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What is insurance benchmarking?
Insurance benchmarking shows a company how it’s insurance
programme compares to peers of similar stature in their industry,
location and organisation size.
Welcome the first blog post in our ‘Bridging The Gap’
series, tailored for financial institutions. In this article
we’re delving into the critical world of liability insurance
and considering how an over reliance on insurance limit
benchmarking may not be sufficient for an evolving global economic
landscape.
The titanic lesson: More than just a story
Remember the story of the Titanic? A century-old lesson in
underestimating risk. Similarly, many financial institutions, much
like the ill-fated liner, have charted their insurance course by
merely glancing sideways – using benchmarking as their North
Star. This method, akin to following the crowd, has too often left
firms under-insured when storms hit.
Consider the case of Insurer X (name changed for
confidentiality). In 2016, amid a seemingly stable financial
climate, Insurer X faced a cyber-attack. Their insurance,
benchmarked against peers, fell short by 60%, turning a manageable
incident into a financial nightmare. Why? Because their policy
limit didn’t account for the rapid escalation in cyber risk
costs.
21%
Potential increase in insurance recoveries if limits had
been more reflective of financial institutions’ unique risk
profiles from the previous 10 years.
Data deep dive: What the numbers really say
WTW’s proprietary data paints a telling picture. Over the
last ten years, financial institutions could have mitigated losses
by 21% more if their insurance limits were more reflective of their
unique risk profiles. Extending our view to the tumultuous times of
the financial crisis, this gap widens alarmingly to 50%. It’s
clear: relying entirely on benchmarking may not suffice in the face
of new challenges.
Charting today’s waters: Navigating current and emerging
risks
As we navigate through a period marked by geopolitical tensions,
fluctuating markets, and emerging cyber threats, the need for a
tailored insurance strategy is more pronounced than ever.
… the need for a tailored insurance strategy is more
pronounced than ever
The collection of industry wide loss data over the past decade
is allowing financial institutions to have a far more detailed
understanding of their risk exposure than ever before. Ensuring
your approach is steered by a combination of internal risk
management and industry event data will keep you afloat.
Your next port of call: Securing your institution’s
future
Insurance isn’t just a line item on your balance sheet;
it’s a lifeline in today’s unpredictable financial seas.
For support in developing an insurance strategy fit for your risk
profile get in touch with your WTW broker or the Operational Risk
Solutions team.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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