Insurers can prepare Professional and Financial Lines clients for the next challenge

Following the recent Travelers webinar: Navigating the Rapidly Changing World of Professional and Financial Lines Insurance, James Kerr – Vice President Bond & Speciality at Travelers Europe – discusses how insurers can help businesses navigate the rapidly evolving market.

The past few years have thrown a character-building mix of challenges at businesses. Inflation, economic volatility, fragility in financial systems, a heightened sanctions environment primarily driven by the Russia-Ukraine conflict and associated supply chain interruption, increasingly sophisticated cyber threats, and changing employee expectations are all impacting the exposures that companies and their leadership must face.

Meanwhile, the market landscape is bringing us some surprises.

We’re seeing new kinds of capital flow into the market. The first cyber catastrophe bond emerged earlier this year, and such alternatives provide new options to clients and encourage creativity in the marketplace. At the same time, these innovations make it more important for brokers and clients to do their homework on carriers so they trust their insurer will be there for them in the long term when claims happen.

Add to that the dizzying developments in technology in recent months. They are allowing us to bring advanced analytics to clients – who will increasingly come to expect sophisticated insights about their risks and the claim environment. Internally, technology is changing how insurers and brokers collaborate, allowing us to make better-informed decisions using real-time data and removing friction from the underwriting process.

The flip side of these positive developments in technology is cyber risk, which is evolving all the time and requires new risk management and insurance protections. Indeed, addressing cyber exposure is now the top risk our US customers are facing, according to the Travelers Risk Index, and the UK business environment is no different.

The shifting landscape is giving rise to a greater range of differentiators among competing insurers, as well as opportunities to forge stronger partnerships with clients through bespoke products and service.

Your choice of insurer matters

Our industry remains a people-focused business. While people may worry about artificial intelligence claiming jobs, the advances we’re experiencing clarify the need for guidance from a trusted source. That’s especially true as risks become increasingly complex to navigate.

Consider silent cyber, for instance. Cyber breaches are now treated as a “when, not if” problem for businesses of all sizes. Insurers can help clients know what to expect from their cover when they face a claim in different scenarios by providing case studies and claims examples. They can also reinforce the systemic impact of cyber risk as they review the cyber controls that firms have in place and identify where holes exist that nefarious actors could exploit.

Meanwhile, challenges surrounding ESG continue to demand attention from business leaders. Across the industry, more Directors & Officers claims are being made against boards in an effort to hold them responsible for either failing to make disclosures or for making misleading statements about ESG, known as greenwashing. Insurers can help business leaders understand the nuances of a particular market that may impact ESG risk and regulation, as well as identify and address weaknesses or inaccuracies in statements in order to present the company in the best light.

More broadly, the employment landscape is making it necessary for businesses to scrutinise how they manage employees and attract and retain talent. When the macroeconomic environment isn’t favourable to employees, claims will increase, with activity tied to redundancies as well as the shift back to the office. These claims may take a few years to surface, but they are another exposure that businesses must not only understand, but also be able to demonstrate to clients and other stakeholders how they are being proactively mitigated.

Managing such risks can feel like a full-time job for business leaders, on top of the daily task of running a business. Business leaders need informed counsel about the risks they face – both now and in the future – and guidance about how to manage them and present their company favourably. Insurers can be educated, trusted advisors who identify the protections and provide solutions that firms need so they have the freedom to focus on what truly matters: running their business successfully.

The information provided in this document is for general information purposes only. It does not constitute legal or professional advice nor a recommendation to any individual or business of any product or service. Insurance coverage is governed by the actual terms and conditions of insurance as set out in the policy documentation and not by any of the information in this document.