Airmic CEO John Hurrell, who opened this year’s Airmic Conference in Harrogate, England, believes that the insurance industry is moving at a faster pace and facing more changes it has ever seen before.
In his opening remarks, Hurrell announced the results from the survey of Airmic members. He revealed that respondents ranked cyber as their main concern.
Hurrell also noted that business interruption and cyber breaches were the two risks where participants had the lowest levels of confidence. The survey found that less than half of members had any form of insurance for cyber risks. Insurers and risk managers need to work together and review how they go about their business in order to boost the rising, but still low, levels of cover purchased for non-traditional risk such as cyber, the survey found.
According to Hurrell, 49 percent of Airmic members believe their insurers are ‘hardly innovative’ or ‘not innovative’ at all in developing relevant covers. Only 1 percent of respondents view their insurer as ‘highly innovative’.
He said: “All the big gains the market has made in recent years have come about as a result of collaboration between the interested parties and a willingness to change the way they do things. Innovation is no exception. We do think the condition is making rapid progress and product innovation is in place.”
The insurance industry is doing more to innovate but there is still a long way to go before it meets the growing demand of its clients for new products and solutions, according to Airmic.
Also speaking at this year’s Airmic Conference Nicolas Aubert, head of Great Britain at Willis Towers Watson. He emphasised how business success or failure is fundamentally dependent on the behaviour of an organisation’s people.
Aubert believes that strong risk culture can build business resilience, minimise potential losses and help organisations gain a competitive advantage.
He said: “In an increasingly complex corporate world, managing risks related to an organisation’s ‘human capital’ is critical. But the management of an organisation’s risk culture offers more than just a way of avoiding the downside of risk. A good, balanced risk culture can help an organisation identify and take advantage of the right opportunities, benefitting from the upside too.”
Aubert suggested that risk culture is built, shaped and reinforced by individuals, groups and leaders within an organisation. He highlighted that to be effective, it has to be driven from the top.
“While the effectiveness of any internal controls ultimately depends on the individuals responsible for operating those systems, it is not sufficient for the board to simply set the desired values.”
“Senior executives also need to ensure these values are communicated properly and that they are incentivising the desired behaviours while sanctioning inappropriate behaviour.”
He advised risk managers to consider how the company’s cultures, code of conduct, human resource policies and performance reward systems support risk management as well as the overall objectives of the business.
“Pay and incentive programmes can clearly have an impact on risk culture. This connection must not be overlooked. Leaders need to assess talent risk across the organisation and ensure that risk culture aligns incentives to desired behaviour,” he said.
Captives were put under the spotlight in a panel at this year’s Airmic Conference. Jeff Soar, partner of Europe, Middle East, India and Africa (EMEIA) financial services at EY, said that regimes are changing and there is still a huge demand for captive insurance.
Simon Burtwell, director of EMEIA financial services at EY, explained that there is still a commercial need for captives and it is evermore pressing. He suggested there is much more of a drive for alternative transfer from risk management departments.
Soar added that the unprecedented time of commercial, regulatory and tax change is likely to affect commercial, financial and operational aspects of a captive insurer’s business. Big contributors, including the tax landscape, Solvency II, increased operational and compliance costs, base erosion and profit sharing (BEPS), and reputational damage, have all affected the growth of the captive market.
Tax landscape changes and Solvency II in particular have kept the industry busy, according to Burtwell. He said that these impacts have given parents the opportunity to rethink whether they need a captive. But he added that captives are so much more than a tax avoision vehicle but that’s not attention they receive.
