Risk managers call for more time to manage expectations in ‘harsh’ market conditions

Insurers are being urged to give risk managers plenty of time to prepare for tougher renewal negotiations and help them manage internal expectations as reports rise of a “harsher” market in certain commercial insurance lines. Risk and insurance managers should use the opportunity offered by the harder-nosed approach from most leading corporate insurers to show their real value, according to leading buyer representatives. John Ludlow, CEO of Airmic, told UK risk managers during his opening remarks at the association’s annual conference in Harrogate yesterday that the commercial insurance market is seeing “more challenging” renewals for some lines and industries. This echoes similar comments made by leading Dutch risk managers at the Narim annual conference in Rotterdam, during a roundtable discussion hosted by Commercial Risk Europe. The Dutch risk managers agreed with Airmic that the market cannot be described as hardening overall. But negotiations are certainly tougher in some lines, and for loss-hit accounts in particular. “It seems that the dash for market share is over and underwriting decisions are more discerning,” said Mr Ludlow. “This may be uncomfortable, but is ultimately a good thing for risk and insurance managers. It is in these conditions that experienced insurance buyers can really demonstrate their value,” he continued. Mr Ludlow agreed with his Dutch peers, however, that the last thing a risk manager needs at times like this are nasty last-minute surprises. “I would also plea to insurers that changes made to your risk appetite are clearly signalled to policyholders. Several members have reported being given little notice that an insurer is changing its strategy, and in some cases this is preventing members from managing the expectations of their business leaders, and even having to delay renewal,” said Mr Ludlow. “We appreciate the challenges in the current market, but we would urge insurers to signal their intentions as early as possible to protect valued relationships and to ensure a smooth renewal process. I am sure the next few days will give ample opportunity for these discussions to take place,” he told delegates. Commenting in Airmic’s latest member survey report, which was published yesterday, Mr Ludlow said it is “a harsh market, rather than a hard market, because the challenges are less about price and more about the process and communication”. “If insurers do not provide adequate notice when cover is withdrawn, then the implications can be quite severe,” added Julia Graham, technical director and deputy CEO at Airmic. “Members want more notice from their insurance partners if terms are changing, and a more open and collaborative relationship.” The association added that timing of decision-making by underwriters is important and the way decisions are communicated to buyers needs to improve. In a recent interview with Commercial Risk Europe, Ferma president Jo Willaert stressed the need to avoid using the term “hardening” market. He said the focus should be more on professionalism in a market that is giving risk managers a chance to show their worth. “I don’t like the term ‘hardening market’. I would say a professional market… in which insurers, brokers and risk managers are obliged to be much more professional. They need real skills to place the business. Risk managers need to be able to properly measure and analyse their risks so they can sell them to the insurers. We will all have to be much more professional,” he explained. “The best brokers, the best insurers, those that can really evaluate the risk, will do best. The best risk managers, with the best skills, will stand out even more in any hardening market. The more difficult the market is, the more the risk managers’ role and added value will be appreciated by the board and decision-makers. The reason being is it becomes much more than buying insurance. It is about managing the risks holistically, because in a hard market there are not always cost-effective insurance options, or it might not be possible to transfer the risk at all. So, the whole ERM approach and wider risk management remit will need to come to the fore,” added Mr Willaert. Meanwhile, businesses and risk professionals are not paying enough attention to emerging and intangible risks, according to reports published at the Airmic conference this week that call for a transformation of risk management frameworks and closer collaboration with the insurance market to boost response.

Risk managers call for more time to manage expectations in ‘harsh’ market conditions

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