Insurers must innovate to meet risk managers' needs - or become irrelevant

Insurers have been told that increasing numbers of risk managers are questioning their relevance amid concerns over their appetite to tackle a range of emerging risks.

Former general secretary and president of FERMA, and past president and chairman of IFRIMA, the Worldwide Federation of risk management associations, Maurizio Castelli, said unless insurers were willing to be more creative with their solutions, risk managers would be forced to look at new ways to protect their balance sheets.

“I have to say I am trying to see where there have been any new solutions to the risk challenges we face,” he explained. “I am looking to see how insurers are ready to examine new solutions and also integrated solutions to meet new risks.

“The industry has always reacted in the past. I have always had the view that when the market is in a hard part of the cycle, insurers will look to engage with risk managers. However. I have not seen that in this cycle which as we know is starting to soften.”

Castelli, who is now CEO of the Milan-based risk management consultancy Augustas Risk Services and the leader of the risk management practice at global broking network Brokerslink added: “There is talk of the way in which a strong risk managed approach is recognised by insurers. In theory they are doing this but in practice it seems it is not the case.”

He said that risk managers were concerned at the lack of response from insures to a range of new risks and as such there were already signs that the risk managers were looking to other ways to mitigate and manage the risks leaving insurers in danger of being left behind.

“We are seeing more interest in alternative solutions and captives,” Castelli added. “If insurers want to remain relevant, they need to look at how they can better integrate solutions to meet the needs of the risk manager.

“Insurers have always approached the issues in a very black and white way. “It is covered by the policy, or it is excluded’. However, these risks are not black and white and as such they need a solution which takes sections from a range of products to create a response.

“Most emerging risks cannot be covered by a single solution. Insurers need to have the discussions around what they will and will not cover. That coverage can be part of an integrated solution which might include, higher retentions, self-insurance via a captive or parametric covers. Insurers need to ensure they are not too rigid.”

He added underwriters needed to better collaborate with risk managers and other parties in the risk management environment to come to a more refined solution using data, analytics, wider sector insight and knowledge.

“In the end I cannot see insurers disappearing,” Castelli added. “We have seen the cycles and the have come through them all. In a world of increasing risks, we are seeing risk managers working in a different way. They have gone from operational to strategic. Insurers will need to look at how they can move from an operational mindset to a more strategic approach.”