Global programmes offer protection from tough market but smoothing now harder to come by

Global programmes offer risk managers the chance to spread risk and smooth some of the difficulties they face in the hard insurance market, but as conditions toughen for buyers in an increasing number of regions around the world this opportunity is now harder to come by, according to experts at Commercial Risk’s latest conference. Speaking at our ‘Global Programmes Europe: Gaining Maximum Benefit’ two-day virtual event, risk management association heads told delegates that multinational insurance programmes are an option to explore in the hard market. “I think global programmes do offer an opportunity in the hard market if it is the right thing for your business. They are not the solution for everything, but their whole purpose is to spread risk and you should be able to use a global programme to smooth some of the impacts we are seeing,” said Julia Graham, deputy CEO and technical director at UK risk management association Airmic. Fellow panellist Adri van der Waart, president of Dutch risk management association Narim and corporate insurance manager at Arcadis, said global programmes are potentially a “good solution” as the insurance market hardens. “Local programmes are likely the first to be hit in this hard market, so working on global programmes you can spread risk globally and it can give you something to discuss with brokers and insurers,” he said at the event sponsored by AIG, Allianz, AXA, Axco, Maxis Global Benefits Network, Swiss Re Corporate Solutions, TMF Group, Willis Towers Watson and Zurich. However, the panellists explained how insurance markets in the UK, mainland Europe and Asia are all now difficult for buyers and therefore Ms Graham noted that the smoothing potential offered by global programmes has receded. “But there is definitely a place for them, particularly if you can get around some of the taxation issues and work needed to make them compliant,” she added. Ms Graham explained that the insurance market is increasingly difficult for UK buyers and is getting worse. “If you compare the latest Airmic survey to the one in January, premium rates are still increasing, restrictions in cover are still increasing and options to go to other markets are still reducing,” she said. Adding: “So it is not a great picture and I don’t really know ultimately where this is all going to lead. My biggest concern is that it is still difficult and is getting worse.” She said that some of the behaviour currently on display from insurers in the hard market is not what buyers expect from long-term partners and trust is being eroded. “Insurance is built on a foundation of trust and once you start to lose trust you lose partnership, in a deteriorating market. It is not a great prospect. So I remain optimistic but the writing on the wall is not great,” she continued. Mr Van der Waart said market conditions are similar in continental Europe and partnership is “eroding” here too. “I see insurers stepping out of business on the same conditions as before and insurance managers have problems to get their programme filled,” he said. “D&O, professional indemnity and crime insurance are a real fight and struggle to get programmes filled and successfully renewed,” he added. “There is definitely a questions mark as to whether insurers want to follow us as they did in the past,” continued Mr Van der Waart. He stressed that buyers need to be realistic after many years of soft market conditions and accept that hardening is needed in some areas. But he said it’s the rate of change that is causing concern and problems. “We have had ten years of soft market conditions. So some increases are acceptable and reasonable, but the size right now in many areas is difficult,” he said. Frank Baron, chairman of the Pan-Asia Risk & Insurance Management Association and group deputy director of risk management and insurance at International SOS, said the market is potentially even worse in Asia. He said pricing is increasing, coverage is restricting and capacity is significantly shrinking. “We are talking about a hardening market that does not support businesses for traditional insurable risks,” he told delegates. He added that there is little room for discussion with insurers during renewals and is particularly concerned that risk management and good loss histories are not being taken into account. “I am not happy that clients who have established very strong risk management protocols and loss-prevention plans, and have a good loss history, are treated the same as those that do not,” he said. Mr Van der Waart agreed it is frustrating that well risk-managed companies with no claims history still face “enormous” premium increases.

Global programmes offer protection from tough market but smoothing now harder to come by

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