Overark Insight – the Grenfell tragedy

Once the immediate needs of the poor victims of the tragic fire at Grenfell Tower have been provided, attention is likely to turn to the management of risk and the provision of insurance, both within the insurance market but also more widely as the inevitable quest for responsibility becomes the prime focus and as the “was this avoidable?” question is addressed.

Three key areas area will probably need to be addressed and should be areas of keen interest for the Executive teams and Boards of social housing providers:

Overark Insight – the Grenfell tragedy

Offers risk financing, risk management and insurance solutions exclusively to Social Housing sector

November 9 2016 – Today marks the launch of Overark Limited, a UK-based managing general agent established to provide risk and insurance advisory services exclusively to Housing Associations in the UK.

Overark offers an extensive range of risk financing, risk management and insurance solutions designed specifically for the Social Housing sector. By combining these with improved data management techniques plus access to the multiple financial and non-financial benefits of a captive insurance structure, Housing Associations can achieve greater risk control and enhanced risk governance, as well as guaranteed insurance costs that accurately reflect their risk profile.

Overark’s risk-led approach also enables associations to gain a full understanding of their Total Cost of Risk, from premium spend and incident management and loss control costs, through to the financial impact of any major losses and any resulting reputational damage. By conducting a thorough cost/benefit analysis of overall risk expenditure, organisations can enhance efficiency and productivity to ultimately improve Value for Money at all stages of the process.Peter Berring

The company, is led by Peter Berring. Peter has more than 40 years of insurance and risk experience, having been Director of Risk at multi-national corporation De La Rue and Chair of AIRMIC, the UK association for risk and insurance management professionals. Peter also held a number of senior underwriting roles specialising in alternative risk financing.

The Overark team also includes Malcolm Wilson, former deputy chief executive and commercial director of RCT Homes; Huw Thomas, former chief executive of specialist insurance broker Acumus who has advised Housing Associations in the UK on all aspects of insurance and risk management for more than 20 years; and David Voller, an accomplished claims professional with extensive self-insurance, claims and project management experience.

Berring said: “At Overark, we are providing Housing Associations with a new approach to risk which is much more focused on managing and optimising their Total Cost of Risk, and enhancing overall risk control. By offering solutions specifically geared to the needs of associations, including access to a self-insurance facility, our aim is to enable them to reap and retain the financial benefits of risk management.”

Wilson added: “Housing Associations operate in a very diverse risk environment which requires the full range of risk and insurance techniques to manage effectively, but which must be achieved against the backdrop of reducing rents and other budgetary pressures. At Overark, our aim is to help associations achieve the optimum return on investment from their risk expenditure by introducing smarter risk financing techniques which are designed to deliver Value for Money at all stages.”

Specialist Housing Association risk advisor ‘Overark’ launches

Prevention, as the saying goes, is often better than cure. And while traditional insurance can help organisations to bear the costs of losses – and act as a partial “cure” – it does not necessarily address other, often hidden, costs that stem from an insured event. Nor does insurance necessarily help to mitigate risks and prevent losses occurring in the first place. This is where an understanding of the Total Cost of Risk can help organisations to reduce their loss exposure and associated costs, experts say.

The total cost of risk in social housing

When Malcolm Wilson, Housing Association specialist for Overark, first started exploring the possibility of using a self-insurance vehicle for his Housing Association he was looking for consistency and certainty of premiums.

Having been quoted a significant premium increase at renewal by his insurer, Malcolm wanted to reduce his Housing Association’s exposure to insurance market cycles. He wanted to pay a premium based on his own organisation’s experience and to retain the benefits of his own proactive approach to risk management.

By self-insuring predictable losses and insuring larger, more catastrophic claims in the commercial market, he then had access to a wider array of underwriters than would previously have been the case.

“When you self-insure”, he explains, “you insulate yourself to a significant extent from insurance market shocks, and you manage your own costs. The money that you save – that previously would have been paid out in insurance premium that may then never have been needed to pay a loss – can instead be used for risk mitigation efforts.”

“Using a self-insurance vehicle, such as a protected cell company (PCC), really is a long-term solution”, he continues, “and not just a way to save money on premiums. It also makes loss patterns much more visible, and this gives all employees a much greater incentive to play their part in working to reduce claims activity and as a result risk expenditure.”

Overark founder and managing partner Peter Berring highlights the important stabilising effect that PCCs can bring. “Once you take a self-insured retention, then the premiums you pay for your insurance become far more stable, he explains. “And the claims that fall within that self-insured retention become more predictable, with the more volatile, high-severity claims insured into the wider insurance market.”

Protected cell companies are not a new phenomenon, with their origins stretching back 20 years to the introduction of the first PCC legislation in Guernsey. The domicile is in fact where Overark has chosen to locate its own PCC Caucus Intelligent Risk PCC, set up exclusively for Housing Associations.

“The Guernsey insurance regulator, the Guernsey Financial Services Commission, has established a market-wide reputation for being secure and professional,” notes Peter. “And the island boasts both good legislative processes and deeply experienced personnel.” The latest figures show that at the end of 2015, Guernsey had 65 protected cell companies comprised of 444 cells.

These self-insurance facilities have become a widely recognised and valued component of effective risk financing by many successful organisations.

“Most FTSE 250 companies have a cell or a captive insurance vehicle,” Peter points out. “And there is every reason for Housing Associations to use this approach too. You gain more control over your business and it gives you access to catastrophe reinsurance experts.”

The value of self-insurance

How to harness “Big Data” to manage risk is one of the key challenges facing businesses across all sectors today. And for housing associations, fundamental to this challenge is how to access and link up the masses of data they have – often in multiple systems – to produce one version of the truth and use it to reduce cost.

Clarifying the various data sets and linking that data together can help to illuminate what is leading to claims and other costs. Finding out what falls within a maintenance budget, for example, can help identify trends and possible preventative actions.

Of course, housing associations have a potential wealth of data at their disposal, but too often fail to capitalise on it or even to access it. These unique data sets range from information they hold on their properties, to hazard spotting or pre-notification information about damage or wear and tear that could lead to future claims, to accident book entries, to the cost of responsive repairs and small damage, to claims information that may reside primarily with their insurers and much, much more. By extracting and linking these various information chains effectively, this data can build a valuable picture of the association’s risks and its total cost of risk.

Also, if all of this information is then tied to the Unit Recognition Number (or London Property Gazetteer number for properties in London), you can start to identify trends and also track the frequency of events which result in costs, whether they are insured or uninsured.

For example, multiple leaks across a block of housing might be due to a problem with the same type of heating system that has been used across that block. This trend could remain hidden if the data for properties, responsive repairs and damage is not linked. And, of course, if housing associations become aware of potential problems before they become too widespread, then efficiency and productivity can be improved leading to significant cost savings.

An awareness of the linkage between pre-notification of damage or wear and tear and accident book entries andclaims can also serve to improve health and safety and reduce incidents and costs. For example, if a housing association can better track the occasions on which they are notified of faulty paving slabs, they can act quickly to implement repairs and stop future claims. And taking before and after photographs of those paving slabs – and linking that with the pre-notification data – can help housing associations be alert to those spurious slip-and-trip claims that might be made after a repair has been carried out.

Having the full picture of where multiple claims are made for similar types of events can truly help housing associations to get a much better handle on their risks, to manage those risks more, to reduce repair and claims activity, and ultimately to drive down their overall cost of risk.

Armed with the right tools and the right information, housing associations can implement a centralised approach to effective data management, bringing to the fore all pertinent information, thus gaining knowledge to manage risk and truly unlock the power of big data.