Companies Failing to Consider Rising Commodity, Materials and Labour Costs
SINGAPORE, March 29, 2012 /PRNewswire-Asia/ -- Telecommunications, energy and petrochemical companies are underinsuring their industrial assets between 30 percent and 60 percent in Asia, according to a new report published by Marsh, a global leader in insurance broking and risk management, and John Foord, a leading industrial asset valuation firm in Asia.
According to the report, many companies are not taking into account recent fluctuations in commodity prices, material and labour costs and, consequently, are underinsuring the full replacement value of their assets. In addition, companies may also be relying on outdated asset registers which apply simple inflation indices that often do not accurately reflect true asset values.
Jason Wells, Managing Director and Leader of Specialty Practices for Marsh in Asia, said: "In our experience, the extent of underinsurance in Asia is more widespread than in more developed regions. Last year's devastating floods in Thailand were a stark reminder of how serious the problem has become.
"Firms often only become aware when they make a claim and discover the sum insured does not cover the replacement cost. We urge companies to perform regular asset valuation 'health checks' -- at least once every two to three years -- so that the sums insured can be both accurate and adequate."
Graham Copland, Managing Director of John Foord, said: "We reviewed nearly 100 asset valuations performed in the telecommunication, energy and petrochemical sectors, and compared the true replacement value with the sum insured. The findings speak for themselves, with an average of 30% underinsurance, with several instances of up to 60%."
With a myriad of infrastructure projects already underway and more in the pipeline, the economic viability of many of the businesses involved may be at risk due to inadequate levels of insurance. Many businesses are unaware that their insurance is not adequate to cover the true cost of replacement of assets.
To download the report, please click here.
About Marsh
Marsh, a global leader in insurance broking and risk management, teams with its clients to define, design, and deliver innovative industry-specific solutions that help them protect their future and thrive. It has approximately 25,000 colleagues who collaborate to provide advice and transactional capabilities to clients in over 100 countries. Marsh is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital. With 52,000 employees worldwide and annual revenue exceeding US$10 billion, Marsh & McLennan Companies is also the parent company of Guy Carpenter, a global leader in providing risk and reinsurance intermediary services; Mercer, a global leader in human resource consulting and related services; and Oliver Wyman, a global leader in management consulting. Follow Marsh on Twitter @Marsh_Inc.