Regulators urged to support insurer innovation

Insurance regulators need to take a more flexible approach to commercial insurance if carriers are to respond to emerging and intangible risks, according to Nicolas Aubert, head of Great Britain at Willis Towers Watson. Willis is asking insurance regulators like the UK’s Prudential Regulatory Authority to take a more flexible approach and enable insurers to provide transversal coverages that are not allocated to any specific product line. Speaking on an Airmic panel debate at its conference in Harrogate, Mr Aubert said insurers currently allocate “very little” capital to emerging risks. But this is in part a reflection of regulation and risk management, he added. Carriers are currently required to allocate capital to risks. But due to the demands of traditional insurance regulation and insurers’ own capital management, this tends to focus on lines of business that do not fit new coverages, such as reputational risk. During the panel debate, Mark Roberts, chief underwriting officer for UK and Ireland at Chubb, said the changing risk landscape requires different solutions. The response of insurance to emerging risks typically involves multiple claims across multiple insurers and policies, all with different wordings and limits, explained Mr Roberts. “This is not an ultimate solution,” he told risk managers. Insurers, brokers and clients need to “go on a journey together”, collaborating and sharing data to “create new solutions – one holistic policy” to address certain risks that can cut across different classes of insurance, he said. One such risk is business interruption. “We are on a journey. Insurers and brokers need to work to put multiline policies under one roof,” said Mr Roberts. This is beginning to happen – for example with technology companies where insurers are combining liability, cyber, crime, terror and environmental coverages into one product, he added. Mr Aubert said new approaches are need, but this requires the support of regulators. “We can’t keep combining six or seven products together. This is why I am asking regulators to allow insurers to allocate capital to risk in a different way. Not allocating risk in silo but on a transversal basis, unallocated to any line of business. We need the support and creativity from regulators,” he said. Captives can also form part of the solution to emerging and intangible risks, according to John Ludlow, chief executive of Airmic. Speaking on the panel debate, he described a “new dawn” for captives, in which they can play an important role in managing new risks. Risk managers will not want to hand over data to insurers in an uncontrolled manner, and could use captives to generate data for insurers and help them get comfortable with new risk, he said. “Captives are a stepping stone to innovation,” said Mr Ludlow. Risk managers also need to get better at protecting new and intangible assets like IP data before “running to insurers” for solutions, according to Mr Ludlow. “If you ask for products, you need to get better at managing them,” he said. Mr Aubert also believes that brokers need to do a better job “upstream” to help clients understand their risks, before approaching insurers. “We need to do a better job of assessing and managing risk before we get to risk transfer,” he said.

Regulators urged to support insurer innovation

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