The importance of insurance for medium-sized businesses

Commercial Risk talks to Nina Arquint, CEO EMEA of Swiss Re Corporate Solutions, about the issues facing medium-sized businesses and how innovation can provide the right solutions.

Do you believe that the most innovative insurance solutions are exclusively designed for large corporates facing complex risks across the globe? According to Swiss Re Corporate Solutions, the picture is much broader.

Both large and mid-sized businesses face an increasingly perilous risk landscape covering products, supply chains and contractual tightening, as well as the new operating models created by digitisation and existential challenges like climate change. In the current geopolitical and macroeconomic environment, challenges for risk managers have never been greater.

Indeed, insurance is as critical for medium-sized businesses as it is for larger corporates, and often a critical means to increase operational resilience. A large loss poorly managed can have a devastating impact for a business without huge financial reserves and dedicated risk and insurance management teams.

For example, if a large loss occurs and the time required to settle the claim is too long, a company can face a potentially ruinous liquidity shortfall.

“We address these issues for our medium-sized customers on a daily basis,” says Arquint. “These businesses are often lean and focused, and they do not have the resources to employ teams of professional risk and insurance managers – and this is where we have a lot of value to add,” says Arquint.

Advanced solutions like international programs, parametric insurance and other innovative risk solutions can play a vital role in bridging the resources gap, says Arquint. “It’s about providing straightforward solutions to critical issues”.

International insurance needs

While there are different definitions about medium-sized companies depending on the regional scope, what is sometimes understated is that those businesses often have an extended international footprint equal to that of large corporates. For multinational mid-sized companies, supply chains and customer bases are increasingly global and require cross-border operations.

“Similarly, when it comes to commercial insurance, the use of international programs is sometimes associated with large multinationals with international operations and a host of overseas offices,” says Arquint. “But many of Swiss Re Corporate Solutions’ customers have set up an international program even when only operating within one or two countries outside of their headquarters.”

For example, an international insurance program can help businesses that operate across borders but with a decentralised structure and therefore less visibility about the risks faced by their global operations. “Our offering addresses exactly this need to have a more consistent coverage across countries with clear visibility on local policies issuance, premium payments, claims and risk engineering services,” says Arquint.

Large or medium sized, what is key is the network

At the core of the Swiss Re Corporate Solutions’ offerings are people. There is a vast network of employees and partners to provide constant and comprehensive support across the globe.

“We also work very closely with brokers to help these businesses make the right risk and insurance decisions to be able to grow sustainably in the long term, and to support them with adequate insurance coverages and risk management when or if they are expanding their business internationally.”

Technology is also key to making the international program offering more efficient and effective, says Arquint. “Our PULSE portal, for example, allows risk and insurance managers and their brokers to view their policy, track premium payments, to submit and monitor losses, and to update risk improvements in real time, and from one secure place that essentially simplifies the communication associated with International Programs for all parties.”

Alongside the PULSE platform, Swiss Re also has its ONE Form wording framework to ensure automation, consistency and transparency of coverage, and a network covering 150+ countries. The majority of local policies are issued by Swiss Re Corporate Solutions’ own offices, with their strong network partners issuing policies in countries where Swiss Re Corporate Solutions is not represented.

Solving critical issues with straightforward parametric insurance

Another example is parametric insurance, which is a proven tool that is just as applicable for medium-sized clients as it is for large corporates. Indeed, parametric offerings are gaining traction within the mid-market as an efficient way to solve emerging or accumulating risk issues, and to benefit from fast cash settlements, says Arquint. “This is particularly true for businesses with assets or key suppliers based abroad in locations exposed to earthquakes or windstorms, floods or droughts.”

The big benefit of parametric insurance is how fast customers can receive the liquidity so they can keep the business running. Thanks to pre-defined triggers, an index-based cover and a swift cash settlement, the claims process is very simple. Payments can be used for a broad range of reasons. “The applicability of parametric insurance is rising because of an increasingly volatile environment but also advancements in data and technology that makes it easier to develop more indices and more accurate modelling,” says Arquint.

“Many of our customers are family owned, and protecting their assets over several generations is a very high priority,” says Arquint. “These businesses can rely on Swiss Re Corporate Solutions to provide risk engineering insights and analytics so they can take a forward-looking approach to risk management. “It’s crucial for businesses of all sizes to understand the risks they face so they can mitigate them appropriately,” says Arquint.

“As an insurer and part of the Swiss Re group, we’re in the privileged position to have a broad view of the changing risk landscape. Risk experts in our industry practices and risk engineering teams leverage our broad group resources (eg Swiss Re Institute) to work closely on the ground with our brokers and customers on their risk-mitigation plans.”