How to manage the risk of new technology

New technology will be a cornerstone of the green transformation and the fight against climate change. However, there is less consensus on how ‘new’ technology is defined and the risks identified. Furthermore, it is unclear how the insurance of new technology is handled and what coverage should be offered to companies that use new technology. Darim has convened a working group, led by Pernille Rechenbach, risk and insurance manager at Carlsberg Breweries, to address this deficiency. “The first job of the group was to give a definition of new technology and prototypes in general. This will then cover the developments in ESG, sustainability and climate change,” said Torben Larsen, senior claims manager and insurance specialist, European Energy, a Danish supplier of solar energy equipment. “Insurers want a lot of input before giving insurance. If it is a prototype, you definitely want to be open and transparent and explain how it is used,” said Larsen. The second job of the group is to scope new coverage and what basic protections should be sought in an insurance policy wording. The work has focused on newly-built renewable energy factories, warehouses and office buildings or else plans where the technology is not new but the scale of use has increased markedly. “We wanted to get a discussion going about what insurers would need to take on these types of risks. What is their perception around new technology and prototypes? We don’t want them to reduce cover,” said Rechenbach. Risk managers also want more transparency on the underwriting process in order to avoid problems in claims handling. According to Larsen, there are numerous companies developing new technology for climate change purpose, but they need some form of risk acceptance from insurers and others. The issue is further complicated by the non-disclosure agreements and confidentiality issues that can come with new technology as confidentiality conflict with the transparency needed for insurance purpose. Consequently, risk managers need to be more involved in the development process and insurers, brokers and loss adjusters need to have the expertise to understand the risks related to the new technology and prototypes, said Rechenbach. “There is a lot of responsibility on risk managers to understand the risks and explain these to insurers so we need to draw on specific internal resources and take in more technical knowledge to close that information gap,” said Rechenbach. This onus also extends to the broker’s role and requires them to invest in greater engineering expertise. And loss adjusters, with their technical expertise, should be involved earlier in the process in order to better understand the relationship between the insurer and insured. This could even result in loss adjusters with an engineering expertise acting as independent consultants offering their insights prior to a claim being made. The working group has focused on property losses at the moment but it will widen its scope to take in environmental liability and other lines in the future, said Rechenbach.

How to manage the risk of new technology

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