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Property Risk Insights Strengthen Resilience After Loss

Risk engineers help customers harden their assets against a variety of perils.
By: | November 2, 2016 • 5 min read

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Commercial property owners need to protect their assets, and a focus on resilience is an important way to mitigate property risks, advises Richard Montminy, head of property for Commercial Insurance, Zurich North America.

In this Perspectives presented by Zurich, he discusses marketplace trends and shares insights on property risk management.

What trends is Zurich seeing in 2016 in the property insurance marketplace?

The market is seeing an abundance of capacity, driven in part by the entry of new and alternative players in commercial insurance. These include non-traditional insurers, start-ups and investors seeking new opportunities. At the same time, we are continuing to see downward pressure on property rates. In the past, we used to describe the market cycles as “soft” or “hard,” but these aren’t really coming into play anymore; it’s just the market. The marked reduction in insured catastrophe losses has also been pressuring both insurance and reinsurance rates downward.

Zurich_SponsoredContent“Our risk engineers are equipped to help customers harden their assets against a variety of perils.”

– Richard Montminy, head of property, Commercial Insurance, Zurich North America

At the same time there has been a continued flow of attritional and large losses hitting the market, including most recently the Fort McMurray wildfires in western Canada. Even though these losses appear to be putting a slight damper on rate declines, the overabundance of capacity continues to drive the market that we have been experiencing in 2015 and into 2016. The challenge that insurers will face as we look forward is that the continued drawn-out downward pressure on rates across the property industry is creating an unhealthy market that is not sustainable over the long run.

How can commercial property insurers deliver value to retain profitable business in an environment of declining rates? How can you truly differentiate?

In a market where rates are declining, it can be tempting to seek the lowest price for coverage. But there are significant differences among insurance providers. At Zurich, we differentiate our value through our ability to give our customers insights to improve the resilience of their organizations. We’re constantly working with customers to build that into the infrastructure of their organizations so that they can regain their footing quickly after a loss. Zurich has more than 100 years of experience in delivering on our promises to customers in North America, and as a leading global insurance group we can help property owners manage their risks in more than 200 countries and territories. Risk insight, claims expertise, global reach, financial strength — these are just a few of the reasons why multinational corporations have chosen Zurich as their risk partner for many years. We provide value not just in the insurance policies we offer but also through the insights we deliver.

How does Zurich help property customers build resilience?

Our risk engineers are equipped to help customers harden their assets against a variety of perils. Zurich risk engineers work closely with customers to build business continuity plans, and to take steps before, during and after a loss. We bring not just a catastrophic perspective or a fire perspective but broad-based experience in mitigating a broad spectrum of risks. Our teams gain insights from working with customers in all industries, and we are able to share insights to help reduce property risks. For example, a company in the plastics industry acquired a peer with manufacturing processes somewhat different from our customer’s operations. Zurich had experience with a loss on similar exposures faced by another customer, and our engineer was able to share these insights. We showed the companies where they could build protection into their processes. In another instance, we engaged with a large hospitality company to show them how to build in protection to prevent water intrusion, which causes most of the damage in hurricanes. From securing rooftop equipment with cables to sloping balconies to encourage drainage to the proper glazing and support structure of windows to resist projectiles and breakage, Zurich helped this customer enhance its resilience. We have shown our customers that it’s possible to retrofit buildings but generally much cheaper to incorporate the proper design up-front. Many of our large customers have used our insights to implement changes in the design phase.

How important is it for insurers to make investments that help customers build resilience?

We want our customers to expect full engagement and attention from us. Zurich continues to invest heavily in our risk engineering group, to deliver insights and to ensure we’re keeping up with changes in building and industry standards. Our teams have been through catastrophe events many times, and we are able to advise customers on what they need to do in the first hour, the first week and month, etc., when a loss occurs. Zurich’s relationships with vendors enable us to help customers plan for generators and fuel, for example. We are making investments to strengthen our ability to help our customers think about and plan for resilience and recovery.

For more information about Zurich property solutions and risk insights, visit zurichna.com and the Zurich Virtual Literature Rack at zurichvlr.com.

This is intended as a general description of certain types of insurance and services available to qualified customers through the companies of Zurich in North America, provided solely for informational purposes. Nothing herein should be construed as a solicitation, offer, advice, recommendation, or any other service with regard to any type of insurance product underwritten by individual member companies of Zurich in North America, including Zurich American Insurance Company, 1299 Zurich Way, Schaumburg, IL 60196.

Your policy is the contract that specifically and fully describes your coverage, terms and conditions. The description of the policy provisions gives a broad overview of coverages and does not revise or amend the policy. Coverages and rates are subject to individual insured meeting our underwriting qualifications and product availability in applicable states. Some coverages may be written on a nonadmitted basis through licensed surplus lines brokers. Zurich does not guarantee any particular outcome and there may be conditions on your premises or within your organization, which may not be apparent to us. You are in the best position to understand your business and your organization and to take steps to minimize risk, and we wish to assist you by providing the information and tools to help you assess your changing risk environment. Risk engineering services are provided by The Zurich Services Corporation.

©2016 Zurich American Insurance Company

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




Zurich Insurance Group, Ltd is an insurance-based financial services provider with a global network of subsidiaries and offices in North America and Europe as well as in Asia Pacific, Latin America and other markets.

