An insurance broker serves as a vital link between an organisation’s risk management and the international insurance market. Rather than being a mere intermediary for contracts, a broker is an expert who helps organisations structure a complex risk landscape, evaluate the insurability of risks, and articulate threats in a format that insurers can understand and price effectively.
In our recent expert discussion on the subject, we were joined by Niko Vornanen, Specialty Practice Lead at Howden Finland, and Jukka Mäkitalo, a GRC Consultant from Granite. Vornanen brings over 14 years of experience in corporate insurance and speciality risks, while Mäkitalo specialises in developing risk management processes for organisations.
Internal Dialogue Reveals the True Nature of Risk
The greatest challenge in risk management is often the fragmentation of information within an organisation. A key role of the insurance broker is to facilitate dialogue between different departments to ensure the financial impact of risks is accurately assessed. Without a shared understanding, transferring risk to the insurance market is difficult, as insurers require precise data on exactly what they are being asked to protect.
It is necessary to stop and consider exactly those things that can go wrong, even if it isn’t always the most pleasant of topics
Niko Vornanen emphasises that the best answers are often found within the company itself, provided the right people sit down together. ”The broker’s job is to ensure that time is taken for this discussion. It is necessary to stop and consider exactly those things that can go wrong, even if it isn’t always the most pleasant of topics,” Vornanen states.
A prime example of this is cyber risk, which often appears completely differently to IT management than it does to business leadership. In one industrial company, the CISO considered the loss of personal data to be the greatest system-related threat. Meanwhile, the plant manager recognised that a cyber disruption would halt all production and logistics, leading to massive financial losses. The broker’s role is to consolidate these perspectives and translate them into financial data, providing a sound basis for insurance decisions.
Risk Management Maturity is a Trump Card in the Insurance Market
Insurance terms and premiums are not determined solely by industry sector; they are directly influenced by an organisation’s level of risk management. If a company wishes to strengthen its negotiating position, it must be able to demonstrate to the insurer that its risks are under control. The broker assists in this ‘risk marketing’—presenting the company as an attractive prospect to insurance providers.
This is particularly crucial for challenging cases. Vornanen cites an example of a production facility that had suffered two major fire losses within a short period. The market situation was difficult, as insurance companies were no longer willing to cover the site. The solution was found by enhancing the facility’s physical protection, such as installing sprinklers and local fire suppression systems, as early as the design phase of a new plant. Subsequently, a willing insurer was found.
”In this case, we essentially built a ‘new’ risk in the eyes of the insurer. We were able to demonstrate that the controls are now in order, and it is no longer the same risk that burned down previously,” Vornanen explains. This demonstrates how proactive risk management and brokerage expertise can open doors to markets that would otherwise remain closed.
Strategic Choice: What to Insure and What to Retain?
It is not always sensible to transfer all risks to an insurance company. To support decision-making, a clear insurance strategy is required—one that reflects the company’s risk appetite and financial resilience. The strategy defines which risks are so significant they threaten business continuity, and which are everyday incidents that are more cost-effective to manage internally.
If a loss occurs on average once every 20 years or less, it is an optimal risk to transfer from an insurance perspective.
Insurance is most effective for low-frequency, high-impact events. Vornanen provides a rough rule of thumb: ”If a loss occurs on average once every 20 years or less, it is an optimal risk to transfer from an insurance perspective. Conversely, if an event is highly probable, transferring it may not make financial sense.”
A broker also helps identify situations where it is not advisable to tender the insurance. If analysis shows that the current contract is exceptionally favourable relative to the claims history, aggressive tendering can backfire and lead to price increases. Strategic market insight is therefore just as vital as technical insurance expertise.
Summary: Insurance Brokerage as a Pillar of Risk Management
An insurance broker is a strategic partner who ensures that investments in risk management yield the best possible protection and negotiating power. Key takeaways for utilising a broker include:
- The broker helps identify and categorise risks and assess their true financial significance to the business.
- Benchmarking and claims history data provided by the broker allow organisations to mirror their risks against similar industry peers.
- Well-maintained risk management and effective ‘risk marketing’ by the broker directly improve insurance terms, enhance availability, and reduce costs.
- An insurance strategy enables the company to make informed decisions on which risks to retain and which to transfer to the market.
- Correctly scaled risk transfer acts as a catalyst for growth, allowing the organisation to expand into new regions or markets with the security of insurance.