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FM Global Asia VP: ‘Keep the Weather Outside Your Building’

SINGAPORE, Dec 06, 2017, (A. M. Best via COMTEX) --

David M. Johnson, vice president, regional manager, Asia, FM Global, details fundamental safeguards that commercial insureds can use to protect their properties. Johnson spoke with A.M. BestTV at the 14th Singapore International Reinsurance Conference.

View the video version of this interview at: http://www.ambest.com/v.asp?v=dmjohnson1117

Following is an edited transcript of the interview.

Q: Are there lessons to be learned in the industry in Asia-Pacific from the recent catastrophes we’ve seen in the Americas?

A: Several lessons can be learned. Natural catastrophes are the same no matter where they are in the world. Asia is certainly not immune to natural catastrophes. I think there has been over 20 typhoons in Asia alone this year.

Probably the No. 1 lesson that people should remember is: You have to know if you’re exposed. There are a lot of ways to find out. If you’re on a coastal area and you’re used to hurricanes coming in, you know you’re exposed to hurricanes. Earthquake zones are the same. You know you’re in an earthquake zone.

Flood zones are a little bit different. Flood zones around the world are a little bit harder to ascertain. FM Global over the last five years has developed a global flood map that allows anybody, not just clients of FM Global, to ascertain whether they’re in a flood zone or not. Lesson No. 1 is, understand what your hazard is. Are you exposed?

Lesson No. 2 is, once you find that out, now you can do something about it. You don’t just have to accept the fact that a hurricane is coming or a flood is coming and there’s nothing you can do other than call the insurance company. There’s a lot you can do.

We believe that the majority of loss is preventable. It’s not a forgone conclusion that a hurricane has to blow your building over or a flood has to flood. You can fight against that. You can control the risk.

Q: We really can control the risk?

A: With flood and with windstorm in particular, the number one thing you want to do in an event like that is you want to keep the weather outside of your building if you’re a factory or you’re a commercial building.

Once the water gets in, it can get in in a number of ways. Flood waters can rise and if there are no barriers to keep the flood water out, then certainly water can get in. In a windstorm or in a hurricane, probably the No. 1 thing that destroys the building envelope, it’s not necessarily the wind, it’s blowing debris. It’s rocks or it’s trees or it’s stop signs. Once that building envelope is open, then the weather can get in. The water can get in. The wind can get in. That can shut down operations. The No. 1 thing is to keep the integrity of that building. That can be done through engineering. It can be done through risk assessments by walking around your facilities, making sure there’s nothing that can blow into your facilities.

Q: If we saw a cat situation in Asia-Pacific similar to what we’ve seen in North America, what would you be most worried about?

A: I’d be worried if I had a client in the path of that hurricane and had we prepared them well enough. Our job is to assess risks like hurricane and to offer scientifically based solutions to them so that they can reduce that risk and hopefully even avoid it.

If they can’t, if there is a loss, then certainly we get our adjusters in as quickly as possible and we get them back up and running so they can produce. That’s my No. 1 worry.

Here in Asia in particular, sometimes the penetration of insurance, especially with smaller companies and middle-sized companies, may not be as good as it is in other areas. Companies may be under-insured. When a disaster strikes, if it’s a big disaster, they may not have the resources or the insurance coverage to build back up.

Q: What about preparedness?

A: Preparedness, anybody can prepare but you have to have the right resources, whether that’s a partner, an insurance carrier, an outside consultant, somebody at the facility who studies the situation. You can prepare. It does make a big difference.

Q: Talk to us about major commercial and property risks here in Asia. How resilient are the markets here?

A: There are a couple ways to look at that. FM Global publishes an annual resilience index. We look at 12 different factors related to what we do. Two of those risk factors pertain to natural catastrophes.

It’s probably not surprising that our resilience index says that Asia is exposed to natural catastrophes but what some people don’t know is how ready, that’s another aspect to this index, how well-prepared, how well-protected are facilities, governments, countries, to prepare for natural catastrophes. What we found is in Asia it’s moderately good but it could be better, just like anywhere in the world.

