Risk managers – what do you want from a broker?

Compiled by Insurance24

HARARE, Working for oil and gas producer Noble Energy, with operations in a number of volatile, possibly hostile regions, Dave Gresko oversees a pretty unique risk strategy. Aside from location, the industry itself has inherent risk, and exploration brings with it the potential for a major catastrophe, he says.

“As an oil and gas company, we have operations in West Africa, Israel, so you have exposures that are related to being in a foreign country,” he says. “We have off-shore production, so there is always the danger of having an event occur like what happened with BP in the Gulf of Mexico.”

A risk manager for the past 14 years, Gresko has encountered a number of different brokers over years. That experience means he has developed a keen sense for what is required from a broker who is at the top of their game.

“It’s not the broker coming in and saying, ‘We recommend you renew as expiring’,” he says. “That tells me they aren’t really doing anything. We pay good money for brokers to come in and say, ‘This is how your operations have changed since last year, here are some things you should be taking into consideration when renewing programs’.”

The renewal process is central to the relationship between a risk manager and broker. Gresko has his own ideas of what constitutes an effective partnership, and like many of his peers, regular communication is essential.

“Typically, about four or five months out from renewal, we will have a strategy meeting,” he says. “We will sit down and go over the program and they will update us on the market and we update them on changes at Noble. Then we start laying out the strategy for renewing.”

Once that happens, the frequency of conversations ramps up, with brokers and risk managers working alongside each other to forge an insurance program that leaves nothing to chance. For Noble Energy, a company working in South America, Africa and the Middle East, there are many potential risks, so insurance coverage needs to reflect that.

“After the strategy meeting, brokers start approaching the markets on the first of January,” he says. “When that starts happening, we will probably talk about two or three times per week to get feedback on how renewal is going. As we get closer and closer to renewal date, we will teleconference every day.”

Gresko considers it an important part of his job to keep his finger on the industry’s pulse. That means keeping track of what his happening with his own brokers, but also those he is yet to do business with. Keeping up with the industry gives him better insight into the value, or lack thereof, of his various insurance plans.

“In strategy meeting, we will talk about what is going on in general with premiums across the marketplace,” he says. “I also keep in contact with brokers that are not part of our program. That means I can get feedback and I can pressure test what I’m hearing from the brokers we are using.”

There are a number of resources available to risk managers who want to keep their ears to the ground. Brokers are always on the lookout for their next client, and if you work for a company like Noble with annual revenue of $3.4 billion, your questions usually tend to find an answer.

“Different brokers hold lunch-and-learns each quarter, and I like to go to them because I like to hear what other people’s opinions are,” Gresko says. “When you do that over the course of a year, you really get a sense of where premiums are. If I’m hearing from other brokers that premiums are down five to 10%, then that’s what I’ll be expecting when it comes time for renewal for our program.”

Gresko is a risk manager that likes to keep brokers on their toes, and that is to be expected when dealing with billion-dollar enterprises. Changing broker isn’t a decision he takes lightly, however – and if it happens, money is rarely the issue.

“I have never moved a program from one broker to another because fees were too high,” he says. “What you tend to get is that brokers get complacent. You can get a sense if they are not really paying attention to what is going on with your business. I like creativity, and there are a lot of ways to be creative in an insurance program.”

One way a brokerage can define itself is through an ability to create plans that move with the times. The threats that firms face do not stay static, so insurance needs to reflect that. For Gresko, it means developing tailor-made plans for specific companies and industries.

“One of the things Noble has been pushing hard the past three to four years is cyber security,” he says. “In the upstream market, cyber is excluded from our property damage & business interruption insurance. But the answer is not to go and buy another policy to plug the hole.”

That could create a situation where Noble pays premiums on a property policy, a political violence policy, and a cyber policy, but where an event could occur for which none of those individual policies would provide adequate coverage. Such an occurrence would almost certainly mean a risk manager losing their job, according to Gresko.

Better then to be prepared for any event, which is why he and his team are determined to push the industry forward when it comes to cyber security. With high-profile cases like the Equifax breach still fresh in the mind, insurers need to stay one step ahead of those using computers for nefarious means.

“We have been pushing back on the underwriting community because it’s incumbent on the insurers to explain how they view cyber security and what measures they are taking to address risk managers’ concerns on cyber security,” he says.

“That means that instead of excluding it, the coverage will be built into a policy – like it should be.”

This is another area where brokers and risk managers can work in concert – and Gresko says progress is being made on this front.

“The brokers have been working very closely with us to keep pushing that message,” he says. “We made a breakthrough on this a couple of years ago when we had a couple of markets say they were comfortable working this into the program. Not every market did, but the next year when we came back more companies bought in.”

PartnerRe: The future of reinsurance looks bright

HARARE, In a world that seems to be getting riskier each year, global reinsurer PartnerRe maintains that the future looks bright for reinsurers.

Speaking at a press conference at the Monte Carlo Reinsurance Rendez-vous 2018, both PartnerRe president and CEO Emmanuel Clarke and PartnerRe P&C CEO Charles Goldie (pictured) spoke positively about the market.

Clarke mentioned that there is a “bright future” ahead for reinsurers that can increase their relevance at a time when demand for volatility protection is growing. He then cited a reversing trend in recent years, observed among major global insurers, that they have moved from buying reinsurance only for capital management purposes and towards purchasing reinsurance for both capital management and volatility control.

PartnerRe is well-positioned for this trend, Clarke added, saying that the company’s privately-owned reinsurance model takes a long-term approach to economic value creation instead of focusing on just managing volatility on a quarterly basis.

“Our insurance clients want to work with reinsurance partners that have a vested interest in helping them to grow and develop their businesses, support their most confidential initiatives and that can provide capacity after large or unexpected events,” he said. “PartnerRe’s business model as a pure-play, privately-owned reinsurer perfectly positions us for that role.”

The chief executive also hypothesized that while the reinsurance industry will continue to be affected by the soft-hard market cycle in the future, the amplitude between the market’s high and low points would become smaller. In such a market, success depends on how efficiently reinsurers create value for their clients, Clarke explained.

In his own presentation, Goldie pointed out that reinsurers need to be able to match capital in order to lower the overall cost of capital for their clients.

“Reinsurers need to become experts at sourcing and matching capital. We believe using all forms of capital to improve our product offering for our clients is the right thing to do,” Goldie remarked.

He added that with the reinsurance market experiencing consolidations left and right, the most successful reinsurers are those that remain “nimble and agile” as they continue to grow.

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