their strategies and insurance programmes. The number one tactic over the last year, employed by 54% of respondents, was changing insurance buying patterns following a review of coverage requirements, limits and sub-limits. The next-most popular strategy was strengthening loss-prevention activities (44%) to anticipate further hardening conditions and remain attractive for insurers. Then came trying to negotiate long-term agreements or policy roll-overs (30%) to secure favourable terms and conditions, and the implementation, or further use, of captives (28%). “Risk managers recognise the increasing influence of economic shifts, geopolitical uncertainty, regulatory development and the changing risk environment on insurance market dynamics,” said Charlotte Hedemark, president of Ferma. “In response, they are advising organisations appropriately and taking considered and necessary actions to adapt their buying strategies and prevention activities.” This is the first time Ferma has surveyed risk and insurance managers outside of Europe. This time around, it polled members from risk management associations in the US (Rims), Asia (Parima), Australasia (RMIA), Latin America (Alarys), South Africa (Irmsa) and French-speaking risk managers via Club Francorisk. Seventy-nine percent of respondents were from Europe, 11% from North America and the rest were split across the other regions.

Buyer concern mounts over uninsurable risk as cover recedes

Ferma urges market to take action

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