How Programs Address Emerging Risks

Specialists in the program business segment agree – this is a good market to be in right now. Those specialists also agree that the program business market is poised to handle emerging risks that face the industry, in fact, they may even be better at it.

“I actually think the program segment is, in many cases, on the forefront of innovation and recognizing emerging risks,” said David Brown, senior vice president of Specialty Markets for Munich Re. “This is mainly because in that specialty niche space and that program space, the MGAs and program administrators sell more than just the product.”

Brown said the specialists in the program business market are “inherently tied to the industry segments they support” which is why they started the program in the first place. That makes them experts and focused on that niche.

“They’re constantly in contact with those insurers, understanding what their needs are, what the differentiators are. And it’s good practice in this space to always be aware of what those differentiators, other than price, may be,” Brown said.

Arthur Seifert, president of Glatfelter Program Managers, said cyber is an example of a risk that has been handled by the program business market in a more niche-specific manner while the rest of the industry has tried to respond with broader coverage.

Seifert says insureds have been more responsive to having cyber coverage when they see how it affects their business specifically.

“Everybody’s dipping their tail into it,” Seifert said. “We added cyber to all of our products about two years ago on an opt-out basis… We had a little push back from some small clients who didn’t feel like they had a need but the more they see in the press of what can happen, they realized they do have the need and it’s a relatively inexpensive way to address it.”

Brown says the emerging risks in the program business market are not necessarily different than the rest of the industry. Cyber is a risk that has obviously brought opportunity and challenges to all of the insurance space.

But emerging risks don’t always have to be the hot topics. Established risks can have emerging exposures.

“Those are the front page, headline-grabbing things, and that’s the innovation everyone’s talking about,” Brown said. “But sometimes it’s just about going back to basics and doing some old things better.”

Brown said Munich Re’s Specialty Markets division is looking at addressing the risks in its supportive programs in a more effective manner. He said it is focused on rethinking how programs deal with sexual abuse and molestation or traumatic brain injury and concussive activity exposures.

“These are exposures that are inherent in many portfolios, but the rules of engagement change. The litigation issues may change,” Brown said. “We’re trying to find an intelligent approach to be able to offer these coverages, but we can’t just continue to do it as it’s been done the last 20 years.”

Another challenge for those in the program business market is developing new programs for emerging risks, as most carriers are, ironically, risk averse, particularly with those segments without sufficient claims history to know what the real exposures are.

“We’ve become a much more data driven industry. It’s extremely difficult today [to start a program] unless you’re coming from a place where you already have that experience and you have contacts within the industry that know you’re capable of being that tough with the challenge,” Seifert said.

Brown said, as a carrier, Munich Re’s approach is to not write a program around an emerging exposure, but instead offer coverage in an established program that address the new risk.

However, the carrier has been careful to fully understand and to cover these risks in a multiline, balanced way.

“It’s a matter of sometimes putting bumpers around [the risk] so that it can’t get out of control. I think that’s most often the case with emerging exposures — it’s things that are already in the books,” Brown said.

For those that are looking to start a program focused on an emerging risk, data and experience are key, said Seifert.

“If you can’t develop specific data for a program, you have to develop relevant data,” Seifert said.

Having the right connections and knowing whom to talk to, as well as a good story backed up by relevant information, make it more likely a carrier will consider a start-up program.

It also takes perseverance.

“You are going to hear a lot of ‘no’s’ but you just keep going forward and hopefully you land with an ear that’s receptive to what you’re trying to say,” said Seifert.