Insurance firms to face post Covid-19 risks, report warns
Steve Umidha @UmidhaSteve
A looming uncertainty in the magnitude of economic disruption brought by the coronavirus (Covid-19) pandemic will increase downside risks for many insurers in the months ahead, a new report by Lloyd’s and KPMG has warned.
Titled, Protecting Intangible Assets: Preparing for a New Reality, 2020, the report paints a worrying picture on how Covid-19 has increased companies’ exposure to new risks, many of which implicate the intangible assets held by businesses currently going through re-set modes.
The report released this week says insurance companies across the globe will struggle to offer indemnity covers to companies whose reputation and brand have suffered as a result of drastic measures they took such as unprecedented layoffs and salary cuts among others in order to remain afloat in the face of the pandemic.
“They will have to rethink the optimal ways of using risk management practices to build internal resilience and become proficient at safeguarding their existing and new intangible assets,” it reads.
Intellectual property
An intangible asset is an asset that is not physical in nature and includes a company’s reputation, goodwill, brand recognition and intellectual property (IP) such as patents, trade marks and copyrights and is usually very hard to evaluate.
Reputation and brand, human capital, and IP appear to be the most valuable of asset types, although particularly in the case of human capital are sometimes difficult to quantify for most insurers.
Risk owners according to Sonja Rottiers, the chief executive of Lloyd’s Insurance Company, in businesses across all industries will have to be alive to these changes to make sure they have the right tools to keep enhancing their corporate value.
“With unprecedented scrutiny on firms’ behaviour, reputational issues are one of many posing a threat to firms’ resilience during the pandemic.
New ways of working are also presenting own unique challenges, amplifying the complexity of managing intellectual property and conduct risk amongst a remote workforce,” he says.
For businesses to stay resilient, operationally and financially, awareness of what intangible assets are and how they can be protected will be critical and will form a considerable part of their risk management strategy.
The economic damage from the Covid-19 outbreak has already been significant and has ruthlessly exposed the deep faultiness in the country’s insurance sector which predominantly lacks radical innovations and post pandemic interventions.
Indeed, investments, gross premium income and claims incurred from general insurance last year, recorded slowed growths of 2.2, 1.5 and 1.2 per cent, according to the National Economic Survey, and now players in the sector predict a rougher 2020 – fuelled by the pandemic shocks.
While the majority of local insurers do not cover pandemic risks, experts say “out of the box strategies” will be a key component if industry players are to avoid an expected upsurge in claims that are indirectly related to the pandemic.
