The 2015 Tianjin disaster had highlighted the limited risk accumulation controls in Asia. Many affected companies did not have a full picture of how their assets were stored, managed and secured and had not successfully harnessed big data in this process, noted Mr Franck Baron, PARIMA Chairman at the Pan-Asia Risk and Insurance Management Association (PARIMA) conference held in Kuala Lumpur in May.
From the insurance perspective, the incident also shows the continuing lack of room for appropriate and sustainable catastrophe insurance pricing in Asia’s competitive market. Pricing in the region continues to fail to incentivise the practice of good risk management by not differentiating between well- and poorly-managed risks, he added.
The Nepal and Kyushu earthquakes both had significant uninsured losses, which shows the continuing Nat CAT protection gap that needs to be filled. Despite lessons drawn from the 2011 Tohoku earthquake, Kyushu had shown that even Japan has room for improvement, he said and urged the audience to step up to fill existing gaps in the discipline, particularly in CAT risks.
Public sector risks
Mr Baron added that the Tianjin incident had also spotlighted the limited risk management by public authorities, a situation that was not limited to China.
He said that generally, regional and national authorities in the region do not have a good picture of risks. He suggested a review and stronger enforcement of safety and regulations for incident and crisis response, with more focus on health, safety and environment (HSE) and a better resiliency among community and business.
“PARIMA and the industry could do more to support regional authorities. One edition of the World Economic Forum’s Global Risk Report had suggested that each country or region should appoint a risk manager. This is a good idea and if not possible, each region should have least have a risk management agenda,” he said.
Other key risk concerns
Besides catastrophe risks, other key risk concerns that were discussed at the conference included climate change, business interruption covers, cyber, terrorism and reputational risks. Some of these risks were not sufficiently met by the insurance community, said some speakers.
Mr Martin South, CEO APAC of Marsh spoke about business interruption (BI) covers where the policies were often outdated, misunderstood and mis-sold. Ms Raziyah Yahya, General Manager of Group Insurance at Petronas, said that BI cover had so many limitations and exclusions that risk managers often found themselves wondering if it was worth insuring
Mr Kent Chaplin, Managing Director of Lloyd’s Asia noted that cyber, terrorism, BI and reputational risk faced gaps in coverage because there was still insufficient data and the industry needed more experience in this.
Mr South believed it is more than just data. “Corporate governance now makes everybody so risk averse that unless you can prove something is going to happen, it is very hard to get people to innovate.”
Raising the bar of the risk management profession
Turning to the development of the PARIMA community, Mr Baron said that while he strongly believes that there is “a lot of greatness and a great future” in the risk management profession, there are still “barriers to be smashed”.
The Asian risk manager needs to have good insurance expertise, to ensure he is properly supported by his insurer in risk financing as a critical and strategic tool when a major loss event happens, he said. Unfortunately, within organisations, there is still a lack of understanding in this area.
One step for risk managers to move towards professional recognition is certification. On PARIMA’s partnership with FERMA, the Federation of European Risk Management Associations, to launch a certification programme for risk managers in Asia that was announced in October 2015, Mr Baron pledged that by the end of 2016, PARIMA should be able to present its first certificate.
He noted, however, that certification would also have to be supplemented by ongoing education for risk managers. To this end, he said PARIMA and Lloyd’s were ready to launch a Professional Development Programme, a two-day course which Kuala Lumpur would be among the first Asian cities to host.
The PARIMA conference in Kuala Lumpur was the first of two PARIMA conferences to be held this year. The next will be held in Hong Kong from 16-17 November.