Contract certainty will be a hot topic

Contract certainty and compliance will be hot topics for discussion at this year’s AIRMIC conference, according to Matthieu Caillat, CEO AXA Corporate Solutions UK Branch.

“I am sure that, as in past years, pricing trends will once again be a ubiquitous discussion point as will the need for innovation, and ways and means of transferring uninsurable and difficult risk,” he added.

He said that having to find smarter ways of transferring and mitigating risk with either the same or reduced resource available to them is a major issue for risk managers and insurance buyers.

“The pace of change is unlikely to abate with the result that the spread and complexity of risk presented to risk management teams will continue to evolve at a frightening pace,” he said. “This generates the need for insurers to deliver ever more exotic covers and services while still retaining the financial stability their clients demand.”

He believes the only way both can be delivered is by ever increasing co-operation between insurers, brokers and risk managers.

“As a result I believe risk managers will become increasingly influenced in their choice of insurance partner by the willingness of that partner to invest resource in co-operative development of individual solutions,” he said.

“In addition, the need for contract certainty and insurers’ ability to provide this will become an increasingly important buying factor.”

He also believes that, due to the increasingly complex and global environment risk managers find themselves operating in, the need for sophisticated and optimised insurance structures, compliant international programs, and added value services (in particular risk consulting) will influence buying decisions to a greater extent in the future.

Probably the most often heard criticism of the insurance industry these days is in respect of a perceived inability to innovate; to be able to provide timely solutions in respect of emerging and fast moving risks. The necessity to balance stability with the unquantifiable risk of new products (covering little understood exposures) brings is a difficult conundrum for insurers to solve, says Caillat.

“However, it is surely not beyond our industry to solve this problem, whether that is through insurers pooling risk and resource or through greater cooperation and mutual ‘product’ development between insurers, brokers and the risk management community. Innovation is, in my view, an area where we as an industry must try harder. AXA CS has set up a specific department to ensure innovation is high on our agenda.”

He said that a common question posed to AXA recently is how a risk manager can gain effective, pragmatic control of their insurance program at a global level.

“We are also being asked to assist with the assessment of what constitutes optimum design of policy structure, specifically in relation to retention levels and vehicles,” he said. “A further key challenge that remains on risk managers’ agendas is how to ensure their board is fully aware of the value insurance has for their company.”

Caillat observes that risk managers are demonstrating a more sophisticated approach to what has become a more complex and in some ways scientific challenge. They are also much more willing to spend more time and resource with insurers to ensure the specific and individual needs of their organisation are both understood and met.

“However, over more recent years there is a clear divergence into two camps with very different attitudes toward the way they transfer risk. The majority of risk managers take a very healthy interest in the content of the insurance contract, the quality of service and many other aspects such as compliance, contract certainty, risk consultancy and then balance this against the price to ascertain true value.

“However, there is a significant proportion of insurance buyers, who – presumably due to restricted resources – have little control on risk management, produce poor submissions and focus solely on price as a measure of value. It will be interesting to see in a few years how history has treated this second group, especially those who suffer a major loss.”