In these uncertain, turbulent times it’s nice to get a bit of reassuring, good news. The news is that big businesses in Europe are getting better at risk management and they think the service they receive from their insurers is improving.

That’s the optimistic message coming out of a new survey published this week by Brussels based FERMA—the Federation of European Risk Management Associations.

FERMA polls its members, the risk managers of mostly big corporations across 16 European countries, every two years to find out how their profession is evolving and what they think of the service they get from risk carriers.

The results make interesting reading because risk managers have always had an odd relationship with the insurance industry. It is a sort of “can’t live with them, can’t live without them” thing.

When you speak to risk managers, they are often quick to criticise insurers on a number of different scores: premium rates are too high, they’re inflexible on terms and conditions, they don’t get policy documents out or pay claims quickly enough, they don’t offer cover for the risks we’re really worried about, etc.

For their part, insurers say that too many risk managers have unrealistic expectations of premium rates, that they don’t provide sufficient data on risks for insurers to price and underwrite them, that businesses don’t have well thought out, long term risk management processes.

But the situation is improving at least from the buyer perspective, if the 2008 FERMA risk management benchmarking survey is to be believed. Perhaps not surprisingly given the soft market cycle, corporate insurance buyers consider prices to have “stabilised”, although they do expect to see some increases in the medium term, particularly in liability classes and specifically in the environmental arena and also D&O.

Encouragingly, the survey found that in 2008 25% of respondents believe insurers are “fully meeting their needs” compared to 21% in 2006. The proportion that said insurers still needed to find additional solutions fell from 62% to 57%.

Risk managers themselves are developing too. Risk management is becoming more financially oriented. More risk managers are reporting to the chief financial officer in 2008 than in 2006 (51% versus 46%).

More are implementing corporate level risk assessments. More than half of risk managers are now involved in corporate strategy planning. They are on top of their game. They feel in control of operational, financial and liability risks and they believe that these risks will diminish over time.
 
But a closer look at the findings reveals concern among risk managers about the future and how their “risk portfolio” is changing. Competition, regulation, sustainability, information security and fraud are all identified as threats to worry about tomorrow.

Why wait until then? Insurers and brokers, especially at Lloyd’s, are getting to grips with these types of intangible risks.

The survey says that 22% of risk managers want innovation from their insurers. The intangible risk area is a good place to start looking.

Lloyd’s insurers and brokers already offer a wide range of covers against risks such as network security, intellectual property, brand, reputation and, crucially, non-damage business interruption (for example, when a key supplier is knocked out of the chain).

Increasing risk complexity, global interdependencies and changing legal environments have created a market environment that cannot be satisfied by standard offerings alone. So, risk managers are increasingly aware of that and, at the same time, insurers see that opportunities come out of innovation.

This is all good news. Risk managers are well positioned in the organization, they have their traditional risks under control and they are closely watching to see how non-traditional risks are developing. At the same time, insurers are getting better at providing a good service (as well as the actual cover) and are also coming up with insurance products that address 21st century risks.

Enjoy the harmony while it lasts, cynics might say. The prevailing chaos in the financial sector and a prolonged hard market could change everybody’s thinking.

This entry was posted by Garry Booth on Friday, October 3rd, 2008 at 8:51 am and is filed under Exposure Management.