riskandinsurance.com Open in urlscan Pro
2a06:98c1:3121::3 Public Scan

Back to summary

Submitted URL:
http://click1.email.riskandinsurance.com/imyhndppvvmwyvtgwbrrkwtdgrwzkrttzzfdcmbvyddyb_zfbpzrwfrkrldzlzflzz.html?a=301791
Effective URL:
https://riskandinsurance.com/sponsored-5-factors-driving-rising-risk-costs-for-businesses-how-technology-and-a-strong-carrier...
Submission: On April 04 via manual (April 4th 2023, 7:21:35 pm UTC) from US — Scanned from DE

Form analysis
1 forms found in the DOM

GET https://riskandinsurance.com

<form class="search-form" method="get" action="https://riskandinsurance.com" role="search" autocomplete="off">
  <div class="search-wrapper ">
    <div class="input-holder">
      <input type="search" name="s" class="search-input" value="" placeholder="Search">
      <span class="search-help">Type your search term above</span>
      <!---->
    </div>
    <!--<span class="close search-toggle"></span>-->
    <div class="result-container">
    </div>
  </div>
</form>

Text Content

*
*
*

* Sections
* Critical Risks
* Risk Management
* The Insurance Industry
* Claims & The Law
* Workers’ Comp Forum
* Risk Insiders
* Sector Focus
* .
* Risk Central
* Power Broker
* Risk Matrix
* Risk Scenarios
* Risk All Stars
* Teddy Award
* Sponsored Content
* Branded Webinars
* Magazine
* Digital Issue
* Issue Archive
* Subscribe
* Conferences
* Ergo
* National Comp
* Advertise
* Subscribe
* More
* Award Applications
* Newsletters
* &BrandStudio
* Privacy Policy
* About R&I
* Contact Us
* Media Kit

* Trending Stories
* National Comp
* Power Broker
* Workers’ Comp Forum
* Risk Matrix
* Risk Central
* The Profession

NEWSLETTERS

The best of R&I and around the web, handpicked by our editors.

RISK CENTRAL

White papers, service directory and conferences for the R&I community.

GO TO RISK CENTRAL.

DIGITAL EDITION

Web replica of the print magazine.

VIEW DIGITAL EDITION.

Type your search term above

*
*
*
*

SPONSORED: AXA XL

5 FACTORS DRIVING RISING RISK COSTS FOR BUSINESSES. HOW TECHNOLOGY AND A STRONG
CARRIER PARTNER CAN HELP

Businesses in a variety of sectors are struggling with rising costs of risk.
These resources can help.
By: AXA XL | March 1, 2023

From an economy straining under the pressure of inflation and prolonged supply
chain pressures to increased natural catastrophes over the past few years,
cyberattacks and rising jury verdicts, businesses are dealing with more
exposures than ever.

The cost of managing and transferring risk is rising, and risk managers and
their brokers are working to reduce these costs in whatever ways they can.

Thankfully, carriers are engaging risk consultants and new technologies to help
tackle risk in today’s ever-evolving world. They’re partnering with insureds to
help predict, prevent and reduce the impact of losses.

“We want to partner with our insureds as much as possible in terms of helping
them manage their risk,” said Matt O’Malley, U.S. country leader, AXA XL. “We
need to help our insureds be successful in the business they’ve chosen to be
in.”

Here are five areas where risk costs are increasing, and how carriers can help
mitigate these exposures.

1) INFLATION AND VALUATION GAPS

Matt O’Malley, U.S. Country Manager, AXA XL

It’s no secret that the U.S. is straining under the pressure of inflation. Costs
on a variety of products and services have increased due to shortages, supply
chain issues and other factors.

Beyond consumer goods and services, O’Malley says he’s seen today’s inflationary
economic conditions affect property and equipment values, leading to valuation
gaps between an insured’s policy and the actual cost of restoring the building
or equipment. With increasingly frequent natural catastrophes resulting in
increasingly frequent property damage, rising repair costs are a major concern
for insureds.

“We were seeing losses that exceeded what insureds had thought the value of
their properties were,” he said.

It’s not just buildings that are affected, either. Merchant marine fleets have
increased 26% over the past year, according to O’Malley. When gaps exist between
the policy coverage and the value of an item, businesses have to shoulder the
difference. Carriers can work with brokers and risk managers to ensure that
their valuation data is up to date. If need be, they might be able to make
adjustments in the middle of the policy period.

“We’ve made sure that we’re aligning with our brokers, in terms of how current
the data is, to make sure that, if there are gaps in the data, we’re
communicating that to them so that they’re engaging the insured at the
appropriate time,” O’Malley said.

