Expert view: Entering the new decade: emerging risks and evolving risks

The beginning of the year was marked for many of us by the disruption caused by widespread public sector strikes that crippled transport in some areas. Businesses up and down the country were affected as staff, suppliers and their clients struggled to move themselves and their goods from place to place.

These are uncertain and challenging times for businesses and individuals in France and across Europe. New technologies bring with them both huge advances and potential new challenges for risk managers and their companies. The geopolitical landscape is changing almost constantly, posing challenges to companies doing business both at home and abroad.

Against this backdrop, the insurance market has begun to harden for certain lines of business including property, the mainstay of many risk managers’ insurance-buying budgets.

For insurance buyers, this may not seem like the news you want to hear. Times like these, however, are where the quality of risk management, risk information and risk analysis really come to the fore. We want to stand behind our clients – both in the large and middle-market segment – who have sound risk management strategies. Our aim is to offer continuity of coverage and service to our clients and brokers during this new market phase – embodying our Payer to Partner philosophy.

Insurance is about much more than providing capacity. Our teams of risk engineers, for example, can work with clients upfront to gain risk insights that help clients improve their risk management strategies and our underwriters to more effectively tailor coverage. And the knowledge gained from events or “near misses” can be fed back into these strategies to strengthen risk management still further.

Extreme weather events continue to be a major issue for companies of all types. This summer, a heatwave swept across Europe, resulting in several deaths across the continent. The highest-ever temperature was recorded in France, and hundreds of schools were forced to close. As well as the potential health effects on people, record temperatures affect some of our most famous industries, such as wine-making.

The year ended, as it had begun, with severe storms wreaking havoc across France. Indeed, just last month, severe weather warnings were issued for this part of northern France as high winds made their way across the country. Wind, snow, hail and flood all have obvious effects on businesses’ ability to function.

Insurers, of course, have a long history of supporting their clients through weather-related events and losses. Our property underwriters work closely with clients to understand their exposures both in France and across the world. We collaborate with risk managers to create global insurance programs, where appropriate, to give them a handle on their exposures and risk management strategies wherever they have property risks.

Last year, we launched a risk modelling capability for clients, enabling them to model their natural catastrophe exposures and adapt their risk management strategies. The better the information, data and risk mitigation, the more tailored and responsive can be the risk transfer.

The changing nature and severity of natural catastrophe events call, in some cases, for a new approach. Our underwriters can work with their colleagues at AXA Climate to put together parametric solutions that can help clients have financial certainty should an event hit.

A parametric trigger can be designed to respond to an event that causes a financial loss to a client, without the client having to demonstrate the loss. For example, if the temperature reaches a certain pre-defined threshold, which data shows could result in losses for the client, the policy pays out – automatically and swiftly.

As well as this type of coverage, we can work with clients to help them retain natural catastrophe risk within captives or to use structured reinsurance solutions to transfer some of their exposure to extreme weather events and natural hazards.

The business world is changing. New technologies offer enormous potential for companies to change the way they work.

And as our clients innovate in their businesses, insurers too must innovate to find ways to cover new and emerging risks. Our innovation teams are working with artificial intelligence and machine learning to find ways to harness the masses of data produced to improve risk insights and underwriting.

Our new risk innovation incubator, Cube, was launched late last year to build on some of the lessons we have learned from working on several successful proofs of concept and apply them to some of our processes. This six-week program of workshops enables risk managers to work alongside AXA XL innovation and risk experts to find solutions to their most complex risks.

Meetings such as the AMRAE Rencontres provide a great opportunity for us to talk with our clients and brokers, to hear their challenges and concerns and work to provide solutions that enable them to continue to do business when things get tough.

None of us knows what 2020 will hold. But we will stand firm behind our clients and look forward to working with you in the months and years to come.