AGCS vows to triple business from emerging markets

With the announcement, Allianz is throwing down the gauntlet to rivals, in particular US insurer AIG that is represented in this market by Chartis. Despite its near-collapse in 2008, when AIG had to be rescued by $182bn of government money, the company remains the global market leader in industrial insurance. Mr Theis will have to rob business from AIG and other competitors or at least hit their growth rates to meet his own ambitious targets. Its rivals include the Zurich Insurance Group, and Talanx in Germany, which apart from preparing for an IPO has just become active in India and Vietnam, as well as in other markets, through HDI-Gerling Industrie. In Latin America, AGCS is up against market leader, Madrid-headquartered Mapfre. Other leading players in this market include AXA Corporate Solutions, XL and ACE. AGCS is forced to go for global growth if it wants to fulfill the high expectations of industrial customers. They like to buy insurance cover from one and the same insurer but increasingly demand local offices, for example in Brazil. Many buyers are convinced that this is the only way they can be assured that they are truly compliant with all local regulations and ensure that the insurer looks after the needs of customers' local companies.hideMr Theis told Commercial Risk Europe that he is convinced that the company's main growth will in future be produced in Latin America, Eastern Europe including Russia, Africa and Asia. “We have just opened an office with a staff of 35 in Moscow; we have applied for a licence as a reinsurer in Brazil and we are expanding our affiliate in South Africa,” Mr Theis said. AGCS plans to set up the hub in Brazil for the whole of South America. “We are under-represented in Asia,” Mr Theis admitted. He plans to change this by means of international programmes for large enterprises including European and American companies. Another focus will be D&O insurance and other special insurance lines for customers in the region. “In Africa, we are growing with the large foreign investments in infrastructure projects,” he added. The same trend towards globalisation that is forcing AGCS to expand its network is also creating demand among customers for more business interruption cover. Multiple international dependencies mean manufacturers need more insurance cover as was demonstrated recently with the floods in Thailand and the floods and tsunami in Japan. “More than 30% of our losses of €250m in Japan and Thailand were due to business interruption,” Mr Theis added. Of these ‘a significant amount’ were related to contingent business interruption, when production is interrupted in Germany or the UK for example because a supplier in Asia cannot provide the goods. “There are car manufacturers which were hardly able to provide certain colours, because a Japanese pigment manufacturer had to close down,” Mr Theis revealed. Some German customers are at odds with insurers about the issue of contingent business interruption and accuse the insurance industry of wanting to obtain too much information about supply chains. Mr Theis rejects this accusation. “We must know the exact risks involved in global supply chains to be able to offer insurance cover,” he said. “Many companies have already gathered this information to be able to react faster when an emergency occurs.” And those who have not yet collected this data should do so as soon as possible, he added. The AGCS chief executive is also worried about the trend in many companies to shift the responsibility for buying insurance from risk managers, who are usually specialists in the finance departments, to the general purchasing departments. There is the trend to think only of the company's budget and to say ‘insurance cover must not cost more than such and such’, he said. However, when buying industrial insurance, it would be better not to think of saving 5–10 percent but to think of the overall balance sheet. “A group which does not insure certain risks, has no option but to create a liability for that in its own balance sheet,” said Mr Theis. AGCS has seen strong growth since it was established in its current form in 2006. Its premium income has grown from €2.8bn in 2006 to €4.9bn in 2011 and staff has increased from 1,660 to 3,200. The company last year produced an operating profit of €549m. A large part of the turnover growth was generated by taking over segments of other Allianz subsidiaries in many countries. “We are still trying to deal with how to integrate the more than 200 systems, which we have taken over,” Mr Theis said. “This can lead to occasional problems in work flow,” he conceded. But Mr Theis does not have any time for a consolidation phase. Driven by the markets, he has to manage both efforts at the same time—strong growth and the consolidation of existing businesses.

AGCS vows to triple business from emerging markets

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