Carrier innovation is giving commercial insurance a broader reach as the economy continues to deal with major structural changes, according to a new Swiss Re sigma report.
The reinsurer noted that the corporate sector is today less about manufacturing and more about services, adding that carriers are developing new products and expanding the scope of what it means to reduce risk in today’s corporate world.
“Product developments and innovation around data and analytics are expanding the scope of insurance,” Swiss Re said in its report. “They provide protection against a wider range of threats and peril and extend insurance covers from tangible assets to intangible assets.”
Cyber risks and supply chain disruptions are two of the bigger new risks to emerge from the new global economy, according to the report.
Swiss Re said that “holistic covers” and “parametric solutions” are helping to make risk transfer more efficient in the new economy and to make exposures otherwise hard to insurer more insurable. Holistic covers combine multiple risks and/or interdependent triggers, and parametric solutions are based on indices instead of actual losses.
Coverage innovations are key in the new service economy age, Swiss Re said in the report, because they “can close protection gaps in conventional insurance policies stemming from policy exclusions or limitations.”
As Swiss Re sees it, insurance innovations are making strides in a number of new areas. New coverages protect earnings and cash flow risks. They also support business strategy and growth, backing economic pioneers such as sharing economy startups. New insurance approaches also let companies use risk transfer for marketing support and product differentiation, Swiss Re said.
The report also cites the expanding, more sophisticated role of corporate risk management as a noteworthy innovation.
Swiss Re pointed out that firms focus more now on transferring risk through financial instruments, so they can reduce costs connected to financial distress. This helps them protect cash flow and corresponding investment products. New risk transfer products also help lower the cost of capital and dampen earnings volatility.
“New covers will expand the scope of protection products by enlarging the boundaries of insurability and also the role of insurance in corporate risk management,” Swiss Re said.
Swiss Re’s full report is: “Commercial Insurance: Innovating to Expand the Scope of Insurability.”
Source: Swiss Re