Closing the volatility gap means moving beyond reactive risk transfer.
Property and engineering risks have become significantly harder to predict, model and transfer. Climate volatility, ageing infrastructure and increasingly complex supply chains are changing where losses happen, how quickly they escalate and how easily they can be transferred. At the same time, insurers are looking much more closely at the quality of risk management behind the risk itself. The result is a growing mismatch between the exposures organisations face today and the assumptions they may still be relying on from the past. That mismatch is the volatility gap.
Dangerous Assumption #1: Historical Risk Data Predicts Future Losses
Risk models are only as useful as the assumptions behind them. And increasingly, those assumptions are being tested. Severe convective storms, flash floods and extreme thermal stress are now affecting industrial parks and logistics hubs in places once considered comparatively low risk.
That makes past loss experience a less reliable guide than it used to be. If the environment around an asset changes faster than the data set behind it, organisations can find themselves exposed to risks that have not yet appeared in their own history.
Dangerous Assumption #2: Infrastructure Will Continue to Perform as Expected
Many industrial sites across Central and Eastern Europe are still operating with infrastructure designed decades ago. It may still function, and in many cases function well, but it was not built for today’s level of climate volatility, production dependency or supply chain pressure.
In highly connected production systems, even a localised incident can quickly become something much larger. A weak roof, an overloaded drainage system or a single point of failure may look manageable on paper, until it interrupts the wider operation.
Dangerous Assumption #3: Having Insurance Means Being Protected
Insurance is still a crucial part of the answer, but it is no longer enough simply to have a policy in place. Underwriters are asking tougher questions, looking more closely at the quality of risk management and limiting capacity where exposures are not properly understood or addressed.
For organisations relying on older property wordings, this can create a false sense of security. The cover may still be there, but it may not respond as expected when the loss scenario is more complex, more interconnected or more severe than the policy was originally designed to contemplate.
Dangerous Assumption #4: Business Interruption Is Easy to Recover From
Business interruption is no longer just about repairing damaged buildings or replacing machinery. Extended supply chains, specialist components and regional production dependencies mean the real delay often starts after the physical damage has been dealt with.
If critical parts are unavailable, alternative suppliers are limited or customers are affected for longer than expected, recovery becomes much harder to control. What begins as a property loss can quickly turn into a wider commercial problem.
Dangerous Assumption #5: Property Risk Is an Operational Issue
Property and engineering risk can no longer sit only with facilities or operations teams. Decisions about resilience, continuity and risk financing now have a direct impact on financial performance, competitiveness and long-term growth.
Treating these risks as purely operational can therefore mean missing their wider strategic consequences. The real test is whether the business can keep performing when a critical site comes under pressure.
Closing the Volatility Gap
Closing the volatility gap means moving beyond reactive risk transfer. It starts with understanding how assets actually perform, where the critical dependencies sit, which vulnerabilities could become loss drivers and whether insurance programmes still reflect the risk as it exists today.
The organisations that do this well will not only be better protected. They will also be better prepared for a market that increasingly rewards evidence, resilience and clear risk understanding.
Nathalie Vantieghem
Head of Industrial Risks
T +43 5 04 04 328
David Makhatadze
Group Specialist – Property, PVI, Contingency
T+43 664 888 44 797
