Understanding Your Exposure to Socially Risk-Averse Business Partners

Tony Somers
4/5/22 9:30 AM

War comes with risk and devastatingly immeasurable losses.

Identifying risk and anticipating loss is what the insurance industry does, and they do it well. Years of claims and consumer trends have allowed insurance carriers to anticipate loss and adjust as needed to support growth successfully. Policy coverage exclusions & proven underwriting processes have positioned global carriers to avoid loss associated with war. War and periods of heightened global conflict carry significant potential to impact anyone from any industry at any time. The insurance industry is no different.

War Introduces New Challenges

On March 8th, 2022 the United Kingdom started taking strategic steps to limit Russian aviation and space industry entities from accessing UK-based insurance and reinsurance services. Severe economic sanctions prohibited financial transactions connected/tied to a Russian entity.

Because Insurance Carriers are designed to cover only perils as named or excluded in their policies, this concept of essentially black-listing coverage for new or existing businesses due to their relationship/association with Russian Entities and Oligarchs is unique and complicated. While today's underwriting processes are adequate in flushing out undesirable new business, tomorrow's need to identify all existing insureds associated with Russia comes with a new set of challenges that threaten the industry's growth efforts.

For insurance carriers, growth is understood through earned premiums and claims paid. These data points can be easily influenced and measured. However, the true value and risk behind these numbers lie with the policyholders. Historically, Insurance carriers have relied on complete and accurate underwriting processes to determine whether or not a particular new business application met their risk appetite. Today, who you provide coverage to poses a more significant social & economic threat to your organization's growth efforts than what you are covering and for how much. Insurance policies were designed to cover pure risks. With legislative initiatives popping up worldwide, a new 'social risk' threatens industry growth through sanctions and severed relationships.

Insurance Risk Management

In the United States, the Office of Foreign Assets Control (OFAC) maintains a Specially Designated Nationals and Blocked Persons (SDN) List of about 6,300 people & entities worldwide that are restricted from conducting business with U.S. enterprises or people. Each identified sanction violation carries a hefty fine ranging from $11,000 to $10,000,000. As Putin's reign of terror continues to spread across Europe, prohibited entities are sure to increase in volume to turn up the pressure through peaceful retaliatory measures. In 2019, Russia was estimated to have over 3.75 million legal entities, most of which require insurance. This prompts several questions.

How long until the United States joins in sanctioning Russian Entities & Oligarchs? Will the SDN list grow to 3.756 Million?

And lastly, which Industry Carrier has unknowingly positioned themselves without an exit strategy.

Understanding Entity Relationships

The rules of engagement have changed, and the world's largest enterprises have begun reflecting on the powerful influence they hold to make a difference. As such, new material efforts will become critical to more and more companies understanding their exposure to socially risk-averse business partners and policyholders. A thorough understanding of these ownerships, associations, and influential relationships requires advanced hierarchy management technology designed to easily and effectively manage enterprise data. Many of the world's leading insurers are now scrambling with software solutions that provide a less than 360-degree view of their enterprise's exposure to risk through insufficient entity management capabilities.

At Kingland we understand just how messy entity-to-entity or even entity-to-natural person relationships can be to identify and connect. Our entity management software product puts carriers back in control of identifying new risks while staying compliant and out of the news. Where the world sees a complex network of heightened risk, we see trees and risk designations neatly organized and easily understood.

This is what we do, and it's how we think.

Deliver confidence with Kingland.

Learn More

No Comments Yet

Let us know what you think