Suchitra Narayanan, head of risk and insurance for Bumi Armada, offers a complete guide to the process

Buying insurance is the risk-transfer lifeblood of a risk manager, but while this undertaking may seem familiar, there are often still ways to improve the process. For the best way to take a structured approach and ensure that the most optimal outcome is achieved, here are my eight key phases of buying insurance:


1. Understanding the company strategy, vision and risk landscape
Understand what the risk retention strategy is and the appetite for buying insurance at the organisation. You need to understand what is driving the motivation to transfer risk – is this driven by the company’s internal goals or by stakeholder (such as clients and lenders) requirements? You also need to understand where the company’s vision lies. A lot of our contracts at Bumi Armada are long-term, so we need to think about how our insurance policies best fit those long-term contracts and how to protect our assets. We need to make sure that the risks we face today but also in the future are mapped out clearly. It is also beneficial to look at external data to see where some of the industry losses have come from and then ensure they are adequately covered, or there are strong controls and mitigations around them. This stage is all about having a holistic view of what you want to buy and why you are buying it.

2. Getting a sense of contractual requirements
With the fine print of a commercial contract, some aspects around insurance will be obvious. That is, the requirement to buy certain policies that will form the core element of the insurance programme. Other insurance requirements might be more subtle and subjective. You may wish to add or exclude certain clauses from the policies based on each different contract, while working with the legal team is crucial to achieve the optimal solution. At Bumi Armada, the insurance functions reports to the general counsel, which we believe puts us in good stead for some of the complex contracts that we see. The contract can also be very different based on where you are operating and who the contract is with. There is no one size fits all and it makes the process more challenging but also more interesting!

3. What are the budget constraints?
To understanding the commercial constraints that are driven by the business and the economic climate you need to look at your claims ratios and have a premium forecast, based on current market rates. The insurance market is one that is generally eager to share information, so use this to your advantage and apply this data to what you should be paying for your insurances. At Bumi Armada, the pricing of our projects is crucial to the success of the business and including these numbers in our financial modelling at an early stage is really important.

4. Benchmarking: where do you sit versus other players in the market?
Considering the large size of Bumi Armada’s fleet and our strong claims record, I would expect to get competitive terms and pricing on our insurance. However, it is always good to benchmark against other players in the market. Cost is one aspect here, but so is coverage. Consider what other companies are buying that you may not be and evaluate why this is the case. Is it a strategic call that the organisation has made or do we need to make our programme more expansive and robust? This is where the buying becomes more strategic and is a real opportunity for risk managers to add commercial value.

5. Working with brokers
Aside from the broker tendering process, which in itself is a rigorous exercise, when you have an established broker relationship, there is often a lot of reliance on the broker to go out and find the most optimal solution for the insurance programme. However, the key is for risk managers to get really involved in this process. Let the brokers create the path, but also establish relationships with underwriters that are writing your risk. You know your business best and are often best placed to talk about it.

6. Meeting underwriters
I cannot stress enough how useful it is to meet the underwriters. You have a panel of insurers who write your risk, but having a face-to-face meeting with underwriters and articulating the story of your company, what it stands for and what the current and future goals are, is such a useful exercise. You will gain a lot from it, whilst underwriters also feel they have an avenue should they have any questions or want to further develop the relationship with the client

7. Issuance of policies and circulation
Make sure that everyone within the organisation who is a stakeholder, has read and understood the policy and they know what is and is not covered. It should not just sit with the risk and insurance team. The stakeholders of the policy are actually the operations and project teams (in the case of Bumi Armada). There needs to be an effective flow of communication once the policy has been placed.

8. Keeping the polices ‘alive’
At Bumi Armada we have started having quarterly calls with brokers, myself and the operations/projects team. The operations team are focused on delivering a safe operation and whilst they take an active participation in risk management, they might not be aware of the potential insurance implications of the risks that they manage on a day to day basis. This process encourages more of an understanding and ensures that everyone knows why a particular policy is put in place and what it is actually covering.