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Welcome to Maximum Exposure, the Emerging Risks podcast.
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In episode seven, Meg Catalano, Global Managing Partner, and John Bruce, senior partner at Kennedy's, joined John Guy to discuss how pressure on the global supply chain is creating new risks for businesses and with it, growing liability exposures.
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I'm delighted today to be joined by John Bruce and Meg Catalano from Kennedy's.
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Welcome to you both.
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I suppose, in a way, one of the key interesting, one of the most interesting points in your recent Forsyth report is that you're finding that the major risks that seem to dominate risk and insurance risk managers and insurance thinking at the moment, cyber, climate, and geopolitical risk seem to be getting ever more interconnected.
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Are you finding that this is forcing a change or a rethinking the way those risks need to be approached?
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Um certainly, yes.
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That that interconnectedness of risks is absolutely something we're seeing, something we're seeing, and something that our clients are also talking about.
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Does it require a change in approach?
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Yeah, I would say so.
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Um one good example of this is in the natural catastrophe arena, um, where perhaps historically you would have said a hurricane hits Alabama, and you look at that as a first-party loss, you look at that through the first party framework.
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That's no longer the case.
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You now need to look at a whole host of other issues.
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Um, and this is coming more and more to the fore, perhaps, with climate change.
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And this year we're reading reports about it being a Super El Nino year.
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Um, and this Super El Nino in itself is a great example of where one weather system in the Pacific is spawning issues throughout the world.
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Um, it's gonna lead to storms, droughts, and heat extremes in in various regions.
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Um, so that that's gonna lead to um potentially a whole host of losses, and that in turn has a real impact on risk modeling, for example.
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So in the past, maybe you would have just looked at some historical data around um what is the likely outcome going to be of a particular event.
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That historical data these days, from what we can see, is less likely to be sufficient.
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You're gonna have to look at a whole host of other information.
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And at the same time, we're moving out from looking at things simply as a first-party type issue into also liability issues.
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For instance, when a hurricane hits, if damages are not as resilient as it was expected that they should be, then there could be a whole host of issues, liability issues.
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Were these buildings designed properly?
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That could lead to implications for the um architects, for the engineers and other design professionals.
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Should these buildings have withstood the hurricanes better than they actually did?
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So, yes, absolutely, interconnectedness is is definitely a theme that we're seeing all over the place at the moment.
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I suppose the problem's always been that insurance has always been seen to be quite siloed, you know, and if you look at it, the various class underwriters have their own their own sort of patch, and and rarely should the two meet.
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Are you seeing, obviously, from your client's point of view and the and the data and the research that you've been doing, are you seeing sort of as these as the the corporate risks change that a lot of risk managers are now talking to their insurers to say, well, look, we we we can't we need a more holistic approach to these risks, um, because what we don't want to see is um separate policies, which mean that some of these risks could fall through the cracks.
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John, yes, I think that's exactly what our clients are starting to look at.
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And they're they're realizing that what was a more traditional approach of one event, isolated events, one type of risk analysis just isn't going to be the thing that wins the day, so to speak, in the future.
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They are going to have to take a holistic approach to things, they're going to have to realize, as John just mentioned, that there's such a cascading effect of the connectedness of claims these days.
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So you go from a property damage claim that uh potentially has business risk implications, that has geopolitical implications, that may have cyber implications.
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So it's very much something that people are gonna have to look at, not just the single risk these days, but the portfolio risk.
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It's really so much more.
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And and the world is just getting very complicated.
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Those risks are not just across the business lines when we talk about looking at things holistically, but we're gonna have to overlay that with how does climate change impact those risks?
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How does an energy transition phase that the world is going through impact those risks?
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How do geopolitical conditions impact the risks?
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So, yeah, we are we are well beyond the isolated event analysis and much more into a connectedness and complex world for the insurance industry.
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I know you've you've mentioned claims, but I suppose actually from your point of view, is this is this creating sort of new um new challenges for for you around uh the interpretation of claims and maybe um the way in which um the way in which claimants are approaching um their you know their um their insurers and their claims management teams around well actually we we you know we we don't think you're performing as well as you should do.
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Um I'm not sure I've necessarily seen it as an issue of negative performance, but I I we are seeing a desire for the claims team and the underwriting teams and the actuarial teams to work more closely together and perhaps at times to get us, the lawyers, involved on an earlier stage.
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So um joining those people, not just at the point that the claims come in, but before the claims in the sort of loss assessment, how good is a particular insured?
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Um, and then looking at the new risks which are out there on the horizon and how do we how do they insurers cater for those?