More from Risk & Insurance

More from Risk & Insurance

2017 RIMS

RIMS Conference Opens in Birthplace of Insurance in US

Carriers continue their vital role of helping insureds mitigate risks and promote safety.
By: | April 21, 2017 • 4 min read

As RIMS begins its annual conference in Philadelphia, it’s worth remembering that the City of Brotherly Love is not just the birthplace of liberty, but it is the birthplace of insurance in the United States as well.

In 1751, Benjamin Franklin and members of Philadelphia’s first volunteer fire brigade conceived of an insurance company, eventually named The Philadelphia Contributionship for the Insurance of Houses from Loss by Fire.

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For the first time in America — but certainly not for the last time – insurers became instrumental in protecting businesses by requiring safety inspections before agreeing to issue policies.

“That included fire brigades and the knowledge that a brick house was less susceptible to fire than a wood house,” said Martin Frappolli, director of knowledge resources at The Institutes.

It also included good hygiene habits, such as not placing oily rags next to a furnace and having a trap door to the roof to help the fire brigade fight roof and chimney blazes.

Businesses with high risk of fire, such as apothecary shops and brewers, were either denied policies or insured at significantly higher rates, according to the Independence Hall Association.

Robert Hartwig, co-director, Center of Risk and Uncertainty Management at the Darla Moore School of Business, University of South Carolina

Before that, fire was generally “not considered an insurable risk because it was so common and so destructive,” Frappolli said.

“Over the years, we have developed a lot of really good hygiene habits regarding the risk of fire and a lot of those were prompted by the insurance considerations,” he said. “There are parallels in a lot of other areas.”

Insurance companies were instrumental in the creation of Underwriters Laboratories (UL), which helps create standards for electrical devices, and the Insurance Institute for Highway Safety, which works to improve the safety of vehicles and highways, said Robert Hartwig, co-director, Center of Risk and Uncertainty Management at the Darla Moore School of Business at the University of South Carolina and former president of the Insurance Information Institute.

Insurers have also been active through the years in strengthening building codes and promoting wiser land use and zoning rules, he said.

When shipping was the predominant mode of commercial transport, insurers were active in ports, making sure vessels were seaworthy, captains were experienced and cargoes were stored safety, particularly since it was the common, but hazardous, practice to transport oil in barrels, Hartwig said.

Some underwriters refused to insure ships that carried oil, he said.

When commercial enterprises engaged in hazardous activities and were charged more for insurance, “insurers were sending a message about risk,” he said.

In the industrial area, the common risk of boiler and machinery explosions led insurers to insist on inspections. “The idea was to prevent an accident from occurring,” Hartwig said. Insurers of the day – and some like FM Global and Hartford Steam Boiler continue to exist today — “took a very active and early role in prevention and risk management.”

Whenever insurance gets involved in business, the emphasis on safety, loss control and risk mitigation takes on a higher priority, Frappolli said.

“It’s a really good example of how consideration for insurance has driven the nature of what needs to be insured and leads to better and safer habits,” he said.

Workers’ compensation insurance prompted the same response, he said. When workers’ compensation laws were passed in the early 1900s, employee injuries were frequent and costly, especially in factories and for other physical types of work.

Because insurers wanted to reduce losses and employers wanted reduced insurance premiums, safety procedures were introduced.

“Employers knew insurance would cost a lot more if they didn’t do the things necessary to reduce employee injury,” Frappolli said.

Martin J. Frappolli, senior director of knowledge resources, The Institutes

Cyber risk, he said, is another example where insurance companies are helping employers reduce their risk of loss by increasing cyber hygiene.

Cyber risk is immature now, Frappolli said, but it’s similar in some ways to boiler and machinery explosions. “That was once horribly damaging, unpredictable and expensive,” he said. “With prompting from risk management and insurance, people were educated about it and learned how to mitigate that risk.

“Insurance is just one tool in the toolbox. A true risk manager appreciates and cares about mitigating the risk and not just securing a lower insurance rate.

“Someone looking at managing risk for the long term will take a longer view, and as a byproduct, that will lead to lower insurance rates.”

Whenever technology has evolved, Hartwig said, insurance has been instrumental in increasing safety, whether it was when railroads eclipsed sailing ships for commerce, or when trucking and aviation took precedence.

The risks of terrorism and cyber attacks have led insurance companies and brokers to partner with outside companies with expertise in prevention and reduction of potential losses, he said. That knowledge is transmitted to insureds, who are provided insurance coverage that results in financial resources even when the risk management methods fail to prevent a cyber attack.

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This year’s RIMS Conference in Philadelphia shares with risk managers much of the knowledge that has been developed on so many critical exposures. Interestingly enough, the opening reception is at The Franklin Institute, which celebrates some of Ben Franklin’s innovations.

But in-depth sessions on a variety of industry sectors as well as presentations on emerging risks, cyber risk management, risk finance, technology and claims management, as well as other issues of concern help risk managers prepare their organizations to face continuing disruption, and take advantage of successful mitigation techniques.

“This is just the next iteration of the insurance world,” Hartwig said. “The insurance industry constantly reinvents itself. It is always on the cutting edge of insuring new and different risks and that will never change.” &

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]