Swerma president urges insurers to boost innovation as market hardens

The president of Swedish risk management association Swerma has called on the insurance industry to improve product development and boost innovation, while encouraging risk managers to up their game as the market hardens. Swerma president Athina Pehrmantold CRE that innovative product development is the number one area in which risk managers would like insurers to improve and put in more effort, adding that there is “huge market” among European companies for new risk transfer solutions. “The insurance industry is not really at the forefront of following industry developments. As a risk manager you need to be agile and respond quickly to new risks, but the insurance industry is in general quite slow,” she said. “Some initiatives have been taken with non-damage business interruption, for instance, but progress is slow and the interest among insurers is therefore limited. There are only a few players offering comprehensive or really fit-for-purpose cyber insurance today, for example, hence the market is still very restricted,” she continued. Ms Pehrman, who is also group risk manager at Electrolux Professional, went on to explain that renewals are becoming increasingly difficult for Swedish and European companies as the commercial insurance starts to harden. “It has been a soft market for a long time; we have been fearing this change and it has arrived now,” she said. Swerma’s president explained that things started to get tough with cargo renewals earlier this year and then property and financial lines became difficult after the summer. “We can see that there is still capacity out there, but carriers are not willing to utilise it as much as they did before, and certainly not at the same price and in many cases insurance conditions. They are tightening capacities and coverage, while premium rates are going up even for customers or placements with good loss records,” she said. Ms Pehrman said a few sectors in particular are facing “really tough” renewals. “Energy downstream is really, really difficult. Metals, pulp and paper, life sciences, pharma and food are all finding it hard. In terms of lines, property and business interruption, D&O, crime and cargo are particularly difficult. Insurers and reinsurers are also withdrawing full limits on certain coverages. Cover for nat cats is now more sub-limited than before,” she said. She added that it was not easy being a risk and insurance manger in the soft market, but stressed things are going to get even more difficult as the market hardens. “As a risk manager you will have to show that you understand the insurance and reinsurance industry, and what is driving price, coverage, capacity utilisation and other conditions. You will need to stay tuned to market change even more than before,” said Ms Perhman. Swerma advises members to start renewals much earlier than in the past, because they could get into problems where insurance markets previously used might not be available or will not be available at the price they expect. Ms Pehrman added that risk managers should seriously consider tendering their programmes and may also have to change their programme structures to secure the best outcomes. Those buyers that provide the best and most thorough underwriting material will come out on top, she continued. “Go much more into technical detail – future renewals will require more technical underwriting, more information provided on loss prevention and what mitigation activities you have in place. Survey reports are key; you need to provide much more detail. The better you can explain and present your risks technically, the easier it will be to attract insurers to use their capacity on your particular risk and the better outcomes you will secure,” she said. Ms Pehrman added that risk managers also need to carefully choose their broker or strategic risk adviser, and challenge their existing brokers. “Experienced brokers with broad market knowledge and a good network among insurers and reinsurers will definitely make much more of a difference now as the market shifts,” she said. But Ms Pehrman stressed that the harder market conditions are not all bad news for insurance buyers. On the flipside, it will be easier for risk managers to prove their worth within their own companies or organisations, she said. “The work you put in will now more visibly pay off. It might also encourage companies to put more budget into loss-prevention projects that could keep rate rises down,” she added. “If you are an experienced risk manager, are on top of your risks, work continuously with loss prevention and are able to show continuous improvement, you can actually come out pretty well. But there will be a change now where companies that are not familiar with their risks, or don’t manage them well, will face more challenges,” Ms Perhman concluded.

Swerma president urges insurers to boost innovation as market hardens

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