Data can unleash the power of risk management and lower TCOR, says leading risk manager

The risk manager from Moller-Maersk has told colleagues that getting a proper grasp on data can transform your relationships with carriers and radically reduce your total cost of risk, while also freeing up time to focus on added value risk management rather than insurance contracts.

Speaking on a recent Commercial Risk webinar, Lars Henneberg, vice president and head of risk management at A.P. Moller-Maersk, said the shipping giant’s data journey has seen his role with key partners, such as insurers and brokers, change from transactional to strategic, with much more focus on the services they can provide. Data has allowed Maersk to take control of decisions about whether and how to retain or transfer risk, he said.

Henneberg has been on a journey to improve the risk and insurance data held by Maersk for several years now with the help of Insurwave. Insurwave is a data management platform that helps global corporates manage their risk insurance data, allowing them to optimise their risk management, transfer and retention strategies.

“By doing our homework we get an efficiently priced reinsurance programme and overall risk financing structure. That requires good system support and good data, and it means we change our own role from being insurance contract administrators pushing around insurance documents and become proper risk managers, where we spend 75% of our time on risk management and 25% of our time on administration, which used to be the other way around,” said Henneberg.

“And we have been able to take more control of our own risk transfer decisions, and use the data to make risk prevention decisions,” he continued.

Maersk took the step to try to really get on top of its data in order to help deliver the lowest possible cost of risk, the nirvana for all risk managers.

“There is no doubt that developing the system with Insurwave has reduced a lot of the transactional friction in risk transfer because we share data on the same platform with the market, with our brokers, with our capital providers. As soon as we update the info they can see that. It doesn’t have to go through the frictional value chain of slips and endorsements and between the various parts of the value chain,” said Henneberg.

He said using Insurwave’s system also reduced the distance between risk and capital. “As soon as we update the system it is automatically updated, without any delay and with capital providers and with our brokers to the extent that they have signed up to the platform,” said the risk manager.

He said the data has allowed Maersk to better understand its own risks and update its internal processes and interaction with the insurance market.

“It has also allowed us to procure reinsurance efficiently because we can provide accurate data that is credible so underwriters don’t have to err on the side of caution,” said Henneberg. “We have moved from being extremely transactional to being strategic with our partners and relying less on their risk transfer and more on the services they provide,” he added.

The upshot is better risk transfer and more time to spend on risk management.

Fellow speaker Stefan Schrijnen, chief commercial officer at Insurwave, said the more time he spends in the world of complex risk and insurance the clearer it becomes that data is one of the biggest obstacles to success.

“Unless you have a really clear understanding of your risk and exposure, it is very hard to move to that more flexible risk financing model where you can make more strategic decisions – like what insurance you really want to buy, and where does it make sense to retain risk. It is hard to do that without first solving the data challenge,” he said.

Henneberg believes companies need to have a strong balance sheet and the ability to retain risk for data mining to really pay off and help reduce the total costs risk.

“The ability to retain risk is important. This is all about leveraging the strength of your own balance sheet as a competitive advantage to have a lower cost of risk than your competitors. Companies tend to do that in a captive,” he said.

“So you probably need to be a multinational corporation and this is typically where you see these data systems in place. You can then turn the info into a competitive advantage by restructuring a risk financing programme,” he added.

Henneberg said Maersk can now insource all of its data and documentation, which means it can form its own opinion about risk and the value of risk transfer. This has vastly changed the company’s relationship with the insurance market.

“Most of the risks we insure will come through our captive, and armed with the data this means our needs from the insurance market have changed. It is not just there to provide transactional services for us and keep all our data and documents. What we need now is more intellectual capital,” he said.

“We need their fronting services to able to distribute our captive capacity in the 130 territories we operate in across the world. So we need access to a global network. We also need their analytical services to model the data and understand the risks. So we have a lot of need for actuarial services from insurers and, in particular, brokers. We then need to integrate our systems of data and processes with them to ensure we have a seamless operations and tie in their services to our captive,” he concluded.