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Risk managers have pledged to work more closely with underwriters in the London market to develop insurance to cover emerging risks, such as cyber breaches and supply chain disruptions.
London-based Airmic Ltd., which represents U.K. risk managers, said it will work more closely with the International Underwriting Association, which represents insurers underwriting in the London market, to encourage innovation.
Airmic CEO John Hurrell and IUA Chair Helen-Clare Pope, who also is head of insurable risk at London-based supermarket chain Tesco P.L.C., discussed closer cooperation on product development which was discussed at the IUA's board meeting in February.
Risk managers in the United Kingdom are more concerned about risks that are “intangible,” such as reputation, and supply chain issues that are “only insurable to a limited extent or not insurable at all,” Mr. Hurrell said.
IUA CEO Dave Matcham said the idea of closer collaboration with Airmic and its members was prompted in part by findings of the London Matters report published last fall by the London Market Group, which is made up of underwriters and brokerages operating in the London market.
That report outlined the need for the London market to “build upon its reputation for innovation and flexibility” to meet the competitive challenges it faces from other marketplaces. The challenges include added costs associated with placing business in London and the tendency for buyers in emerging economies to purchase insurance in local markets.
“Innovation rarely happens in isolation,” Mr. Matcham said.
While many sectors of the insurance market are involved in research and development around such risks, greater collaboration will help insurers design loss triggers, for example, in the absence of extensive historical loss data, Mr. Hurrell said, adding that insurance innovation is needed in three areas.
There are some risks, such as business interruption, for which insurance exists but may no longer be “fit for purpose” in that it does not adequately cover such losses as well as exclusions and/or endorsements, Mr. Hurrell said.
Cyber insurance also exists, but the “real world” is changing at a faster pace than current policies, he said.
Then there is coverage that either does not exist or is available but only in a very limited way, such as brand and reputational risk, he said.
Mr. Matcham said that while the IUA has always “maintained a regular dialogue with Airmic,” it realized that it could be a “facilitating body to get the insurer and the risk manager in the same room” to discuss coverage needs.
He said the IUA said it would invite representatives of the Lloyd's of London market to join the initiative. While there are no concrete terms for the collaboration as yet, he expects brokers to be asked to also join the discussions.
He said a more coordinated approach should help the design of policies to cover buyer needs.
One broker, who asked not to be named, said the London market needs to retain its position as a center of excellence and resist becoming merely a distribution center. The greatest innovation, he said, likely will come in the field of cyber insurance, where the potential risks to insurance buyers are huge.