Risk management association Airmic has released its annual survey in collaboration with Control Risks, KPMG, Marsh, QBE and Sedgwick during the association’s annual conference.
The 2021 annual survey explores the current risk landscape, specifically focusing on the concerns, priorities and challenges of Airmic’s members.
The survey was conducted in Q3 2021 and includes qualitative input from roundtable discussions by Airmic members. Respondents range across sectors, with the largest majority working in the insurance and risk management industry.
Julia Graham, CEO of Airmic, describes the respondents of the survey as “statistically significant” — the organisations represented by Airmic members have an estimated total annual insurance spend of £10.5 billion, with an annual total of £75.8 million on professional fees for risk management services and £254.2 million for insurance services.
The survey identifies that risks associated with the COVID-19 pandemic have shaped the global risk profile (particularly in terms of risk management, crisis management and business continuity planning) owing to greater risk connectivity.
Airmic notes that the top three front-of-mind risks (business interruption following a cyber event, loss of reputational value, failure of operational resilience) remain the same from the 2020 survey in the ongoing context of an accelerated migration to a virtual economy.
The 2021 survey outlines other key risks as supply chain failure, employee health and wellbeing, changes in regulation, and disease and pandemics, respectively. In particular, supply chain failure (for example as a result of Brexit) carries significant reputational and operational risks from an ESG perspective.
Hot topics: ESG
In the survey, Airmic asked respondents to rate 28 ‘hot topics’ — regulatory compliance in the context of ESG was determined the most important topic, with climate change as a key area where insurance buyers and insurers can work more collaboratively.
More than 40 per cent of risk professionals believe that climate change will have a material impact on their organisations within one or two years, while 46.4 per cent believe that being ethical and environmentally responsible has also improved their organisation’s resilience and profit margins.
Respondents say that they view regulations and reporting requirements such as the Task Force on Climate-related Financial Disclosures (TFCD) as an opportunity to hone their focus on the ESG issues that could be potentially perilous to the resiliency of their businesses, with almost 40 per cent of respondents stating their organisations are ready for TFCD reporting.
In a themed report produced with KPMG, Airmic highlights that transition risks are attracting a higher level of attention as well as the more easily recognisable physical risks of climate change. Transition risk refers to the collateral damage as economies migrate to more environmentally sustainable models, such as increased costs or a dramatic shift in asset values.
The report highlights that an organisation’s management of climate risk is becoming increasingly integrated into a broader risk management framework for emerging risks, rather than as a standalone issue.
Graham comments: “ESG has seen a meteoric rise in our thinking and priorities. We all face challenges moving from what was largely a voluntary set of activities, to one with demands for legal, regulatory, stakeholder and contractual compliance, with associated demands placed on governance, transparency and reporting. The insurance industry, its investors and partners have a once-in-a-lifetime opportunity to make a global difference.”
Hot topics: cyber
In the wake of the pandemic and remote working models, ransomware and cyber threats placed as the second most significant concern for risk managers.
These top two topics were followed by diversity and inclusion, mental health risks, transition to a low carbon/net zero economy, and talent retention and development, among others.
Airmic’s themed report on remote working, produced in collaboration with Sedgwick, highlights how the pandemic, isolation and hybrid working has heightened mental health risk and talent retention issues — areas where risk professionals have the capabilities to preempt these risks.
However, Airmic notes that risk professionals currently lack a consensus on the formal processes for identifying such emerging risks, as these procedures must find the balance between being analytical, but also creative and pragmatic.
In its themed report with QBE, Airmic highlights the importance of agility and adaptability, as risk managers have an increasingly important role in the flexible deployment of resources to ensure greater dynamism with stakeholders.
Claire Combes, chair of Airmic, adds that the association’s salary and status survey demonstrates that developing a diverse profession reaffirms the importance of risk as a strategic enabler and is key to professional success.
Combes notes there has also been a shift in the responsibility for managing risk and insurance together in a combined space, particularly in the reassessment of people risk in a post-pandemic world.
Trends
In terms of the trends that will shape the insurance industry, Airmic emphasises the threefold importance of responsible leadership, sustainable growth and medical innovation.
“During the pandemic the velocity of digitisation has had a stunning impact on everything, from online services to remote working, to supply-chain reinvention, to the use of artificial intelligence (AI) and machine learning, to improve operations,” the survey says.
The survey cites the collective drivers of transformation in the insurance industry to be new competitors and business models, the capabilities of AI-powered analytics, improved performance of insurance innovators and the emergence of usage-based products.
Airmic’s annual survey concludes that risk professionals and organisations are “actively reviewing and changing their strategic approach to resilience” in order to better address the challenges presented by systemic crises such as the pandemic.
“Management and risk professionals need to be comfortable dealing with more and different uncertainty, allowing them to better identify opportunities and threats, and rise to the occasion. There is a concurrent opportunity for risk professionals to add value to and inform strategic decision-making,” the survey continues.
Graham notes some optimism in the insurance industry in the form of “green shoots of recovery”, although the harsh market definitively remains — a term used by Airmic to describe the market in terms wider than price (as is encompassed in the hard/soft dichotomy) to consider longevity, changing covers, increased deductibles and the unavailability of upper limits.
Graham adds: “We believe the role of Airmic has never been more important. We are taking a lead in the development of risk management and insurance as integrated and dynamic professions. As part of this process, we will examine what we have learnt from our member experiences and this survey, and convert the opportunities of using technology to develop smarter ways to work.”
