‘Steady as she goes’ for Mapfre as group plans continued expansion outside Spain

Mapfre global risks has ‘enjoyed’ as challenging a year as any other commercial and corporate insurance group in 2017, as the stubbornly soft underwriting conditions were exacerbated in the final quarter by a string of huge catastrophes in the Caribbean and southern United States. But Chris Smith, chief regions and markets officer – international at Mapfre Global Risks, says the group will maintain its push towards becoming a lead player in the highly complex, high value commercial and corporate insurance sector despite the tough market conditions. The group will use the resources, knowledge and experience gained by being the leading insurer in Spain and Latin America to expand its footprint in the London international insurance market and in retail markets across Europe when the opportunities arise. But do not expect fireworks and grand statements from Mapfre Global Risks. The Spanish group did not arrive at its current position of strength in the Americas and at home in Spain by making bold and rash moves. This has been a story of careful expansion led by a long-term plan. Mapfre Global Risks will follow the same measured approach under Mr Smith and his team. Expert people are being hired and the business is expanding its portfolio, notably into liability lines to add to its core property market strengths, but above all the key goal is to win the confidence of customers and brokers and convince them that Mapfre offers a valued and long-term lead partnership option in this highly competitive environment. One reason Mr Smith will not commit to any bullish expansion plans in 2018 is that, despite the scale of the catastrophic losses towards the end of this year, few expect a dramatic hardening at the 1 January renewals. The signs are that the market will improve from an insurer’s perspective during the first half of 2018, but this will not be the knee-jerk hardening of the past that could support an aggressive push. Mr Smith says: “2017 was a tough year for many in the market, including Mapfre Global Risks, as even before the cat losses in the Caribbean and the Mexico earthquakes, insurers were challenged by reduced rates after years of a soft market. “This said, we were able to pursue our strategic objectives and continue to grow our business, in London as a platform for international growth and across our European office network, in France, Germany, Italy and Turkey where we operate out of Mapfre’s offices. We hired top new talent in all our offices, which has enabled us to underwrite new product lines, such as energy, construction and aviation, and move towards a more influential lead position in our markets. Aligned to this, we have had a big focus on continuing to improve our delivery of service to our customers,” he adds. Mr Smith explains that the state of the market does not determine the fundamental strategy but rather the pace that drives it. “In Mapfre we always have a clear view of the direction in which we are heading, and a clear view of what this will look like for our customers. The competitiveness (or softness) of the market just impacts on the pace at which we execute that strategy, as we only underwrite business where we can attain acceptable terms and conditions,” he says. It obviously helps that Mr Smith’s business is not backed by return-hungry private equity capital with hardcore targets. “We are fortunate in that we have no pressure to grow from the group if the rates aren’t right, due to the strength of Mapfre’s balance sheet and our approach to take a longer-term view in all that we do. We are building a unique business at Mapfre Global Risks, that serves customers in the long term, so we will grow at the pace that the market enables us to,” he explains. The string of catastrophic losses in the second half of the year were obviously not welcome from a financial perspective. But Mr Smith says that Mapfre was ready for the shock and, paradoxically, such periods can be very positive for the sector as it truly proves its worth in times of need. “At Mapfre Global Risks, we constantly model and monitor our cat exposures, so we were not surprised by events, and our reinsurance protections worked as expected. Clearly the losses were significant, but it is at times like these that our customers need us most and it’s the reason we are here. It is our focus to respond to our customers that have been hit hard by these events, quickly and without fuss. As an industry, we often get a bad rap, so we need to get better at showing to the wider public the key role that insurers play in improving people’s lives and getting businesses (and countries) up and running again. So far, the market seems to have responded well, let’s hope this continues,” he says. As noted above, Mr Smith is not looking to the catastrophes to provide the platform for a dramatic shift in terms and conditions. This is not the way that Mapfre likes to operate. Clearly the sector needs a ‘correction’ for the good of all but Mr Smith is not looking for “blanket increases”, he says. “We believe that it is necessary for everyone that the market hardens, because as businesses insurers need to make a profit and a good ROI, so that our balance sheets are strong to pay future claims. Customers need this. This said, Mapfre Global Risks has a different view to many insurers in that we do not believe in blanket increases. Instead, we take an objective view of all our customers individually and price each risk accordingly. Our strategy is to retain our existing customers where we feel that the exposures we are picking up are aligned to the premium that they are willing to pay. It is the same for new business – whether in a soft or hard market, we will endeavour to get the right price for each risk,” explains Mr Smith. The big picture strategy for 2018 is a continuation of the existing strategy. No big changes are planned for the new year, says Mr Smith. “Our strategy remains consistent from