Allianz Commercial: Global and local approach offers greater value

The GVNW membership and wider German insurance market is clearly keen to hear what the creation of Allianz Commercial means for them and what benefits the new partnership will bring. Adrian Ladbury interviewed Hans-Jörg Mauthe, commercial managing director in Germany for Allianz Commercial, to discover the answers.

Adrian Ladbury (AL): What exactly does the newly merged Allianz Commercial book comprise of currently by size, lines of business and market segments?

Hans-Jörg Mauthe (HM): First of all, it is important to be clear – Allianz Commercial is not a merger, but a global partnership model under a new trading name. But you are right, Allianz Commercial brings together several market segments.

We are offering traditional P&C solutions as well as alternative risk transfer and multinational programmes for large corporate and specialty customers. At the same time, we are serving mid-sized – or mid-corporate – businesses, which have previously been serviced through our national Allianz companies worldwide. All these segments will now be served with one go-to market approach and represented by one commercial managing director per market. Combined, Allianz Commercial generated a premium volume of about €19bn in 2022 globally.

AL: How has this business performed in recent times? The German market was suffering serious losses in the period 2015 to 2018. Has this now improved for Allianz Commercial and how has this improvement been achieved?

HM: Well, from an Allianz Global Corporate and Specialty (AGCS) point of view, we have delivered our turnaround with a successful portfolio remediation and a clear strategy – called New AGCS – in the past two to three years. At the same time, the MidCorp businesses of Allianz have improved their business model, profitability and technical capabilities. So, both segments were in good shape globally, as well as in Germany as a core market for Allianz, and therefore ready to join forces in order to open the next chapter and build a market leader in the commercial insurance segment.

AL: What is the benefit for brokers and customers from the creation of Allianz Commercial? How will you ensure that both mid-sized and larger customers benefit from the creation of the new operation?

HM: First of all, Allianz Commercial will represent the full value of Allianz’s scale and set of skills for the benefit of our customers and brokers. They will not only experience a consistent product and underwriting approach that is globally coordinated, but also an approach that is locally delivered with one face to the market.

Furthermore, whether we are talking about large or mid-sized customers, by combining strengths, we will develop best-in-class capabilities and a compelling value proposition. For example, in multinational services for large and MidCorp customers.

Other examples are a consistent and clear risk appetite, as well as new and aligned products. We also now have the capability to play the full commercial market in a seamless approach. This is a clear benefit.

Also, we shouldn’t forget about advantages on an operational level, like the access to a bigger pool of specialist risk consultants or complementary products and solutions, provided by one or both segments.

AL: How will you use the creation of the new structure to deliver a more cost-effective, efficient and transparent service for customers of all sizes? Do you have any specific plans to enhance contract certainty and reduce conflicts over claims?

HM: Allianz Commercial primarily focuses on targeting growth and consistency for customers and brokers, but it will also help unlock productivity through better processes and a consolidated, harmonised IT architecture, the so-called Allianz Business Master Platform. All these initiatives will help us to become more productive and improve our expense ratio, which again benefits our customers.

We ask our customers for feedback in an annual satisfaction survey and continuously measure the development of our customer experience and loyalty.

We have seen very strong results this year, with another increase year-on-year compared to 2022, after a dip in our restructuring years, 2019 and 2020. We are considered as a market leader in Germany and Switzerland.

An important driver is our claims handling approach, which is a key element of our value proposition. Overall, our customers are happy with our performance in claims and underwriting, although this doesn’t mean that we cannot improve further in all areas.

AL: What are your main target areas for growth in Germany? Where do you see the best opportunities and which are the most challenging lines?

HM: We see opportunities for growth in all lines of business, but especially in liability, property, energy and construction, and financial lines. Two areas we focus on are multinational and project business like big construction projects, with a view to green energy – LNG, offshore wind parks and so forth. I would like to highlight that we not only keep the traditional risk transfer in mind, but also the evolving alternative risk transfer business.

With a view to challenges, we have to talk about cyber, for obvious reasons. However, we still see a strong demand and market with growth potential. Other than that, we also keep an eye on property and marine.

AL: Catastrophe losses in Germany continue to rise, as shown by the latest figures from the GDV. In fact, it predicts that the cost of residential natural hazard insurance will double over the next ten years unless risk prevention and climate adaption measures are taken. Do you agree with this analysis and what exactly needs to be done at both personal and commercial line levels? Does this need a public-private structure/cat pool? And how would this work?

HM: We see weather-related natural hazard events in a clear upward trend. This means that the economic losses, but also the insured losses, are rising continuously. This applies globally and also here in Germany.

