AIRMIC’s annual conference in Manchester received a large delegation from Guernsey, including Paul Sykes, Managing Director of Aon Insurance Guernsey, who gave an address at the event. Here he shares his reflections on the conference
The AIRMIC 2023 conference in Manchester themed “Riding the Waves (of future risks and opportunities)” was nearly wiped out through freak flooding of the venue due to heavy rain during the weekend before it was scheduled to take place from Monday 19 June. With risk management and business continuity plans befitting the Association of Insurance and Risk Managers in Industry and Commerce (AIRMIC), the show did go on. 8,000 delegates were signed up for the event that took place at the Manchester Central Convention Complex, the former Manchester Central Railway station, once one of the major train station hubs of the North West.
It was fitting then that one of the 3 top risks that AIRMIC members highlighted as keeping them awake at night was climate exposure and weather. Geopolitical risks emanating from Russia and China and Artificial Intelligence (that could make business models redundant) were scanned on the horizon but more immediately, workstyles and productivity were deemed to be a more prevalent challenge. However, the dominant risk topping the list of concerns above weather and workstyles was cyber threat. Indeed, the issue is so ubiquitous and important that AIRMIC have determined that it will deserve a separate dedicated conference all to itself.
It was no surprise then that the panel I was asked to speak on, addressing trends in captive insurance, was also preoccupied in part with Cyber risk. Keynote speaker Amanda Blanc, CEO of Aviva, had set the scene when she referred to cyber risk as ‘a clear and present danger that is around us every day, everywhere.’
Cyber risk is extraordinary in that it is one of very few new classes of insurance in an industry that has been operating in ostensibly the same manner providing protection for damage to property and tangible assets for the last 300 years. Cyber threats have emerged in recent years as more of modern life takes place online. The class is in its infancy in terms of risk maturity proving to be something of a problem child for the industry. In part this is because it is problematic by definition. Cyber risk can mean many different things, from theft or loss of data to network server insecurity giving opportunity for ransom attacks and in the extreme, state sponsored terrorism.
Perhaps because cyber is relatively new it hasn’t featured widely in captive insurance programmes until recently. Insurers and captive insurance managers alike have been unsure as to whether cyber risk is a frequent event such as data leaks and phishing scams or a less frequent catastrophe event that costs many millions in losses. Be that as it may, the use of captive insurance companies for cyber cover has doubled in recent years. Captives have been used to fill gaps in cover provided by the market but also used to insure primary layers and reinsure higher value cyber risk into the (re)insurance market. Therefore, captives aren’t being used just to retain risks but also to ‘sell’ risk into the market, which is something of a paradigm shift. A growing contingent of Guernsey based captives are now covering cyber risk exposures of the parent company.
Away from cyber risk the emergence of new domiciles for captive insurers was raised as a question for the panel given that France has enacted a regime for captives ‘onshore’ and Lloyds of London is offering a proposition to captives. In response it was noted that Guernsey remains the domicile of choice for UK captives and many European clients.
I explained at conference that Guernsey would not become complacent, citing that the insurance industry, government and the regulator were strategically aligned and committed to ensuring that Guernsey’s finance sector remains highly competitive and at the leading edge of international standards and developments as well as innovation.
It’s about taking initiatives such as VASP (virtual asset service provider) regulations, and other advances in AML/CFT and company law revisions to ensure that the infrastructure remains world class. The relaunched Programme in Captive and Insurance Company Management education was another good example of how Guernsey is seeking to create incremental gains and provide a platform to enable its industry professionals to continue to perform at the elite level.
