Property rates may be easing, but for Achim Hillgraf (pictured), head of EMEA market strategy and engagement at FM, that doesn’t take resilience off the table.
Transferring risk that an organisation isn’t comfortable holding on its own balance sheet will in all likelihood remain the centrepiece of insurance for decades, he said. But awareness of exposures, whether they come from natural hazards, supply chains or a firm’s own production facilities, and decisions on whether and how to mitigate them, are taking the front seat in the conversation.
Over the past three to five years, starting perhaps with the pandemic, resilience has evolved to the point where it is no longer really optional, he said.
Hillgraf’s starting point on whether a site with unclear resilience can be insured is the Lloyd’s credo that everything is insurable.
“At the end of the day, it’s just a question of price and terms and conditions. And whether this is continuously true, I guess time will tell,” he said.
He is clearer that demonstrating resilience improves the odds of favourable terms and pricing. With risks that are difficult to calculate, insurers are trying to know what they are getting themselves into, he said. The more resilient an organisation is, the better an insurer can read the risk in front of it.
“Our battle cry continues to be the more resilient you are, the more likely it will be that you will be able to transfer certain risks in the future to the insurance market, and that you will be able to do so at reasonable terms and conditions as well as price,” he said.
What resilience looks like depends heavily on location. A coastal site may face storms and heavy rain on a weekly basis through the winter months. Being inland doesn’t remove exposure to natural hazards but changes it, Hillgraf said, with risks ranging from flood and earthquake to those that come with a valley location. Then comes what the business does, with flammable liquids, pressurised equipment or a combustible building structure each setting different priorities.
Proximity to emergency services can change the calculation entirely. A plant in suburban Madrid with a fire station three minutes down the road is a very different proposition from an operation near the polar circle, where the nearest might be 200 miles away.
“If the mitigation takes three hours to get there, it’s probably nothing that you could take into consideration when you try to become a more resilient operation,” he said.
For brokers, the starting point is information. That means an address, an occupancy group and a description of what actually happens under the roof, whether that’s metalworking, plastics or assembly. Each additional detail allows more concrete advice on improving resilience at that specific location.
With FM Essential, FM has broadened its approach, recognising that manufacturers have different risk profiles and different ambitions when it comes to resilience. Resilience itself is essential, Hillgraf said, but the level an organisation aspires to remains optional.
The cost of falling short isn’t necessarily insolvency. Rather, the people, money and time needed to respond to adversity will be exponentially higher for less resilient organisations than for peers able to react quickly.
