Structured responses needed to emerging risks: Kam

Adrian Ladbury interviews Antonio Kam, head of insurance Asia Pacific at BASF and Hong Kong board member of Parima for the ongoing Risk Frontiers Asia survey, sponsored by HDI Global. Kam is positive about the recent rise in recognition of the value brought by risk management and improving market conditions in corporate insurance. However, he also sees major challenges on the horizon such as cyber and climate change, that need structured and co-ordinated responses that the insurance industry needs to deliver sooner rather than later. Antonio Kam, head of insurance, Asia Pacific of BASF based in Hong Kong and Parima board member for Hong Kong, has more than 25 years of experience in the risk management and insurance industry. Before joining BASF, Kam worked for various international insurance companies in diverse roles such as underwriting, product development and claims for 15 years. Kam told Commercial Risk Asia that the shift into the risk management role gave him a deeper insight into the risks faced by organisation and how they are interconnected in daily business. He also stressed the importance of communicating and translating the jargon of the insurance sector for wider management. “The impact of the risk is not just about claims payment, but how business is affected. In my previous roles in insurance companies, most people were insurance experts and communicating in insurance jargon was expected. In the role of a risk manager, one of the key challenges is to avoid insurance jargon and to communicate effectively with the non-insurance experts internally. This can be a challenge because it makes me think deeper about what the jargon actually means, and listen more from other people’s perspectives,” explained Kam. Kam agrees that the role of the risk manager has fundamentally changed in recent times as complexity and uncertainty has increased, particularly post Covid-19, and gives risk managers less time to work out strategic reactions. “The world is changing very rapidly nowadays. It increases the complexity and uncertainty, while decreasing the time allowed for mitigation actions. Also, we must learn, and unlearn, quickly. The impact of Covid-19 to the world was beyond everyone’s imagination. So it was impossible to forecast. With this unpredictable event and with the profound impact to business, it made all risk managers rethink risk management, including insurance coverage, risk management processes and what the best plan can be with such a dynamic environment,” explained Kam. The risk manager’s involvement with Parima has certainly helped him rise to the challenge, he added. “Learning through our peers and obtaining the external view is important when rethinking risk management. Parima provides a very important platform to learn and share. I learn a lot at every Parima event to generate new ideas to improve my work in the face of this uncertain world,” he added. Kam, like many of his peers, believes that the more central and broader role of risk management in recent times makes the profession more attractive to new young talent. “Risk management requires a holistic analysis of not just return but also the risks associated with opportunities in the business. While profit and return is very important, this allows oneself to reflect and think about the long-term from various perspectives. It also gives me a deep understanding of the challenges facing business nowadays. I am further required to talk to many people to understand their thoughts and concerns. These all provide very valuable experience,” said Kam. And given the scale and diversity of the risks facing corporations in Asia currently, the function is unlikely to become less interesting in future, said Kam. “Geopolitical tension is on the news every day now, and it indeed affects the flow of goods and money. This can further affect supply chain disruption in coming years. Climate change is another big topic, which not only can cause damage to property but also affects people’s behaviour, and then this affects the business. Technology and AI creates risk, of course, but it also offers opportunities if we use them effectively,” added Kam. ESG in its various guises has forced its way into the remit of the risk and insurance manager, in Asia and worldwide. Kam has also experienced this, seeing it as a positive development overall. “ESG is affecting all business globally. All risk managers, including myself, are involved on all fronts. All companies need to consider how to adapt their business model to meet ESG requirements and expectations of the regulator, society, and customer. All change will create new opportunities and risks. Risk managers can add value by discussing this with the business and how to minimise the risks during change,” he said. The outlook for the corporate insurance market over the coming renewals is certainly looking more positive for risk and insurance managers than in the recent past, as profits and capacity return after the hard market. The big challenge for the insurance sector has to be working out how to remain relevant, particularly in the face of climate change, according to Kam. “After the longest period of hard market that I have experienced in my career, finally we see some signs of a soft market. As risk managers, of course we want the insurance sector to reward those companies that can demonstrate a good risk management process and record, and not increasing premium for the good risks. The challenge for the insurance industry is to stay relevant with the continuous change across the globe. There are constant new risks because of new technology, AI, climate change, etc. Insurance companies need to understand and find solutions for the new risks, and quickly,” he said. Cyber risk continues to evolve and really challenge corporations in all sectors, as shown by the recent CrowdStrike incident. For Kam, the key element that needs to be focused on is culture, not least because so many cyber risks become incidents because of simple human error. “Cyber risk is evolving so quickly. The world is already interconnected through computers, networks and AI, but it will only become more complex and even more dependent on it. It can get so complex that it will take a long time for any incident to be analysed, leading to long interruption of business. If you consider the traditional property damage and business interruption claim, it is known that a small physical damage can lead to a long business interruption,” explained Kam. “For cyber insurance it looks similar. In such a highly connected world by network, a small error or cyberattack in a remote supplier can result in a substantial, unexpected and profound impact, as with the CrowdStrike event. Corporations need to set the culture and train all employees to be aware of the risk, as shown by many cyber incidents related to human errors. Cultivating such risk sensitive culture is important, because this is the first line of defence for any corporation,” he added. Interest in captives and other alternatives such as parametrics is on the rise in Asia, as it has been worldwide in recent times, as risk and insurance managers seek fresh solutions to the big challenges faced such as cyber and climate change. Kam agrees with most of his Parima board member peers that this trend is certain to continue in the current risk environment, but perhaps more education and awareness of the real potential of such tools is needed in this region. “In Asia, the captive is still an underdeveloped tool. Compared to the big organisations in Fortune 500, for example, the percentage of companies that have a captive in Asia is low. So there is a lot of potential here for companies in Asia to have a captive as a risk management tool. With the hard insurance market in the last few years, it showed how important a captive could be to help to transfer the risks at a reasonable price when the insurance rate was high, even for well-managed corporations,” said Kam. “Captives is a hot topic in Parima indeed, and all members have more interest than ever before. Risk managers should be aware of the available tools in the market. Parametric insurance and ART, of course, are new tools, which can be used to complement the traditional insurance products. Only a holistic review and assessment of the tools can lead to a complete risk transfer and management strategy,” he added. And finally for Kam, all corporations need to up their game in a more joined-up and data-driven manner, to rise to the many challenges presented by climate change, with or without state backing. “Climate change can affect a lot of business decisions. For the manufacturing industry, the last thing everyone wants is the plant being damaged by events such as flooding, typhoons or earthquakes. A complete assessment, with external input such as from insurance companies, is important to continue running the manufacturing site safely. This is the area that risk managers can coordinate between internal stakeholders and insurance companies, with a lot of data and experience to manage and reduce such risks,” concluded Kam.

Structured responses needed to emerging risks: Kam

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