In Germany, it is mainly heavy rain events and hail, but also the increasing drought, which, for example, causes low water levels in rivers, impacting shipping transport and potentially causing supply chain disruptions.

Risk prevention is crucial to counter this increasing trend. This is equally true in retail and commercial insurance business. It is about continuously upgrading physical site protection, establishing monitoring and early warning mechanisms, and bringing business continuity management and crisis planning to the next level, including regular testing.

As an insurer, we are ready to support our customers to adapt and better mitigate increasing climate risk. In Germany, we are successfully rolling out an AI-enabled extreme weather app for residential customers that provides local hazard alerts, and we are also looking into similar solutions for our commercial customers.

In addition, we need more stringency when it comes to planning, for example in development areas. Even in the case of reconstruction in the Ahr Valley, which was devastated by a flood in 2021, it is evident that here, areas marked as alluvial are not being kept completely free.

Public-private solutions may be needed as an additional element. A pool solution can help to manage this increasing risk trend collectively better in the portfolio. Governmental-backed solutions, which also involve the private insurance sector, are being discussed in Germany and elsewhere, and as Allianz we are participating in these discussions. However, we don’t believe that mandatory insurance schemes are an optimal solution.

Alternatives are the bundling of elemental covers in combination with prevention in the building code and through on-site flood protection measures, eg climate-adapted construction and flood protection for major rivers.

AL: What is your strategy for cyber? How can customers, brokers and insurers work more effectively together to ensure that adequate and affordable cover is made available? Should insurers be worried about the fact that a major German corporation such as BASF has joined the MIRIS cyber mutual? Does the state/EU have a role to play for systemic cyber risk as suggested by Ferma and Eiopa?

HM: The environment for cyber isn’t easy, but like I said before, we see a strong demand for cyber insurance with an overall market growth potential of $20bn to $30bn in the next decade. What the Allianz group is aiming to achieve is controlled profitable growth of cyber insurance for businesses of all sizes, creating a more diversified portfolio.

The plan is to turn the portfolio from a predominantly large corporate focus to a more balanced one, with a significant share of SME/mid-corporate cyber risks. Our partnership with the cyber insurtech Coalition in the United States and the United Kingdom underlines this approach. The Commercial model will help us to create a more diversified cyber portfolio in Germany as well.

What is important for us is that we want to be a sustainable and reliable partner for our clients in the long term. Hence, we pursue a prudent, conservative underwriting approach and require a solid level of IT security and cyber control from our customers.

Since you talked about MIRIS – the cyber market can certainly benefit from innovative approaches, be it mutuals or transfer to capital markets through insurance-linked-securities.

Our corporate customers may understand from first-hand experience the challenges involved when providing coverage for a fast-evolving, ever-changing and potentially systemic risks, such as cyber.

The insurance market cannot act alone to solve all the challenges regarding cyber risk and cyber insurance. Neither can it, in isolation, find ways to increase the insurance penetration rate among enterprises of all sizes.

Each company needs to make cyber resilience a priority. A comprehensive approach to IT security is vital for defending against attacks and, if an incident cannot be avoided, resuming business continuity quickly. In turn, the greater the cyber resilience of an enterprise, the greater the insurance coverage it will be able to secure.

Indeed, a public-private partnership may be necessary if systemic cyber risks are to be managed and transferred in the long term. We believe that a more sustainable cyber insurance market will only be made possible through effective collaboration between risk and insurance managers, insurance intermediaries, insurers and reinsurers, and public authorities.

AL: What is your strategy for ESG? How do you take the ESG credentials of German customers into account when underwriting? What must customer do to ensure that their ESG investments and efforts are recognised by their insurer?

HM: As Allianz Commercial in Germany and Switzerland, we are committed to the Allianz goal: net zero by 2030 in our own operations and 2050 in underwriting and investments.

From my perspective, Allianz Commercial will be an important contributor to achieve these targets at a group level. To do so, we have established a dedicated ESG and sustainability organisation consisting of three teams.

One team drives innovation and a wider offering of sustainable product and solutions. A second team focuses on the decarbonisation of portfolios – for example we have published, and are implementing, underwriting guidelines for coal, oil and gas businesses. Last but not least, a third team is responsible for fulfilling our ambitious net-zero target in our own operations; eg by moving to 100% renewable electricity. By the way, all of that is irrespective of our recent NZIA withdrawal.

When we take a look at our customers, it is of course a priority for us to partner with them on the pathway to net zero. However, I don’t see a ‘one-size-fits-all’ approach here, where good ESG performance will directly translate into more favourable pricing or more capacity. ESG is an increasingly important additional element in the overall underwriting and risk assessment process, together with other factors like market dynamics, regulation or the respective industry sector.