Cooperation and innovation needed to boost risk industries, says Narim

This year’s Narim conference, which attracted almost 360 delegates and 90 risk managers, focused on the need for greater cooperation at an industry level and between individual risk managers, brokers and insurers. Most insurers and brokers attending the event seemed to agree, but recognised that competition laws and the industry’s traditional mind-set limit what they can do. The conference theme of ‘Go go-create and innovate!’ was to get people to discuss the traditional ways of insurance and consider alternatives, said Annemarie Schouw, Chair of Narim and risk manager at a global metals company. A large part of the conference was given over to small discussion groups of risk managers, brokers, insurers, loss experts and lawyers that were free to discuss key issues, as well come up with ‘big ideas’. At the conference delegates took part in open workshops where they were invited to work together in small teams to devise solutions to risk management or insurance issues of their choosing. The best ‘big idea’ could be taken forward, although the top five were all shared with the delegates.hideFor example, the wining ‘big idea’ drew on the development of ‘crowd funding’, the mainly internet-based mechanism that allows people to collectively support initiatives, such as funding a start-up, financing a film production or pledging resources to disaster relief efforts. The proposal was for post-disaster claims funding for charitable institutions and corporates, whereby people pledge to help rebuild a business. “We wanted people to discuss insurance in a new way and share experiences. Too often insurers keep their knowledge and information about loss and prevention to themselves,” said Ms Schouw. One other big idea discussed at Narim was to create a shared resource and open forum for discussion on risk and insurance matters, a kind of ‘wiki-insurance’. Risk managers are asking for more collaboration with brokers, insurers and reinsurers, said Ms Schouw. “We want to work together with the industry—our businesses are more integrated and so we want more integrated insurance solutions and greater access to loss prevention services,” she said. Risk managers are seeking closer cooperation with insurers as they face an increasingly complex world, said Bas van Mullem, Global Relationship Leader for Zurich Global Corporate Benelux. “New threats pop up all the time and risk management implementation is becoming more and more important for organisations as they look to prevent issues and protect their brands in a fast changing world.” As seen at Narim, risk managers are asking the industry how it can adopt new ways of thinking, new products and approaches. “Our customers raise their voices more and more and seek to influence what insurers do,” he said. Risk managers are increasingly turning to insurers for help and advice on best practices, said Arthur van Essen, Country Manager for Allianz Global Corporate & Specialty in the Netherlands. “Risk managers and board level executives recognise that they are also part of the solution—as reflected in the growth of enterprise risk management. As an insurer we see a more partnership approach with large companies more open to dialogue on the most effective levels of retentions and risk financing,” he said. One of the areas on which risk managers want to see more cooperation is product innovation. Many of the products in the insurance market are often designed by brokers and insurers, but they rarely engage with the clients prior to the launch, said Otto Bekouw, Head of Insurance and Risk Management at Philips. “In the past few years several new products have been developed that could have been good risk transfer solutions—like supply chain and cyber insurance—but they miss the point in their usage. The pricing of capacity and underwriting is so far off other insurance products that it is not realistic that a buyer will consider purchasing these policies,” he said. “Many insurers design products without speaking to the clients that would purchase it and development is typically driven by the need for a new product, not by incorporating new cover into existing products,” said Mr Bekouw. “If an insurer or broker sees demand they should gather people around the table that are expert and can give valuable input of the reality if they bring the product to market and test what a buyer would be willing to pay.” There is a desire to reach out and find solutions for a wider audience, said Andreas Luberichs of Amlin Europe. “However, often there is good dialogue with risk managers and an exchange of views, but there is limited pickup rate for new products. If buyer demand is limited and there are too few purchasers, the premiums end up too large, so the exposure remains on the client’s balance sheet,” he said. “I have seen a lack of clear and concise communication between the parties. At the outset companies express a need but when it comes to collaboration they perceive there are too many questions that touch on confidential areas and that the process is too long.” Mr Luberichs is confident, however, that this will improve going forward. Feedback from the Narim conference shows that risk managers see insurers as too traditional and want them to change, said Mr van Mullem. “It is something we are trying to do at Zurich, but it is not easy.” Insurers are limited in their ability to cooperate and co-insure by competition rules, while some insurers are more willing to invest in product development than others, said Mr van Mullem. Competition rules are particularly relevant in the area of co-insurance, where insurers combine capacity to underwrite a risk, such as with Lloyd’s or the Dutch equivalent, the VNAB. Co-insurance can be used to underwrite very large and complex risks. But it could also play a role in providing capacity for ‘new’ risks like cyber and supply chains, some risk managers believe. “The insurance market could use co-insurance for new products—work together on wordings and sign risk,” said Mr Bekouw. “But the tendency has been for insurers to design their own products, which means others can’t follow and capacity is too low,” he said. At a time when risk managers are highlighting the need for more cooperation and co-insurance, the European Competition authorities have reopened their inquiry into the insurance industry’s exemption from certain competition rules. The EU’s renewed interest in co-insurance practices is of particular concern for Dutch risk managers and those at other international companies, says Peter den Dekker, Insurance and Risk Manager at VimpelCom, former chair of Narim and past president of Ferma. “The EU is questioning if insurers can exchange information that could prohibit co-insurance agreements and risk managers are concerned that this could result in capacity being lost from the market and a reduction in insurers’ ability to put together solutions for large complex risks,” he said. “The EU knows that the practice of co-insurance is working very well but it is looking for a stick to hit the market with, but it does not understand the problems this would cause. They should listen to Ferma and national associations like Narim as what they are doing would hurt Europe’s economy,” said Mr Den Dekker. Another ‘Big Idea’ at the Narim conference was for a TV drama or soap opera based on risk managers and insurers in a bid to boost the image of the risk sector. Discussions at the conference on the need for risk managers, brokers and insurers to cooperate on boosting the sectors’ image were particularly poignant, said Hugo Wegbrans of Aon. “The wider insurance and risk management community do great things to help people and companies manage their risks, but the important role of risk management is not always recognised,” he said. There is a real need to show that risk managers, brokers and insurers are a force for good, but this is sometimes not always appreciated nor recognised. The insurance industry should work harder to help risk managers communicate within their own companies the benefits of risk management and insurance protection, said Marc van Nuland of Aon. The insurance industry could be more transparent, providing data and information to demonstrate the benefits of insurance and risk management, as well as to give companies more insight into risk, he added. “The next step for the industry is to provide better structured information and data for clients to get more insight into their risk profile and make better informed decisions,” he said.

Cooperation and innovation needed to boost risk industries, says Narim

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