Kidnapping. Piracy. Terrorism. The world is full of special risks that need covering—and full of opportunities for brokers capable of placing them
As distinct as the worlds of accident, health, and special risks insurance are, a common thread connects them, says Rupesh Appannah, Senior Accident, Health and Special Risks Broker at Chesterfield Group in London. “The common denominator is that you are insuring people. The type of person or people you are insuring is what makes the risk, whether it’s an individual, a business with five people or a multinational company with 5,000 employees.”
In a globally connected business environment, concerns associated with worldwide personal risk are top of mind. Understanding the key concerns of the people insured will help brokers capitalize on opportunities in the marketplace.
“A lot of clients are looking to purchase coverage for global accident and health risks, especially when they have employees who work in or visit high-risk countries,” explains Lalita Mohabir, National Product Leader, Personal Accident, Burns & Wilcox Canada.
“High-net-worth individual personal accident is also a potential growth area, especially for high-limit disability income coverage,” adds Chuck Bastan of Chesterfield Group, who specializes in accident, health & special risks.
What’s more, as the number of kidnapping episodes has increased worldwide, so has the demand for kidnap and ransom insurance. Because many incidents go unreported, definitive kidnapping figures are difficult to obtain. However, even conservative estimates place the number of global incidents in the thousands per annum, with the number increasing due to ever-changing world events.
Many African countries are rich in minerals and energy resources, which fosters a target-rich environment. Mozambique alone is estimated to house 25 billion tons of coal reserves, according to the International Energy Agency, and estimates of the amount of natural gas reserves in the deep water Rovuma basin run as high as 200 trillion cubic feet. These resource riches are drawing energy companies and their typically well-paid employees. And with them come criminals angling to extort money.
“As oil and gas workers enter those areas, there has already been an increase in kidnapping activities because criminals are looking to profit from the arrival of foreign nationals,” Appannah says. Oil and gas workers aren’t the only ones at risk of kidnapping: targets also include pro athletes, celebrities, and other high-visibility individuals.
The market has responded to increased risks and growing demand for coverage with new programs and special forms designed to address worldwide accident, health, and other risk exposure. For instance, Appannah’s group developed a post-traumatic stress disorder (PTSD) extension, originally targeted to high-risk accident coverage for Iraq-based security guards. It also introduced a tropical disease extension.
“With the concern about piracy off Somalia, a lot of shippers are hiring additional maritime guards,” Appannah says. “However, they found that the biggest exposure is not the risk of getting shot by pirates, it is the chance of contracting diseases like malaria.”
Despite growing risks, today’s special risk insurance marketplace is extremely competitive, Mohabir says. “We continue to see high capacity and low rates with a continued downward trend in terms of pricing. It’s a soft market.”
Rate decreases in the double-digits are commonplace. In a buyers’ market, the best way for brokers and agents to compete is not on price, but on coverage and service. “We are able to compete and offer comprehensive and customized quotations,” says Mohabir. “Companies are willing to add more and more cost-benefits to their programs at no charge. And as a result, we’ve been quite successful in writing accounts.”
Underwriting considerations regarding accident, health and special risk coverage remain constant. How challenging an account is to place is based not on class but on experience.
“We look at the exposure and review, assess, and underwrite each case, based on its own merit,” Mohabir says.
The View from London
“The higher the risk/reward for accident and health business, the more desirable it is for placement in Lloyd’s,” Bastan says.
Pricing in London has been falling at a greater rate than in domestic North American markets. “My experience is that prices have been falling about 20 percent per year,” ppannah says. He adds that London has also been offering deep price decreases in kidnap and ransom coverage, driven by strong market capacity.
“There had been only a handful of providers for kidnap and ransom in years past. Today that number has grown, and they are all fighting over the same market,” he notes. “Experience on that coverage has also been very favorable, with very low frequency despite the high severity potential.”
Across all areas of accident, health, and special risk, capacity has increased to a tripling of the number of available markets over the past decade. “Today, capacity in the $100 million-plus range can be readily found for personal accident with disability income, and $50 million for kidnap and ransom is not uncommon,” says Bastan.
Risks that find a home in the London market include not just high-risk, high-limit accounts, but also high-net worth individuals who have a lot on the line to lose.
“Because high-net-worth clients, such as Hollywood celebrities, professional athletes, and musicians, have exposures that are typically excluded under many regular accident programs, this is another growth area in the London market,” Bastan says.
“We’re seeing fewer run-of-the-mill risks and more high-net-worth, niche areas,” adds Appannah.
Mohabir says brokers can stake a competitive edge in the market by consistently uncovering gaps in existing programs, such as war risk.
“War risk is one of the most commonly overlooked coverages. Domestic insurers have an exclusion in their policy around declared or undeclared war,” she says.
Another gap Mohabir often sees is with disability coverage for high-net-worth individuals. “Some insurers can only offer up to a certain limit based on an individual’s earnings, so there is always a shortfall between the available limit and what is truly needed.”
Partnering with resources that have the expertise, experience, and market access is also essential. A wholesale partner can provide customized products and programs based on the unique needs of their client. Having those options provides the opportunity for retail brokers and agents to upsell.
Most important to seizing opportunity in the market is remembering that accident, health and special risk insurance is all about people.
“Success in this business requires offering a local point of sale, being accessible, and providing the tailored, personal service that the clients who seek accident, health, and special risk coverage have come to expect,” Bastan asserts. “That holds true as the recipe for success in any market.”