The shift towards an asset-light global economy has been described as transformative by HX Analytics managing director David Flandro, in a Howden report that highlights the rise of intangibles and the subsequent challenges this brings to re/insurers.
“Intangible – and largely uninsured – exposures are becoming more substantive. The rise of technology companies and peer-to-peer disruptors is indicative of an ability to create value from intangibles,” Flandro said.
Indeed the report from insurance broker Howden shows that nearly 70% of total business value for the world’s largest 50 corporations emanates from intangibles, equating to roughly $11 trillion.
Flandro notes that the bulk of corporate value is today associated with intellectual property, brand and reputation ahead of property, plant and equipment.
“The trend towards intangible value is accelerating,” he says.
The nature and scale of these exposures are seen to have moved non-physical loss scenarios from the theoretical to the real world and, in doing so, caused a marked shift in risk perceptions.
Howden notes that, In many cases, historical experience is no longer indicative of future exposure and that the range of impacts associated with intangible risk proliferation highlights the need to reimagine the scope of insurability.
Charlie Langdale, Managing Director, Financial Lines, Howden Broking, comments, “A new and more outward approach needs to be adopted by the insurance market in finding solutions for intangibles.
“The market has long been held back by its siloed approach to risk. Whilst it may have been workable in an era when perils were more predictable and geographically contained, it will not be sufficient in the long-term for complex and intangible risks that straddle different lines of business and jurisdictions.”
Howden Broking CEO José Manuel González describes COVID-19 as a reminder that certain perils do not conform to long-held assumptions around correlations, boundaries and duration.
“We should learn to expect the unexpected and develop solutions for the risks of tomorrow by reimagining the scope of insurability today,” he said.
Howden believes there are signs that corporations are today holding more risk on their balance sheets than they were even five years ago and that the need for insurance solutions has never been greater.
Overall, this is described a clear opportunity for underwriters to step-up and secure their positions as trusted partners.