2) NUCLEAR VERDICTS

Nuclear verdicts — those over $10 million — continue to plague businesses. As
jurors seem to levy higher and higher awards for plaintiffs, businesses may be
wondering how they can keep costs in check.

Though nuclear verdicts can affect businesses in every sector, commercial auto
is one line where O’Malley has seen particularly high jury verdicts. He’s worked
with his clients to implement telematic solutions to help improve driver safety
and prevent collisions.

In addition to preventing accidents, telematics collect data that can help
companies detect and prevent common claims. AXA XL’s partnership with the
technology company Xtract can process these data points and help insureds
determine what actions they can take to improve driver safety programs and
prevent losses.

“We’re supporting clients that are using a number of different telematics
solutions,” O’Malley said. “Not only do the telematics help to monitor what’s
happening, they also provide real-time data when there is an accident or
incident. We’ve really been successful in using the data to help our insureds in
the support of their claims.”

3) CYBER

Ever since a spate of ransomware attacks began driving up insurance rates a few
years ago, cyber has been a top-of-mind exposure for risk managers. Technology
underpins nearly every part of modern business operations.

If an attack occurs, it’s important for companies to restore operations in a
timely manner to limit the cost of a claim.

Unlike in auto or workers’ compensation claims, many risk managers don’t have
extensive experience responding to cyber events. Leaning on carrier resources in
the event of an attack can help them respond quickly and limit the business
interruption costs incurred by the event. AXA XL operates a 24/7 incident
response team that can walk clients through any cyber crisis.

“One thing about cyber is that many times an organization has not experienced,
say, a ransomware attack,” O’Malley said. “Having a team of dedicated experts
who deal with this on a day-in and day-out basis can make sure that our insureds
have the right response out of the gate.”

4) WORKPLACE INJURIES

Workers’ comp injuries have long been considered a cost of doing business. A
certain number of injuries per year are unavoidable, or so the thinking goes.

But with costs of other claims rising, risk managers might take a harder look at
workers’ compensation to see if they can reduce the financial strain on their
retained layers. This is especially true of industries like warehousing, where
injuries have increased due to the demands of online shopping. Construction,
too, has struggled with worker injuries in recent years.

Carrier partners can help risk managers lead efforts to prevent injuries and
thereby reduce costs. Tools like wearable technologies can help alert workers to
when they’re moving or lifting incorrectly, averting common musculoskeletal
injuries that could occur if the behavior continued. For the construction
industry, AXA XL’s Ecosystem program has pulled together a number of pre-vetted,
available technologies to help contractors manage worker safety, productivity,
and talent shortage risks.

“We’re looking to help them reduce injuries to zero,” O’Malley said. “Our
primary casualty team is working with a number of wearables companies to give
insureds insights into their workforce so that they can better craft the
workplace to reduce injuries.”

Wearables have a proven track record of reducing costs, too: “Wearables have
been able to help decrease the frequency of loss over 75% on claims over
$100,000,” O’Malley said. “There’s a measurable opportunity to help our insureds
manage that retained layer of risk, which, again, is their largest cost.

5) LOOMING ESG RISKS

Companies have been increasing their focus on environmental, social and
governance (ESG) factor risks for the past few years. Individual elements of ESG
often equate to strong practices and protocols in place that in themselves aim
to minimize risks. For instance, employee safety and wellbeing is an aspect of
the “social” part of the ESG equation that contributes to workplace injury
prevention. Good environmental practices help business operations avoid a
potential pollution incident or other environmental impact. Evaluating other ESG
issues, like the environment and social justice, within your business operations
equates to good business practices that can help a company build a strong
reputation and may help avoid situations that can result in claims or lawsuits.

With more and more businesses making various ESG commitments, the SEC has begun
outlining rules for disclosures.

“As the SEC starts to think about how to incorporate ESG reporting metrics, a
lot of our risk managers are trying to figure out the best way to help inform
their CFO of some of the challenges,” O’Malley said.

He added that the company is poised to help clients navigate the new terrain
brought on by mandated ESG disclosures. The AXA Group has outlined its own ESG
goals and the metrics it’s using to evaluate them in its “Climate and
Biodiversity Report.”

“Any time you set up a plan, that’s your target goal. And you have the
opportunity to explain why you exceeded or fell short of it,” O’Malley said.

HOW CARRIERS ARE USING TECHNOLOGY TO HELP REDUCE RISK COSTS

With the costs of exposures rising in a number of key areas and in multiple
types of businesses, partnering with a carrier committed to helping insureds
reduce their risks is key to cutting costs and managing a company’s retained
risk.

AXA XL offers a robust collection of tools, technology partnerships, tailored
insurance solutions and other resources to give clients a holistic view of their
exposures and what they can be doing to predict and prevent losses. They have
over 400 risk consultants who help businesses reduce cyber, construction,
casualty and environmental liability and other risks.

