The unique challenges insurers are experiencing in the hard property market mean it is time to focus on the basics. Challenges in the macroeconomic environment, like continuing inflationary pressures — as well as those within the insurance industry, like the rise in third-party litigation funding — make the business climate unique. A session at RISKWORLD 2024 addressed this topic through the lens of helping attendees create a winning property loss control formula.

Risk managers, loss control specialists and insurers must work together to face the wide variety of emerging risks and trends within the context of a hard property market. Severe weather events, like windstorms and convective storms, continue to devastate policyholders, and sustainability efforts are critical as changing weather patterns impact the globe.

And regardless of whether or not the market is softening, the importance of a well-rounded program remains.

Charlie Carriker, strategic sales leader at Global Risk Consultants, and Felix Brobbey, ARM, director of risk management & insurance at nVent, teamed up to tackle this topic in a popular session at RISKWORLD 2024. The two experts facilitated a discussion among the participants about the ways to address this challenging property market by developing a winning property loss control formula.

Stressing that no two risks are exactly alike, the speakers gave real-world examples and tangible takeaways to benefit the industry. Managing risks in uncertain times means understanding interconnected risks and adopting a holistic approach.

The Keys to a Successful Property Loss Control Program

The foundational pieces to all loss control programs include loss prevention assessments, loss estimates and accurate valuation, according to the speakers. Adding to these foundational elements are the unique factors that make each client and every risk different.

Foundational risks are considered constants or “the cornerstones,” Carriker explained, while emerging risks are the variables. Managing the unknown variables requires collaboration among stakeholders.

Property risk and valuation in rapidly changing industries presents both challenges and opportunities.

Carriker emphasized the importance of being proactive and designing a comprehensive approach. He started by describing how loss control specialists can review property risk assessment reports and develop response plans for recommendations. The company can then implement these recommendations on a continual basis.

Felix Brobbey, ARM, director of risk management & insurance, nVent

Brobbey mentioned the idea of using captives to stabilize premiums and to help manage capacity challenges in the marketplace. While deploying captives can help a company address some of its constraints, as Carriker pointed out, the increased use of captives highlights the need for a multifaceted risk management program. Another way to help control premiums in the hard market is through additional risk retention through large deductibles or self-insured retentions.

Knowing a loss may fall under the retained layer may cause a company to improve its risk management efforts, since it shares in the loss with the insurer.

Both speakers agreed that when starting new projects, it is a best practice for companies to partner with their insurers to manage any coverage issues from the start while treating every valuation like a partnership.

“We would treat any valuation project as a partnership. We’re going to be talking with you and understanding more about your business. And we’ll be looking for your feedback,” Carriker explained.

“Working with our team, we would take all that into account as we were putting together your overall value to make sure it met not just what you needed now but what you’re looking at in the future so you have adequate coverage.”

The Challenges with Property Loss Control Programs

While the opportunities are plentiful, the speakers also spoke about the challenges facing the industry. Brobbey described some of the challenges in the manufacturing sector, including climate change, regulatory updates, natural disasters, cyber risk and geopolitical instability. These macroeconomic challenges create an uncertain environment where data-driven approaches to loss control make sense.

Regulatory changes, such as the Paris Agreement, have global implications for the sustainability efforts companies make. Carriker pointed out there are two different impacts from climate change challenges. One is based on regulations and their directives, along with how companies respond to them, and the other is based on actual loss events and how they impact society.

The speakers talked about supply chain impacts that may arise from dynamic global issues, which is especially concerning this year, when much of the world’s leadership may change through elections. Understanding how their products are sourced will help companies plan for inconsistencies in their supply chain without suffering downtime.

ESG goals are important to most companies, but sometimes the goals conflict when there is a mismatch between what is best for one sector versus another.

Another challenge arises from the integration of technology into workflows. Every company wants to benefit from efficiencies gleaned through the use of innovations, but those new tools often bring new risks. For example, IoT devices and smart sensors that are designed to monitor and mitigate risks like water leaks could introduce cyber concerns and data privacy issues.

Takeaways to Develop a Winning Property Loss Control Formula

Charlie Carriker, strategic sales leader, Global Risk Consultants

Carriker and Brobbey gave the audience a list of ways to develop a winning property loss control formula:

• Look at the bigger picture to develop your formula.
• There is not one single formula that works for every exposure.
• Establish your baseline with a good set of constants.
• Work with good partners.
• Incorporate your unique set of variables.
• Develop a plan to address areas needing improvement.
• Collect high-quality, meaningful data.
• Stay aware of the evolving risk landscape.
• Be willing to update your plan and adapt to changing conditions.

These takeaways can be implemented immediately, helping to drive relief in a tough property market. While not every recommendation applies to every company, the list is a proactive starting point for developing a winning property loss control formula, as long as they remain flexible in a dynamic market. As Brobbey noted, “The one thing that is constant is it’s always changing.” &