LONDON--(BUSINESS WIRE)--Time and resource constraints are hindering risk managers’ efforts to help their organisations prepare for catastrophes, such as power outages, avian flu or extreme weather, according to the latest Economist Intelligence Unit (EIU) report sponsored by the ACE Group of Insurance and Reinsurance Companies.
Over half of the 225 global risk officers and other senior risk professionals questioned as part of the survey stated that while preparation for high impact but low probability events was important, they lacked sufficient time and resources to develop detailed contingency plans. More than 70% said that their organisation’s investment in catastrophe risk management had either remained static or increased only slightly during the last three years. A further 40 % said that they did not regard these events as a priority and that little or no attention was being given to preparation.
Commenting on the findings, Brian Owens, Chief Catastrophe Risk Officer at ACE European Group, said: “This survey confirms efforts the risk management community is making to ensure their organisations are prepared for catastrophes but highlights the difficult conditions in which they are working.”
“With competing pressures on time and resource, planning is being forced down a short term track. While the effects of ‘today’s’ problems such as power outages can, of course, be devastating, the world is changing around us and new threats such as avian flu, climate change and terrorism are moving up the agenda. Unfortunately, the survey results suggest that too many European risk managers perceive events such as Hurricane Katrina as something far removed from businesses here. In truth, these global challenges are as relevant to Europe as any other region. Dreadful events like Katrina only confirm the critical importance of effective planning and preparation.”
The role of insurers in catastrophe risk planning was seen as key with over 40% of survey respondents saying they had consulted with their insurance company to develop their plans. This importance was further reinforced with over half of those questioned (52%) stating that they had ‘fairly high’ confidence that their company’s insurance policies would provide adequate cover in the event of a catastrophe with nearly 11% describing their confidence as ‘very high.’
While time and resource issues are restricting risk managers’ ability to prepare, the potential impact on businesses of some kind of catastrophe is causing real concern within the global risk management community. The risk from power outages was viewed as the most serious. Over 45% of those questioned saw the threat as significant. This compared to 42% for avian flu. The impacts of other high profile threats such as acts of terrorism or extreme weather events were also cited by 35% and 32% of respondents respectively as areas of significant concern.
The allocation of adequate resources is crucial for risk professionals and this is borne out by the fact that a variety of tools are being used to manage catastrophe risk. Scenario planning was the most popular tool with nearly 57% of those questioned using it. The specialist training of employees was also referenced by 47% and the testing of disaster recovery plans by over 46%. Lack of resource is clearly still an issue though with 16% claiming they use no tools to support their catastrophe planning.
Over 36% of those questioned claimed that they revised their catastrophe risk plans once a year with nearly 13% saying they revised their plans more often than this. 21% only reviewed their plans every two-three years. Again, and more worryingly, almost 13% said that they had no catastrophe plans at all.
Note to editors
The EIU Report, ‘Reputation: Risk of Risks’, is the fifth in a series of reports from the EIU’s Global Risk Briefing, a research programme targeted at senior executives responsible for managing corporate risk. It is based on the findings of a survey among 225 senior executives, responsible for risk management, thirty six per cent of whom are from companies in the financial services sector. The Global Risk Briefing is sponsored by ACE, Cisco Systems, Deutsche Bank, IBM and KPMG.
ACE European Group has established branch offices in 16 countries across Europe, Freedom of Services permissions to operate in 27 EEA countries and affiliate offices in Egypt, Bahrain and Pakistan.
ACE European Group comprises the operations of ACE Europe, ACE Global Markets and ACE Tempest Re Group. ACE Europe provides a range of tailored Property and Casualty, Accident and Health and Personal Lines solutions for a diverse range of clients. ACE Global Markets (AGM) is ACE’s specialty international business, underwriting through ACE’s Lloyd’s Syndicate 2488 and UK registered company ACE European Group Limited. Specialty lines include excess and surplus lines business, Marine, Aviation, Energy and Political Risk as well as Property, Financial Lines and Accident and Health. Additional information on ACE European Group can be found at www.aceeuropeangroup.com.
The ACE Group of Companies is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), a component of the Standard & Poor’s 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acelimited.com