Their underwriting, risk consulting and claims teams work with particular
regions so that they can provide expertise in a client’s business and the
particular exposures they face.

“By having that regional focus, we have underwriters that build expertise,
because they see a particular client base on a repeated basis,” O’Malley said.

The company is committed to helping clients, not just as an insurer but as a
risk mitigation partner as well. The technology partnerships they’ve forged,
like those mentioned above, have helped predict and prevent losses and reduce
the impact when an event occurs. Consider water damage, which is the leading
cause of property damage claims. O’Malley pointed to sensors installed in
buildings that detect shifting humidity and water levels as yet another tech
tool they’re using to predict and prevent losses.

“About 40% of claims come from water,” O’Malley said. “Technology now provides
the ability to have an early warning system for humidity, pressure [and]
temperature so that when we look at an overall property, there’s the ability to
put flow controls on a building.”

AXA XL strives to work with clients on multiple lines of business. That way, it
can provide risk managers with a holistic view of their company’s risks.

“We’re looking to grow our relationship with our clients,” O’Malley said. “There
are advantages from a claims perspective in terms of having multiple lines of
business together. Plus, working across all lines of business, underwriters get
to build closer relationships with the risk managers we serve.”

To learn more, visit: https://axaxl.com/.

This article was produced by the R&I Brand Studio, a unit of the advertising
department of Risk & Insurance, in collaboration with AXA XL. The editorial
staff of Risk & Insurance had no role in its preparation.

AXA XL, the property & casualty and specialty risk division of AXA, provides
insurance and risk management products and services for mid-sized companies
through to large multinationals, and reinsurance solutions to insurance
companies globally. We partner with those who move the world forward. To learn
more, visit www.axaxl.com.

SHARE THIS ARTICLE!

Click to Copy
Share
Tweet
Share

SPONSORED CONTENT BY BHSI

SEARCHING FOR A SURETY PARTNER? LOOK FOR SOMEONE INVESTED IN STABILITY FOR THE
YEARS TO COME

Surety customers need stability and consistency to support their operations.
By: Berkshire Hathaway Specialty Insurance | April 3, 2023

While insurance products exist to help an insured in the event of a loss, surety
bonds are purchased so that a customer can guarantee their work on a particular
project will be completed within a certain timeframe and at a reasonable cost.

Bonds support everything from a guarantee that a construction project will be
completed on time to license and permit products that ensure a company will
operate following any specific laws and regulations. If a surety customer is
unable to complete these requirements, their surety partner will step in to
cover any financial obligations.

“Surety is an indemnity product,” said Geoff Delisio, head of surety, Berkshire
Hathaway Specialty Insurance (BHSI). “If our customers are unable to perform and
they’re in bankruptcy proceedings, we are there to stand in the shoes of our
customers.”

Governments often require surety bonds for businesses to become involved in a
particular contract. If a contractor wants to bid on a project to build a
highway, for example, they will be required to purchase a bond to guarantee the
work will be completed.

Since businesses are often required by law to purchase surety bonds, it’s
important they find a carrier partner that’s able to offer consistency and
stability over the long term. Look for underwriters who thoroughly consider your
business model, and who remain abreast of challenges like supply chain risks
that could cause project delays.

WHY CONSISTENCY AND STABILITY ARE KEY FOR SURETY CUSTOMERS

Geoff Delisio, Head of Surety, Berkshire Hathaway Specialty Insurance (BHSI)

Since surety bonds are often a statutory requirement, contractors and other
commercial customers are looking to build long-term partnerships with the
institutions issuing their bonds. Rates may be rising in traditional insurance
markets, but Delisio says that BHSI’s surety rates are “fairly stable,”
something surety customers — from contractors to airlines — appreciate.

“You tend to have long-term relationships,” Delisio said. “What really makes
that alignment is understanding their strategy and understanding where they want
to go with their business.”

In order to create consistent and stable surety capacity , underwriters need to
have a full understanding of an organization’s business model and the risk it
needs a bond to cover. Some underwriters rely on credit models to select which
surety risks they’re comfortable with, but Delisio believes that to truly make
the long-term commitments necessitated by bonding institutions requires a longer
view.

Credit models often offer only 12-month projections of financial performance,
but the projects a surety bond is guaranteeing can last much longer than that.
“If you’re looking at one-year default models and you write a six-year
obligation, that may not end up well at all times,” Delisio said.

Construction projects in particular can last a number of years, so bond
underwriters often want to have a strong understanding of a contractor’s
financials, its business models and the particular project it needs bonded.

