Risk professionals set to shine as insurance market hardens

Leaving insurance buying to anyone but risk professionals could expose companies to some dangerous shocks, particularly as the market hardens, according to a group of leading Swiss risk managers. They discussed whether or not they should solely buy insurance or whether it should sit elsewhere in the business, for example with procurement. Daniele Zucchi, captive manager at Saipem/Sigurd Rück, believes that in certain circumstances, procurement could play a greater role in buying insurance. But he suggested this should only be for standardised classes and not for complex coverages. “And it depends on having someone within the procurement department who is sufficiently skilled to know what they are doing,” added Mr Zucchi. He stressed that when it came to complex risks and claims, almost all companies will want the process managed by a risk professional. Mr Zucchi also emphasised the need to develop a longstanding relationship between insurer and insured. It is crucial, he said, that a relationship exists to help manage claims as and when they arise. The danger with leaving the task to procurement is they do not have the time or inclination to build that relationship, he added. Sabrina Hartusch, global head of insurance at Triumph Holding, is against leaving the job of buying insurance to procurement, because it could actually expose the company to greater risks. “Take some of the liability risks… the risk of a mistake in in our liability insurance is dangerous. It might be just one policy but it is so important to us,” she said. Carsten Schirmeisen, head of group insurance and risk financing at LafargeHolcim, stressed that a good working relationship with procurement is useful when buying insurance. “Both departments can use their skillsets cooperatively with our insurer and that seems to work very well. Both departments are happy with their roles and insurers are happy with the outcome too,” he said. The importance of getting the insurance programme right in the current climate is crucial, agreed the group. As is managing relationships with insurers. Ines Surholt, corporate non-marine risk and insurance programme manager at Nacora International Insurance Brokers, said the insurance market is hardening overall. Prices are on the rise, while terms and conditions are tightening as insurers become more disciplined, he said. Furthermore, he noted that a few syndicates in London, notably marine players, have closed down, which may influence the European market. The group agreed with other insurance buyers across Europe that the market is far from uniform, with different sectors facing different challenges. Companies face various conditions, depending on whether they have a good or bad claims history, the risk managers added. “It is not that competition has suddenly dried up. The competition is the same as ever. However, you might find that sub-limits have changed for a particular risk – say you are exposed to earthquake risk in one of your locations,” said Vito Fortunato, insurance manager at retail giant Migros. Mr Schirmeisen made the point that because rates have fallen for so many years, small increases still mean the overall cost of insurance is less than, say, four years ago. But the group felt that risk managers have the necessary experience to negotiate in a hard market, should one emerge. Such conditions make it important to keep insurance buying in the hands of a risk professional, they added. The Risk Frontiers Europe participants also said insurers need to think carefully about the long-term consequences of sudden upward rate movements and must work with their insureds through a managed pricing transition. Mr Zucchi believes companies may also turn to more self-insurance if the market hardens. “We might see the development of more captives,” he said. He cited the examples of 9/11 and the Piper Alpha accident, which resulted in an uptick in captives. The role of the risk manager also came under scrutiny. The experts suggested it is not necessarily best to pigeonhole the risk manager, but rather allow him or her to have a fluid role where skills can be maximised. They also argued it can be crucial to have one central risk management role where all elements of the business can be brought together. Much depends, they agreed, on the size and type of business, as well as the way in which it operates. For example, whether it is a family business or a multinational corporate with operations in 100 countries.

Risk professionals set to shine as insurance market hardens

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