Peter Olyott, CEO, WTW
The integration and interdependency of risk which had come to the fore during the Covid19 pandemic and more recently the geo-political impact of events in the Ukraine and more latterly Israel, requires organisations to reset the traditional approach to both risk and the management of risk including the financial treatment of the consequences of these risks.
Historically risks were compartmentalised, depending on their risk origin and they were often dealt with separately (and in fact by different areas within the business). Human Capital risks, as an example, which have come to the fore particularly in technology companies are now being seen alongside the traditional Fire and Allied Perils risks, Commercial Crime and Cyber Risks and growing legal liability risks. Additionally, the scope of Human Capital Risk has spread beyond the traditional views of employee benefits and health care.
The risk advisors’ role is to guide the client through the process of risk identification, evaluation and then, the assessment of the potential means of treatment. Additionally, it is important for the client, with the assistance of the risk advisor, to prioritise risks, but only once the potential interdependencies have been determined. This process allows clients to both plan for and assess the most appropriate solutions to manage and account for risks which may impact the sustainability of their business.
These changing dynamics in the risk field will surely bring about product changes and even now we have seen how cyber related risks have been excluded from the traditional property and casualty classes of insurance and brought in a new cyber insurance class of business, with products ranging from liability, first party property damage as well as third party losses. With the cyber risk landscape becoming more intense, especially with the rise in systemic cyber events tied to vendor or supply chain risks, as well as geopolitical threats like war or terrorism, the ability to successfully identify and evaluate risks becomes more important. Statistically breaches are escalating rapidly – over 3,200 breaches in the USA in just one year is staggering. With the projected rise in the cost of cybercrime, we’re looking at a massive shift in the way companies, insurers, and governments need to approach cybersecurity.
Even the older classes of insurance such as fire and perils or all risks property and business interruption insurances have largely been reset following the global pandemic, which was Covid19. Something such as the traditional motor fleet or automotive insurance product are in dire need of upgrading with the introduction of electric vehicles, hybrid vehicles, self- driving vehicles and the like. The changing world therefore presents a wealth of opportunity for risk and insurance advisors who are willing to challenge and change the status quo.
On the insurance side, it’s interesting to see how the coverage definitions are evolving. The fact that insurers are now including supply chain disruptions shows that they’re responding to the complexity of these risks.
WTW is that company – we assist our clients to face the future with confidence!
Quotes
- “The changing world presents a wealth of opportunity for risk and insurance advisors who are willing to challenge and change the status quo.”
- “The risk advisor’s role is to guide the client through risk identification, evaluation, and the assessment of potential treatment options. Prioritising risks must only happen once their interdependencies have been determined.”