As head of one of Asia’s leading Property & Casualty insurers, Jarrod Hill makes it his business to understand the opportunities and challenges present in the region.

The regional head of Property & Casualty at ACE Asia also knows his company and its products, having been with ACE since 1991. The ACE Insurance franchise in Asia Pacific serves Australia, Hong Kong, Indonesia, Malaysia,  Singapore, Thailand and several other nations in the region, with core Property & Casualty and Accident & Health lines, as well as its growing Small to Medium Enterprise and Personal Lines businesses.

Strategic RISK talks to Jarrod Hill about some of the big insurance issues in Asia at present:

On the top risks facing Asia’s large national, regional and multinational corporates:
“Consistently in discussion with clients and with our broking partners, legal, regulatory or compliance risks figure prominently. In addition, depending on the clients and their industry or location, reputation, human resources, natural disasters and supply-chain management are at the forefront. The Thailand floods of 2011 very much heightened the awareness of supply-chain management, adequate business-interruption protection and management of catastrophe risk and exposure.”

On what ACE Asia is doing to address these risks:
“We work closely with our broking partners and clients on developing appropriate risk-management plans, particularly around asset protection. We will be launching a new online risk-management tool this quarter that will offer clients an efficient platform to identify areas for risk assessment and manage their risk-mitigation efforts. The multinational client segment in particular is seeing continual and varied challenges around regulation and compliance. As a provider to this segment, we have invested heavily in our service and delivery capability, not only in Asia but globally to minimise the compliance and regulatory exposure for these clients. We have made available both online tools – ACE Worldview – and expertise to assist both clients and brokers.”

On how organisations and the insurance industry in Asia can manage natural catastrophe risk:
“The insurance industry as a whole has a leading role to play in the identification, assessment and advice on mitigation of risk in relation to natural catastrophes. This not only relates to the fixed assets of the client but also the identification and management of exposures to key suppliers and customers. As we witnessed post Thailand floods, there was significant supply-chain disruption.”

On the state of property catastrophe risk insurance in Asia:
“Outside of Thailand, we have seen a consistent and adequate catastrophe capacity to meet client needs. In respect to Thailand, there was, and remains, a reduction in capacity available. However, capacity is returning to the market and more client needs are being met. The available capacity in Thailand remains significantly lower than prior to the event and is priced differently, but capacity will continue to return, particularly as further flood-mitigation measures are implemented and flood models are refined and improved. As insurers and reinsurers become more comfortable with the output of these flood models and therefore have more confidence in the measurement of their aggregate flood exposures to various events, I would expect additional capacity will become available.”

On the key factors driving greater demand for Directors’ and Officers’ (D&O) liability insurance in the region:
“Firstly, increasing claim activities. Many regulators are more proactive now due to the tightening of regulations and the market pressure. For example, the D&O claims initiated by the Securities and Futures Investors Protection Center in Taiwan and US-listed Chinese companies’ class exposure are two examples.

Secondly, changes of relevant regulation. For example, listed companies in Hong Kong are now required to arrange appropriate insurance for directors under the code provisions, effective 1 April. 2012. (The issuer may choose not to adopt this provision but must explain the reasons for its decision in its corporate governance report; the issuer is encouraged to comply but does not need to explain non-compliance.)

Thirdly, better understanding. D&O insurance is now better understood, coupled with the type of protection being offered.

On what risk managers need to consider in managing executive liability:
Risk managers should find the right insurer in terms of product coverage, and assess the insurer’s networks, its claim reputation and its financial strength, given that D&O claims tend to be complex and run for a protracted period. Encouraging good corporate governance within the company is also very important to minimise the executive-liability exposure.

On the drivers of demand for environmental liability insurance:
Over the past decade, businesses have faced growing environmental liabilities and stricter regulations. Stricter environmental regulations are becoming a global phenomenon, with both developed and emerging nations attempting to limit and repair the damage of pollution, and establish legal means to fund remediation. The demand for environmental insurance is mainly being driven by two factors: Changes in regulations and heightened enforcement, and insureds becoming more sophisticated in understanding their current pollution coverage (or lack of it). Standard liability insurance provides limited coverage for pollution costs and in almost all cases, coverage is limited to third-party property damage and third-party bodily injury arising from sudden and accidental pollution incidents only. Serious pollution can also occur gradually and in most cases significant costs are associated with first-party and third-party clean-up. Other costs that are not covered under standard-liability insurance include emergency response, civil fines and penalties, damage to natural resources, and diminution in third-party property value.

On steps organisations should be taking to understand and manage environmental risk:
There are two main aspects to understanding and managing risk, assessment of mitigation and risk transfer. Environmental insurance is viewed primarily as third-party liability coverage, designed to mitigate the risk of pollution-related lawsuits that have been specifically excluded under general liability, excess and umbrella policies since the mid-1980s. Businesses around the world also need to insure against the risks of pollution-related damage to their own property, as well as offset the cost of clean-up and associated liabilities for damage to the property of others.

On the impact of the rise in employee-led litigation in Asia:
Employee-led litigation can have a number of negative effects on companies: financially it is an unplanned expense the company incurs as a result of the litigation; culturally it can have a negative impact more broadly on staff morale. Litigation can also distract senior management’s focus if they are involved in the litigation. Senior management can also face personal liability as a result of litigation against them. Again, the management of the exposure can be separated between mitigation and risk transfer. For the latter, liability policies are available that not only cover the defence costs, but also provide advice on the selection of defence counsel and strategies to manage the situation. With respect to mitigation, a clear and updated employee handbook is fundamental, coupled with consistent and clear communication, as well as regular training of management and employees.