Supporting risk managers with business transformation

In this second interview, Penny Seach, group chief underwriting officer, Zurich Insurance Company, talks to Tony Dowding, editor of ESG Risk Review, about the critical role insurers have in supporting risk managers with ESG and sustainability data, innovative solutions, and early warnings of emerging risks and trends.

Risk managers are playing an increasingly important role in ESG and sustainability in their organisations, and insurers are providing support, not just in terms of insurance solutions, but, crucially, in data, analysis, and building resilience.

“Insurers can provide an end-to-end solution, from risk identification and assessment to development of risk adaptation measures. The data we already have for underwriting purposes are a natural starting point for such an assessment,” says Penny Seach, group chief underwriting officer, Zurich Insurance.

Insurers have data at a scale that generally eclipses what risk managers have for their own organisations, simply because of the breadth of their portfolios, Seach says. “It’s just a much broader model, and when you’re looking at different scenarios, you can help a customer see the operational footprint from their own assets as well as their supply infrastructure.”

When considering ESG-related risks, it is necessary to incorporate forward-looking data into ‘conventional’ tools such as catastrophe models, building codes and regulations. “You need forward-looking data because you are modelling your risk exposure on conventional data sets or conventional models, but from an ESG perspective you need to then incorporate the scenarios to estimate what the forward-looking impact could be,” Seach explains.

She provides a simple analogy – driving a car. Historical losses are the rear-view mirror perspective – indicating how the customer’s organisation was impacted and its level of readiness to previous events. Underwriting data is the windshield view, giving a perspective on the current situation, while the navigation system plans the path to the ultimate destination, Seach says.

It is important to stress, she adds, that data has to be credible, especially when it is used for any form of external reporting or external disclosures. There is a lot of climate-related reporting across different jurisdictions, and your insurer being supportive of your data adds credibility.” Seach says. “It is credible because this is modelled data that insurers are using when they’re developing their own capital models and disclosure requirements.”

The next step is combining global exposure analysis with global data sets and models and considering forward-looking scenarios.

“That’s one really strong tangible value-creation point because it goes beyond creating innovative solutions – the real value is understanding the scope of the operations and bringing data to help support the initial analysis, and then decisions can be taken. Innovation and structuring will flow from there,” says Seach.

In an evolving risk landscape, businesses are focused on understanding their future risks and opportunities and adapting their insurance cover accordingly, says Seach.

Substantive business transformation – especially that brought about by climate change and other ESG urgencies – will almost certainly lead to changes in exposure, creating new assets to protect, and liabilities to guard against, she notes, adding that changes to business models and supply chains will impact business interruption exposures, creating new dependencies and affecting revenue and profit streams.

But insurance is not only about risk transfer, says Seach: “Though it is often overlooked, insurers have an important role to play in helping to ensure business transformation. They can facilitate innovation, de-risking the adoption of new technologies and business models, as well as help attract financing and investment. Insurers can be a part of sharpening the lens of opportunity – through new technology or new ways of doing things.”

Insurers are increasingly offering advice and expertise and access to data and modelling tools to identify and assess risks, as well as risk management and loss prevention services, with a big focus on resilience.

And while data is crucial, insurers can also provide critical insight and knowledge to their customers. Seach notes that the insurance industry can facilitate an exchange of knowledge by sharing experiences of working across sectors and geographies.

Furthermore, insurers are in a particularly strong position to identify emerging risk trends.

“Carriers are almost the ‘canary in the mine’, serving as an early warning system of impending and emerging risks,” says Seach. “Being at the forefront of sustainability, carriers are in a position to identify some of the trends and issues emerging sooner because of their broad lens across different industries. Carriers also have a cross-industry perspective that can help reveal how risks impact the value chain.”

Above all, says Seach, it is important to build strategic partnerships, and this goes beyond simply providing an insurance product for 12 months. “We develop long-term relationships with our customers to ensure that these strategies are developed and implemented properly,” she says. “Overall, it is about taking a holistic approach to risk and insurance management, understanding which risks impact the business, and how the business impacts certain external aspects like climate change, the environment and communities.”