Intangible assets account for nearly 70% of business value among top corporations: Howden

Intangible assets have become the predominant source of economic value for global businesses, meaning historical experience is no longer always a reliable guide for future exposures, according to Howden, the international insurance broker.

In a report on the evolving risk landscape and the rise of the intangible economy, Howden found that nearly 70 percent of total business value for the world’s largest 50 corporations emanates from intangibles - equating to around $11 trillion. Moreover, the trend towards intangible value is accelerating.

The transition of value creation towards intangible assets predates COVID-19, Howden noted, but has been catalysed by it, while the pandemic has also exposed pre-existing vulnerabilities.

Howden’s report found that insurance gaps are often disproportionately large for perils whose loss characteristics are of a non-physical nature, and called for action to reverse this trend.

David Flandro, managing director of HX analytics at Howden, said: “The rise of technology companies and peer-to-peer disruptors is indicative of an ability to create value from intangibles. In fact, the bulk of corporate value is today associated with intellectual property, brand and reputation ahead of property, plant and equipment.”

Charlie Langdale, managing director of financial lines at Howden Broking, said the market has long been held back by its siloed approach to risk. “Whilst it may have been workable in an era when perils were more predictable and geographically contained, it will not be sufficient in the long-term for complex and intangible risks that straddle different lines of business and jurisdictions,” he warned.

Langdale argued a more client-centric approach would be mutually beneficial for both customers and insurers, creating new and potentially lucrative pools of risk while ensuring insurers remain relevant.

José Manuel González, chief executive officer at Howden Broking, called for more support for the re/insurance industry from governments.

“Advances in data and analytics, alongside creative thinking around structures and parametric triggers, have increased the insurability of intangible assets. Nevertheless, there are limitations for certain low probability, high impact perils,” he said. “Events that cause huge loss accumulations and transcend sectors and geographies, such as COVID-19, are simply beyond the financial capabilities of the re/insurance market alone.”

The re/insurance market should still play an important and risk-bearing role, González added. “Failure to do so would be an abdication of responsibility,” he admitted.

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