Briefing: Risk managers question insurance relevancy

By Jon Guy

Risk managers gathered in Madrid last month for the biennial Ferma Forum conference – hosted by trade association the European Forum for Risk and Insurance Professionals (Ferma), 2024’s event was held between 20 and 22 October.

With a packed agenda, much of the conversations surrounding insurers will have made very uncomfortable listening.

The event opened with publication of Ferma’s risk management survey, which polled 1,000 risk management professionals from across 77 countries.

This found that 53% of risk managers believe they are facing a future where significant parts of their risk portfolio will become uninsurable.

In many ways, this finding set the theme for things to come over the two-day event.

While insurers were busy telling risk managers how keen they were to work with them in meeting the challenges of the major risks they face, risk managers were not buying it.

Delegates were risk managers of major corporate firms – a large number from the UK – and they were not pulling any punches in their views that insurers have become more absent.

Although brokers were feeding back to attendees that there was capacity for the likes of cyber risks and natural perils, risk managers flagged that they felt insurers were becoming increasingly unwilling to meet their needs around emerging risks.

The main reason insurers gave for this action included a lack of data on which to base underwriting and pricing decisions, amid a general fear of unexpected exposures.

ESG loggerheads

The environmental, social and governance (ESG) agenda is without doubt a major concern for risk managers.

There are growing fears over the rapidly changing regulatory landscape here, with potential new risks around compliance and reporting.

This presents another area where risk managers said they were looking for support from insurers – particularly around enhanced directors’ and officers’ (D&O) risks from activists looking to take legal action around allegations of greenwashing or ESG failures.

Once again, insurers have adopted a cautious approach – they told risk managers that while the number of legal cases being brought over ESG breeches were increasing, the vast majority were being successfully defended.

Relevancy is questioned

Typhaine Beaupérin, chief executive at Ferma, was clear when addressing Forum attendees.

She said that risk managers were seeking solutions to the major risks they faced and that insurers were simply excluding those coverages from policies.

“That is not a solution,” she told the media.

Because of this, risk managers have been looking for new ways to cover affected risks.

For example, there has been a surge in demand for captives and alternative market solutions as companies seek to mitigate and transfer risks they believe they cannot place in the company market.

The biggest concern for insurers has to be the terms and language which was consistently used by risk managers when talking about the insurance industry – far too many times in conversations around insurance, the word ‘relevance’ was bandied about.

It was sobering week for insurers. Risk managers want action, not platitudes, when it comes to their risks.