Europe’s largest companies will need to spend more time and resources over the next year on long-term strategic risk planning to avoid being vulnerable to changing market conditions. That’s the advice from Gilbert Van den Eynde, Global Leader of Marsh’s G5, speaking at the Federation of European Risk Management Associations’ (FERMA) London seminar.
“As a result of the recession and ongoing cost pressures, Europe’s largest companies have tended to be more focused on counterparty security and credit risk in the short-term, as well as taking advantage of any efficiency savings from their insurance transactions arising from the soft market,” he explained.
“These immediate efficiency savings are highly attractive. However, by failing to pay enough attention to the interconnectivity of the risks their organizations face – and preparing for the possible hardening of insurance rates, many firms could be dangerously exposed to the vagaries of an uncertain economic outlook.
“The past 10 years also bear witness to how unexpected events, such as terrorist attacks or severe hurricanes, can quickly trigger a swing between a soft and hard insurance market.
“Longer-term risk strategies, such as risk transfer optimization and the use of captives, should be considered and used, where appropriate, to extract more value from firms’ risk and insurance programs. This is true even when softer market conditions prevail.”
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