View from the top: Sierra Signorelli, Zurich

Sierra Signorelli was named CEO of commercial insurance at Zurich Insurance Group Ltd. in March 2021. Based in Zurich, she joined the company in 2017 after spending 17 years at American International Group Inc., where she worked in Los Angeles, New York and Singapore. With a background in environmental and specialty underwriting, she heads the Swiss insurer’s global commercial business. In 2019, she was named one of the Business Insurance Women to Watch. Recently, Ms. Signorelli spoke with BI Editor Gavin Souter about how risk managers can get involved with environmental, social and governance issues, challenges facing buyers and insurers, and the outlook for the market. Edited excerpts follow.

Q: With ESG issues growing in importance, where do risk managers fit into the process?

A: We see that more and more companies have to do reporting — particularly in the U.K., certain companies in the U.S., and we’re starting to see it in Europe as well. There’s an element around assessing the risk, especially when it comes to physical risk, so we often work with risk managers to help them. We do a lot of modeling of climate risks and natural hazard risks as it is, so we work with them to help them understand what those exposures are. And we’ve seen that it’s really elevated the profile of the risk manager. 

As companies make these commitments, it’s really important to have reporting and transparency around how they’re making progress, so risk managers can help with that and also as they think about insurance placements. Directors and officers liability is an area where we are very thoughtful about our approach — how we provide coverage and where there are big commitments being made. So, they can play a role in helping set the strategy with the companies that they work for, because it touches governance, it touches operations, it touches the strategy, but even more specifically, in areas such as physical risk they have that expertise in working with insurance companies to help quantify that.

Q: What can insurers do to support risk managers as they start getting involved in these ESG initiatives and discussions?

A: Many of our conversations are focused on understanding what a transition might look like and the new types of risk. For the most part, the coverages that exist provide coverage, but we want to make sure that we understand those risks, and instead of leading with an exclusion we provide the right solution.

And there’s always the piece around working with companies to become more resilient, so we work with them to build resiliency, and we offer them risk engineering support to better understand their risks. That can be anything from things that they need to do to make their facilities more resilient to things that might not necessarily be covered by insurance, such as drought, to understand how do they future proof their operations and maybe shift locations or how they do things over time. 

Then there are other, simple things, such as our experience with installing solar panels or battery storage. We’ve learned some very expensive lessons, so we’re making sure our customers and risk managers understand there are things that you can do well and won’t cause challenges, and you can also install a solar panel the wrong way and set your building on fire, which is not what you want to do. 

Q: Looking forward over the next year or so, what are the key concerns of risk managers that you deal with?

A: There’s a number of concerns. The current economic and geopolitical environment certainly weighs on their minds. Understanding future capacity from insurance companies is also something that is on their minds. How predictable is coverage going to be, how predictable is price going to be? It’s been a challenging couple of years for insurance companies and for risk managers, and the market has been evolving quite a bit. There’s been lots of change and I think what weighs on their minds when I talk to them is how do they get more stability in the insurance that they have going forward.

Q: And what about from your own perspective as an insurer, what are your concerns over the next year or so?

A: Similar concerns. We expect that we’ll continue to see quite a number of changes that we’re going to have to navigate. As we think about what concerns us, inflation is something that we see coming through in our claims and that’s something that we have to address. The industry lost a bit of discipline around making sure that building values were regularly updated and so we’re spending time to make sure that we have appropriate valuations. 

From a nat cat exposure perspective, we’ve been updating models and thinking about what our exposures are so that we can be more reliable over time.

We face new risks and, this may be more European-focused, as we think about the energy crisis we’re trying to work with some larger companies that we insure. If there’s a shortage of energy, a lot of industrial facilities can’t be shut down. It takes quite a bit of planning upfront so we are working with them to think through what that means for them. 

The other area is social inflation. Courts have been closed, which may have artificially quieted the storm that we saw brewing for a while. Courts are now opening, and we see some larger awards coming through. Understanding what that means is going to be something that we’ll continue to have to watch and to understand. 

Q: And is that just a U.S. phenomenon or are you seeing that in Europe, too?

A: You see it a little bit in Australia where you have the litigation funders as well, but not to the same extent. There are a couple of cases that are bubbling in Europe that we’re watching, but for the most part it’s a U.S. phenomenon. 

Q: Can policyholders expect any letup in the rate increases? 

A: We’re always very committed to looking at individual risks and individual customers. We don’t want to do things that are across the board, but there are a number of things that are working against us. Inflation erodes our margins if we don’t address it. And the supply chain challenges that we see also create challenges. These challenges continue to drive increased costs and there’s just not enough margin in what we do to absorb them. So, we’ll take a more nuanced approach and we’re not looking to do anything across the board that would mandate rate increases far into the future. But I would think that in 2023 we will continue to see strong rate.