Risk managers struggle to insure against top two exposures

Risk managers are struggling to purchase cover for some of their biggest exposure concerns – reputation and cyber – a new survey has revealed.

Airmic, the UK-based risk managers association, released the results of its survey at its annual conference in Liverpool this week. It found that the insurance market is not keeping up with demand for solutions in emerging areas.

For example, the survey revealed that reputational risk is the number one worry for risk managers, but the vast majority (93%) do not buy cover, with lack of availability or inadequate cover given as the main reasons.

Cyber risk features twice in the top-six concerns, and yet two-thirds of risk managers say they are unable to buy insurance for the risks of loss or theft of personal data and business interruption, largely because of inadequate cover and high costs.

The only risks in the top six with substantial insurance availability were catastrophe events and public liability.

Intercontinental Hotel Group director of corporate risk and reputation, Greater China, Rudi Wertheim agrees that cyber and reputation are difficult exposures to insure.

He tells StrategicRISK: “The reputation insurance market is still very much emerging. The difficulty is [determining] what you are insuring and what are you insuring it against.

“You would have to place a value on your reputation and then decide whether you insure against a catastrophic loss, which elements you would insure, or whether it’s just the value of getting experts in to advise you on how best to deal with an event. There are a lot of options there and it still seems to be a very much emerging.”

Given the UK report findings, it is perhaps no surprise that lack of innovation once again topped the list of concerns about the insurance market, with 60% marking it in their top three. Broker conflicts of interest was also a significant worry (41%) along with multinational insurance programme compliance (31%).

Almost one-quarter of members were concerned about a rise in claims challenges. These fears were justified given an increase in the proportion of members reporting having had a claim challenged, reduced, delayed or declined in the past three years – up from 29% in 2014 to 34% this year. The top three reasons given were: late notification; basis clauses / conditions precedent; and being unable to obtain information requested by insurers.

The survey painted an encouraging picture of the standards of risk governance within businesses, with the 97% of respondents agreeing that their board assumes “ultimate responsibility for risk”. Similarly, over two-thirds of risk managers believe that risk management has become more important in their business over the past five years. Only 3% believe it has declined in importance.

There is more work to be done, however.

In particular, the survey highlights that breaking risk management out of its traditional silo is one of the biggest challenges: 42% of risk managers believe that risk culture is not embedded in their organisation, and 36% reported that risk management and risk education are not integrated into the wider business.

Airmic chief executive says John Hurrell (pictured) says: “These results show that it’s more important than ever that insurers, risk managers and brokers work together to find risk transfer options fit for 21st century businesses. Creating relevant products is no easy task but will benefit everyone in the market – underwriters, brokers and policyholders alike.

“We are, however, delighted to see that risk management is growing in status and that the vital work of risk professionals is being recognised. This is good for the profession but also good for business.”