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Mitigating risk in 2022

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For the first edition of Markel Matters in 2022 we asked our Wholesale leaders to talk about the key risks facing their clients for the year ahead and how their teams will be helping them to mitigate those risks. Here’s what they had to say…

Chris Fenn
Divisional Managing Director, Marine

One of the increasing risks facing many of our clients concerns heightened levels of strikes, riots, civil commotions, and malicious damage (SRCCMD) incidents around the world. We have seen high profile events of this nature in Chile, Israel, South Africa, Europe, and the US in recent times, and they have arisen from a variety of causes that have impacted a diverse client base, including the retail, hotel, commercial, manufacturing, and industrial sectors.

These events have generally been restricted to localised areas, but some have occurred over widespread areas, including a number of cities. The frequency and severity of these events is undoubtedly increasing, and we have been monitoring this trend closely since 2017.

We remain committed to supporting and protecting our clients from these events. Risk transfer obviously has to be equitable and so we have to set insurance terms and conditions that provide us with pricing adequacy to accept these risks. However, alongside our technical underwriting considerations, we have increased the use of third-party expertise to provide added value to the risk transfer process. Whilst this expertise obviously benefits our underwriting, it also provides direct value to our clients, not just via our insurance products, but also by the value-added services these third-party experts can provide them in conjunction with our insurance policies.

We are fortunate to be able to call on some very valuable expertise that ranges from intelligence agencies who provide us with regular intelligence reports, security experts who profile and advise clients on their security and vulnerability to SRCCMD events, and crisis management specialists who can assist clients in cases where they need expert support. When combined, those third party services – which are aligned to Markel’s insurance products – deliver a client offering that will become increasingly important for our war and terrorism team during 2022.

Scott Bailey
Divisional Managing Director, Cyber

Ransomware is undoubtedly the number one cyber-threat to businesses at the moment. However, it is likely that a new risk will emerge in the coming years, due to the ever-changing cyber landscape. This is what makes cyber risk incredibly interesting, albeit somewhat challenging to remain on top of trends.

The cyber market, Markel included, is expecting clients to be able to demonstrate how they have prepared for ransomware attacks; both in avoiding and recovering from them, should they succeed.

Cyber insurance has swung from ‘hard to sell’ just a few years ago, to ‘hard to buy’ in current times. Those clients with the best-in-class defences are likely to be the ones who receive the insurance terms they want, while others that haven’t contemplated this complex threat might not be insurable at all.

The good news is that most businesses can learn from Markel’s feedback on the key risk management we expect, having witnessed more ransomware incidents in recent times. Insurers, such as Markel, have lots of ‘lessons learned’ and it is encouraging to hear that many of our clients are keen to listen to our perspective.

Rohan Davies
Divisional Managing Director, Energy

Climate change, cyber, regulation, the ‘war for talent’, as well as natural catastrophe and the ever-changing geopolitical landscape, are some of the main risks that are affecting Markel’s clients.

We work with our clients to equip them with the best products from the insurance sector, so that they can transfer that risk to us as a key partner in their risk management strategy. The energy industry evolves so rapidly that our clients look for a partner who has the expertise to identify the changes in risk landscape and is nimble enough to negotiate the change, while being big enough to assume risk and be dependable for when the worst should happen.

In Markel’s Wholesale division, we offer insurance products in energy, trade credit, political risk, and surety (TCPRS), terrorism, liabilities, directors and officers, among others. We are a dependable partner across such a breadth of risk that we can help clients sleep easy knowing they are covered by a company that understands their industry and exposures.

We can all see that the drive to be more sustainable is only going to accelerate, which will impact our clients in different ways. Some will move rapidly into renewable energy, while others will invest in hydrogen or carbon sequestration and power from renewable energy sources for traditional energy assets, including offshore complexes. We can, and do, lead all those types of risks, so that we are prepared to be a lead market of choice for the energy sector.

We are here to support all our clients, whatever their pace of change. Markel International is a dependable partner that has been with some of its clients for over two decades, and we look forward to being a trusted partner for many more in 2022 and beyond.

Juliet Redfern
Divisional Managing Director, Equine and Livestock

One ongoing risk that faces clients is fractures of horses’ limbs on the racecourse. In this scenario, it has often resulted in a horse not being able to be saved and put to sleep on the track. However, as a result of a generous grant from The Racing Foundation, as well as additional support from the racecourses, ARVS, and The National Trainers Federation, all British racecourses will be provided with fracture support kits; comprising of different boots that can be used on the front limbs after a breakdown on the racecourse.

The application of those kits will mean less horses have to be put down at the track, and, together with the boots, horses can be moved, having been stabilised to specialist vet hospitals for treatment. We welcome this news as a risk mitigation strategy and are certain that our clients will be delighted to hear of the initiative, which has the welfare of horses at heart.  

Carl Titterton
Divisional Managing Director, TCPRS

Heading into 2022, the key theme for trade credit, political risk, and surety (TCPRS) on risk will remain the ongoing ripple effects of Covid-19 within the global economy. Notably, we will continue to focus on factors driving supply chain constraints, price volatility, and the resulting inflationary pressures in the broader economy worldwide (e.g., imbalances in supply and demand).

Clearly, given the broad diversity of industries and geographies covered by TCPRS, we approach those aforementioned risks with our clients and brokers on a case-by-case basis, by understanding the specific circumstances, challenges, and opportunities as they present themselves for each client. As is often the case, the key to understanding those risks and addressing them is communication, ensuring that we remain as close to our clients and brokers as we can be throughout the year.

David Sawyer
Divisional Managing Director, PFR

Professional and financial risk (PFR) is a broad church so it is difficult to focus in on one specific risk facing clients today. At the macro level, I would say it is the changing risk landscape, be it Environmental, social and governance (ESG), ransomware, exposures coming from a volatile economic outlook, or the increasing regulatory environment. Those are all key risk issues a business has to consider today. 

When it comes to underwriting every risk, underwriters must not only consider the individual risk aspects specific to the client, but also the wider sector, economic, and regulatory environment. Within PFR, we have product line specific teams and within those teams, we have sector specific subject matter experts, who are known to be market-leading in their field.

We also provide underwriters with the support and time to maintain and grow their knowledge base. This is achieved by having a culture of openness, not just in the division, but across many departments such as claims, legal and compliance, and underwriting operations at Markel International.

Additionally, we have a good network established with professional firms, including solicitors and risk managers, of whom we can go to, to get advice or an independent perspective.

The key lesson is that the risk environment is constantly evolving and we must keep abreast of it to be able to continue making informed underwriting decisions.         

Chris O’Shea
Claims Director, Wholesale

A key challenge which is widely publicised, but particularly poignant, is claims inflation – whether that be driven by increased litigation and nuclear jury awards (typically referenced as ‘social inflation’), supply chain issues leading to extended business interruption and increased cost to repair, or court delays as a result of the pandemic resulting in increased defence costs.

Claims inflation is not confined by class of business or territory despite the natural lean towards US litigation. The increased litigation potential, cost, and delay can perpetuate uncertainty and concern for the insured, and that is why Markel’s claims team is always on hand to support its clients, by helping them to navigate through these difficult times. Our claims team prides itself on good communication and providing an unrivalled service to clients, ensuring their claim is dealt with quickly and efficiently.

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