Airmic and IUA publish recommendations for closing protection gaps

Bridging the gap between the real-world exposures facing members and the solutions available in the market is of critical importance for organisational resilience and macroeconomic stability – as well as the very relevance of the insurance industry, a new report by Airmic and the IUA warns.

Not only is the insurance market struggling to keep pace with the fast-changing risk landscape, but its products – structured by insurance class – do not always align with real-world interconnected risks.

“While underwriters often seek to apply flexibility to best fit the needs of their clients, they remain beholden to their underwriting guidelines, regulatory permissions, and the prudential expectations of regulators, boards, and the wider customer base,” the report notes.

Six recommendations

Airmic and the IUA’s research reveals both an appetite and a growing consensus from policyholders and insurers to carve out a new approach that will reduce and even close protection gaps.

The report reveals six key areas of consensus, including the following short-, medium- and long-term recommendations:

1. Short term: Review the reactive exclusion cycle

2. Short term: Establish three-way engagement between the underwriter, broker and the buyer

3. Medium term: Invest more in education between clients and the market

4. Medium term: Establish scenario-testing as standard practice

5. Long term: Reorient product development from product logic to outcome logic

6. Long term: Build the capital infrastructure for systemic risk

“Having a better understanding of the client risk profile is in the commercial interests of the market, producing better pricing, and better relationships,” Diane Maxwell, Airmic’s CEO, commented.

“It’s really encouraging we’ve found areas of consensus to build on but this report is just the first step – I’m looking forward to working with the IUA and our partners on the next stage of this collaborative, market-leading project.”