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According to Andrew Kendrick, Chairman, ACE European Group, this is due to a lack of dialogue between buyers, brokers and insurers around such risks. He called for more transparency and discussions across the risk transfer chain in order to develop an understanding of the risk management and risk transfer options on offer and promote further innovative solutions.
“Despite the elevation of risk on the corporate agenda, there is little consistency in the way in which companies manage risk. Just over half of respondents say their chief executive or chief operations officer has a formal role and responsibility for managing risk. This seems surprisingly low”, said Ace in its European Risk Briefing 2012.
The new research from ACE focused on six emerging risks that it identified as increasingly important for 21st century business. Terrorism and political violence was deemed the most relevant by business with 32 per cent rating it as an important concern. It was followed by environmental risk (30 per cent), multinational/export risk (27 per cent), IT and cyber risk (26 per cent), directors’ and officers’ (D&O) liability risk (25 per cent), and business travel risk (21 per cent).
A further reason for a lack of preparedness could lie in a lack of crisis management plans, said Mr Kendrick. A third reason, according to Mr Kendrick and ACE, is that the research suggests European companies are underinsured for certain emerging risks.
Whilst some buyers might point to a lack of suitable insurance solutions to some of these emerging risks, Mr Kendrick argues that the level of insurance take up rather reflects a lack of collaboration between buyers, brokers and insurers and a failure to explain and fully understand risks and solutions.
“We have said for many years that in order for companies to have a fair assessment of their risk, there needs to be a collaboration between the broker, insurer and client and a sharing of information. If you do not have that sharing of information how can we most accurately price risk and understand exposure. It also helps to ensure that in the event of a claim there is less likelihood of dispute”, said the ACE European Group’s Chairman.
Speaking at a press briefing focused primarily on the threat of terrorism and political violence risk, Piers Gregory, Terrorism Underwriting Manager, ACE European Group, said the reason for increased concern is threefold.
High profile terrorist events in recent years dating back to 9/11, the financial crisis and ensuing recession placing more emphasis on political violence and ongoing geopolitical concerns have all contributed, he said.
There has been confusion amongst clients about the gaps that exist between specialist cover for terrorism and political violence and traditional property/casualty policies. Solutions have come under criticism. Mr Gregory thinks the market has made great strides to address these concerns but could do more.
“The market continues to evolve but I think it needs to do more. We have addressed the issue with our Shield concept, an integrated property and terror product”, said Mr Gregory. Shield is ACE’s new comprehensive terrorism and political violence all risk policy that attempts to bridge the gaps between traditional and specialist cover. It packages the separate covers under a single policy, with a single carrier and therefore hopes to remove uncertainty of cover.