Risk Conversation®

Despite sweeping macroeconomic challenges, middle market companies are continuing to report sustained growth, according to recent data from Chubb and the National Center for the Middle Market in their semi-annual survey of 1,000 middle market business leaders. Respondents are continuing to report increased revenue growth with nearly four of five (79%) firms reporting revenue growth compared to a year ago.

When asked about managing key challenges, middle market executives underscored the importance of robust risk management strategies and insurance programs created in close partnership with their agents/brokers to help mitigate potential exposures. Inflation emerged as the leading concern, but those surveyed also said increasing challenges in supply chain risk, competitive risk, and catastrophic risk are top of mind.

Inflation Emerges as the Leading Risk

Middle market business leaders are extremely concerned about the risks and challenges posed by inflation, with 62% citing inflation as a change that is extremely or very challenging to manage – demonstrating how inflation is impacting the cost of risk for their businesses. Additionally, of the thirty nine percent of respondents who said that inflation has negatively impacted their company, 62% have raised their prices or rates in response.

Inflation has also changed how middle market companies view the role of insurance in protecting their businesses. Three out of four firms (75%) recognize that the replacement cost of covered assets has increased, highlighting the importance of accurate valuations and strong business continuity planning to mitigating the impact of a loss.

Supply Chain Challenges Persist

Middle market companies are continuing to experience supply chain snarls, with 50% of middle market firms reporting supply chain risk as extremely or very challenging to manage – up from 40% the same time last year. More so, 55% still report that they have been directly impacted by supply chain disruption in the last six months – up from 47% in the fourth quarter of 2021 – which continues to impact the outlook of middle market firms: Eighty six percent reported a negative impact on current revenue, and 85% reported a negative impact on revenue projections for the remainder of this year. Middle market companies can implement a variety of risk mitigation strategies – including sourcing diverse suppliers or adding additional business interruption insurance – to help stem the impact of supply chain delays, and are encouraged to work closely with their insurance agent/broker and carrier to help identify and mitigate risks, and ensure that accurate valuations and adequate coverages are in place.

The Role of Insurance Agents and Brokers

Following a challenging year, and with increasingly complex risks continuing to emerge, it’s important for middle market companies to maintain focus on risk management activities. According to the survey, 9 in 10 middle market executives indicated they work closely with their insurance agents and brokers to identify best practices for helping mitigate exposures to a range of business concerns, underscoring the importance of choosing the right business partner in both an agency and carrier.

For more information on the NCMM mid-year survey findings, visit https://www.chubb.com/us-en/businesses/campaign/ncmm-research.html.

Ben Rockwell is Division President, Chubb Middle Market.