year to year. However, we are constantly challenging ourselves to better meet the changing needs of our customers. This includes risks such as UK retail. We then aim to deliver against customer needs in a timescale that the market allows us to. This means introducing different lines of business in different geographies, with an improved service offering to the end customer. We have yet to see what 2018 brings, but in an ideal world we will be looking to add value and grow our major property account and our energy, construction and aviation books among others,” he explains. There are obvious challenges and opportunities for insurers in complex areas such as supply chain and cyber that require careful management. This requires time and effort, says Mr Smith. “In global business, there are no longer great discrepancies within countries and territories. A German client is likely to have exposures in cat countries, a supply chain challenge and a difficult cyber exposure the same as a US company or a Spanish company has. The real challenge for insurers remains in trying to price new and emerging risk with little historic exposure on which to build a pricing model. Non-tangible assets, cyber and supply chain risks – these will all require careful management,” he says. One area that any insurer needs to focus upon if it is keen to build its position in the European and international corporate insurance space, is global programmes. Mr Smith points out that Mapfre Global Risks can draw on the experience of the group in this important area. “Mapfre Global Risks has a great deal of experience in building global programmes for Spanish and Latin American customers who have invested in Latin America and other parts of the world. In the international business, we are learning from that expertise and actively adapting it to fit in other non-Spanish markets. Of course, it is critical that we constantly use technology to ensure these programmes become more efficient and continue to respond to our customers. We are doing that. Also, we need to constantly be aware of the different, changing legal environments so that we are operating in a fully compliant manner,” he says. Another critical way in which to differentiate oneself in such a competitive market is service. Risk managers expect fast and accurate delivery of their product and insurers must be able to deliver. Mr Smith was asked how Mapfre Global Risks plans to deliver an improved service for its customers in 2018. What will persuade customers and brokers to place their business with Mapfre Global Risks rather than the competition? “At Mapfre Global Risks, we are totally aware that we will be judged by our customers and brokers in a number of areas, but the most important is delivery of our proposition. This means understanding each customer risks and needs and aligning our solutions and service ‘engine’ behind them,” he says. “Experience shows that, initially, customers come to us because of our experience, knowledge, flexibility and responsiveness. But we only retain them if we deliver. This includes ensuring that we make fast underwriting decisions, are issuing documentation, paying claims and responding to their needs in the most efficient, cost-effective way. I am pleased to say that at Mapfre Global Risks, because we truly partner with our customers and focus on their needs, we have an excellent track record of retention,” adds Mr Smith. Another differentiating factor that is intrinsically linked to the delivery of superior service is technology. Those carriers that truly harness the power of big data to deliver concrete efficiencies and savings, more accurate and transparent analysis (and pricing) of individual risks, and innovative new product designs will surely emerge the winners. So, how is Mapfre Global Risks (and Mapfre as a group) harnessing the potential of digitalisation and big data to improve service levels and the overall offering for customers in the modern, global economy? “New algorithms, ever greater computational capacity and big data are unleashing a technological revolution in our business, and insurance is going to face more dramatic changes in the next ten years than it has seen in the past century,” says Mr Smith. “We are witnessing changes in the essence of the insurance model, with the emergence of new risks (cyber risk), with the mutation of others (to cover the manufacturer’s risk rather than the driver’s [in motor]) and the attenuation of some (much fewer car accidents). The backbone of all the changes we are seeing focuses on the empowerment of the connected client. In this regard, we are working on new insurance solutions for the car, on smart predictive and underwriting models, and on digital health, among other things,” he adds. Another exciting new area is of course blockchain, a technology that offers a potential revolution in how to construct and process risk transfer. Mr Smith also sees exciting potential here for the sector as a whole. “If blockchain means we can find a more efficient way of running this business then, of all industries, this could really make a difference. This sector is so ripe for being more efficient. There is so much duplication of effort. If we can use such technology to give back ten points to our clients then I would be its biggest supporter,” he says. But there is a certain element of complacency in the commercial and corporate sector, which seems to think that it is somehow immune to all of this change, for now at least. Making that assumption could be a dangerous strategy, says Mr Smith. “There is a feeling in this industry that this will immediately hit the personal lines and SME sectors first and global risks last. I think there is a danger that people could get too comfortable in this regard. Just because it is bespoke does not mean that it is not applicable, far from it,” concludes Mr Smith.

‘Steady as she goes’ for Mapfre as group plans continued expansion outside Spain

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