Ferma survey shows cyber and supply chain top risk agenda

Cyber risk and the threat of supply chain failure have shot up the European risk management agenda during the last two years, according to Ferma’s 2022 member survey. Over the longer term, it is clear, however, that while the cyber threat remains a key concern, climate change and the related impact of natural disasters are the main risk. Uncertain economic growth, partly caused by geopolitical volatility, is another major shorter- and longer-term worry for Europe’s risk and insurance managers, based on the latest Ferma poll, carried out in partnership with PwC Europe. Changing consumer behaviour is also seen as a major risk looking forwards. In 2020, cyber risk took top spot with 48% of respondents identifying it as the number one concern. This year, that figure has shot up to 63%. Back in 2020, against the backdrop of the arrival of Covid-19 in Europe, uncertain economic growth took second place with 27%. This year, the threat of supply chain failure, not surprisingly, came second on 41%. Availability of key skills, or the battle for talent, was third two years ago on 22% but has been supplanted by geopolitical uncertainties and uncertain economic growth this time around, in joint third on 31% each. Data fraud and theft took fourth place in 2020 with 21% and over-regulation took fifth with 19%. Over-regulation still featured this year at fifth place, on 27%. The top risks identified for the next three years are changing consumer behaviour at 36%, the cyber threat at 35% and uncertain economic growth at 30%. A big shift is seen over the ten-year outlook, which is of course more remote and thus, less pressing. Climate change took a clear top spot, with 48% of respondents identifying it as the number one risk, while changing consumer behaviour remains a big worry at 24% and natural disasters came third with 21%. A further interesting question posed in the survey was: what are the top five risks lacking management attention in times of transition? Climate change came first on 28%, the cyber threat second on 28%, geopolitical uncertainties third on 21%, speed of technological change fourth on 19% and, again, changing consumer behaviour featured on 17%. Market dynamics The seemingly dramatic rise in risk exposures faced by Europe’s corporations during recent times has coincided with a challenging hardening of the commercial insurance market. And Ferma’s survey confirmed what we all know: just as corporations needed their insurance partners to step up, they backed away. The survey results show that European risk managers are facing a triple crunch of rising rates, reduced capacity and more exclusions. Some 78% of respondents said they are heavily impacted or face a major impact from rising premiums. In addition, 71% face reduced capacity and 63% are having to deal with more limitations and exclusions on specific risks. Not surprisingly, Europe’s risk managers are planning to adapt their insurance strategy during the next two years. Just under three quarters (73%) will focus on risk retention, 35% plan to use their existing captive, 12% to create a new captive and 29% to use alternative risk transfer vehicles. The survey results support recent statements from brokers and captive managers that interest in captives has risen significantly during the past five years. Back in 2018, 15% of Ferma’s survey respondents said they were interested in setting up a captive. This has risen to 47% in the latest poll. In addition, 41% of respondents believe that some of their company’s activities or locations will become uninsurable in the future, illustrating the growing difficulty to insure systemic risks such as cyber and climate change.

Ferma survey shows cyber and supply chain top risk agenda

Climate change and consumer behaviour longer-term threats

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Want to read this article?

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