Risk management for the affluent in today’s environment
Risk management for the affluent in today’s environment | Insurance Business America
Risk Management News
Risk management for the affluent in today’s environment
“In times of conflict, risk increases significantly”
Risk Management News
By
Kenneth Araullo
In today’s interconnected world, the ripple effects of global events, such as supply chain disruptions, economic instability, and the ever-present threat of terrorism, are felt far and wide. These challenges pose unique risks to those with significant wealth – the high-net-worth (HNW) sector – impacting their assets and overall financial security.
Shane Ahern (pictured above), private risk consultant and vice president at Lockton, sheds light on the critical steps individuals can take to navigate this complex risk landscape effectively.
“While these issues have widespread implications for society at large, successful Americans are grappling with the potential impact on their wealth, assets, and overall financial well-being,” Ahern said. “The good news is that there are many proactive steps you can take now to safeguard your property, cherished possessions, and family members.”
For affluent clients who own luxury properties, the escalating geopolitical tensions and global unrest highlight the inadequacies of standard property and casualty policies, which typically exclude “acts of war” coverage.
“You have luxury homes with custom interiors, high-end electronics, and valuable personal belongings,” he explained. “In times of conflict, risk of damage or destruction increases significantly.”
Ahern stresses the importance of a comprehensive review of one’s risk management strategy to ensure adequate coverage limits are in place. He points out that insurers might adjust premiums in response to increased risks, and some may implement stringent security requirements for insuring high-value homes.
“Additionally, insurers may adjust premiums based on heightened risks, potentially leading to increased policy costs that cover the dwelling as well as its contents. Some may also require detailed security protocols for high-value residences. By reaching out to your broker before an event occurs, you can execute a risk mitigation plan during stable periods when contractors and supply chains are not overwhelmed,” Ahern said.
Collectors of art, jewellery, memorabilia, wine, or cars also face additional challenges in safeguarding their investments against the backdrop of international instability. Ahern notes that insurers are likely to reassess how policies for valuable collections are structured, potentially necessitating additional coverage or enhanced security measures.
“Insurers could start to require enhanced protocols such as increased security personnel, updated surveillance systems, and even restrictions on the display or transport of items to high-risk regions,” Ahern said. “Most carriers offer reduced rates for pieces kept in vaults or collections split between multiple residences. It might also be worth exploring secure offsite locations, in case the need arises for emergency evacuation and storage.”
Ahern also says that clients should consider secure offsite storage or enhanced protection for items in regions deemed high-risk. Collaboration with insurance brokers is essential to ensure that policy terms adequately reflect the evolving risk landscape and protect valuable collections from conflict-related damages.
Personal security concerns – how should risk managers navigate?
The increasing global instability inevitably raises concerns about personal security, impacting the availability and terms of life and travel insurance policies. Ahern said that individuals engaging in high-risk activities or traveling to volatile regions may find it increasingly difficult to secure comprehensive coverage.
“Kidnap and ransom insurance, a crucial risk mitigation component for affluent or high-profile individuals, will undoubtedly experience a paradigm shift,” he said. “The increased likelihood of security threats necessitates enhanced security measures, comprehensive assessments, and updated requirements for anyone seeking kidnap and ransom coverage.”
Ahern emphasises the importance of securing optimal coverage programs proactively, as the terms and conditions sought may not be available once a conflict has begun.
Finally, in the realm of luxury travel, Ahern says that it is not just about experiencing opulence but also ensuring safety and security in an unpredictable world.
“In the unfortunate event of political instability or armed conflict at a travel destination, emergency evacuation may be necessary for the personal safety of you and your loved ones,” he said. “Travel insurance with evacuation coverage ensures that everyone is swiftly and safely transported to a secure location.”
Likewise, health crises can occur anywhere, and finding appropriate medical care might be challenging, especially when local medical facilities are at capacity.
“This coverage provides for medical transportation, including air ambulances or medically equipped flights, allowing you or your family members to receive specialized medical care or return home for treatment,” Ahern said.
Disruptions in travel and lost luggage are also frequent during times of turmoil. Ahern says that staff shortages at airports, transportation services, and hotels can occur if workers are required elsewhere.
“These types of policies provide financial compensation for expenses incurred due to unanticipated transit delays or the loss of personal items. When you have tight schedules and high-value belongings, this coverage can provide peace of mind when navigating complex travel situations,” he said.
Such coverage is indispensable for ensuring that travellers can navigate complex situations with confidence, knowing that they are protected against unexpected disruptions.
As the world grapples with unprecedented levels of turmoil, the need for strategic risk management has never been more acute for HNW clients concerned about protecting their assets, families, and lifestyles.
“Lockton is here to reduce the uncertainty associated with local, regional, or global unrest. Our goal is to minimize your anxiety and provide you with a plan of action,” Ahern said. “Together, we will discuss ‘what if’ scenarios that help bring your risk management strategy up to date so you can continue to live your life without undue concern.”
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