From cyber risk to supply chain disruption and reputational damage, a wide range of intangible risks are posing a threat to businesses in today’s inter-connected, technology-driven world.
But the commercial insurance sector has not kept pace with the changes, and in many cases is still unable to provide adequate coverage for clients’ growing roster of intangible risks, says risk management association Airmic.
“We’ve been talking for years about the need for insurance to cover risks to intangible assets yet, despite our best efforts, we’ve made very little progress. In some areas, like business interruption, there’s a perception that things have actually gone backwards,” said CEO John Ludlow at Airmic’s annual conference.
Companies today are increasingly built on a foundation of intangibles – a recent study suggested that 82% of Fortune 500 companies’ value now resides in intangible assets.
The insurance industry risks becoming obsolete to its buyers if it continues to trail behind in offering solutions, according to Ludlow.
“We know that the commercial insurance market is very experienced at protecting physical things like property, but that is not where the future lies for most of its customers,” he said.
“Threats to reputation, cyber, supply chains and other intangibles are what really worry them, and insurance needs to be able to find solutions. Otherwise it will cease to be central to the risk management of most large companies.”
Buyers must also develop a good understanding of intangible assets and the wider risk picture if they are to use insurance strategically.
“Your insurance isn’t going to be worth much if you don’t know what you’re doing,” Ludlow said. “I think you’ve got to understand your risks in the new cyber, technology-enabled world, and you’re going to have to declare them and share that risk information with your insurance.”
Should both parties improve their stance on the issue, there should be a positive end result.
“If insurers, brokers and buyers can work together to resolve these challenges – and I am sure we can – then the future will look bright,” Ludlow added.