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Is the policy drafted in the right way?
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What is the coverage intent?
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Um, aggregation of losses, um, that could be at an insurance level or indeed a reinsurance level.
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Um, what are the resilience requirements for a particular insured?
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Has an insured um demonstrated holistically that it's prepared for these big events, not just how is that building um going to perform in a particular hurricane in the example I started out with, but um is there all the other aspects of that business which may be impacted, whether it's um have they got diversified suppliers, um have they got sufficient business interruption cover?
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Are they properly stress testing in advance of losses, their crisis management plans and the like?
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And I would add to that, John, I think it's an exciting time for both insureds and insurers, and I think we are going to see the relationship evolve as a result.
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I think that the insureds are going to be looking to their insurers as business partners.
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They're going to be looking beyond just compensation for that individual claim because it is so much more complex, because the claims are connected, because it's going to be so much more important to really think about how do we prevent these losses, not just how we pay these losses?
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I think you're going to see that there's much more of a business partnership with insureds and insurers, and they're going to be looking for some guidance.
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They're going to be looking for the information that the insurers have on these claims.
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What is the data that they are amassing telling them?
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What lessons can be learned, so to speak?
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How do we jointly look at risk in a very different kind of way in the future?
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That's quite interesting.
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You mentioned there, uh, Meg that the whole issue about data and information, particularly information.
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I suppose, you know, once these risks start to unfold, how does that interconnected nature affect the way events are experienced?
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I mean, particularly, as we say, in a in a sort of a real-time social media-driven environment in which we now live.
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Yeah, no, I think I think it's um again very exciting, very challenging because not only, like we said, so they're connected um not just by different business lines, right?
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You know, we've we've talked about how that can happen.
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It's no longer just um one area, so it's connected from a geography perspective.
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John mentioned um earlier, just you know, El Nino, and that is not just in one region, one area.
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So geography is is connected.
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We're a smaller, smaller world.
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And social media, that that just is a whole nother dimension for sure.
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I think that it raises the stakes on claims.
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It means that the reputation of our insureds becomes a huge part of the claims analysis.
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And um just the fact that it becomes very public very fast is is critical.
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And that often is going to change how one potentially responds to these claims.
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There is going to be a public perception and reputation risk that both sides are going to need to consider.
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And how we pay and how much is at risk is very much going to be shaped by social media.
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I suppose, in a way, um this sort of comes on.
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I suppose one of the questions really is what should insurers be doing differently in terms of their modeling and underwriting in this new, more connected risk world?
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Obviously, those historic data trends are important, but they're going to need to get more and more information.
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And no doubt AI, everyone's talking about AI, AI will help them assess all the extra data that they're going to need to probably properly be able to assess the risks.
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Um and as we've said, given the interconnectedness, um, when you look at a property risk, you're not simply looking at the structure of the building, you're looking at all the consequences that may flow from a damage to that building, from the supply contracts that they may have in place.
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Um impacts as a result of um what's going to happen to their digital infrastructure, how their suppliers are going to be affected by the same sort of event.
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So absolutely, you just have to take a much more holistic view about any risk assessment.
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John, one of the things we've talked about here is that I think we're going to move to just a different analysis model, really.
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It's going to be not just what has happened, because that was really the focus in the past.
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What happened, what was that isolated event, and it's going to be much more what could happen.
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So understanding the cascade, understanding all the possibilities, that has got to be part of the underwriting process going forward that is going to be different and as I said, a challenge for everybody.
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I think you're going to also see some real changes potentially in pricing.
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Just how how do we address a cascade, the possibilities, and not just the single event?
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Portfolio management, as I mentioned before, is going to be critical.
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So we're no longer going to be looking at just single policies anymore.
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You're going to need to look at do you have too many flood risks in a specific geographic area?
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You know, things like supply chain risk.
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Is your portfolio concentrating in one manufacturing area versus another?
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Um all of that is going to be subject to change for the insurance industry going forward.
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As you say, it sounds like it's it's going to be a very um dynamic period for the insurance sector.
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But I mean, on the other side of this, and if we look at the insured, you know, what should businesses be doing now to try and reduce their exposures and obviously make themselves more attractive to risk carriers?
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I think a real focus on that practical resilience.
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Um, have they got diversified suppliers?
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Are they able to avoid single points of failure?
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Um, are they reviewing their business interruption cover?
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Are they really stress testing all their crisis plans?
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Are they investing in physical adaptation, um, improving energy resilience?
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Um, and are they ready to go when something hits?
