Pace of change causing risk management problems

The pace of change is hampering risk managers’ ability to identify, manage and mitigate their organisations’ risks, according to Francesco Semprini, managing director for Risk Frontiers Europe sponsor HDI Global in Italy. Mr Semprini said risk managers face an increasing list of risks to manage, and they are becoming ever more complex. “Even ‘traditional’ risks such as natural catastrophe are no longer the same thanks to climate change. Climate change is one of the major risks for any organisation and impacts both new and traditional areas,” he said. On top of that, the connection between business continuity and supply chains is becoming ever more complex, he continued. The implication for just-in-time deliveries is becoming more apparent, both for insureds and their insurers, he added. But that is not the complete picture. Cyber risks are also rapidly expanding and intertwined with natural catastrophe, business continuity and supply chain risks. Combined, these all “have a huge impact on the community”, Mr Semprini warned. Overarching all of these threats is reputational damage, which is notoriously hard to quantify from an insurer’s perspective. “Natural catastrophe, the environment and pollution, business continuity, supply chain, cyber and reputation – that is some list, but it is all something the insurance industry is looking at,” he added. The good news for insureds, however, is that insurers are able to draw on the experience of all claims. “We see claims from every industry and are able to draw on that experience in offering insurance to others and in managing the claims and their process,” explained Mr Semprini. “It is definitely an added value that we offer our insureds. We have lived through the event before. On large claims, we will always visit the site and will gather information to support the claims process and educate further our underwriters, risk engineers and also the risk managers. We also share information with all stakeholders to help prevent the same thing happening elsewhere,” said the insurer. Adding: “Quite often and understandably, clients are focused entirely on their internal issues and are unaware of what is happening elsewhere in their industry sector – or in other sectors that might also have an impact to them. That is something where we as an international industrial insurer can actually help and make a difference. By sharing our industry-wide experience, we broaden the awareness of our customers and their ability to manage their risks.” This might include advice on a particular risk location. “For example, we can assist a company that might be unaware that a specific risk location is flood-prone,” said Mr Semprini. Such advice and consulting can apply to claims as well. “If a company is headquartered in Milan but has to tackle a major claim in China, we have the experience and can provide our abilities to steer them through any challenges that might emerge,” said the HDI man. Mr Semprini believes that such service requires an insurance company to be in good financial health and in a position to invest in solid risk engineering. It also needs internationally-experienced underwriters and its own claims experts, plus the setup and maintenance of its own truly international network. All these requirements are also a key reason why HDI Global must bring back pricing to sustainable levels, said Mr Semprini. “We are already seeing promising improvements of terms and conditions in our books. We have been able to achieve significant price increases on property and marine renewals. Where this was not possible in case of inadequately priced risks, we did also leave such risks with the market,” he explained. “It is not the time to be influenced by others, but to do what is right for my company,” he continued. “No one can afford to simply follow other market participants, everyone should be taking the right approach for them. If you just try and follow the market, you will lose your way very quickly.” He said it is key that insureds know their insurer is financially stable, secure and prepared to settle claims as they arrive. Mr Semprini is convinced that insureds and customers also want to partner with an insurer able to invest in training and education of their own teams. Cyber is a classic example of an area where such education is key. He also strongly believes that insurers should sell cyber coverages as standalone policies. “It is not simply possible to expect a property underwriter or a liability specialist to instantly become a cyber underwriter. You cannot simply have a fire underwriter talking about cyber risks; the underwriting of cyber risks requires a different skillset,” Mr Semprini said. He went on to stress that good communication and transparency is of utmost importance to create and further develop adequate insurance products. “Insureds must understand that it is not fair to ask for so-called innovative products while, to provide one example in conjunction with cyber risks, the customer is hesitant to allow the insurer a deep dive into its IT architecture and landscape,” said Mr Semprini. “We must know and understand what we cover.” “We cannot simply increase limits and coverage conditions for supply chain risks in cases where even the customers themselves are not in the position to provide us with reliable and complete data regarding their own suppliers, sub-suppliers and interconnections between them. How can you, as an insurer, assess such risks and adequately price such exposures without transparent information?” he asked.

Pace of change causing risk management problems

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