There are vulnerabilities. The urbanization that we see in Asia, the clustering of cities and the expansion of cities, it actually increases the risk of natural catastrophes because you have all this accumulation of factories, much greater accumulation than a rural area. There’s always a way to raise the awareness about hurricanes and hurricane season.

Q: As a mutual company how are you different from the others?

A: Yes, we are a mutual company. I’ll explain the uniqueness of the mutual company here in Asia. The easiest way to explain that is we’re owned by our policyholders. Where a normal insurance company would have stockholders, would be a publicly traded company, we’re owned by our policyholders.

When somebody purchases an insurance policy from FM Global they become an owner. With that mutual concept, our number one goal is to service the clients that we currently have. We insure over 13,000 locations in Asia.

We have field engineers who are going out into those facilities, assessing risk, coming up with scientifically based solutions that our clients can implement to make their facilities more resilient. That’s No. 1.

No. 2, we have Asian clients domiciled here in Singapore, Hong Kong, Korea and in other areas. We need to grow that. Our market penetration here in Asia compared to the rest of the world, the FM Global market share is relatively low, which is good. We’ve got a huge upside.

What we’re trying to do is raise the level of awareness about protecting property, not accepting risk for what it is. You can affect risk. That message seems to be resonating quite well.

It turns into what we’re really focusing on here is we’ve got a brand new S$100 million headquarters and what we call a learning center here in Singapore. It’s a six-story building at the science park. We’re an insurance company that operates at the science park. You have to quality as a scientifically based company to end up in the science park. We’re not in the financial district. We’re in the science park because we are a bunch of engineers running an insurance company.

The bottom two floors of that is exciting for us and we think for our clients and anybody that’s involved in the building industry in Asia. The fire protection industry, regulators, government personnel come and get hands-on training and a hands-on look at things that could affect property, things that could damage property.

For example, we have labs there where you can see how a fire pump works or you can see how a sprinkler system that protects buildings works. We’ll even show demonstrations along the lines of hurricanes of how projectiles can be hurled through the air and can break windows. We have an air cannon.

We can show how to protect because there are very simple ways that people can protect the envelope of the building. We’ll be able to demonstrate that. The top four floors will be for our offices.

Q: Where do you see opportunities and challenges under the evolving trends?

A: It’s incumbent on us in the insurance industry to always stay on top of the trends. What we’re doing is we’re listening to our clients because our clients are out there. They’re at the sharp edge of their business. They’re the ones that have the growth ideas. They’re the ones that have the new ideas that they’re trying to implement to grow their companies. We need to support that. You’ve got to listen to your clients.

If the insurance industry has been listening lately, you hear C-suite people talking about cyber threats. What’s causing these cyber threats is all of these opportunities that cyber enhancements have brought. Production is better. Production is more efficient. That’s really what we’ve got to protect.

FM Global has developed a suite of coverages to protect things from cyber threats. It’s not just insurance coverages. We like to engineer what we insure. We’re also developing different engineering programs where we can come in and we can help clients.

For example, we can evaluate the physical security of their buildings to make sure that nobody can intrude on their computer systems. We’re hiring cybersecurity consultants who can be part of a team with a client to assess their cyberrisk and hopefully find whatever vulnerabilities there are and close those vulnerabilities.

If I had a message to the insurance industry or a calling is we’ve got to listen to our clients. I’ve had some great bosses in my time. One in particular told all of us constantly, “There are a thousand problems out there. There’s a thousand problems that our clients have. There’s a thousand things they’re trying to accomplish. Listen to the most important one and take care of it for them.”

View this and other interviews at http://www.ambest.tv

(By Ernesto Calucag, Hong Kong news editor: Ernesto.Calucag@ambest.com)

Ernesto Calucag

Copyright (C) 2017 by A. M. Best Company, Inc.

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