Rates rises are hitting APAC risk managers hard and boardrooms are awash with questions on why prices are on the increase. PARIMA’s president, Franck Baron, shares his top tips for managing this issue.
- Information is your best friend: It’s about information and about how you are telling it. It’s about having the right conduit internally, to escalate this type of information to the people who need to hear it. If you do not have yet, the right level of communication, the right channel of information and the right way of reporting it, then you’re going to be in a bit of trouble. If you have some sort of channel to report information, start socialising the fact that the market is turning, the market is shifting and that this may have potentially, an impact on your insurance buying or an impact on your next budget cycle.
- Value risk strategies: The next thing you need to focus on is valuing risk management initiatives as best you can. If you have a good loss-control programme in place somewhere, or risk prevention programme on something similar, then make sure you are doing the right story-telling to your workers and insurers. To tell them, ’Okay, despite the overall increase, my risks are better than others” for these reasons.
- Connections are key: The next challenge for a risk manager is making sure that you can connect and partner internally, with all your stakeholders so that you can get good stories about risk management in each and every department. Namely with your CIO and CSO for cyber, your factory and supply chain managers, for your loss control on physical and non-physical assets, potentially with HR on your wellness and well-being programmes for your ED. For me, it’s also a wonderful opportunity because it’s a way to say, to knock at the door of people you are not talking to, and say “Guys, I need your help because at the end of the day we’re going to be impacted fairly, by these market shifts.’
- It’s all about relationships: For some risk managers who have been investing in a long-term relationship with insurers, then you’re going to face lesser trouble. However, if you have been extremely opportunistic, then the markets still have a memory of it and are likely to say ’Since you moved around, I’m going to give you my short-term rates” and the short-term rates are going to be more expensive. It’s up to each and every of us, but I just want to make sure that when you say to your top management “We’re going to be opportunistic and short-term”, that people understand that there is a flip-side to this strategy, especially when there is a shift in the market.
- Insurers aren’t money pots: When we look at critical vendors and critical suppliers, we are looking at making sure that there is a decent level of profitability to them because we want to secure the relationship with them. So if you think that an insurer is a critical financial protection provider to you, you should make sure that there is at least a decent profitability being generated, along the years by them. Otherwise, obviously, besides any catastrophe or any very large event, but based on your average loss-profile, your insurer should be able to make some money. I think that for risk managers, we should not see insurance as being a pot that you can go into and get some money, without any expectation from the pot-owner, to get to some return on it.