Higher levels of sophistication needed to link insurance to risk management functions
As premium price rises begin to bite the markets outside of Asia, PARIMA’s chairman Franck Baron says now is the time to properly embed the links between risk management and insurance, in order to prepare for the realities of next year’s market.
“There is a growing awareness in the risk management community that higher levels of sophistication are needed in terms of insurance buying and risk management in companies across Asia,”explains Baron.
“The fact there is the beginning of a pricing increase cycle in Europe, yet to be seen in Asia, but for which there is evidence of in the US and Europe, is actually going to help organisations understand that insurance should be treated as a strategic risk financing tool. It cannot be purely commoditised, especially for corporations.”
Baron adds: ‘To put it very bluntly, if you have been tasked by your C-suites to generate a 10% savings rates over the past 10 years, but now you will have to go to the board next year and say ‘It is now going to be 10%+’, how do you cope with that? How do you explain that?”
According to Baron, this is exactly the kind of challenge the market needs, and as chairman of PARIMA, he is trying to equip members to cope with this impending challenge.
“We need this challenge because insurance is still seen as a commodity and not a strategic risk financing tool. It is just a piece of paper that is compulsory so we have to pay for it. We have to have it but it is not providing added value to the business. It is just seen as part of the licence to operate.”
Baron says it is frustrating that organisations across Asia are yet to see the beneficial links between insurance and risk management but the reason for this is “not easy to answer”. He says many of the issues are because of the way enterprise risk management functions are not integrated into insurance buying functions in companies; meaning there is a lack of communication and clarity between both, which cause friction and inefficiencies.
“This is an issue we would like to address at PARIMA and that is why we are inviting both parties to our events as a way for people to get used to the collaboration and interaction.”