Interdependency of risks a key concern for insurers across Europe

Michael Rüsch, recently appointed country manager for HDI Global in Switzerland, spoke to Commercial Risk Europe about the challenges facing risk managers in today’s rapidly changing environment.

As the weather across Europe turns autumnal, it is hard to remember back to a summer of record heat. But for insurers and risk managers alike, the hot summer (yet again) was a reminder of the challenges a changing climate can bring.

For Michael Rüsch, who joined Risk Frontier Europe sponsor HDI Global in Switzerland as country manager this August, the summer was a reminder that no one should forget the risks of natural catastrophe and how quickly the world can turn upside down.

“Last winter,” he said “we had a lot of snow and then a hot summer with heavy rainfall, which means meltwater – and a lot of it. In Switzerland we are prepared for meltwater in many ways, but it was a reminder of the strength and suddenness of these type of flood events,” said Mr Rüsch.

Natural catastrophe risk is among the insurer’s top three concerns. However, he pointed out that no one can consider natural catastrophe in isolation.

“From a risk management perspective, you have to think about natural catastrophe but also of business continuity, supply chain and, always, of reputational damage,” he said.

Adding: “On top of that, cyber remains a real challenge as it is yet another way in which Swiss businesses cannot operate in isolation – we are all part of a global network now and those risks are unescapable.”

Mr Rüsch said cyber risk is on everyone’s agenda. Interestingly, uptake of insurance cover has not been as quick as the insurance sector may have predicted. But he added that more and more claims are now being settled. Mr Rüsch believes this will drive more businesses to buy cover. “Once they see claims being settled, it gives people confidence as more risk managers can see the potential losses and the experience of existing losses,” said the insurer.

So far, Mr Rüsch reported little in the way of claims for data breach in Switzerland, however Swiss clients operating elsewhere in the world, notably the US, have suffered losses, he said.

One of the challenges facing insureds and insurers is quantifying cyber risk. Mr Rüsch argued that insureds should be answering insurer questions in much more detail. “When we send out a proposal form, we usually get ten to 20 pages back in reply… It is difficult, however, to assess cyber risks in a simple questionnaire with a few pages. It needs a conversation and a continuous dialogue,” he said.

“The digital world is changing so rapidly – almost hourly it seems – so risk managers might assess their risk as X but very quickly it will become Y, which is why we need that continuous conversation,” he added.

Mr Rüsch stressed that without that level of transparency, it is hard for any insurer to properly price cyber risk. He also said cyber risks demand a tailor-made insurance solution that covers corporate managers too.

“HDI attaches particular importance to this issue. Therefore, we have included a very extensive criminal legal protection component and a separate D&O module to our cyber policy. In my opinion, this aspect has tended to be rather neglected in the debate about cyber insurance,” said Mr Rüsch.

One difficult topic for the whole insurance industry is whether cyber-related fines can be covered. Generally speaking, insurers would not cover the cost of penalties, but there has been a question mark hanging over fines imposed under the General Data Protection Regulation.

“I don’t think anyone would want insurers to be able to pay out for an illegal action and I think it is one where the regulators and governments need to determine the answer,” said Mr Rüsch.

When it comes to the state of the wider commercial insurance market, Mr Rüsch said prices are showing signs of rising but it remains hit and miss. For example, buyers with properties in disaster-prone areas will be facing price increases that others escape.

HDI Global has made no secret of its desire to drive rates upwards to what it argues are more sustainable levels. Mr Rüsch said the key to this conversation with risk managers is making sure everyone understands the rationale behind the changes. It is also vital to ensure that any prices increases can be justified, he added. As always, however, insurers will price business based on individual clients’ risk, he stressed. Those with the strongest risk management capability and low loss records will fare better than those with poor histories.

Mr Rüsch also understands that choice of insurer, and broker, has been shrinking as consolidation continues, which is why HDI Global is proud of its commitment to the market and its innovative thinking.

“Innovation is critical. We must work with insureds and deliver the right service for them. It is a long-term partnership and both partners want it to work,” said Mr Rüsch.

He said he loves captive business because “a captive is a true reflection of a partnership”, but he stressed it is not the answer for everyone and size does matter.

“Insurers have an important role to play for captive owners in making the capital work in the most efficient way and in fronting the captive,” said Mr Rüsch.

Joining HDI Global has also meant being part of a global network – another key ingredient in making the relationship between captive and insurer work.

“HDI is one of the very few international industrial insurers with a truly own global network. This really attracted me to this company, because you need your own network if you want to lead international programmes for your global corporate clients,” said Mr Rüsch.

Developing a long-term relationship is also one of the key reasons why any insured should pick their insurer, he continued. “There has to be mutual trust and that is something we believe in. There needs to be that partnership approach and a consistency in the delivery of services,” he said.

The second important thing is “service, service, service”. “We have the capacity and the products but those have to be backed by a good service at all stages of the relationship, from underwriting to claims,” said Mr Rüsch.

The third most important element in choosing a partner is claims service, he continued.

“That is where we fulfil our promise. Our claims team always goes the extra mile. They will go out on site when there is a claim and not sit back and wait for the client to provide information. They are proactive and involved. They don’t shy away from getting information and sharing it too. This holds true whether the claim is in Switzerland or in the furthest reaches of the world. With our global network, we offer clients the same service wherever they need it,” added the HDI man.