I just read an article quoting one of the insurance industry’s leaders on the battle of the industry to remain relevant because it is being overlooked by some of the biggest firms and sectors. His argument is that of the five largest companies in the world by market capitalization, three of them are technology firms while one is an oil and gas business. He warned that these larger and more diversified companies are becoming less needy of insurance and these were two industries “where we are increasingly less present”.
Now, juxtapose that with many in the risk management arena reporting on the growing importance of this sector in the C-suite of most companies and corporations, including the evolution of the CRO or chief risk officer as I discussed in my blog from last July. Clearly risk management has taken on a new focus, so one might wonder why the insurance industry feels less relevant.
Let’s not get confused here! Enterprises of all types and sizes are taking risk management more seriously; but many are using alternative risk transfers instead of traditional insurance models, and that includes the technology and energy sectors especially. With available capital and new risk management techniques and models, these organizations are not “uninsured” as was implied – they are just bringing risk management in-house by using alternative structures like captive insurance. Captives bring control and efficiency to enterprises of all types while remaining extremely flexible and innovative. But while the traditional insurance industry, of course, will still have a major role in risk management, I think they are beginning to take notice of their upstart siblings.
Thank you all very much, and I look forward to hearing from you soon.