Commercial insurance news - Rethink needed to avoid "perfect storm"

Mactavish, an industrial research specialist, has warned that a failure to address new and challenging risks in the business market could result in significant financial difficulties; it added that the commercial insurance sector had a significant role to play in addressing these challenges.

A report by the organisation says that leaving these challenges unmet could have catastrophic consequences: "Parallels can be drawn between large property and casualty insurance institutions today lacking the ability to fully understand changing risk exposures and more publicised past failures of financial institutions to understand risks assumed.

"While loss impacts naturally lag economic changes by several years, turmoil in commercial insurance is expected as a latter phase of the financial crisis."

The primary reason for the new risk, says Mactavish, is the "change and uncertainty" brought about by the global financial crisis. As such, the needs, stability and viability of many businesses have altered dramatically, something all companies need to account for when considering their insurance needs.

The report warns: "British firms contain new risks that have not been properly understood or reflected. As a result of this combining with existing pressures on insurers, the insurance sector and the companies it serves could be facing a perfect storm that would form another phase of the financial crisis."

PriceWaterhouseCoopers described the report as a "wake up call" and called on all insurers, brokers and clients working in commercial insurance to carry out a serious rethink on the way they assess risk.