AMRAE calls for changes to nat cat pools

“A key issue in nat cat regimes is transparency,” Yvon Colleu, AMRAE’s financial director, told journalists in Paris. “We do not have access to the numbers, but we can well imagine that companies today fund a system that mostly benefits private insurance buyers.” In consultation with the European Commission over its green paper on the Insurance of Natural and Man-Made Disasters, AMRAE listed the subsidising of homeowners’ insurance by corporate buyers as a key drawback of mandatory nat cat risk transfer regimes. It also argued that although regimes such as those found today in France and Spain provide assurance of financial protection in cases of catastrophic loss they simultaneously disincentivise risk management because tariffs do not take into account the real risk exposure.hideThe desire for transparency reflects a concern among large insurance buyers that companies properly assessing their nat cat risks and taking the right mitigation measures are prevented from being rewarded with lower insurance rates. Currently all buyers pay into the pools the same percentage of their property premium for nat cat cover. Insurance buyers whose asset is heavily flood exposed should have to pay higher rates to benefit from the coverages guaranteed by pooling systems, AMRAE explained. Those less exposed, due to risk management efforts or otherwise, should be rewarded with lower rates, argues the association. In its response to the EC’s paper, AMRAE said rates charged by nat cat regimes should be calculated using the same risk modelling as commercial reinsurers. Other concerns highlighted by the association include a lack of flexibility that prevents buyers from optimising their other insurance arrangements and a fear that political pressure inflates payouts from certain catastrophic events thereby affecting the price of mandatory insurance premiums. The call for increased transparency was made public as AMRAE prepares for its annual conference in Deauville, France. The event is being held from 5 to 7 February. The association meets for the 22nd time with the French risk management community increasingly able to voice its views and ensure its opinions are taken on board by the insurance industry and authorities alike. “We do not do lobbying for the sake of it,” said Gilbert Canaméras, AMRAE’s president, in an interview with Commercial Risk Europe. “We do it to support the interests of our members and to advance our profession.” The recent updating of tariffs charged by GAREAT, France’s terrorism reinsurance pool, is an example of lobbying success. “Last year we took on the issue of the clarification of GAREAT,” Mr Canaméras said. “It is a very good system of protection against the risk of terrorism, but it had never been reviewed after its creation ten years ago. So it was necessary to refresh.” He added: “We started the discussion with the issue of tariffs and after a long negotiation process we achieved success on having tariff grades reviewed. It showed the professionalism and skills of AMRAE members and that we can negotiate with the French authorities.” AMRAE encourages members to voice concerns over particular issues. These concerns can become key items on the association’s agenda. “Each time a member alerts us about some topic that concerns them, and if we believe that it has a broader interest for the profession, we organise a workshop to discuss it,” Mr Canaméras said. “All our opinions are the result of the work of a group of members, as we want them to reflect the position of the risk management community. For example, we have produced a position paper on a new law project regarding environmental prejudice that is not satisfactory for us as we believe that this subject is already very well endowed in the corpus of present law.” AMRAE is also developing ties with others parties on issues of shared interest. In the case of GAREAT’s tariffs the French broker association, CSCA, added weight to risk management calls for change. Contact has intensified with other potential partners. “Today we are much more in partnership with other corporate associations, like MEDEF and FFSA,” Mr Canaméras said, referring to France’s main employers’ union and its insurance association. “And we are more listened to.” Improved diplomacy has, in recent years, resulted in agreements between AMRAE, CSCA and FFSA over rules of conduct and discussion over areas of common interest. Such efforts are now increasingly producing results, said Mr Canaméras. “The agreements that we have signed with brokers and insurers have created a feeling that we have a shared field of work,” he said. “That has fuelled a spirit of trust that helps us to work together to solve problems that affect all of us.” AMRAE gathers in Deauville with the expectation of repeating, or even improving, on last year’s attendance. By mid-January, the association had 1900 registered participants and 56 sponsors. The increasingly global operating environment for risk managers is the theme of the conference. Experts will discuss topics such as spreading ERM principles throughout international units, the management of claims in international insurance programmes and other aspects that have gained relevance for an increasingly internationalised profession. “We live in a globalised world and there is no choice for companies other than seeking development opportunities abroad,” Mr Canaméras said. “Foreign markets present new risks and the job of the risk manager is to help the board to mitigate them.” He added that the effects of globalisation are not restricted to companies operating on the world stage. “It impacts not only companies that work directly in foreign markets, but also their subcontractors,” Mr Canaméras said. “Major companies will apply to their subcontractors the rules and regulations that they face when dealing with international clients. For that reason, globalisation is impacting at least indirectly on all companies and all sectors of the economy.” AMRAE has strived to help its members meet this challenge by producing a series of research documents that deal with different aspects of globalised businesses. The association has released a total of 13 publications so far. Three more are planned with a focus on the relationship between risk management and information technology. The research and publishing activity reflects the effort made by AMRAE to become, above all, a scientific organisation, said Mr Canaméras. “We are publishing studies and building up a body of knowledge about risk management. The idea is to help us consolidate the role of risk manager in French companies.”

AMRAE calls for changes to nat cat pools

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