Solving “Concentration Risk” on Group Protection
In recent years, we have got used to regular announcements about new jobs and aspirations to build new headquarters in Ireland. This has led to large scale commercial property development across Ireland in cities and business parks. Take the example of the IFSC. Now over 30 years old, its continued success is demonstrated by the fact there are in excess of 38,000 employed there. With Phase 3 underway, the IFSC is still expanding. Thankfully it is not just the IFSC that has seen growth - we have seen continued development within Dublin City, its suburbs and also across the rest of the country in a number of regional hubs.
This great news for the country presents opportunities for brokers to consider the life insurance needs for employees of growing or newly established companies. As employee benefits becomes a key way to attract and retain staff, it undoubtedly means the Group Life and Group Income Protection benefits should be top of the agenda for discussion with employers.
For example, this may mean charging a higher premium as concentration risk increases – this is similar to how a unit linked investor may demand higher returns from riskier investment funds. Alternatively, it may mean not being willing to quote at all for new cases if an insurer has exhausted its concentration risk appetite within an area. It is therefore important for brokers to be aware of this issue, investigate innovative solutions and consider how best to ensure value for your clients.
Global solutions to deliver value for your clients
Event limits have worked well in other countries. They mean a lower price for your clients – both related to a lower risk as well as meaning more availability of insurers to quote on a case yielding a more competitive environment. As an event limit does include a restriction on catastrophe events, a key item to understand is what level this is set at. To ensure your clients benefit both from access to insurance cover as well as being protected in most circumstances, the event limit should be set at a significantly high level.
The growing employment market and development presents opportunities for brokers. Group Life and Group Income Protection needs should be at the fore of brokers minds when advising employers as these will be part of a suite of features key to attracting and retaining staff. It is important that brokers are aware of the growing concentration risk that may arise for life insurers and how this can be mitigated. It is innovative solutions to this concentration risk such as event limits which will ensure continuing capacity in the market and value for your clients.