Parima chairman Franck Baron says most APAC corporates are retaining more risk as the insurance market hardens
Insurance companies have a “social and business role” to play as organisations adapt to the new normal, but they are failing to adequately fulfil this role at a time of hardening rates and tightening terms and conditions. This is according to Parima chairman Franck Baron, who is also group general manager, Risk Management & Insurance for International SOS.
“Insurers need to adapt to what certain industries are trying to do to cope with the current situation,” he told StrategicRISK. “How do you make sure your carriers are going to cope with it and still be willing to support you?”
He said previous decisions made during the protracted soft market conditions are now coming back to bite. ”Due to the cost cutting we have witnessed over the years, insurers and brokers have not maintained the right level of expertise. So the problem is now when you talk to underwriters or brokers, they are not senior enough or technical enough to refer to a previous rate increase cycle.”
”As chairman as Parima and a client to insurers I am challenging insurers and saying, ’Guys you have a social and business role to play here’.”
According to data from Marsh, there were double digit rises in commercial insurance pricing globally in the fourth quarter of 2020, led by the UK (44%), Pacific (35%) and US. Financial and professional lines were up 47% on average with public company D&O coverages continuing to see large increases.
“I would like to see my own account being valued based on my own risk management merits and we did not have the opportunity for this type of conversation during the last renewals. So the lack of dialogue and interaction was very negative towards insurance buyers.”
Remote working did not help the situation, reducing the ability to engage with broker and insurance partners face-to-face. ”It made it easier for carriers to say there was no room for discussion – these are my terms – take it or leave it.”
As a result, organisations have been forced to take more risk on their own balance sheet. ”There is a strong tendency of organisations in Asia Pacific and the rest of the worl d to develop their risk rentention. For a lot of organisations they simply don’t have the means or willingness to buy insurance from commercial carriers the way they did 12 or 18 months ago. They just can’t find favourable terms or they don’t have any budget left.”