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Are they are they checked all their crisis management plans?
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Do they have a crisis management plan?
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And if if they do, are they are they checking them?
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Um and ultimately this is so important because this is going to be a governance issue for insureds.
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This is going to be questions asked of the board, whether it's by a regulator, whether it's by their shareholders or other stakeholders.
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So more than ever, this is incredibly important.
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I would I would add, without trying to be too much of a doomsdayer, that I think that it's going to be critical for businesses really to be prepared for that perfect storm and really take a look at at their risks and say to themselves, you know, are they prepared for extreme weather events?
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Are they ready to address that disruption in energy suppliers?
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Have they looked at their supply chains?
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Are they ready for a cyber attack?
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Are they ready for how financial markets might react and be volatile?
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Are they ready for social media blitz or attention?
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So it's really going to be that careful planning for the perfect storm and working with the insurance industry as a business partner.
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Because I suppose one of the things that it comes back to, I think what you you know from the outset, John, you mentioned that you know we now need to take a sort of broader look at the risks we face.
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And I suppose for you know corporate leaders and you know the C-suite, they need to, I suppose, now start to think about the pressure they may come under from or the scrutiny they may come under from their shareholders if when you know if when the worst occurs they're found wanting when it comes to the necessary resilience and and business continuity planning.
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Yeah, absolutely.
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So um by trade, if you like, I'm a directors and officers claims lawyer, and there's a well-trodden path in the United States where there are claims against boards where they haven't properly prepared or where they've overstated their expected resilience.
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Um, traditionally in in with respect to other types of risks, but now, as ever, if there's a sort of catastrophe which hits, if there's some climate change um impacted event which hits their business, any statements that they've said in the past, they're going to be scrutinized.
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And if the share prices are dropping as a result, you you can be pretty sure that a claim will follow.
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Um, but I think it's also important to remember that it's not just uh shareholders that may have a view.
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Um, there's a whole host of regulatory obligations upon companies and boards.
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Um, so is are they all are all of those regulatory obligations being satisfied?
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Um whether it's with respect to um uh transparency over sourcing, production, um, and distribution, um, who are their suppliers?
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Um, are they satisfying the anti-slavery legislation, all those sorts of things?
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So a whole panoply of issues that boards are going to have to consider going forward.
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I agree, John.
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I mean, we haven't really spent that much time, but one of the biggest areas of uncertainty these days, and uncertainty means challenge, is the geopolitical horizon that we're all working under.
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The reality is we just don't know always what's coming next, and that just adds another layer of complexity, another layer of uncertainty.
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It's it's actually one more area that you need to do that um preparation for.
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It's all part of a perfect storm, whether it's you know, the situation in the Middle East or frankly, just um reactions from a sanctions perspective, it creates that instability that has a cascading effect, and that just makes the whole horizon more complicated.
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So I suppose the key issue throughout all of this is as you say, uh Meg, it's been, you know, we're going through a period of real uncertainty for businesses, and I suppose, in a way, for the insurers who are now having to um, as John said, almost like rip up their former historical data-led models to create a new breed of uh of future-looking sort of models.
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But I mean, from that point of view, it do you think we're now at a point where you know um the the bro, you know, the broker, the insurer, and the insured really need to get a little bit bit closer together now from the outset to have a broader discussion rather than well actually, is this you know, is this the risk you want me to assume?
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Rather than actually, how can we, you know, how how can we as a tripartite make your business more resilient to the benefit of all?
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I think it's a perfect way of describing it, John.
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Absolutely.
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There really needs to be a business partnership.
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It's what makes insurance so interesting.
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It actually is a societal issue.
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We can't have protection gaps.
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This is a critical part of what keeps the world going.
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And if they don't all work together, it's not gonna work.
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I suppose in in a way, um uh in a I suppose in a way the b the big issue, I suppose, for a lot of people now, and as you mentioned, is that it is the the swiftness of the way in which our geopolitical environment is changing.
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Um, and of course, I suppose in a way, the other issue is that um at the current point in time we don't really see any end to some of the major geopolitical issues.
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Uh I suppose in a way, um my sort of final question is are we going to see, and I I know we mentioned it, uh you mentioned a little bit earlier on the fact that it may well be that there needs to be a greater concentration on on policy wordings and how, as you say, we we look to you know we look to avoid, you know, we avoid the gaps, but I suppose drive greater insurance um penetration within the commercial market.
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I mean, do you think we may that may well be our next step?
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Is that we're gonna start to see very different wording when it comes to to to the policies that will that will be um you know sort of promoted and and marketed in the future.
