The report examines the forces reshaping the marketplace, detailing the steps insurance brokers need to navigate the changing landscape.

 General Outlook 

The risk of loss is likely to increase. For example, the globalized economy is creating ever more diffuse and vulnerable supply chains. At the same time, growing reliance on technology introduces an array of new and escalating risks in areas from cyber attacks to nanotechnology. 

The evolving risk environment can no longer be managed through solely traditional approaches. Complex challenges require a comprehensive risk facilitation leader to educate, promote and coordinate solutions across a range of stakeholders, including corporations, insurance and reinsurance companies, capital markets and policy makers around the globe.  

In order to mitigate escalating exposures, the report suggests that agents adapt business and operating models to simultaneously support cost-efficient standard market risk management, as well as a knowledge-intensive consultative interacting with clients.  

The report assesses that there are five key questions brokers must address in order to capitalize on the unfolding opportunities in the evolving marketplace. The brokers who address challenges take advantage of opportunities will have highly practical analytics, the ability to anticipate emerging risks, capacity for innovation and inspirational leadership needed to create effective and economic risk management solutions.

1. Do you have clear enough insights into the rapidly shifting risk and pressures facing your clients? 
2. Do you have the expertise to turn advanced analytics into actionable solutions? 
3. Are you doing enough to bring together and make the most of the information, expertise and talent available to you within your organization and among your partners and stakeholders? 
4. Do you have the operational efficiency and flexibility to respond to clients' changing channel and engagement choices in a sufficiently fast and economic way? 
5. Do you have the confidence of your clients, risk transfer partners and other key stakeholders needed to lead effective risk facilitation? 

The results would provide a boost for a sector facing disruptive competitive pressures and shifts in customer expectations. In a new era of risk, brokers have an opportunity to realize the full value of their capabilities and market position by examining their current strategy, and using analytics and data to anticipate emerging risk and provide innovative solutions moving forward.

Next page: Forces Transforming the Risk Landscape

Forces Transforming the Risk Landscape 

According to the report, the disruptive forces that are reshaping the global risk landscape and the impact on businesses, brokers, insurers and reinsurers are vested using social, technological, economic, environmental and political frameworks. 

1. Social 

Social media is changing the face of commerce, even innovating traditional notions of e-commerce. Various social media platforms have allowed customers to engage and interact with businesses in a whole new way. The tracking of these interactions provides valuable new sources of Big Data, but it also allows for the viral speed of negative news and misinformation to lead to a sudden loss of value, which can be crippling for particular client relationships.  

2. Technological 

Technology shapes the way people communicate and conduct business, and for agents and brokers, technology can boost information flows, and also create value-adding analytical capabilities, taking out the cost of distribution services.  

As a result, the industry is seeing new ways of engaging with risk managers, insurers and reinsurers, and also providing the basis for richer discussions and sharper insights. 

But at the same time, technology presents challenges across different market segments. For brokers, whose client base includes large risk management accounts, there is an ever present disparity regarding fees and expenses. Standardized placement options would allow for greater cost controls, but consulting activities and the requisite intellectual capital to provide appropriate solutions to emerging insurers will create alternative costs that must be divided between clients and insurers. But there's also the dark side of technology, specifically cyber security, which was a top concern for the participant survey of risk managers reported in the PwC study.

The interplay between technological possibilities and the risk of loss can be seen in the developments of nanotechnology, according to the report. And while there are endless possibilities for technological development, there are also concerns that exposure to nanoparticles could lead to a variety of losses.  

3. Environmental 

Catastrophe liabilities are continuously heightened by the increasing values of assets and production in Southeast Asia, Latin America and other rapidly growing regions. These regions also happen to be climactically or seismically unstable. To make matters worse there is often a lack of risk information available to ensure pricing adequacy. 

4. Economic 

Improved risk insight, protection and transfer are essential in sustaining global growth, but there is a huge and growing protection gap. Under-insurance creates threats to growth and liability to recover from disaster. 

At the same time, globalization has resulted in the creation of ever more diffuse supply chains, which is another top concern for survey participants. Supply chain risk is starting to become a bigger consideration for the manufacturing strategy than costs within many major corporations, the survey reveals. 

5. Political 

Governments in self-dominated insurance sectors, including China and India, do not always have the desire (or the capability) to absorb their countries' fast rising insured values. 

But even mature markets see governments unable or unwilling to continue to play the role of "insurer of last resort," according to the report, especially if major or multiple loss events have occurred.  

Next page: How can brokers retain their risk managers?

How can brokers retain their risk managers? 

Brokers have the ability to help their clients respond to these emerging and strategically critical risks, but on the flip side, failure to provide insightful advice could call relationships and capabilities into question.  

While there are great opportunities on which brokers could capitalize, they also come with large risks, should the broker fail to deliver. While two-thirds of risk managers who responded to the PwC survey see brokers as "trusted advisors," reliance only on past relationships to carry the industry forward is not an effective strategy. Far more survey participants see their broker as a service provider, rather than a source of solutions, for example.  

Overall, survey participants see service capabilities and the ability to complete the program as the most important capabilities, even more important than price, in choosing a broker.

How can your brokerage firm assist on a more efficient basis? 

According to the PwC survey, "Clients are essentially asking for three things: What risk can you help me to understand better, how can you help me to grow my business, and how can you help me transfer risk through traditional or capital market means at a price I can accept," said Dominic Christian, executive chairman of Aon Benfield International. "There are few brokers who have the scale, licenses and analytical capabilities to answer all three of these questions." 

Many small brokerage firms may lack the scale to develop advance capabilities in house, so it is important for them to find ways to pool resources or access market-wide information services. 

 The survey reveals that risk analysis is the No. 1 way in which a brokerage firm can assist clients on a more efficient basis, with more than half citing it as the biggest concern.