Why COVID-19 puts risk managers and insurance buyers in the spotlight: Mark Dawson

The roles of risk managers and insurance managers have become more important as a result of the coronavirus pandemic and the hardening market which started in 2018, according to Mark Dawson, head of insurance for Dyson and an Airmic board member.

Speaking to Intelligent Insurer in the run-up to next week’s Airmic conference, Dawson highlighted the ways in which recent events have placed risk managers and insurance buyers in the spotlight.

“COVID-19 certainly raised the importance of business resilience and the need to identify and manage key risks within an organisation,” he said.

“These include supply chain risks, business interruption-related issues, employee risks particularly with home working but also in terms of return to work, cyber risks, the rise of online working, direct sales, and interaction with customers and suppliers.”

In this environment, crisis management and business continuity planning have become essential. Dawson believes corporates are now far more attentive when it comes to looking at their plans and understanding how they deal with a crisis and how they recover their businesses.

“Insurance costs are increasing and organisations will benefit from having dedicated expertise in the areas of risk management and insurance,” he said.

“Risk management and insurance professionals will be able to help companies navigate through these challenging times.”

He added that the shift to home working, with transactions carried out remotely, has made it prudent to start the insurance renewal process early.

“Insurers are wanting more information to satisfy their requirements and that takes time for companies to gather, so the whole process is taking longer,” he said.

“My advice to anyone is to start the process early, to give themselves enough time. Given the fact there is quite a lot of volatility in the market it’s important for insurance buyers to make people within their organisations aware of the challenges and to budget accordingly.

“It’s also an option to look at your current insurance programmes, considering your priorities in terms of the cover you want to buy and also the opportunity to engage more widely with the insurance market.

“Buyers need consider looking at different options, whether that is different markets, different programme structures, or different retention levels: they need to be quite flexible about the options they are considering.”

He added that it will be vital for brokers to be able to clearly present the risk profile of a company to insurers, making sure that this is well understood.

Current environment
The current situation has not solely been caused by COVID-19’s impact on insurers, but also the way changes in the financial markets have impacted insurers, with the current environment being characterised by extremely low interest rates and lowered stock market valuations.

“This comes on top of three years of already deteriorating financial results for many insurers,” Dawson said.

“Pre-COVID-19, the insurance market was already hardening and COVID-19 has added an extra layer of complexity. What we are seeing as a result of that is significant hardening in the market in terms of rate increases, reduction of capacity, higher retentions, coverage restrictions, and some insurers pulling out of certain lines of insurance so the availability of coverage for some buyers is becoming an increasing challenge.”

Against this backdrop, Dawson would like to see insurers engaging positively with their clients, recognising that many of them are experiencing significant challenges.

“I’d like to see the true value of relationships. Insurers have in the past been very vocal about the need to build long-term relationships with their clients and I think COVID-19 is a good test of those relationships.

“I’d like to think that insurers will keep to their word and look to maintain and continue to develop those relationships in supporting their clients, not just in terms of the insurance cover and the pricing of that but also dealing with claims in a fair and expedient manner.”

He added that insurers need to recognise that larger commercial buyers in particular want innovative new products to deal with the new risks that are facing large corporates and global organisations.

Dawson expects the current hardening market and its impact on the availability and cost of certain types of coverage, especially nat cat, to be a topic of conversation in the Airmic conference, from September 22 to 24.

Other hot topics are likely to be the effects of climate change and the possible outcome of the current COVID-19 business interruption test case.

“The whole area of risk financing is another hot topic,” he said. “There is greater interest in captive insurance because as insurance market pricing and capacity becomes more constrained, insurance buyers will be looking at other options

“One of those will be looking at investing more in their captives if they have one or if they don’t have one I’m sure companies will be looking whether they should have one.”

Other issues he expects to be high on the agenda are supply chain risk, the protection of intangible assets, and reputational risk.

“The pandemic has highlighted the issue of reputational risk: if you don’t respond in an appropriate and positive way to pandemic, this can be damaging,” he said.

Seminar date
Dawson will be attending the conference as an Airmic member and delegate but also as a panellist speaker, taking part in a seminar on the future of catastrophe risk financing on September 24.

“For members, the conference is very much about developing their knowledge and learning, so there is a whole host of great workshops available over the three days for members to select,” he said.

“It’s also a great networking event. In this case it will be virtual and not just with other Airmic members, but also with partners and other providers—in other words, the wider insurance ecosystem who attend.

“For partners it’s a great way of being able to demonstrate thought-leadership and a real opportunity to interact with members, many of which are clients and potential clients.

“It’s also an opportunity for the brokers to understand the challenges faced by insurance managers and risk managers it’s a great two-way interaction.”