Commoditised Asian market failing to reward risk management: Franck Baron

Speaking at the annual Parima conference in Singapore this week, Mr Baron also said that many organisations in Asia are failing to grasp the magnitude of potential risk scenarios and build in suitable business continuity and crisis planning responses. The comments were made during a panel debate on risk management innovation hosted by Aon Risk Solution's chief innovation officer Stephen Cross. According to Mr Baron, the Asian commercial insurance market is not encouraging the development of risk management in the region because it is ignoring loss prevention. Put simply the market is overly price-driven. "If you look at Asia as an insurance market, and I am talking about corporate risks, I think all of the Parima members already receive the credit for being well risk-managed organisations and most of them are not yet there. We have a very low pricing structure in Asia in terms of insurance and financial protection coverage but at the end of the day we are still not really taking into account the real quality of each and every risk. I think that is something that needs to be factored in," said the Parima president.hideMr Baron, who is also Group General Manager, Risk Management & Insurance at International SOS, said his firm has been 'extremely disappointed' by the lack of interest from the insurance market about risk information it has prepared and presented. "The only part they are interested in is the limits we want and how much we are willing to pay," he bemoaned. "Insurance is Asia is already heavily commoditised and we need to change this." "There is little room for organisations that are very good at managing risks and have a stringent loss prevention programme because the market is already structured in a way that is extremely price-driven. So the question is how to reward very well risk-managed business," he added. Mr Baron said the Asian risk and insurance industry needs to invest more time and money in understanding risk at all levels. The panelists, including leading insurers, agreed that more work needs to be done to reflect risk management in pricing. Otherwise there is the risk of nasty surprises down the line. Keith Thomas, Chief Executive Officer, Zurich Global Corporate Asia Pacific, said that if buyers focus purely on price of insurance, rather than quality of cover, they may also be missing out on an opportunity to deliver strategic benefits to their company. "The folks that are more resilient and get up and running quickly don't lose market share...You need to think about risk strategically and not just in a cost context because it can be the difference between being a winner in the long term and not being in business," he said. Mr Thomas also noted that the risk information insurers generally receive from insureds in Asia is not as good as from companies in the EU and US. This why when questioned by Aon's Mr Cross about the merits of multiyear insurance programmes in favour of the annual renewal he said Asia as a whole is not ready for such a development. Mr Thomas said that while multiyear programmes make a lot of sense where risk management is well developed, in areas where it is not advanced, such as Asia, the annual renewal process is an important safety net for both sides of the risk transfer divide. There is an 'integrity' to the annual renewal process, he said. "For this part of the world if you are not at that 'got all the data and know it all position' I think it is an important process internally within your own organisation [as risk managers] and for insurers to go back and sense check the controls and risk management practices you have in place," said the Zurich man. For his part, Marc Breuil, President Asia for Berkshire Hathaway Specialty Insurance, believes there is a lot to be said for multiyear policies and conceded that the annual renewal process could add 'artificial complexity' to the insurance buying process. Parima's Mr Baron also raised concerns over the lack of in-depth business continuity and crisis management planning taking place in organisations. "It is still amazing to me the lack of true understanding and awareness about the magnitude of potential risk scenarios," he said. "It is not about having a plan for each and every risk scenario you may have in mind, it is really about making sure an organisation is ready to face a crisis," he advised. "Crises are happening and will happen. I find it strange that in a lot of organisations people are very siloed in terms of their crisis plan."

Commoditised Asian market failing to reward risk management: Franck Baron

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