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Yes, for sure.
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And I I think it will be also important that the buyers of insurance don't, and indeed the sellers and the brokers don't just look at each line of cover separately.
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So um they look at cyber alongside the property damage alongside the general liability covers, so that there is no gap in cover between all of those.
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So a real need more than ever before to look at insurance programs holistically so that there aren't those gaps in cover that perhaps there were in the past.
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That's brilliant.
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Thank you.
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Um our time is I our time has been run.
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Um I know I'm I'm honestly I could you know the three of us could talk for for far longer because as you say, it's a a huge topic.
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Um, but I can only thank you both for um all your you know your views, your expertise, and and and you know, the um the we the the sort of content that we're you know that our our readers and our listeners now um always want.
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Um hopefully we've left them asking one or two questions, maybe prompted one or two discussions in and around in around the offices, um, and and hopefully the C-suite around how they're gonna better manage their resilience in what is a very um very challenging and changeable world.
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And as I said, Meg, John, I really appreciate all your time and uh and thank you for joining me.
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Thank you, John.
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It's been a pleasure.
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Yeah, a really great discussion.
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Thanks, John.
00:21:51.359 --> 00:21:59.920
Thank you for listening to Maximum Exposure, Talking Emerging Risks, a new series of podcasts brought to you by emergingrisks.co.uk.
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Welcome to Maximum Exposure, the Emerging Risks podcast.
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In episode seven, Meg Catalano, Global Managing Partner, and John Bruce, senior partner at Kennedy's, joined John Guy to discuss how pressure on the global supply chain is creating new risks for businesses and with it, growing liability exposures.
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I'm delighted today to be joined by John Bruce and Meg Catalano from Kennedy's.
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Welcome to you both.
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I suppose, in a way, one of the key interesting, one of the most interesting points in your recent Forsyth report is that you're finding that the major risks that seem to dominate risk and insurance risk managers and insurance thinking at the moment, cyber, climate, and geopolitical risk seem to be getting ever more interconnected.
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Are you finding that this is forcing a change or a rethinking the way those risks need to be approached?
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Um certainly, yes.
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That that interconnectedness of risks is absolutely something we're seeing, something we're seeing, and something that our clients are also talking about.
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Does it require a change in approach?
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Yeah, I would say so.
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Um one good example of this is in the natural catastrophe arena, um, where perhaps historically you would have said a hurricane hits Alabama, and you look at that as a first-party loss, you look at that through the first party framework.
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That's no longer the case.
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You now need to look at a whole host of other issues.
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Um, and this is coming more and more to the fore, perhaps, with climate change.
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And this year we're reading reports about it being a Super El Nino year.
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Um, and this Super El Nino in itself is a great example of where one weather system in the Pacific is spawning issues throughout the world.
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Um, it's gonna lead to storms, droughts, and heat extremes in in various regions.
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Um, so that that's gonna lead to um potentially a whole host of losses, and that in turn has a real impact on risk modeling, for example.
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So in the past, maybe you would have just looked at some historical data around um what is the likely outcome going to be of a particular event.
00:02:25.599 --> 00:02:31.199
That historical data these days, from what we can see, is less likely to be sufficient.
00:02:31.280 --> 00:02:34.479
You're gonna have to look at a whole host of other information.
00:02:34.800 --> 00:02:43.280
And at the same time, we're moving out from looking at things simply as a first-party type issue into also liability issues.
00:02:43.439 --> 00:02:54.159
For instance, when a hurricane hits, if damages are not as resilient as it was expected that they should be, then there could be a whole host of issues, liability issues.
00:02:54.400 --> 00:02:56.159
Were these buildings designed properly?
00:02:56.240 --> 00:03:03.840
That could lead to implications for the um architects, for the engineers and other design professionals.
00:03:04.080 --> 00:03:09.120
Should these buildings have withstood the hurricanes better than they actually did?
00:03:09.360 --> 00:03:14.719
So, yes, absolutely, interconnectedness is is definitely a theme that we're seeing all over the place at the moment.
00:03:14.960 --> 00:03:27.439
I suppose the problem's always been that insurance has always been seen to be quite siloed, you know, and if you look at it, the various class underwriters have their own their own sort of patch, and and rarely should the two meet.
00:03:27.599 --> 00:03:55.439
Are you seeing, obviously, from your client's point of view and the and the data and the research that you've been doing, are you seeing sort of as these as the the corporate risks change that a lot of risk managers are now talking to their insurers to say, well, look, we we we can't we need a more holistic approach to these risks, um, because what we don't want to see is um separate policies, which mean that some of these risks could fall through the cracks.
