Roads to Resilience

Business challenges

The essence of Zurich’s business, as for any insurer, is risk management, on behalf of both its customers and its shareholders: “ Zurich needs a 360 degree view of risk ” (Chief Risk Officer General Insurance). Hence, risk management and resilience are built into the organisational structure, control systems and business processes. This is reinforced by regulatory bodies acting to protect the interests of consumers and investors, particularly since the financial crisis of 2008/9. For example, the European Union’s Solvency II Directive, which will harmonise EU insurance regulation, aims to further improve the capital adequacy and risk management of insurers to protect consumers against losses and reduce the risk of insolvency. Zurich’s diversified portfolio of businesses within the insurance industry and its global spread is considered as a key aspect of resilience, reducing its dependence on any particular sector and financial exposure to unpredictable events or changes in macro – economic conditions. Equally Zurich’s extensive long-term collaborations or alliances with banks in many countries and affinity groups acting as distributors, give it access to large customer bases without additional fixed costs. Like all insurers, major risks are spread across a number of companies and also with re-insurers. However, being a complex business (‘multiple markets, multiple products, multiple distribution channels and multiple customer segments’) brings with it organisational complexity and also risks. Changes in technology are also introducing new risks, not just for Zurich as a business, but also for their customers, requiring ‘R&D evaluations’ to identify both the risk implications and the business opportunities that new technologies are creating. There is an increasing need to deal with ‘cyber’ risks, especially with respect to customer data (identity theft, cyber-attacks, etc.) but also the implications for reputational damage of breaches of IT security. Technology and its adoption are also affecting the distribution channels, consumer behaviours and the nature of the insurance products themselves. There is also a shift in the industry to a more customer-centric, market orientation. This requires Zurich to gather new types of data and to take a less mechanistic and more holistic approach to understanding risk. This includes using behavioural data as a way to define customer segments, rather than relying on ‘cruder’ risk assessment techniques such as credit scoring. To address the challenges faced in the industry, Zurich has found that structure and processes such as risk identification and development of contingency plans are not enough: “ As a global organisation it is also about how you actually disseminate governance structures, performance management structures, risk management structures that permeate the entire organisation with consistency. So I think another facet of resilience is an industrialised and standardised set of processes, that operate consistently, but you can have all the best processes in the world but if you haven’t got the right capability in terms of people then again you will be blindsided by issues that you’ve not foreseen or perceived ” (CEO UK General Insurance). People and Culture

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Appendix A Case study: Zurich