The reinsurer opts for a holistic approach to tackle the corporate world’s intangible risks

Changes to business structures is affecting how the industry views and insures risk, according to Swiss Re’s most recent Sigma report.

With a move away from manufacturing and other business models that require physical assets, the corporate sector is seeing value in mitigating supply chain disruption, and earnings and cash flow volatility.

In its most recent Sigma report, ‘Commercial insurance: innovation to expand the scope of insurability’, the firm said: “With the transformation of the corporate sector from being rich in physical assets to deriving more value from intangibles and services, new and innovative insurance solutions are moving from asset and balance sheet covers to protection for earnings and cash flow risks.”

According to Swiss Re, these business model changes are due in large part to technological changes and digital transformation. The firm reports: “Some manufacturers and industrial conglomerates are making more profit from services such as maintenance than from selling the physical goods they produce, and some are moving from selling the produced items to selling or renting out the functionality of those items (eg, selling the output of a wind turbine instead of the turbine itself).”

Swiss Re chief economist Kurt Karl said: “New types of solutions are providing protection against a wider range of perils, and extending insurance cover from tangible to intangible assets.”

According to Karl, holistic covers which combine multiple risks and interdependent triggers are the way forward for tackling the corporate world’s growing set of intangible risks.

He added: “In addition to offering coverage for multiple risks, holistic solutions offer efficient risk transfer given their focus on the joint distribution of all risks.”