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Following the aftershocks of ongoing global conflict and COVID-19, the insurance industry is going through prolonged exposure to a hardened market. As premiums increase and coverage terms and capacity are restricted, risk and insurance managers have to up their game as long-term relationships enjoyed in a formerly soft market have broken down.
With risk managers facing increased scrutiny of their submissions, high-quality data has never been more important as they compete with their peers for scarce capacity. In this environment, a corporation’s data and the ability to understand and present its risk have become essential to creating value through risk management, risk retention or risk transfer, helping reduce its exposure to market fluctuations.
As part of a webinar on unlocking value from your data hosted by Commercial Risk, Lars Henneberg, VP, Head of Risk Management, A.P. Moller-Maersk, and Stefan Schrijnen, CCO at Insurwave, discussed how to make the best of your data in these challenging market conditions, sharing examples based on real-life experience and not just theory.
Maersk's Approach to Risk Management
Speaking with Stefan on Maersk’s approach, Lars outlined three core pillars through which the logistics solutions provider optimised its risk financing strategy to produce the lowest cost of risk possible.
1. Develop the ability to retain risk
Maersk uses a combination of risk management, its captive, and deductible levels to retain as much risk as possible. This protects them from market volatility and is, in the long term, better value than risk transfer.
2. Centralise control of your data
To effectively retain the risk, you must first understand it, and you can only do that through data, Lars explained. With the help of Insurwave, Maersk gained central control of its data and developed sound systems to support it.
3. Automation through data
Using their data and its systems helped Maersk automate many processes previously done through manual transactions. At the same time, this allowed Lars and his team to spend more time ensuring they understood the risk and undertook the data mining required.
So, when it was time to visit their insurers and reinsurers, Lars had access to credible, authentic data points that they could use as reliable information to help paint an accurate picture of the risk without having to err on the side of caution.
By taking these actions, Maersk built a more efficient risk financing structure underpinned by better systems support and, most importantly, good understanding of their data.
“We’ve now been able to carry out proper risk management where we spend 75% of our time on risk management and 25% of our time on administration – this used to be the other way around,” Lars added.
A great result, but how did Maersk get to this point from transactional to strategic decision-making with its partners?
We have automated many of our internal processes and part of our interaction with the market. That’s how Insurwave made it possible for us to be risk managers again instead of insurance contract administrators.
”Lars Henneberg
Vice President, Head of Risk Management, A.P. Møller-Mærsk
Charting the course pre-data
Much like other organisations, before the focus on the value that accurate data can bring, Maersk relied on any information it could get from its brokers.
In the broader sense, this meant a whole heap of administration, from managing insurance contracts to sourcing documentation data directly from their external service providers. As Maersk’s needs from the market changed, so too did its strategic approach.
Working with partners like Zurich and AIG, Lars stressed that they are no longer there to provide technical services or store their data. Maersk now required more intellectual capital and help with distribution rather than solely transactional support.
“We needed service providers to distribute our captive capacity into the various 130 territories that we operate in across the world. In that sense, we moved from being extremely transactional to becoming more strategic with our partners,” Lars said.
Bridging the gap between risk and capital with technology
“How can we use technology to help solve the problem that is the distance between risk and capital?” That was the key question that helped drive the relationship between Insurwave and Maersk as they joined forces to use technology to build a solution. The answer was the Insurwave platform – a single source of truth with one version of the data on the same platform, accessible to the market, brokers and insurance capital providers that was updated in real-time.
This meant that Lars and his team no longer had to go through the frictional value chain of slips and endorsements, creating a seamless cooperation of real-time data exchange with no delays.
“We have basically automated a lot of our processes internally, and all the processes around the interaction with our market, and that simply has made it possible for us to be risk managers again instead of insurance contract administrators”, Lars explained.
ESG and risk management
Towards the latter half of the session, Lars and Stefan fielded questions from the virtual audience. Unsurprisingly, ESG (Environmental, social, and governance) and its place in a risk manager’s agenda were popular on the list.
For Maersk, ESG was high on its agenda. Beyond the mandatory requirements of risk assessment for sustainability risks was the importance of reputational losses if the risks were not managed correctly. Lars also brought up the danger of working with reinsurers that may benefit from inappropriate tax advantages in addition to disclosing your ESG data accurately.
I'm a risk manager - where do I start?
Speaking on what advice he would give to risk managers looking to embark on a similar journey to Maersk in terms of transforming their approach to risk management, Stefan urged the importance of taking the first step.
“When people look at complex challenges, one of the hardest things is accepting that you don’t have all the answers and that there’s no simple, low-risk solution that meets all of our needs. So, for me, the most important thing is to have a clear purpose, a clear long-term objective that you’re working towards, and then begin moving in that direction” he said.
Lars agreed, adding that perfection should be the last thing on your mind and that it was far more essential to try and learn from your experience regardless of the outcome. While these things take time to build, Lars believed this was “the fastest way to progress.”
If you’re interested in taking the first step in unlocking a new insurance buying experience, join market leaders like Maersk and click below to see the Insurwave platform in action.