Russell Group head: ‘Connected risk needs a connected solution’

In May, pharmaceutical giant AstraZeneca Group’s insurance team unveiled a new five-year Business Resilience Insurance Policy. The policy would provide its captive with a “connected risk” outcome-based solution supported by three of the world’s largest reinsurers. It covers supply chain disruption, reputational damage and product withdrawal.

The product is partly the result of discussions the business has had in the Russell Group Corporate Working Group. Formed in 2018, the group brings together 30 of the world’s biggest corporates to explore how data and analytics can help design risk solutions better suited to today’s interconnected world.

As Russell Group founder and managing director Suki Basi explained, the new policy is a first step in addressing two related challenges facing businesses and the insurance industry.

The first is the misalignment between insurer operating models and the corporate business risk need. That came to a head during the COVID-19 pandemic, when many business interruption policies failed to respond.

“Companies want to be able to mitigate the impacts of disruption, regardless of how it comes about,” Basi explained.

“The result of the conversations in the group was that there was a demand for a new type of outcomes-based insurance policy.”

The second is how interconnectivity between companies and markets can result in systemic impacts on commercial organisations from cumulative events. This is the “connected risk” that the Russell Group focuses on.

“Complex ecosystems have been built up over the last 20 or 30 years through digitisation, geopolitics, supply chains and other trends,” Basi said. “We believe connected risk is too big for one company to cover itself against all events. The modern world of risk is too complex.”

“Connected risk is too big for one company to cover itself against all events.”

In it together

To develop solutions to address connected risk it’s necessary to first understand it. Russell Group attempts to do so in two ways.

The first is through collaboration, typified by its working group. Russell Group works with some of the biggest reinsurers and corporates such as Centrica, Vodafone and AstraZeneca.

“We deliberately built up a collaborative approach across industries, sectors and the insurance market,” said Basi. That helps to break down the silos within and between re/insurance companies and clients that prevent clear visibility of risks and accumulated exposures.

“Connected risk needs a connected solution,” he added.

Working with corporates and listening to their concerns helps promote understanding of their risks to better develop solutions. A survey of the group’s members showed that despite its high profile, climate change was seen as less of an immediate challenge than digitisation and geopolitics.

Data and dashboards

The second characteristic that marks Russell Group out is its use of data. It works with 16 different data vendors, including aviation, marine, energy and cyber data suppliers.

“We’re able to build up a universal dataset, so we have data on any company worth over $100 million and can explore the connectivity between all those different types of companies,” Basi said.

In areas where insurers have traditionally been more active, such as nat cat risks, Russell Group works with an in-house meteorologist to enhance the available data. “We’re looking to have a much more granular insight into what happens at the local level and how that might affect businesses, properties and individuals,” he said.

Pulling that data together in dashboards provides improved visibility of the risks facing corporates. For businesses, it can help reveal risks in the supply chain. “We get much more granular insights into global ecosystems and the links and nodes within supply chain networks,” he said.

For re/insurers it means greater and more rapid insight into exposures.

“If a CEO wakes up to a major event and is worried about how he is impacted, he can call in his aviation, marine and energy teams and say he wants a quick snapshot to see what the aggregate might look like. Within half an hour, they can say exactly what the company is facing,” he explained.

“It’s helping them to understand what risk accumulation looks like.”

For re/insurers and their insureds, it’s about promoting visibility and appreciating that what you don’t know can hurt you. As Basi put it: “To be truly resilient and sustainable as a business, you need to have a much deeper understanding of connected risk.”

Suki Basi is the founder and managing director of the Russell Group. He can be contacted at: sbasi@russell.co.uk

FERMA Forum Today is in partnership with Captive Review, part of Newton Media.

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