Market conditions have nothing to do with it – insurers and their clients have a shared responsibility to effectively manage liability risk.

Risk Management Institution of Australasia President Brian Roylett says underwriters want to write cover in soft market conditions to get premium income. “And of course, the focus on liability risk management tends to diminish,” he told insuranceNEWS.com.au.

“It’s not completely forgotten, but it certainly doesn’t become a driving factor in pricing, as it does in hard market cycles.”

Mr Roylett says insureds are morally responsible for having effective liability risk management in place. But underwriters must accept that the insured won’t go beyond a “compliance mentality” unless stringent measures are demanded of them.

He says there are some good corporate models for liability risk management in Australia, among them Wesfarmers, Woodside and Fosters.

“The boards of those organisations are pretty much attuned to the importance of having liability risk management controls in place, irrespective of the cycle of the market,” Mr Roylett said.

He says the failure by many organisations to adopt effective risk management cultures and behaviours has added fuel to the global financial crisis.

“The inevitable question is ‘has risk management failed us?’ I turn that around and say we’ve failed risk management,” Mr Roylett said. “It’s the application, it’s the people who have failed.”