“The shift towards an asset-light economy is transformative; intangible – and largely uninsured – exposures are becoming more substantive,” said David Flandro, managing director of HX Analytics. “The rise of technology companies and peer-to-peer disruptors is indicative of an ability to create value from intangibles. In fact, the bulk of corporate value today is associated with intellectual property, brand and reputation ahead of property, plant and equipment. The trend towards intangible value is accelerating.”
Although the rise of the intangible economy started long before the advent of COVID-19, the pandemic has led to a greater reliance on digital technologies and spotlighted the vulnerabilities of an interdependent, interconnected global economy, Howden said. Risks from perils like cyber, business interruption, loss of reputation (or data), supply-chain vulnerabilities and operational failures can occur simultaneously, creating significant and potentially systemic disruptions across multiple geographies.
“The nature and scale of these exposures 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 said. “In many cases, historical experience is no longer indicative of future risk exposure.”
Key findings of Howden’s report include:
“A new and more outward approach needs to be adopted by the insurance market in finding solutions for intangibles,” said Charlie Langdale, managing director of financial lines at Howden Broking. “The market has long been held back by its siloed approach to risk. While 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.”
“COVID-19 is a reminder that certain perils do not conform to long-held assumptions around correlations, boundaries and duration,” said José Manuel González, CEO of Howden Broking. “We should learn to expect the unexpected and develop solutions for the risks of tomorrow by reimagining the scope of insurability today.”