00:03:56.479 --> 00:04:00.639
John, yes, I think that's exactly what our clients are starting to look at.
00:04:00.719 --> 00:04:17.279
And they're they're realizing that what was a more traditional approach of one event, isolated events, one type of risk analysis just isn't going to be the thing that wins the day, so to speak, in the future.
00:04:17.439 --> 00:04:31.279
They are going to have to take a holistic approach to things, they're going to have to realize, as John just mentioned, that there's such a cascading effect of the connectedness of claims these days.
00:04:31.519 --> 00:04:45.120
So you go from a property damage claim that uh potentially has business risk implications, that has geopolitical implications, that may have cyber implications.
00:04:45.439 --> 00:04:54.879
So it's very much something that people are gonna have to look at, not just the single risk these days, but the portfolio risk.
00:04:55.120 --> 00:04:57.199
It's really so much more.
00:04:57.600 --> 00:05:00.959
And and the world is just getting very complicated.
00:05:01.120 --> 00:05:13.759
Those risks are not just across the business lines when we talk about looking at things holistically, but we're gonna have to overlay that with how does climate change impact those risks?
00:05:14.000 --> 00:05:20.319
How does an energy transition phase that the world is going through impact those risks?
00:05:20.480 --> 00:05:23.519
How do geopolitical conditions impact the risks?
00:05:23.759 --> 00:05:36.959
So, yeah, we are we are well beyond the isolated event analysis and much more into a connectedness and complex world for the insurance industry.
00:05:39.759 --> 00:06:08.800
I know you've you've mentioned claims, but I suppose actually from your point of view, is this is this creating sort of new um new challenges for for you around uh the interpretation of claims and maybe um the way in which um the way in which claimants are approaching um their you know their um their insurers and their claims management teams around well actually we we you know we we don't think you're performing as well as you should do.
00:06:11.759 --> 00:06:29.759
Um I'm not sure I've necessarily seen it as an issue of negative performance, but I I we are seeing a desire for the claims team and the underwriting teams and the actuarial teams to work more closely together and perhaps at times to get us, the lawyers, involved on an earlier stage.
00:06:29.920 --> 00:06:40.079
So um joining those people, not just at the point that the claims come in, but before the claims in the sort of loss assessment, how good is a particular insured?
00:06:40.319 --> 00:06:47.279
Um, and then looking at the new risks which are out there on the horizon and how do we how do they insurers cater for those?
00:06:47.439 --> 00:06:49.439
Is the policy drafted in the right way?
00:06:49.600 --> 00:06:51.360
What is the coverage intent?
00:06:51.439 --> 00:06:57.360
Um, aggregation of losses, um, that could be at an insurance level or indeed a reinsurance level.
00:06:57.519 --> 00:07:01.519
Um, what are the resilience requirements for a particular insured?
00:07:01.680 --> 00:07:26.959
Has an insured um demonstrated holistically that it's prepared for these big events, not just how is that building um going to perform in a particular hurricane in the example I started out with, but um is there all the other aspects of that business which may be impacted, whether it's um have they got diversified suppliers, um have they got sufficient business interruption cover?
00:07:27.120 --> 00:07:32.560
Are they properly stress testing in advance of losses, their crisis management plans and the like?
00:07:33.040 --> 00:07:44.240
And I would add to that, John, I think it's an exciting time for both insureds and insurers, and I think we are going to see the relationship evolve as a result.
00:07:44.480 --> 00:07:50.319
I think that the insureds are going to be looking to their insurers as business partners.
00:07:50.480 --> 00:08:13.040
They're going to be looking beyond just compensation for that individual claim because it is so much more complex, because the claims are connected, because it's going to be so much more important to really think about how do we prevent these losses, not just how we pay these losses?
00:08:13.279 --> 00:08:23.279
I think you're going to see that there's much more of a business partnership with insureds and insurers, and they're going to be looking for some guidance.
00:08:23.439 --> 00:08:28.720
They're going to be looking for the information that the insurers have on these claims.
00:08:28.879 --> 00:08:32.720
What is the data that they are amassing telling them?
00:08:33.279 --> 00:08:35.840
What lessons can be learned, so to speak?
00:08:36.000 --> 00:08:42.879
How do we jointly look at risk in a very different kind of way in the future?
00:08:45.360 --> 00:08:46.320
That's quite interesting.
00:08:46.399 --> 00:08:52.799
You mentioned there, uh, Meg that the whole issue about data and information, particularly information.
