Cyber coverage, supply chain underwriting information among concerns for European risk managers

Several European risk managers are not happy with the cyber coverage available from insurance carriers, while the main concerns for chief executive officers of corporate policyholders tend to be economic, political and social risks, suggests the Risk Frontiers European Survey, published Monday.

“The survey, which gathers views from risk and insurance managers across 12 European countries, reported that individual European risk managers are feeling the pressure brought about by an increasingly complex risk environment coupled with budgetary constraints,” according to a news release from XL Group plc, one of the survey’s sponsors. The other sponsor was Willis Group Holdings plc.

A total of 52 managers — from firms in various industries, including banking, steel, energy, manufacturing, information technology and telecommunications — participated in the survey.

Participants were asked whether they are “happy with recent developments in coverage for key areas such as cyber, supply chain/business interruption and environmental.”

Based on their answers, cyber insurance “appears to be a classic example of the fundamental problem that faces the European and international corporate insurance market in terms of product development and innovation,” according to the report.

“The customers do not appear to be very happy with what is on offer. They say that the capacity is too low, the coverage too limited and many of them do not really understand why it is being offered as a separate policy at all.”

In order to underwrite business interruption coverage, participants noted carriers need more information about their supply chains.

“Most agree that it is reasonable for the insurers to demand more information for evolving risks that are difficult to identify and measure,” the report states. “But the customers want to make sure that the effort they put into finding this information is rewarded with more accurate and tailored coverage terms.”

The report quotes several participants, including Lennart Edström, vice president of group risk management at Stockholm-based electrical appliance maker AB Electrolux.

The report quotes Edström as saying that some information required by carriers to underwrite contingent business interruption coverage includes business secrets, so risk managers must ensure they have NDAs in place.

“I fully understand why insurance companies are asking all of these questions,” Edström states in the survey. “I think they are doing the right thing as it forces us to dig deep within our own organisations. The question is how far down [the supply chain] can you go and how far down will the insurance company ask for information.”

Participants were also asked to identify the “big three” risks that keep their CEOs “awake at night.”

The answers were different “because of the wide range of specific risk types that fall into these big categories identified by the risk managers who work for a range of very different companies with different priorities and operating models,” according to the report. “Most risk managers who took part in this year’s survey identified economic, political and social risks on an international basis as the main challenges that keep their CEOs awake at night.”