Briefing: Brokers face data challenge as clients are told to assume more risk

By Jon Guy

If ever brokers thought they were stuck in the middle of a fight between underwriters and risk managers, the current market may well be the perfect storm.

Amid rumblings of poor service levels from insurers, brokers now face a question they have always wanted to avoid from their corporate clients’ risk managers.

For far too long, risk managers have simply asked their broker to get them the best possible deal to cover their risks.

In many instances, this was based on the most minimal of details around those risks – such as claims history and a derisory pledge that the insured understood their risks and was doing what they could to mitigate them.

However, times have changed and changed dramatically.

Insurers are now under huge pressure when it comes to hedging their extreme risks. Reinsurers have said the game is up and that they are not happy to assume risks if they are not priced at a point where they take into account the technical price for the risk, as well as a cushion for the currently rampant claims inflation.

Insurers have been left with little choice but to react and risk managers have suddenly found themselves on the back foot. No longer is it a case of risk managers getting the capacity they need for the risk they want to offset.

They are now in a position where they are faced with the need to fully understand their risks because they cannot afford to transfer all of them to the insurance market - either due to premium price or lack of capacity.

Better understanding risks

This situation has given risk managers more than simply pause for thought.

They now need to clearly define their risks and understand what ones they can mitigate in-house and which they still need to transfer at all costs.

To do so, they need what the insurance market has long had in abundance – data and analytics.

Some insurers have made muted overtures about their willingness to provide clients with data to better understand their risks. However, as those that have been in the market for some time know all too well, this is an industry which jealously guards its proprietary data.

Brokers say the pressure around access to data is increasing and quite apart from requests for capacity, negotiations now include how much data underwriters are prepared to share to offset the tightening approach to cover.

Can brokers change their mindset and let clients have access to their datasets and can they also persuade insurers to do the same?