00:08:52.960 --> 00:09:01.200
I suppose, you know, once these risks start to unfold, how does that interconnected nature affect the way events are experienced?
00:09:01.360 --> 00:09:07.519
I mean, particularly, as we say, in a in a sort of a real-time social media-driven environment in which we now live.
00:09:07.840 --> 00:09:20.559
Yeah, no, I think I think it's um again very exciting, very challenging because not only, like we said, so they're connected um not just by different business lines, right?
00:09:20.639 --> 00:09:23.679
You know, we've we've talked about how that can happen.
00:09:23.840 --> 00:09:31.679
It's no longer just um one area, so it's connected from a geography perspective.
00:09:32.080 --> 00:09:40.000
John mentioned um earlier, just you know, El Nino, and that is not just in one region, one area.
00:09:40.159 --> 00:09:42.559
So geography is is connected.
00:09:42.799 --> 00:09:44.720
We're a smaller, smaller world.
00:09:44.799 --> 00:09:51.279
And social media, that that just is a whole nother dimension for sure.
00:09:51.440 --> 00:09:54.639
I think that it raises the stakes on claims.
00:09:54.879 --> 00:10:03.840
It means that the reputation of our insureds becomes a huge part of the claims analysis.
00:10:04.320 --> 00:10:13.519
And um just the fact that it becomes very public very fast is is critical.
00:10:13.759 --> 00:10:20.960
And that often is going to change how one potentially responds to these claims.
00:10:21.120 --> 00:10:31.279
There is going to be a public perception and reputation risk that both sides are going to need to consider.
00:10:31.840 --> 00:10:38.799
And how we pay and how much is at risk is very much going to be shaped by social media.
00:10:39.200 --> 00:10:42.320
I suppose, in a way, um this sort of comes on.
00:10:42.559 --> 00:10:51.279
I suppose one of the questions really is what should insurers be doing differently in terms of their modeling and underwriting in this new, more connected risk world?
00:10:51.600 --> 00:10:58.000
Obviously, those historic data trends are important, but they're going to need to get more and more information.
00:10:58.080 --> 00:11:08.960
And no doubt AI, everyone's talking about AI, AI will help them assess all the extra data that they're going to need to probably properly be able to assess the risks.
00:11:09.440 --> 00:11:25.039
Um and as we've said, given the interconnectedness, um, when you look at a property risk, you're not simply looking at the structure of the building, you're looking at all the consequences that may flow from a damage to that building, from the supply contracts that they may have in place.
00:11:25.360 --> 00:11:34.879
Um impacts as a result of um what's going to happen to their digital infrastructure, how their suppliers are going to be affected by the same sort of event.
00:11:35.120 --> 00:11:40.879
So absolutely, you just have to take a much more holistic view about any risk assessment.
00:11:41.279 --> 00:11:49.440
John, one of the things we've talked about here is that I think we're going to move to just a different analysis model, really.
00:11:49.519 --> 00:11:55.679
It's going to be not just what has happened, because that was really the focus in the past.
00:11:55.919 --> 00:12:02.639
What happened, what was that isolated event, and it's going to be much more what could happen.
00:12:02.960 --> 00:12:17.840
So understanding the cascade, understanding all the possibilities, that has got to be part of the underwriting process going forward that is going to be different and as I said, a challenge for everybody.
00:12:18.080 --> 00:12:22.159
I think you're going to also see some real changes potentially in pricing.
00:12:22.399 --> 00:12:30.240
Just how how do we address a cascade, the possibilities, and not just the single event?
00:12:31.200 --> 00:12:35.120
Portfolio management, as I mentioned before, is going to be critical.
00:12:35.279 --> 00:12:39.360
So we're no longer going to be looking at just single policies anymore.
00:12:39.519 --> 00:12:47.440
You're going to need to look at do you have too many flood risks in a specific geographic area?
00:12:48.159 --> 00:12:51.120
You know, things like supply chain risk.
00:12:51.360 --> 00:12:57.360
Is your portfolio concentrating in one manufacturing area versus another?
00:12:57.519 --> 00:13:02.159
Um all of that is going to be subject to change for the insurance industry going forward.
00:13:02.639 --> 00:13:09.519
As you say, it sounds like it's it's going to be a very um dynamic period for the insurance sector.
00:13:09.759 --> 00:13:21.120
But I mean, on the other side of this, and if we look at the insured, you know, what should businesses be doing now to try and reduce their exposures and obviously make themselves more attractive to risk carriers?
00:13:21.759 --> 00:13:26.159
I think a real focus on that practical resilience.
