Capacity and capital markets are an opportunity to cover new risks–UK

“It depends on the risk, but generally the market is soft and there is plenty of capacity and it is currently fairly priced,” said Kathryn Wallin, Senior Manager, Insurance-Europe, Risk Management Department at Marriott Hotels International Ltd. “There are always challenging countries within a global programme, but in general there tends to be enough capacity in the market,” she said. While there is just about enough capacity in London for a global placement, large corporates struggle to buy enough catastrophe risk, especially for the one in two hundred-year event that could knock over a company, said Clive Clarke, Group Insurance Manager, Lloyd’s Register Group Services Ltd. “It would be interesting to see if a large corporate could partner with an insurer to buy cover for certain perils with strategic gaps, as well as using capital markets and captives, to get to the very high levels of cover,” said Mr Clarke.hideFor a UK multinational company there is plenty of capacity, however the best way to develop a quality insurance programme is through long-term partnerships, according to Chris McGloin, VP Risk Management & Insurance at Invensys. “But few insurers are set up to deal with the long-term needs of their clients,” he said. “The very biggest companies have catastrophe exposures beyond what the insurance industry can provide, although there may be ways to develop such cover through long-term relationships,” said Mr McGloin. There appears to be sufficient capacity for most risks, but there are still some difficult sectors, according to Paul Hopkin, Technical Director of UK risk managers’ association Airmic. “And for very large or emerging risks—like reputation, supply chain and cyber—there is a feeling that the insurance market should be deploying more cost-effective solutions,” he said. There is hope that growing interest in insurance from capital market investors could hold the answer to protecting against very large or emerging risks. Capital markets have been involved in insurance for several decades, but they are now having more of an impact, according to John Hurrell, Chief Executive at Airmic. However, very few Airmic members use capital markets directly, he said. Catastrophe bond penetration of the corporate market has been low, with only a small number of deals that come at significant cost, said Mr Hurrell. “For now the conventional market provides a good product,” he said. “Currently insurance requirements are being met by the conventional market, but if there was a capacity shortage, capital markets may come into their own,” said Mr Hurrell. “And thinking more radically, a much smaller proportion of the average corporate risk map is now insurable risk. So there would be opportunities for capital market solutions to risks like reputational damage or research and development risks,” said Mr Hurrell. Capital markets are already involved indirectly in the corporate insurance sector through reinsurance, explained a risk manager at a leading UK Plc. “However, I would like to see more competition for insurers. If there were viable alternative products in capital markets, many risk managers would be interested in exploring them,” said the UK risk manager, who wished to remain anonymous. “There is room for new approaches and new products and I would like to see brokers bring hybrid insurance and capital market products to the market. There could be better engagement between brokers and capital markets to challenge insurers,” the UK risk manager said. “It will take work and collaboration and there may not be a viable product at the end of the process,” she said. This is an area where brokers can really add value, according to Ms Wallin. “There are alternative ways to transfer risk—like hedging and weather products—some of which appear to be solid propositions. However, there is not a great level of awareness and these products remain very niche,” she said. “There is interest in alternative products but they are not being presented well and there remains a lack of awareness. If brokers can’t make them simple to understand then they will be on the back foot,” she continued. Capital markets continue to be of interest to risk managers, explained Mr McGloin. However, so far, capital market solutions have been one or two steps removed from the risk manager and have yet to show that they really improve the position of the buyer, he said. “But there are likely to be opportunities for capital market solutions. For example, terrorist attacks and natural catastrophes can really hit a company’s share price and the absence of quality insurance cover at the right level can jeopardise a company’s existence,” said Mr McGloin. “So there might be an opportunity for capital markets to provide post loss cover above insurance for very large companies,” he said.

Capacity and capital markets are an opportunity to cover new risks–UK

Want to read this article?

Read Next

Supply chains warned of further disruption and costs as Red Sea risk zone widened

Howden’s data analysis finds insurers should be taking on more cyber risk

Belgian mutuals say Europe is ‘relegating’ climate in new legislative programme

Europe’s disaster risk efforts ‘significant’, says UN office

Rates stay flat in Q1 for EMEA buyers but climb in Italy, Iberia and the Netherlands

Supply chains warned of further disruption and costs as Red Sea risk zone widened

Howden’s data analysis finds insurers should be taking on more cyber risk

Belgian mutuals say Europe is ‘relegating’ climate in new legislative programme

Europe’s disaster risk efforts ‘significant’, says UN office

Rates stay flat in Q1 for EMEA buyers but climb in Italy, Iberia and the Netherlands

Want to read this article?

Read Next

Supply chains warned of further disruption and costs as Red Sea risk zone widened

Howden’s data analysis finds insurers should be taking on more cyber risk

Belgian mutuals say Europe is ‘relegating’ climate in new legislative programme

Europe’s disaster risk efforts ‘significant’, says UN office

Rates stay flat in Q1 for EMEA buyers but climb in Italy, Iberia and the Netherlands

Related Articles