Plugging in to data: A new landscape for risk management
Sian Aspinall, Managing Director at BPL Global, takes a look at the private market for credit and political risk as the dust begins to settle following the COVID pandemic, examining the growing role of data as a tool for risk managers globally – and how technology is helping them access rich, valuable data at their fingertips
For industries, organisations and individuals across the globe, the pandemic has brought into sharper focus a number of issues that perhaps weren’t given the airtime they deserved pre-COVID-19. The urgent need to preserve our environment and combat climate change is, of course, one of them.
As with many other industries, in recent years insurance has seen a growing emphasis on driving progress towards a greener economy. At BPL Global, we have witnessed a wholesale shift in this regard, with increasing interest among insurers and brokers alike towards environmentally-focused solutions – not only emanating from the risks insured but also in respect of the direction of insurers’ investment flows.
Euler Hermes’ Green2Green Single Risk Programme is a perfect illustration of both of those aspects combining into one initiative among this general increase in insurer appetite for covering green transactions.
Another aspect that has become inescapably clear is the intrinsic link between the smooth running of the global trading system and economic growth. Trade flows provide vital connections between economies, and are critical to emerging market development. Underpinning this, is the crucial role risk managers play in curating the system; identifying where risk mitigation is required to ensure that the cogs can keep turning and these connections can endure.
Risk management throughout the pandemic has been challenging to say the least. Trade practitioners and financial institutions alike have been faced with rising geopolitical and operational risks in the management of trade flows. In many cases, insureds have been forced to reassess and, in some instances, overhaul their exposures in light of the events of the past eighteen months or so.
Data – the oil of the 21st century
It is therefore apt that we consider the role that data can play as a mitigant against uncertainty; a tool within organisations that aids good decision-making and promotes visibility. In the credit and political risk insurance (CPRI) industry, though arguably one of the areas in which it is most needed, such data has historically been hard to come by, or was too fragmented to conceive of as usable.
At BPL Global, our clients have vast, multinational exposures, and policies that span long durations and involve multiple counterparties – a headache for risk managers at the best of times. But it also presents a veritable gold mine of information that can be leveraged at an organisational level. However, finding a way of collating and presenting this substantial data has long presented a challenge.
As a specialist broker, with a significant CPRI market share, we have a privileged view across trends and movements enabling us to produce meaningful proxies for our market. We primarily see ourselves as custodians of our clients’ data – we are careful in its handling, and have long-desired a means to present it back to our clients in a way that it is usable and effective in helping them manage their exposures.
Realising data’s potential
Developments in technology are now enabling this to become a reality. This year, for the very first time, our clients, and their respective risk managers, can access their data as a usable and valuable asset via BPL Sphere, our new portfolio management tool. BPL Sphere permits real-time visibility across country and counterparty exposures, active policies, invoices, payments, and claims, and can be filtered according to requirement. Such capabilities empower insureds to optimise their insurance programmes, and leverage the data across front, middle and back office functions. Such immediate visibility over everything from transactional flow to counterparty risk, has new meaning in the context of risk management.
As technology advances, so too does digital innovation on behalf of financial service providers. Indeed, in the insurance space, there has been a marked uptick in adoption of digital methods for placing policies; something that, whilst in motion pre pandemic, has necessarily gathered pace over the past eighteen months. There is more work to be done in utilising the full benefits and efficiencies of greater integration between insurers and brokers in ‘going digital’, and as such trends accelerate, brokers and insurers need to get ahead of the curve in order to meet the increased demand from clients for sleeker, faster solutions, whilst ensuring operational efficiencies are maximised for the benefit of all stakeholders.
The COVID-19 pandemic has been an eye-opener in terms of the importance of being digitally-enabled, especially amid increasing complexities around transactional flow and portfolio management. With a rising number of markets available to provide CPRI capacity, and growing needs among insureds for broader coverages, digitalisation allows greater scalability and consistency in work flows. It creates more seamless connections between insurers, brokers and clients, and opens up new avenues for claims handling, efficiency and transparency.
Though a relatively new area of focus within the CPRI industry, efforts to realise data’s huge potential on behalf of clients will likely be one of the more important trends we witness coming out of the pandemic. We anticipate this to be fuelled, not only by the needs of clients at an individual level, but also increasingly as a means to advocate effectively for the industry as a collective; to ensure that the benefits the product provides in supporting the real economy are protected as we navigate through significant periods of economic upheaval and regulatory change.
Ensuring insurers and brokers are in a position to meet these rising demands and expectations will provide a key competitive edge in this new landscape.