00:13:26.320 --> 00:13:29.039
Um, have they got diversified suppliers?
00:13:29.279 --> 00:13:32.320
Are they able to avoid single points of failure?
00:13:32.480 --> 00:13:35.440
Um, are they reviewing their business interruption cover?
00:13:35.600 --> 00:13:38.639
Are they really stress testing all their crisis plans?
00:13:38.879 --> 00:13:44.480
Are they investing in physical adaptation, um, improving energy resilience?
00:13:44.639 --> 00:13:47.759
Um, and are they ready to go when something hits?
00:13:47.840 --> 00:13:51.279
Are they are they checked all their crisis management plans?
00:13:51.440 --> 00:13:52.879
Do they have a crisis management plan?
00:13:52.960 --> 00:13:55.360
And if if they do, are they are they checking them?
00:13:55.600 --> 00:14:03.200
Um and ultimately this is so important because this is going to be a governance issue for insureds.
00:14:03.360 --> 00:14:10.320
This is going to be questions asked of the board, whether it's by a regulator, whether it's by their shareholders or other stakeholders.
00:14:10.480 --> 00:14:14.240
So more than ever, this is incredibly important.
00:14:15.519 --> 00:14:38.399
I would I would add, without trying to be too much of a doomsdayer, that I think that it's going to be critical for businesses really to be prepared for that perfect storm and really take a look at at their risks and say to themselves, you know, are they prepared for extreme weather events?
00:14:38.720 --> 00:14:44.159
Are they ready to address that disruption in energy suppliers?
00:14:44.399 --> 00:14:46.799
Have they looked at their supply chains?
00:14:47.039 --> 00:14:49.679
Are they ready for a cyber attack?
00:14:49.919 --> 00:14:55.519
Are they ready for how financial markets might react and be volatile?
00:14:55.679 --> 00:14:59.919
Are they ready for social media blitz or attention?
00:15:00.159 --> 00:15:09.279
So it's really going to be that careful planning for the perfect storm and working with the insurance industry as a business partner.
00:15:10.240 --> 00:15:19.840
Because I suppose one of the things that it comes back to, I think what you you know from the outset, John, you mentioned that you know we now need to take a sort of broader look at the risks we face.
00:15:20.000 --> 00:15:43.679
And I suppose for you know corporate leaders and you know the C-suite, they need to, I suppose, now start to think about the pressure they may come under from or the scrutiny they may come under from their shareholders if when you know if when the worst occurs they're found wanting when it comes to the necessary resilience and and business continuity planning.
00:15:43.919 --> 00:15:44.879
Yeah, absolutely.
00:15:45.039 --> 00:16:00.960
So um by trade, if you like, I'm a directors and officers claims lawyer, and there's a well-trodden path in the United States where there are claims against boards where they haven't properly prepared or where they've overstated their expected resilience.
00:16:01.039 --> 00:16:16.799
Um, traditionally in in with respect to other types of risks, but now, as ever, if there's a sort of catastrophe which hits, if there's some climate change um impacted event which hits their business, any statements that they've said in the past, they're going to be scrutinized.
00:16:16.879 --> 00:16:22.559
And if the share prices are dropping as a result, you you can be pretty sure that a claim will follow.
00:16:22.799 --> 00:16:28.799
Um, but I think it's also important to remember that it's not just uh shareholders that may have a view.
00:16:28.879 --> 00:16:34.320
Um, there's a whole host of regulatory obligations upon companies and boards.
00:16:34.480 --> 00:16:41.360
Um, so is are they all are all of those regulatory obligations being satisfied?
00:16:41.519 --> 00:16:52.720
Um whether it's with respect to um uh transparency over sourcing, production, um, and distribution, um, who are their suppliers?
00:16:52.799 --> 00:16:57.600
Um, are they satisfying the anti-slavery legislation, all those sorts of things?
00:16:57.679 --> 00:17:01.759
So a whole panoply of issues that boards are going to have to consider going forward.
00:17:02.559 --> 00:17:03.919
I agree, John.
00:17:04.079 --> 00:17:16.559
I mean, we haven't really spent that much time, but one of the biggest areas of uncertainty these days, and uncertainty means challenge, is the geopolitical horizon that we're all working under.
00:17:16.720 --> 00:17:27.599
The reality is we just don't know always what's coming next, and that just adds another layer of complexity, another layer of uncertainty.
00:17:27.839 --> 00:17:33.519
It's it's actually one more area that you need to do that um preparation for.
