Airmic CEO bids insurers to clarify risk appetite in opening speech

Society is in the early stages of a revolution driven by technology. While this should mean more prosperity, it will also mean unintended consequences and some “dark and challenging” times, John Ludlow, the chief executive of Airmic, warned delegates in his opening remarks at the risk management body’s annual conference.

He stressed that this revolution is different from previous ones that society has experienced because of the speed of change and the magnitude of the rewards and consequences.

“On one hand, these changes give rise to unprecedented opportunities. On the other, they lead to threats and vulnerabilities that we could not even have imagined five years ago,” Ludlow said.

While the revolution will make the jobs of risk managers more interesting and demanding, there will be many losers and just a few winners, he added.

“Organisations that embrace risk and technology will find it easier and safer to take advantage of all the opportunities out there. Risk and reward go together. They are two sides of the same coin,” he explained.

“Fortune favours the brave, but courage without caution often leads to folly. This is the message we have to get across.

“Risk managers will play a key role. Our job as risk professionals is not to predict what’s going to happen. Our job is to ensure we are positioned to take advantage of the exciting opportunities opening up in this new world,” he said.

The best boards realise that risk governance must be at the heart of that process.

“As a profession, we must do more to bring risk management fully into the boardroom. Not just to tick the compliance box, but to become a strategic partner,” he said.

Ludlow noted that a desire to see this happen was highlighted in Airmic’s 2019 member survey, which revealed that 75 percent of members want more opportunities to influence strategic decision-making.

He commented on the important role the insurance industry can play, but while insurers will remain invaluable partners in tackling the new world risks, he believes the world is moving at a much faster pace than insurance innovation.

This is changing. A positive transformation highlighted by the Airmic survey is that insurers are doing more to expand their services beyond products—especially when it comes to intangible risks, he noted.

“We have said for some time that our members want more than just insurance, vital as that continues to be. They want a risk partnership—support in making their businesses resilient.

“I believe there is much further to go in this direction. We need a change of mindset from both parties.

“For insurers, advising clients how to reduce risk and add strategic value must become a priority. As for risk managers, they must become more proactive in seeking help.”

Risk managers must do more to acquire and share internal risk information. Both parties will benefit where this happens, he said.

Ludlow noted that the insurance renewals have been much more challenging in some industries and in some lines of business.

He said that while this may be a good thing, insurers need to be clear about their risk appetite.

“It seems that the dash for market share is over and underwriting decisions are more discerning,” he said. “This may be uncomfortable but is ultimately a good thing for risk and insurance managers. It is in these conditions that experienced insurance buyers can really demonstrate their value.

“However, I would also ask insurers that changes made to your risk appetite are clearly signalled to policyholders.

“Several members have reported being given little notice that an insurer is changing its strategy, and in some cases, this is preventing members from managing the expectations of their business leaders, and even having to delay renewal.

“We appreciate the challenges in the current market, but we would urge insurers to signal their intentions as early as possible to protect valued relationships and to ensure a smooth renewal process,” he concluded.