Innovation now key for commercial insurance
Increasingly innovative risk transfer solutions are becoming available to cover the constantly evolving range of exposures that commercial insurers face, according to the latest Sigma study from Swiss Re.
Titled Commercial insurance: innovation to expand the scope of insurability, the study looks at how product development and innovation around data and data analytics have expanded the scope of insurance solutions to a wider range of threats and perils, and made risk transfer more efficient.
According to the study, companies are using novel insurance solutions to protect earnings, reduce cash flow volatility and support business strategy and growth.
Swiss Re points out that technological, economic, demographic, societal and geopolitical macro trends are driving deep changes in the business environment and that these structural changes create new opportunities, but also new risks.
At the same time, the corporate sector has changed from being dominated by physical assets to deriving more value from intangible assets, such as intellectual property, networks, platforms, data and customer relationships.
The study also claims that these transformations and the associated exposures they create are mirrored by surveys of risk perception by companies. For example, business interruption due to cyber and supply chain risks is the key corporate risk concern, according to surveys of risk experts across the globe.
“New types of solutions are providing protection against a wider range of perils, and extending insurance cover from tangible to intangible assets,” said Kurt Karl, Swiss Re’s chief economist.
“For example, holistic covers combine multiple risks and/or interdependent triggers, and allow better alignment to the specific risk transfer needs of an insurance buyer.
“In addition to offering coverage for multiple risks, holistic solutions offer efficient risk transfer given their focus on the joint distribution of all risks.”
The Sigma study also claims that insurance solutions are increasingly being used to protect earnings and cash flow risks.
Some previously uninsurable non-core business risks can now be insured to some degree, due to the evolution of triggers, indemnity structures, and data and modelling advances.
Examples of perils that can be covered in more innovative ways include non-physical damage business interruption, cyber, product recall, weather and energy price risks.
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