00:17:33.680 --> 00:17:52.079
It's all part of a perfect storm, whether it's you know, the situation in the Middle East or frankly, just um reactions from a sanctions perspective, it creates that instability that has a cascading effect, and that just makes the whole horizon more complicated.
00:17:52.799 --> 00:18:16.400
So I suppose the key issue throughout all of this is as you say, uh Meg, it's been, you know, we're going through a period of real uncertainty for businesses, and I suppose, in a way, for the insurers who are now having to um, as John said, almost like rip up their former historical data-led models to create a new breed of uh of future-looking sort of models.
00:18:16.559 --> 00:18:38.160
But I mean, from that point of view, it do you think we're now at a point where you know um the the bro, you know, the broker, the insurer, and the insured really need to get a little bit bit closer together now from the outset to have a broader discussion rather than well actually, is this you know, is this the risk you want me to assume?
00:18:38.319 --> 00:18:46.319
Rather than actually, how can we, you know, how how can we as a tripartite make your business more resilient to the benefit of all?
00:18:47.839 --> 00:18:50.559
I think it's a perfect way of describing it, John.
00:18:50.799 --> 00:18:51.599
Absolutely.
00:18:51.759 --> 00:18:54.799
There really needs to be a business partnership.
00:18:54.960 --> 00:18:57.680
It's what makes insurance so interesting.
00:18:57.839 --> 00:19:00.079
It actually is a societal issue.
00:19:00.240 --> 00:19:02.400
We can't have protection gaps.
00:19:02.559 --> 00:19:05.519
This is a critical part of what keeps the world going.
00:19:05.599 --> 00:19:09.039
And if they don't all work together, it's not gonna work.
00:19:09.279 --> 00:19:25.680
I suppose in in a way, um uh in a I suppose in a way the b the big issue, I suppose, for a lot of people now, and as you mentioned, is that it is the the swiftness of the way in which our geopolitical environment is changing.
00:19:25.759 --> 00:19:37.200
Um, and of course, I suppose in a way, the other issue is that um at the current point in time we don't really see any end to some of the major geopolitical issues.
00:19:37.359 --> 00:20:04.559
Uh I suppose in a way, um my sort of final question is are we going to see, and I I know we mentioned it, uh you mentioned a little bit earlier on the fact that it may well be that there needs to be a greater concentration on on policy wordings and how, as you say, we we look to you know we look to avoid, you know, we avoid the gaps, but I suppose drive greater insurance um penetration within the commercial market.
00:20:04.720 --> 00:20:08.160
I mean, do you think we may that may well be our next step?
00:20:08.319 --> 00:20:19.680
Is that we're gonna start to see very different wording when it comes to to to the policies that will that will be um you know sort of promoted and and marketed in the future.
00:20:21.119 --> 00:20:22.079
Yes, for sure.
00:20:22.240 --> 00:20:31.039
And I I think it will be also important that the buyers of insurance don't, and indeed the sellers and the brokers don't just look at each line of cover separately.
00:20:31.200 --> 00:20:41.519
So um they look at cyber alongside the property damage alongside the general liability covers, so that there is no gap in cover between all of those.
00:20:41.599 --> 00:20:51.119
So a real need more than ever before to look at insurance programs holistically so that there aren't those gaps in cover that perhaps there were in the past.
00:20:53.039 --> 00:20:54.000
That's brilliant.
00:20:54.079 --> 00:20:54.559
Thank you.
00:20:54.640 --> 00:20:57.200
Um our time is I our time has been run.
00:20:57.440 --> 00:21:05.440
Um I know I'm I'm honestly I could you know the three of us could talk for for far longer because as you say, it's a a huge topic.
00:21:05.599 --> 00:21:20.079
Um, but I can only thank you both for um all your you know your views, your expertise, and and and you know, the um the we the the sort of content that we're you know that our our readers and our listeners now um always want.
00:21:20.160 --> 00:21:37.920
Um hopefully we've left them asking one or two questions, maybe prompted one or two discussions in and around in around the offices, um, and and hopefully the C-suite around how they're gonna better manage their resilience in what is a very um very challenging and changeable world.
00:21:38.000 --> 00:21:42.960
And as I said, Meg, John, I really appreciate all your time and uh and thank you for joining me.
00:21:43.440 --> 00:21:44.240
Thank you, John.
00:21:44.319 --> 00:21:44.960
It's been a pleasure.
00:21:45.279 --> 00:21:46.640
Yeah, a really great discussion.
00:21:46.720 --> 00:21:47.519
Thanks, John.
00:21:51.359 --> 00:21:59.920
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