The first conference of the Pan-Asia Risk and Insurance Management Association (PARIMA) in 2016 kicked off in Kuala Lumpur, where it was held for the first time. Delivering the welcome address, Mr Franck Baron, PARIMA Chairman, urged the audience to step up to fill existing gaps in the discipline, particularly in CAT risks, which tend to have the greatest impact in Asia.
Recent catastrophes highlight gaps in risk management and insurance
Mr Baron pointed out that the 2015 Tianjin disaster had raised visibility of the limited risk accumulation controls in Asia. From the insurance perspective, the incident shows the continuing lack of room for appropriate and sustainable catastrophe insurance pricing in Asia’s competitive market. He said that pricing in the region continues to fail to incentivise the practice of good risk management by not differentiating between well- and poorly-managed risks.
The Tianjin case also highlighted the need for risk managers to take a global approach, given most organisations in the room would have cross-border operations. In addition, it revealed that many affected companies did not have a full picture of how their assets were stored, managed and secured and had not successfully harnessed big data in this process. Meanwhile, the Nepal and Kyushu earthquakes both demonstrated significant uninsured losses, which shows the continuing Nat CAT protection gap that needs to be filled. Despite lessons drawn from the 2011 Tohoku earthquake, Kyushu had showed that even Japan has room for improvement.
Government / public sector risks
Mr Baron added that the Tianjin incident had also spotlighted the limited risk management by public authorities, a situation that was not limited to China. He said that generally, regional and national authorities in the region did not have a good picture of risks. He suggested a review and stronger enforcement of safety and regulations for incident and crisis response, with more focus on health, safety and environment (HSE) and a better resiliency among community and business. He said that PARIMA and the industry could do more to support regional authorities. One edition of the World Economic Forum’s Global Risk Report had suggested that each country or region should appoint a risk manager – this, he said, was a good idea and if not, each region should have least have a risk management agenda.
Mr Baron noted that climate change was another issue which Asia had to pay attention to. Even if the issue seemed like a "long shot" for most risk managers to be involved, he suggested that it should be on their risk agenda as it would eventually have an impact on Asia. The Philippines was an example of a country which would be much affected by its related Nat CAT risks.
Raising the bar of the risk management profession
While he strongly believed that there is “a lot of greatness and a great future’ in the risk management profession, Mr Baron said there were still ‘barriers to be smashed”, something to be worked on collectively by the PARIMA community. Addressing the room with both risk and insurance managers of varying job scopes, he noted that the Asian risk manager needs to have good insurance expertise, to ensure he is properly supported by his insurer in risk financing as a critical and strategic tool when a major loss event happens. unfortunately, within organisations, there is still a lack of understanding in this area. One can contrast the CFO’s extent of engagement with his banker in comparison with his insurer, even though the latter is an equally critical financial stakeholder to the organisation.
One step for risk managers to move towards professional recognition is certification. On PARIMA’s partnership with FERMA, the Federation of European Risk Management Associations to launch a certification programme for risk managers in Asia that was announced in October 2015, Mr Baron pledged that by the end of 2016, PARIMA should be able to present its first certificate. He noted, however, that certification would also have to be supplemented by ongoing education for risk managers. To this end, he said that PARIMA and Lloyd’s were ready to launch a Professional Development Programme, a 2-day course which Kuala Lumpur would be among the first Asian cities to host.
“We have to transform our job into a true profession, and bring it to the required level of excellence,” he said, In concluding his address, he urged risk managers once again to look at how to share more information about risks in this age of Big Data.
The PARIMA conference in Kuala Lumpur was held from 9-10 May and is the first of two PARIMA conferences this year. The next will be held from 16-17 November in Hong Kong.