How to grow in an era of new, intangible business risks

As business risks become more global, interconnected and less tangible, brokers and insurers should expand their dialogue with clients about loss mitigation or loss prevention, the chief executive of CNA Canada says.

“An insurance policy today isn’t really enough,” CNA Canada president and CEO Nick Creatura told Canadian Underwriter Thursday in an interview. “We need the risk management advice and expertise of trusted advisors.

“It’s the triangle between the insurance broker, the carrier and the client. In that mix, you need the carrier’s insurance knowledge and expertise, including risk control, claims management and so on, the broker’s advice and advocacy, as well as the client’s organizational knowledge and stewardship.

“That requires more dialogue between insurers, brokers and client firms, and it requires more collaboration. There’s essentially a cultural shift that is required.”

Creatura was speaking to Canadian Underwriter about the results of CNA Hardy’s November 2018 Risk and Confidence Survey: taking the pulse of global business. The global study surveyed 1,500 firms that have operations in the U.K., Europe, North America and Asia.

Examples of “less tangible” risks were highlighted in the CNA Hardy study, which found that 21% of the 550 North American firms surveyed (100 of these firms are based in Canada) cited economic risk as their “top concern,” followed by cyber (20%) and tech risks (16%).

Economic risk takes into account the tension between businesses expanding their operations globally, while political protectionism increases as well. Cyber risk globally still is not thoroughly understood, while the increasing dependency of companies on tech also raises the risk of businesses grinding to a halt as a result of a system failure.

These emerging and intangible business risks will make it more important for risk professionals to expand their partnerships, dialogue and collaboration with clients, Creatura said.

“Losses today tend to be caused by the same drivers – historically, fires or flood,” he said. “If business is finding those sorts of traditional risks to be difficult to master, they will be hard-pressed to deal with the changing types of risks that are less tangible and more global.”

In addition to shifting to a more collaborative culture, the CNA Hardy report lists two other critical priorities for North American companies – leadership and strategy.

Regarding leadership, companies will need to go beyond having traditional financial and legal leadership skills represented on the board, the report notes. “They also need a broader, more diverse range of individuals who can help them appreciate reputation/brand risk, supply chain, technology, cyber and human risk.”

As for strategy, stronger leadership teams operating within a more proactive risk culture will be better-placed to grow through investments in people, processes, technology and markets, the CNA Hardy report states.

“The insurance industry is getting much better at understanding and responding to intangible and interconnected risk and about communicating what needs to change,” the report says. “But there is always more to be done. Risk management is increasingly about service and support as much as balance sheet risk transfer. For that to work effectively there will need to be more and better dialogue.”