Business insurance Wisconsin companies paid close attention to the 2012 International Insurance Society Seminar recently held in Rio de Janeiro, Brazil, on June 17-20 2012.
In one of the most attended conferences of the seminar, Michael McGavick, CEO of XL Group P.L.C said insurers are struggling to maintain their relevance for policyholders as new risks emerge for businesses, while businesses themselves grow more comfortable with retaining risks.
“By adjusting their approach, however, insurers will be able to provide valuable services and coverage that businesses need as they expand in the changing world economy”, stated McGavick.
Indeed, with the insurance premium share of worldwide gross domestic product shrinking from 3.4 to 2.8 percent over the past 10 years, “the insurance industry has been losing relevance”, added McGavick.
The notion that the insurance situation, especially in certain industries could be better, is something business insurance Wisconsin experts agree on. “In the three most important areas of evolving risks –technology, energy and supply chain– insurers are not providing businesses with the services they need”, shared McGavick with the audience.
And he went on saying “If you look at the role of insurance in technology, we are practically not present. While insurers do offer some cyber liability coverage, they are failing to offer coverage for risks such as privacy, intellectual property and business interruption related to technology problems”, he said.
Energy wise, the 2010 deepwater horizon disaster in the Gulf of Mexico perfectly demonstrated how insurance has decreased in value for energy companies, as the well’s operator, BP P.L.C, was largely uninsured. “In that particular accident, insurers were not large enough to match BP´s own balance sheet and did not offer enough insight into the risk to provide risk management assistance” Mr. McGavick remarked.
“I think what happened to BP exposed the flaw in the consideration of energy companies” said a business insurance Wisconsin risk manager expert. “When companies are so confident in their own risk management that they fail to have anyone provide necessary protection, it sets up an inherent risk”.
Regarding supply chain risks, the Thai floods and Japanese earthquake shed light on another crack in the system by exposing the huge contingent business interruptions businesses face. Business insurance Wisconsin insurers were frankly surprised by the size and losses even though just-in-inventories had been discussed for over a decade.
“Insurers responded to the losses by inserting exclusions into policies to limit their exposure to future supply chain losses, a response that will push businesses to find solutions outside of insurance and push themselves further away from the industry”, said McGavick.
To overcome these challenges insurance companies need to have their best people addressing emerging risks rather than using them for the most profitable lines of businesses.
Also, they must face up regulatory challenges that require insurers to maintain capital levels that will dilute their ability to generate an attractive return on equity.
However, business insurance Wisconsin companies are sure these challenges will be met.