After six years of rate increases, restricted capacity and narrower terms and conditions in most major lines of coverage, it wouldn’t be unreasonable to think that risk managers might have exhausted all available options when it comes to restructuring their insurance programs. But as reported in this month’s cover story, nothing could be further from the truth. 

The conversations with brokers and with risk managers across the energy, entertainment, higher education, hospitality and real estate sectors indicate that even with the prolonged hard market risk professionals still have many paths they can explore, and they are doing just that. Their comments mirror broader discussions heard during calls, at conventions and in webinars across the industry. They also point to just how creative and resourceful risk professionals are.

Faced with evolving risks such as cyberattacks, extreme weather events, a changing climate and other business disruptions, retaining more risk is the new normal for many, with higher deductibles and retentions frequently in play. Depending on a company’s risk tolerance, this approach can help manage the impact of higher insurance costs, but there is a lot more going on.

Captives, long a response by companies to the underwriting cycle, continue to grow in terms of number of formations and the lines of commercial coverage they write. Such is their impact that these risk vehicles are no longer considered an alternative market but mainstream. Organizations that have captives are deploying them across their insurance programs in primary and excess layers and regard them as part of the risk management toolbox through any market cycle.

Parametric coverages, based on a pre-defined condition such as wind speed or temperature, are adding capacity and plugging gaps, providing fast payouts for various risks and exposures. While it doesn’t work for every business, parametric coverage is another avenue for risk professionals to explore, especially for risks they can’t adequately transfer in the traditional market.

Then there are multiyear programs. Several of the risk managers we interviewed said they had renewed a multiyear program within the past year. If the market softens, the multiyear bet might not pay off, but with property rate hikes slowing but not falling it looks like multiyear programs will remain on the table for now. 

Greater use of data underlies many renewal discussions. Better data quality gives risk managers a strategic advantage and informs their decisions about how much coverage to buy and whether they can change limits. Gathering key data points about their organization’s exposures and claims history is also helping them monitor risks more effectively and tell their story more accurately in submissions to insurers. And telling that story is essential. As much as a hard market might be viewed as a seller’s market, with buyers on the receiving end of insurers’ terms, it shouldn’t be forgotten that organizations have something to sell, too. The more they can differentiate themselves from their peers and showcase the quality of their risk profiles to insurers, the better results organizations will be able to obtain.

On this latter point, risk management professionals have a crucial role to play. Reaching across organizational lines to involve their peers in engineering, information technology and other disciplines in the risk management process means they can get a handle on risks sooner and better mitigate their impacts. Collaboration and building partnerships is what risk management is all about. That will outlive whatever the next market cycle throws at them.