Analysis of the key lessons and next steps for risk managers taken from six of the speaker sessions at this year’s PARIMA conference in Tokyo

Session: Navigating the corporate asset class shift

  • Speaker: Harry Edwards - regional director, Intellectual Property Solutions, Aon Asia

Harry Edwards - Aon

Key takeaways

The global economy is increasingly driven by innovation and intangible assets. Over the past 25 years, intangibles have grown exponentially by around 11% per annum to $74 trillion in 2021 and it’s expected the value will reach $1 quadrillion by 2050.

These assets are progressively becoming the dominant share of enterprise’ value today. As such, it’s essential that companies identify and understand the exposures this brings.

  • 29% of respondents from the APJ region say their company experienced a material IP event in the past two years
  • Although Intellectual Property risks rank in at least the top 10 of all business risks facing companies, only 18 percent of information assets are covered by insurance.
  • According to the Aon Ponemon survey, only 33% of companies use the insurance market to mitigate against IP Infringement.

What does it mean for risk managers?

With intangible assets becoming increasingly more relevant and valuable for companies globally, companies and their CROs/risk managers need to recognise and understand their potential Intellectual Property risks, the impacts these could have on their businesses, and explore effective ways of mitigating these risks, including insurance solutions.

Session: From novel to mainstream: embracing parametric for natural catastrophe

  • Speaker: Ikuya Shimada – head of Japan, Descartes Underwriting Japan

Key takeaways

The rise of natural catastrophic insurance markets underscores the importance of considering parametric insurance as a key tool in risk management strategy on global perspectives and in vulnerable regions.

Integrating parametric insurance with existing measures and assessing its cost-performance are also crucial steps. This trend emphasises the need for a diversified approach to risk management.

Session: Walking the tightrope on transition planning amidst ESG volatility

  • Speaker: George Nassaouati – managing director and head of energy - Asia for Arthur J. Gallagher Singapore

Key takeaways

The world is faced with a difficult decision around economic recovery following the coronavirus shutdown. This relates to managing emissions to meet COP 26 targets of saving the planet. It’s a fine balance between keeping the lights on, feeding the ever-growing world population, and allowing a full transition to renewables.

The Russia / Ukraine war, along with increases in the cost of energy, challenged most (if not all) of COP26 targets and widened the gap between reducing of our addiction to oil / coal and transitioning to renewables. However, a balance could be achieved within this transition for a number of years until we can fully rely on renewables.

An increased focus on emissions by insurance markets and other financial institutions is only serving to increase premium on coal / oil operated assets, without really impacting or contributing towards real ESG fundamentals.

The European Union and various insurance associations in London are developing a rating model around charging premium to companies based on their emissions outputs. Neither brokers nor energy companies were invited to be part of these discussions.

Gas is and could be the transition fuel for the next 20 years but challenges about infrastructure and costs remain.

What does it mean for risk managers?

  • Analytics, big data and risk management allow risk managers to help their companies through a challenging transition phase
  • Risk professionals must make themselves heard by insurers, regulators and lobbyists about how their companies are managing the transition
  • Captives are a crucial tool for achieving a better spread of risk, reduced risk transfer costs and emissions spread.

Session: Unlocking opportunities: maximising the potential of captive restructuring

  • Speaker: Mr. Etienne De Varax, head centre of excellence, HDI Global SE

Key takeaways

Captive insurance solutions are a powerful strategic risk management tool and organisations have an array of options on how to tailor these structures to their unique needs.

This process helps organisations gain greater control over their insurance programs through better understanding of risks on an intimate level.

Innovative approaches to the application of captive insurance solutions help organisations achieve financial advantages and operational flexibility which are integral to their long-term business success.

Risk management is constantly evolving and risk managers have much to gain in developing a thorough understanding of the array of captive structuring options now available including virtual captives and protected cell companies.

What does it mean for risk managers?

The role of the risk manager is maturing and being redefined well beyond the requirements of being an educated insurance buyer into becoming a professional insurance owner.

In order to succeed in this changing environment, increased efforts in risk mapping, prevention and definition of risk appetite are critical.

Furthermore sensitivity to the importance of data collection and subsequent modelling and analysis of financial impact will become standard practice so that a broader spectrum of stakeholders in decision making can be led to agreement on the best risk management solution(s).

Session: Challenges towards the future of risk management: transforming values we provide in response to evolving risks

  • Speaker: Tomoyuki Motoyama – executive officer, CDO MS&AD Insurance Group Holdings

Key takeaways

In recent years, the risks surrounding businesses have become more diverse, and the scale of damage has been increasing.

Among these changing risks, there are many that cannot be effectively dealt with through insurance alone. Therefore, loss prevention and reduction, recovery efforts will become even more crucial in the future.

Based on these changes, MSI started to provide services that contribute to loss prevention and reduction, utilising the latest AI technology. These services are called “values before and after reimbursement.”.

In the future, MSI is also considering adjusting insurance premium rates based on the reduced risks through the services.

What does it mean for risk managers?

Natural disaster risk has increased by about 8 times compared to the 1970s, and the cyber risk has increased by over 40 times compared to 2013.

As it is difficult to cover all types of risks with insurance, activities for risk reduction and avoidance have become more important than ever before.

Risk managers should consider jointly developing new loss prevention and reduction services with insurance companies if necessary. This presents an opportunity to contribute to solving social issues through risk management activities.

Takahiro Shinome

Session: Co-existing with Natural Disasters: Understanding the BCP Spectrum

  • Speaker: Takahiro Shinome - vice president and executive officer, Sompo Risk Management Inc.

Key takeaways

The risks affecting business management are becoming more diverse. Especially, given the recent occurrence of disasters, the need to address wind and flood risks caused by climate change is growing rapidly.

The establishment of an ‘all-hazards Business Continuity Plan (BCP)’, which not only focuses on risks such as earthquakes, fire and typhoons, but also includes external factors (e.g. electricity shortages), has recently been recommended.

There are three current trends in BCP: all-hazards response, strategy-based implementation of measures and contingency drills.

What does it mean for risk managers?

In addition to rising volatility in the business landscape, corporations in Japan sit on top of a natural disaster hotspot..

In corporate risk management responses, risk control and risk financing are often operated separately, mainly because the departments in charge are different. Risk financing should be considered in the context of the strategies and measures in the company’s BCP and the status of implementation.

Co-existing with calamities presses businesses to adopt an all-hazards BCP, and find the proper balance between risk control and risk financing.