COVID-19 can allow risk managers to shine: Airmic’s Ludlow

COVID-19 is enabling risk managers to demonstrate their value, while challenging insurers to prove theirs at the same time, John Ludlow, CEO of Airmic, tells Intelligent Insurer.

The COVID-19 pandemic has increased enterprise risk managers’ ability to break down the silos in their organisations. As organisations work to tackle the challenges of COVID-19, risk managers have been thrust into the spotlight, with C-suite executives more willing than ever to listen to them.

“The key is collaboration: insurers need to get much closer to their clients and work out what data and information they really need.”

That is the view of John Ludlow, chief executive officer of Airmic.

“Enterprise risk managers have had to step up, and because it’s such a connected risk, COVID-19 has impacted 80 to 90 percent of the other risks,” he says.

“It’s given them the licence to break down the silos across organisations, so you get much more joined-up thinking.”

He adds that it has become clear that it is possible to look at all other risks faced by an organisation through the lens of COVID-19.
“Now that this risk has crystallised, what does that do to your other risks? Risk management is moving from being about managing each risk individually to much more whole-business thinking.

“Enterprise risk managers can now go to the C-suite and executive committee with a much more credible voice because they are talking about a few high priority business issues.”

While enterprise risk management is very much a leadership and coordination role, those on the second line of defence—health and safety and security, for example—have had to step up too.

“People are all much more interested in the risks at the moment—and risk managers have become more highly valued than they were before,” he says.

Price issues
Looking at the insurance side of the situation, Ludlow adds that it’s a very challenging time, with the price of coverage soaring.
“It’s a horrible market—the hard market has become a harsh market,” he says.

“Prices are through the roof, because the insurers’ models are not working very well, and insurers are finding it hard to discern between good and bad risks or to segment risks to protect their own balance sheets and to price them.

“This restricts the flow of capital to market so what capital there is, is expensive.

“There are changes in coverage, last-minute decisions and lots of exclusions—it’s not very helpful, and it is undermining the value of insurance.”

In light of this, he says, risk managers are having to be more imaginative in how they tackle risk—exploring more robust contractual transfer, spending more money on mitigating risks, considering use of their organisations’ own capital in captives, or alternative risk transfer and other risk financing solutions.

“Unless they can get the market back under control, insurers are going to undermine their own business,” Ludlow says.

He believes the key is collaboration: insurers need to get much closer to their clients and work out what data and information they really need.
“Having standard products with standard questions going to everybody is not very helpful,” he says.

“Some of the requests for information from insurers have been, frankly, bizarre. There is some work to be done and we all need to work together because unless we fix the insurers’ models and work out what they need to know so they can differentiate between risks and can understand what their own exposure is, this isn’t going to go anywhere.”

Virtual conference
These topics will be on the agenda at this year’s Airmic conference: Airmic Fest on September 22 to 24, which is being delivered in an innovative online format that aims to preserve much of the feel of the live event.

It will include the usual keynote speeches, workshops and of course the exhibition, plus health and recreational elements such as yoga classes in the mornings and social events in the evenings.

“The other major innovation for this year is the Big Conversation—we decided to have an open platform where people can pitch in and have conversations,” Ludlow explains.

“People can dip in and out. Once you have registered and attended during the three days you will have access to go back later and visit other workshops and on-demand sessions—you will be able to carry on your learning experience from the conference.

“It’s very exciting; I expect next year’s conference to be a blended event combining the best of the live and online formats.”

Other hot topics Ludlow expects to be discussed at this year’s event include climate change, geopolitical tensions between the US and China, Brexit and the far-reaching effects of cyber risk.

“Like COVID-19, cyber is another great connected risk that is proving problematic because the whole world is exposed and you can’t insure the whole world,” he says.

In light of the connected risks currently facing the world, Ludlow expects the need for insurers and risk managers to work together to be a central theme.

“It’s about working together properly: not just meeting up and doing a deal but working together to build new solutions for the new problems,” he says.

“I am hoping we are going to change the culture—from ‘I have a relationship so I can do a deal’ to ‘let’s have a relationship so we can solve our problems’. We must help the insurers and they must help us.”

All of this will take place against a background of significant expansion for Airmic, which has acquired several hundred new members in the past three years. The organisation is enjoying massively increased member engagement, with attendance at workshops having multiplied many times over.

“We have more people internationally engaging with us, and a broader spread of roles—risk and insurance managers, C-suite people—and we have built the Airmic team out as well,” the CEO says.

“We have a brilliant middle management layer there now. I’m very proud of our team and the way we have been able to flick everything to digital overnight.”

Looking to the future Ludlow hopes Airmic will play a bigger role in shaping the environment its members operate in, becoming more outspoken about the issues they face and investing in technology, communication and knowledge-sharing.

“We definitely aim to have a bigger voice,” he says. As for insurers, he is throwing down the gauntlet, challenging them to collaborate with risk managers to tackle the issues that are currently causing so much frustration.

“We want insurers to continue to work with us, invest in us and in modelling the risks.

“Unless they do that, they are not going to get the capital, prices are going to remain on the roof and they are going to need to put in all the exclusions—leading to insurance losing its attraction,” he concludes.