Castelli urges Italian risk managers to keep calm and manage risk

Italian risk managers need to keep calm, not panic and act rationally as they face up to a hard market that will probably be longer than many expected before the rise of Covid-19, advised Maurizio Castelli, former Ferma president, scientific adviser and head of education at Italian risk management association Anra, and now CEO of Milan-based broker and risk advisory firm AUGUSTAS Risk Services. Mr Castelli was president of Ferma during the last hard market, following the terror attacks on New York in 2001. He told Commercial Risk Europe his experience tells him that this hard market will not be over and done with quickly. Risk managers need to focus on partnership with their brokers and insurers to cope with a challenging period, he added. “Uncertainty is the key word these days and no one has the crystal ball, now less than ever, so any prediction is really hard to make. Nevertheless, I would be surprised if after this crisis we would go ‘back to normal’ quickly. We are speaking a lot about the high probability that we’ll all need to become acquainted with a ‘new normal’ in most sectors and industries, and this will probably happen also in the insurance sector,” he said. “Having said this, the market was turning to hard already before Covid-19… [we were] speaking about a ‘real hard market’, after some 20 years or so. So, I would be very surprised if this phase would not last longer than just one year. My expectation is that it will continue for a while. The hardest-hit line is clearly property, but it is not just about insurance lines, it is also about industries. We are seeing the hard market hitting certain specific industries much harder, such as environment, energy and highways operators, where certain events have shed a spotlight on the associated risks,” continued Mr Castelli. The former director of risk management at Pirelli, who was also Italian country head of XL Insurance for a period before its acquisition by AXA, said that now is the time for risk managers to use their partnerships and show the value of their risk management skills and processes. “As you know, I have grey hairs, and not so many remaining, and I’ve been around the commercial insurance and risk management arena for more than 30 years. Therefore, I have the benefit, contrary to many younger colleagues, of having witnessed real insurance cycles and real hard market phases,” he said. “What the players need to do is keep calm, not panic and act rationally. The key words are ‘long-term relationship’ and ‘risk control’. From the risk manager’s perspective, you have a great opportunity to finally demonstrate the true value of what you do, which is not just buying insurance, but rather mapping your risk, mitigating it, controlling it and then transferring the residual risk at the best possible conditions,” continued Mr Castelli. Clearly this is also a time for brokers, working on behalf of risk managers, to show their value. “As an insurer you have the opportunity to clean your portfolio and to make good money by insuring those risks that are managed better than others. The broker can really facilitate the meeting and the mutual understanding of the right clients with the right insurers, understanding that it is in their mutual interest to work jointly on the quality of the risk and to build a long-term relationship around that concept,” explained Mr Castelli. The broker agreed with most others that in order to contain costs in the hardening market, Italian risk managers must take a much closer look at their risk retention strategies and use of captives, where possible. “Risk retention, along with risk control and loss prevention, is a key method to contain the cost of coverage, particularly in the short term. More companies than ever are looking at captives as an effective way of retaining risks, and this is happening also in Italy, a market that traditionally has not been a strong user of this tool,” he said. Captives are not commonly used by Italian companies and Mr Castelli agreed with many leading risk managers across Europe currently that government support in this area would be a good idea. “Nevertheless, it is still a complicated and rather costly tool, and it is not easy at all for medium-sized, let alone small, companies to have real access to this methodology. Italy is still the ‘land of the middle market’ and therefore I do not see a dramatic rise in the use of captives, unless very effective and accessible rent-a-captive schemes – including protected cell segregations – become available and the state gets involved to support, through tax incentives, this shift. This also requires a cultural change, which is not so easy to achieve in our country,” continued Mr Castelli. The Italian government could also significantly help its economy by backing a new insurance scheme to cover against future health crises and other catastrophic risks in key areas such as business interruption. Anra this week formally announced its support for such a scheme, as proposed by the Italian insurance association Ania. But Mr Castelli said this effort could be difficult to progress in Italy, because there is no history of state intervention in this field as there is in France, Spain, Germany and the UK. “I would love to be contradicted on this one, but I’m sceptical. Unfortunately, Italy, the land of earthquakes, is one of the few countries in Europe that does not have a state-backed insurance scheme for earthquakes. I’d be very positively surprised if we are able to do this for pandemics. Anra is backing a request to the government in this direction, and I think this is the right thing to do. But I’m still doubtful that this will happen in the short term. It is, again, a cultural challenge; we need a different mentality and I do not see it there yet,” he told Commercial Risk Europe.

Castelli urges Italian risk managers to keep calm and manage risk

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Related Articles