The Knowledge - Corporate Risks: Interview with RSA's Paul Greensmith | The Knowledge

‘There are few products for reputational risk. How do you value that?’

Q. Tell us about the big events in your markets?

A. Business interruption is one big area because of supply chain disruptions. With the Icelandic ash cloud, a lot of businesses associated with airports were affected. If you had a denial of access, no damage, extension, are you covered under that policy? There are a lot of interdependencies, and a lot of people were surprised by how far their supply chain extended.

We’re getting more requests for consulting around loss scenarios, where people say ‘what would happen if?’ And then, ‘how would that affect my insurance?’ The focus is what’s going on in the business and what could affect that.

Q. So business interruption is growing because of the series of extraordinary events that have happened?

A. Yes, like the riots. There’s activity around business interruption: denial of access, damage; and denial of access, non-damage. If the police close a street because they’re worried about rioters, and business is affected, that would trigger the policy to its limit, if you had that extension.

Other business interruption extensions include denial of access: supplier; loss of utilities; loss of customer. All have to be triggered by an insured act.

Q. What’s the role of the broker?

A. The broker has a crucial role in that it’s the adviser/agent of the customer. Most big brokers offer different consulting services. The overriding point is to look at the business in the light of a catastrophe – has it got the right covers, the right limits?

The broker can help with risk analysis, and in designing insurance. Which elements of risk does the business want to keep and which does it give to an insurer?

Q. Are there other new or emerging risks?

A. People have talked about e-risk and reputational risk. The cover out there for reputational risk is fairly nascent and reasonably expensive. There are very few products out there for pure reputational risk, because how do you value that? If an event happened, you could respond well and that would enhance your reputation. A huge market demand for a financial solution isn’t obvious.

Q. Do you think the market will harden soon?

A. If you ask ‘is there over-supply?’ I’d have to say yes. Prices are very low and have been going down now for four or five years, if not longer. The industry has just had £50bn losses from the earthquakes in New Zealand and Japan. So profits are lower.

There are pockets of prices going up but, across the board, I don’t anticipate that. It could reach a tipping point if there’s another big event. If profits are down, it will tip into a hard market.

Q. In a sustained soft market, how does RSA differentiate itself?

A. In January we started Global Promise, a commitment-based management programme for 15 of our major corporate clients. We have a structured meeting with the client where we find out about their business. Maybe it’s not even about insurance. Perhaps they’ve got a new manager who’s focused on cost-cutting, for example. Then we go away and put down in writing what our commitments are to that customer to help them deal with whatever their agenda is.

We revisit that every six months to see if we’ve done what we said we would do. If you go back and you haven’t delivered, that can be quite embarrassing.

It’s a pilot which has been very successful so far. I am confident that we’ll be rolling it out more broadly next year.