Risk managers showing their value through Covid-19 crisis

Continuity is the key to success with Covid-19, Chris Staes of HDI Global being prepared and able to provide clients with business continuity when it comes to insurance requirements was essential in the early days of the Covid-19 crisis. The key to that, says Chris Staes, Belgium country manager of Risk Frontiers Europe sponsor HDI Global, was providing continuity to international programme clients that have operations in numerous locations worldwide and were experiencing the pandemic in different ways and at different times.

He says HDI Global achieved this objective, providing a seamless service from day one. “We succeeded so efficiently that some of our brokers didn’t quite believe us when we said we were already all working from home,” he says.

But there is no complacency from Mr Staes, who notes that plenty of challenges remain ahead.

In terms of developing suitable cover for pandemics in the future, Mr Staes points out the difficulty for any insurer in quantifying the risk. He adds it is likely that action at government level will be needed before any insurance industry input could be considered. So far, he says, nothing has been publicly discussed in Belgium.

“For us, we have always considered our insureds’ policies on an individual bespoke basis, but our property policies require physical damage before any business interruption claim will be valid,” says Mr Staes.

He comments that wordings have been very clear on that and there has not been any discussion about wordings throughout the pandemic in Belgium.

“It might be that some insureds find a solution within their captives. I would think it is something that could be considered within a captive as part of an alternative risk transfer,” he adds.

But for the insurance market, he says it remains one step too far. “For example, if a cyberattack affected an entire country, is that insurable?” he asks. Most people would say not. The same logic applied to pandemics. “The cost of the pandemic has been too high,” he says, “for any insurer to carry the burden.”

In fact, before the pandemic outbreak there had been no demand from insureds for bespoke pandemic covers, so Mr Staes really feels it will be up to the government to consider future solutions.

“In the past, risk reports mainly concentrated on political risks, cyber threats and natural catastrophes – a pandemic was not on the radar. It is not our place to comment on what was on our clients’ risk radars. What HDI Global is able to do is offer insurance support where there is an insurable risk,” he says.

“We are here to take care of the unexpected and foster entrepreneurship – that is our answer to uncertainty and we do deliver on that aim. That’s not to say there have not been challenges. The whole challenge of the vulnerability of supply chains has been thrown into sharp relief by the pandemic,” continues Mr Staes.

“Covid-19 has shown how complex and vulnerable supply chains have become. People in Belgium have been asking whether they really wanted to have the only supplier of things like personal protective equipment (PPE) outside Europe? And to be dependent on far-flung destinations for key medical products and drugs. But it is not just about the finished product. I think the pandemic is making people consider the source of the raw materials more carefully too and ask if those supply chains can be guaranteed,” he adds.

Mr Staes says Belgians are worried that the same challenges with PPE will occur with vaccines, once they become available. The danger is that poor access to vaccines would impact the ability to return to any form of business as usual.

“As insurers, we were already worried about supply chains and the interconnected nature of business. It impacts on business interruption risks and is a huge multiplying factor. Insureds are asking what insurers can do to help, given the pandemic, and the answer is about business continuity, providing local and international programmes to keep businesses in business,” says Mr Staes.

He says that in the immediate aftermath of lockdowns, his teams of risk engineers were still at work, helping clients with shutdown procedures. Now, as restrictions across the European continent are beginning to ease, insureds are calling on them again for the even trickier process of starting plants back up again.

HDI Global is also playing its part in providing insurance for the many clinical trials that are going on across the world, as scientists hunt for a vaccine against Covid-19.

“Clinical trials simply cannot happen without insurance,” says Mr Staes, “so we have been able to work with insureds to provide that cover on an international basis. Any vaccine will need to be tested in a variety of geographical locations before it can be released – an area in which a global programme can help.”

There has already been a lot of international collaboration among scientists, he says, and now insurance will be able to play a role for manufacturers in converting that work into a successful vaccine programme.

“It’s not easy for the pharma companies, because every country has different compliance demands and different liabilities. For example, the rules in the Netherlands are quite different to those here in Belgium, even though we are neighbours and both within the EU. We are able to provide multinational insurance solutions that are compliant with local regulations,” says Mr Staes.

He further comments that insureds also need their insurers to continue servicing the rest of their policies while the pandemic continues. “It is important that we are here to help our customers with their ‘normal’ claims through this crisis and provide the surety of payment continuity,” Mr Staes stresses.

As countries move out of lockdown, he emphasises the role insurers can play in helping insureds look to the future and build confidence as they return to more normal operating procedures.

Looking ahead to the next renewal season, Mr Staes is confident that the services provided in times of crisis will be of huge value to insureds as they discuss their next policy terms.

“We have made no secret of our desire to return to technical underwriting. And in these times of such low interest rates, we need technical results because we cannot rely on investment income to shore up claims,” he says.

“For risk managers, it is crucial that we remain sustainable,” continues Mr Staes, adding that a lot needs to happen before many renewal discussions take place – including clients ensuring their own survival.

Returning to the question of other claims, Mr Staes is confident that clients’ operations are being well risk managed and that risk managers are not only crisis managing but keeping an eye on longer-term risks.

“Risks like cyber have come to the fore during the crisis, because attacks have increased as people work from home and hackers have sensed a weak spot. Insurance can help but it can’t play a role in saving a company’s reputation – that’s something risk managers are extremely aware of and are working to safeguard against,” he says.

Mr Staes believes that risk managers have a golden opportunity to show their value to boards throughout the pandemic and as companies rebuild. The cyber conversation is just one part of that, as is the longer-term climate change debate.

“Climate change is already manifesting itself in the increased number and severity of storms that we are seeing. Again, risk managers are aware of this and are looking to their insurer to provide the right risk transfer tools, and I think we are doing just that,” Mr Staes concludes.