Replay: Balancing risk and reward in today's market

COVID-19 is heavily impacting today’s insurance market and influencing the way trading is occurring. Companies are facing significant increases in premium and scrutiny around retention, sub-limits/limits and coverage. There has become a strong focus on insurance underwriters to achieve technical pricing due to the current pandemic. It is important that organisations optimise their insurance spend and understand the trade-off between risk and reward.

In our 5th instalment of our special webinar series held on Wednesday 6th May, which is now available on replay, Ben Qin, Head of Analytics and Data Solutions, Pacific and Michelle Ng, Analytics Team Leader, explore the different ways to maximise the effectiveness of your organisations own balance sheet and risk tolerance.

The presentation dives into the importance of having a conversation with your broker to identify how much risk you are putting on your balance sheet, and how you can budget for your risk retention to optimise on your premium, once renewal period comes around. Organisations may experience higher premium figures on their next renewal, due to COVID-19 and how it has influenced the market, but Ben Qin says it is important to analyse your finances to find an accurate figure for how much risk retention your company can withhold. By doing this, you will hopefully see an improvement in your finances, while retaining adequate cover for your organisation.

The analytics team are there to help you and your organisation assess your ability to absorb risk, given your current financial performance and focus on a retention strategy for each line of risk. Whether that be Liability, D&O, PI, or another line of insurance, the assessment gives a good starting point into the discussion of your risk retention. During these times, you can’t assume there will be the same expiring premium terms and the same market capacity as before, so it’s important to know that the Analytics team provide a range of services that will help you make data driven decisions rather than, for example, continuing with the structure currently in place.

The key insights shared in the presentation included:

• How to balance the risk and reward equation and how to manage ressures on budget constraints during times of uncertainty
• Finding the point of intersection where own capital/risk tolerance is maximised
•  The financial resources that are available for corporate to deal with risk
• Fundamental shifts in risk thinking and the culture towards maximising our own risk retention, in order to have a better balance in your company’s budget
• The services that are provided by the analytics team to give organisations a better understanding and starting point on their risk retention and a strategy for each line of insurance
• Rigorous analytical and actuarial method to determine optimal insurance structure (retention and limit)