“The typical duration of a performance and payment bond is right around 36 to 40
months. It is not uncommon to have five- or six-year duration obligations,”
Delisio said. “No one can predict the future, but just a strong understanding of
what the business does well, what they don’t do well and where they want to take
the business is important.”

SUPPLY CHAIN AND OTHER EXPOSURES MAKE UNDERWRITING SURETY MORE COMPLEX

One reason that carriers need to rely on more than credit models when
underwriting surety bonds is the unpredictability of today’s exposures.

Supply chain, inflation and labor issues are just a few factors that might
affect a firm’s ability to meet the commitments guaranteed by the bond in a
timely and cost-effective manner.

Take supply chain issues, for example. In 2020 and 2021, the pandemic and other
events led to shortages of large numbers of products. In some cases, businesses
couldn’t find any suppliers for a particular resource. Delisio knows of one
supplier who couldn’t guarantee when a supply would arrive or how much it would
cost when it did.

“There were times in 2020 and 2021 that people just couldn’t get things at any
price,” Delisio said.

By understanding a company’s business models, surety partners can ensure that
they can support their customers, even through these challenges. Delisio says
that BHSI has worked with customers to understand their contingency plans for
supply chain issues and other risks in order to keep projects on track.

“There were a lot of discussions. How are they handling their supply chain? How
are they handling contingency?” Delisio said.

A SURETY PARTNER COMMITTED TO LONG-TERM PARTNERSHIPS

BHSI is committed to underwriting practices that allow it to offer long-term
stability for its customers. The firm is still writing bonds for customers who
began working with the firm in 2014 when its surety business first began.

BHSI’s underwriters work directly with customers seeking surety bonds and their
brokers, ensuring BHSI has a robust understanding of a customer’s financials,
business model and long-term strategy. Rather than relying on credit models,
they emphasize careful risk selection in order to maintain a consistent appetite
in the market. To date, they’ve completed just over a half-billion dollars in
gross written premium.

“Our underwriters are going to work with the broker and the customer daily,”
Delisio said.

Since surety is an indemnity product, ensuring that a carrier’s claim
professionals and its underwriters are aligned is key to its long-term success.
If the underwriting team starts to notice a deterioration in a company’s
quarterly financials, they’ll get the claims team involved in an attempt to help
the company remain solvent.

They might bring in an accountant to independently review the customer’s books
and identify opportunities for cost savings that could help a company avoid
bankruptcy.

“We get claims involved really early,” Delisio said. “With an indemnity product,
anything that we can do to help the customer stay solvent helps us. At the end
of the day, our customers get much better outcomes.”

To learn more, visit: https://bhspecialty.com/us-products/us-surety/.

This article was produced by the R&I Brand Studio, a unit of the advertising
department of Risk & Insurance, in collaboration with Berkshire Hathaway
Specialty Insurance. The editorial staff of Risk & Insurance had no role in its
preparation.

Berkshire Hathaway Specialty Insurance Company (incorporated in Nebraska, USA)
ABN 84 600 643 034, AFS License No. 466713 (www.bhspecialty.com) provides
commercial property, casualty, healthcare professional liability, executive and
professional lines, transactional liability, surety, marine, travel, programs,
accident & health, medical stop loss, homeowners, and multinational insurance.
The actual and final terms of coverage for all product lines may vary. Berkshire
Hathaway Specialty Insurance Company holds financial strength ratings of A++
from AM Best and AA+ from Standard & Poor’s. Based in Boston, Berkshire Hathaway
Specialty Insurance has offices in Atlanta, Boston, Chicago, Columbia, Dallas,
Houston, Indianapolis, Irvine, Los Angeles, New York, Plymouth Meeting, San
Francisco, San Ramon, Seattle, Stevens Point, Adelaide, Auckland, Barcelona,
Brisbane, Brussels, Cologne, Dubai, Dublin, Frankfurt, Hong Kong, Kuala Lumpur,
London, Lyon, Macau, Madrid, Manchester, Melbourne, Munich, Paris, Perth,
Singapore, Sydney, Toronto, and Zurich.

For more information, contact info@bhspecialty.com.

The information contained herein is for general informational purposes only and
does not constitute an offer to sell or a solicitation of an offer to buy any
product or service. Any description set forth herein does not include all policy
terms, conditions and exclusions. Please refer to the actual policy for complete
details of coverage and exclusions.

Berkshire Hathaway Specialty Insurance (www.bhspecialty.com) provides commercial
property, casualty, healthcare professional liability, executive and
professional lines, surety, travel, programs, accident and health, medical stop
loss, and homeowners insurance. The actual and final terms of coverage for all
product lines may vary. It underwrites on the paper of Berkshire Hathaway's
National Indemnity group of insurance companies, which hold financial strength
ratings of A++ from AM Best and AA+ from Standard & Poor's.