The balancing act Tom Hoad Head of Innovation, TMK June 2018

Innovation at TMK

Today’s agenda Aim of the session: To highlight the perils and pitfalls of intangible risks and to see how insurance can be made fit-for- purpose in this important field What we’ll cover The trouble with intangibles The Balancing Act interactive game What we want you to get from today Be properly briefed on the scale and growth of intangible risks Take part in useful discussion and debate about the issues they create and what solutions work best for Risk Managers Give us feedback on what we can do to help as insurers

Where is the value?

Handling social media

Our data …

“While 52% of AIRMIC risk managers say that reputational harm is their key concern, the number of insurance policies undertaken by businesses to protect their non-physical assets is proportionately lower than those for traditional risks such as Property”

Quick team questions … 1. What’s your team name? 2. What are your top three problems with intangibles?

The ‘balancing act’ game An interactive exercise to get you thinking (and talking) about the balance between tangible and intangible risks. The game Tangible (gold) and intangible (blue) Decide how to allocate your budget 20 chips, £100k each Total risk management budget = £2m (mitigation and premiums) Your team task each time Read the brief - study the risks – place your chips Open discussion and debate Scoring - more chips on the right risks = lower losses!

Scoring Correct risks covered? (Tom will advise) £6m loss on machinery breakdown Divide by your 6 chips = £1m loss No chips? Your loss is £6m £3m loss on network failure Divide by your 6 chips = £500k loss No chips? Your loss is £3m If you covered both risks your total loss is £1.5m. Or £9m if you didn’t cover them at all.

Hotel Company Task – 10 minutes A UK-wide franchisor of 80 hotels operating under a single brand name but owns very few of its properties. They have franchising programmes that permit other hotel owners and operators to use their brand and systems, for which they generally receive an initial application fee and continuing royalty fees. Task – 10 minutes As a team decide where you think the value of this organisation lies How will you spend your annual risk budget (including insurance spend) of GBP2m against both tangible and intangible risks? Place your chips on the board

Department Store Task – 10 minutes A department store business that includes supermarkets, local stores and other small store formats, as well as having an online presence. The company has various product lines including a full line of grocery items (meat, produce, natural & organics, deli & bakery, dairy, frozen foods, alcoholic and non- alcoholic beverages, floral and dry grocery, as well as consumables such as health and beauty aids, baby products, household chemicals, paper goods and pet supplies). Task – 10 minutes As a team decide where you think the value of this organisation lies How will you spend your annual risk budget (including insurance spend) of GBP2m against both tangible and intangible risks? Place your chips on the board

Logistics Company Task – 10 minutes A logistics company offering shipping, mailing, fulfilment and returns that enable the sending of parcels and packages. The technology platform used to offer services is run from leased data centres in various locations in Australia, India, Pakistan, Iceland, Germany and USA. Task – 10 minutes As a team decide where you think the value of this organisation lies How will you spend your annual risk budget (including insurance spend) of GBP2m against both tangible and intangible risks? Place your chips on the board

Final thoughts … How would you invest your budgets to address the growing threats from intangible risks? What do insurers need to do to help you get the balance right?