Hospitality businesses are navigating a long-term hard insurance market in which premiums are growing each year, insurer risk appetites are shrinking, and claims costs are rising. For hospitality businesses to differentiate themselves, adequate risk management needs to be their focus.

These current market dynamics are just some of the reasons why a risk - led discretionary mutual fund is an attractive option for pubs, clubs and other hospitality venues to manage their risks.

A mutual focuses on the importance of risk management with the incentive of a surplus distribution. Member contributions to the mutual are used to fund the self-insured retention; if at the end of the financial year there is a surplus (the difference between contributions to the self-insured retention and total claims costs) the mutual’s board can decide to distribute this back to the members. It is important to realise this is a long-term approach with the aim of members having greater control and determination on how their risk is managed.

Survey determines risk profile

The management of the self-insured retention is a key consideration of Xenia acceptance criteria for prospective members.

Before being accepted into Xenia Mutual each member must complete a comprehensive risk assessment including a property risk survey to help Xenia establish the quality of each prospect. This is because Xenia only has an appetite for the highest quality risks.

To be welcomed into the mutual, any potential new member must be able to demonstrate a robust approach to risk management. This is to benefit all other members of the mutual helping to ensure that any new member is not going to compromise the self-insured retention with avoidable incidents that erode into any surplus that may be available.

Property risk site surveys are used to benchmark new members against the industry and other members of the mutual. It allows the mutual to identify risks that are prevalent across the membership base, as well as salient risks individual members face, so recommendations can be made to address them.

Reaping rewards

Reducing the likelihood and severity of claims for members of the mutual are some of the main benefits of taking a strict approach to risk management. Xenia is committed to and currently going through the process of surveying every member’s site in the mutual. The risk recommendations that come out of each site will help our members’ take greater control of their risks and mitigate those easily avoidable incidents that can affect a business’s ability to trade.

Additionally, if there is a disaster, by taking a best-practice approach to risk, the business is already prepared to respond. Similarly, if there is a claim, the mutual can take a strategic approach to managing it as the members have greater control over claims management.

The ability to use the size and scale of the mutual as a whole, compared to members negotiating on an individual basis means Xenia members can benefit from the power of the collective bargaining and economies of scale in pricing when negotiating with reinsurers. This can result in longer term stable and sustainable contribution amounts that support member cash flow management. Plus, given the low claim rate, reinsurers have a continued appetite to underwrite the mutual’s risks.

Being part of a mutual can offer members substantial business benefits. It provides a mature understanding of risk and how to manage it as well as helps prepare members to face a disaster, getting them back on their feet as soon as possible.

Xenia has a range of alternative approaches to help hospitality businesses mitigate risks. Contact either your insurance broker or Xenia directly to find out more.

Important note:

This general information does not take into account your objectives, financial situations or needs. Information in this article is subject to change.

Xenia Mutual Ltd ACN 650 383 430