Emmanuel Fabin, Insurance manager at TSB Bank
How can insurers better support FIs? The market and organisations need to improve.
Professional indemnity has always been a high-profile element of insurance, even before the credit crunch, but it has become a bigger issue since the crisis. Now, the robustness of regulators is increasing, particularly with retrospective analysis of conduct risks (the risks associated with how a firm and its staff conduct themselves). Regulators are looking at issues that do not necessarily reflect the current risk culture and the risk management of FIs, but they are focusing on issues of the past 10 to 15 years.
For large FIs, there is such a large value attached to managing conduct risks, but is there a form of risk mitigation that is useful for large multinationals? [StrategicRISK’s] survey shows that for 40% of FIs, their insurable risks make up between 20% and 30% of their overall exposures. This could be improved, but it depends on the levels of engagement between a firm’s operational risk function and its insurable risk function and then how it articulates its communication to the insurers.
However, there seems to be a disconnect between insurable and non-insurable risk functions. This is not because risks are non-insurable, but because the language of insurance is often not translated to a language that operational risk personnel understand. The figure of 20% to 30% shows that some FIs are doing this better than others and some are not taking the right approach.
This article was first published in StrategicRISK’s Financial Institutions Report, published in association with Zurich. To download a copy of the full report, click here
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