The new research from ACE focused on six emerging risks that it identified as increasingly important for 21st century business.

Terrorism and political violence was deemed the most relevant by business with 32% rating it as an important concern.

It was followed by environmental risk (30%), multinational/export risk, (27%) IT and cyber risk (26%), directors’ and officers’ (D&O) liability risk (25%) and business travel risk (21%).

In four of the six risk categories surveyed, over half of companies said they feel somewhat or completely unprepared to manage the risks.

Again terrorism and political violence was the chief concern with 54% of respondents feeling underprepared.

52% said the same about D&O risk and cyber risk, and 51% business travel risk.

According to Mr Kendrick, the research suggests several reasons for this lack of confidence.

One reason is that only 50% of respondents said their companies' CEO or COO has formal responsibility for risk management.

“It suggests there is still room for greater clarity about risk management responsibilities at some European companies and maybe a need for stronger leadership from the top,” said Mr Kendrick. “When it comes to driving a culture of preparedness and awareness for emerging risks throughout an organisation it is critical that at least the CEO, CRO or COO takes responsibility, and subsequently the board of directors.”

The countries with the highest levels of CEO oversight are Spain (62%), Germany (53%) and the UK (53%). The lowest were Italy and France with 41%.

A further reason for a lack of preparedness could lie in a lack of crisis management plans, said Mr Kendrick.

According to ACE’s research, 54% of companies have no crisis management plans in place for terrorism and political violence and 49% have no plans for crises relating to cyber and business travel risk.

A third reason, according to Mr Kendrick and ACE, is that the research suggests European companies are underinsured for certain emerging risks.

For example, over a third of companies (34%) have no insurance coverage in place for terrorism or political risk.

“Is that because companies don't see the value of insurance?” asked Mr Kendrick. “We don't think so because for all six risk categories well over half said insurance is of medium, high or very important to their risk management strategy.”

Whilst some buyers might point to a lack of suitable insurance solutions to some of these emerging risks, Mr Kendrick argues that the level of insurance take up rather reflects a lack of collaboration between buyers, brokers and insurers and a failure to explain and fully understand risks and solutions.

“We have said for many years that in order for companies to have a fair assessment of their risk, there needs to be a collaboration between the broker, insurer and client and a sharing of information. If you do not have that sharing of information how can we most accurately price risk and understand exposure. It also helps to ensure that in the event of a claim there is less likelihood of dispute,” said the ACE European Group’s Chairman.

The research reveals that respondents rely on their insurer or insurance broker for guidance and information on emerging risks. 51% do so for terrorism and political violence risk.

“This simply reinforces our view that it is crucial for insurers, clients and brokers to all work together to understand the exposures and therefore develop risk solutions,” continued Mr Kendrick. “The triumvirate should share the accountability…I think more needs to be done to get the three parties around the table, in either a formal or less formal arrangement,” he added. “The relationship has been evolving over many years but it still isn’t quite right. The important message is we have to keep doing more of this.”

“It comes back to that sharing of information. Don't let me guess what your concerns are. You are the business, you tell me what you want. Let me know what is going on in your firm that you really want covered. If I can cover that I will endeavour to do so provided you give me the information around exposure and accept that I will charge you a price for it,” he said on developing solutions to emerging risks.

Speaking at a press briefing focused primarily on the threat of terrorism and political violence risk, Piers Gregory, Terrorism Underwriting Manager, ACE European Group, said the reason for increased concern is threefold.

High profile terrorist events in recent years dating back to 9/11, the financial crisis and ensuing recession placing more emphasis on political violence and ongoing geopolitical concerns have all contributed, he said.

“It is notable that only 7% of European companies in our research have comprehensive cover for terrorism and political violence risk. A further one in five believes that these risks are covered under another policy, but our experience shows that this is often not the case,” said Mr Gregory.

“Our research points to confusion on the part of companies about what risks are covered and what are not under different policies. 21% of respondents believe risk are covered elsewhere, 15% are unaware of the potential gaps in cover. 8% are aware but are unsure how to upgrade cover. Even if companies know standard policies exclude terrorism they may not know just how broad that definition can be,” he added.

Like Mr Kendrick he called for improved education of clients and greater dialogue between stakeholders.

There has been confusion amongst clients about the gaps that exist between specialist cover for terrorism and political violence and traditional property/casualty policies. Solutions have come under criticism. Mr Gregory thinks the market has made great strides to address these concerns but could do more.

“The market continues to evolve but I think it needs to do more. We have addressed the issue with our Shield concept, an integrated property and terror product,” said Mr Gregory.

Shield is ACE’s new comprehensive terrorism and political violence all risk policy that attempts to bridge the gaps between traditional and specialist cover.

It was released as a solution to the many disputes between rival insurers as to which policy should respond to an event. This arbitrage has increased over the last 24 months, according to the experts at ACE.

It packages the separate covers under a single policy, with a single carrier and therefore hopes to remove uncertainty of cover.

Please sign up here to our full-time mailing list to ensure that you receive our weekly newsletter.

• More EU News
• More Terrorism News