Austrian market less tricky for buyers but no time to relax, says HDI

Despite a fairly benign insurance market, Austrian corporates cannot afford to relax and must prepare for the next crisis, warns Thomas Lackner, country manager at HDI Global.

The Austrian arm of HDI Global has a different perspective on recent events due to the mixed nature of its portfolio, which is split 50-50 between personal and commercial lines.

As Thomas Lackner, board member of the Austrian Carrier HDI Versicherung AG, a subsidiary of HDI Global, explained as part of the Risk Frontiers Europe survey that this gives the insurer a different take on the hardening commercial lines market, and on the risks that lie ahead.

“We are a zebra company,” quipped Mr Lackner, “as since 1990 half of our business has been in personal lines. Austria is also a relatively small insurance market, backed by a strong economy, so we have had different experiences to much of Europe.”

He said that many businesses in Austria fall into the SME or mid-sized sector, which also gives the insurer’s business a different flavour to the rest of the HDI group.

One thing the Austrian market does share with the rest of Europe, however, is a hardening commercial insurance market. And Mr Lackner said there is “still room… for changes to come in terms and conditions” at 2022 renewals.

Smaller businesses have also seen a market tightening and the recent claims experience means terms and conditions will have to change in this segment at next renewal too. “If you have a bad claims experience, we have to adapt terms and conditions – that’s natural,” added Mr Lackner.

But despite these market conditions, most Austrian businesses will not see the same scale of changes experienced in other markets, he reassured buyers. “Disproportionate increases in general are not essential for the local market, but of course, we want to write premium at the right level for the risk,” explained Lackner.

However, pressure remains from the reinsurance markets, particularly when it comes to nat cat risks in the wake of the catastrophic floods this summer that impacted Austria, he added.

“There have been some very intense conversations this summer with the large corporates and their brokers where capacity has become tighter, not least because the pressure from the reinsurance market is still increasing,” he said.

That means pressure on wordings too in Austria, particularly for pandemic cover and cyber. This has been driven by the demands of reinsurers, a story reflected across Europe.

Another challenging area is D&O, where capacity is hard to find globally.

The positive side of all of this is insureds and their brokers have had “more intense” conversations with HDI Global to develop a more technical approach to risk, which is good for insured and insurer alike, said Lackner.

At the sharp end of the conversation, and the issue of claims, Mr Lackner said service has been maintained. Despite the challenges posed by Covid-19 last year, HDI Global has continued to keep its promises on claims and maintained service levels within the process, he believes.

Because of the nature of the Austrian market, most insureds are very happy to operate within the traditional, rather than alternative, insurance market, explained Mr Lackner. “From my point of view, we are simply discussing retention levels and having more deductibles for our main clients – it is a more efficient way for them to go, rather than towards captives or alternative solutions,” he said.

Communication has remained vital throughout the pandemic and continues to be vital. As part of that, risk engineering remains crucial, giving clients risk transparency, explained Lackner. This is a vital service for those smaller and mid-sized clients that do not have their own risk management departments.

“We use our risk experts to have a dialogue with the client management and we are firmly focused on finding a solution for our customer. It helps us to have a balanced partnership,” said Lackner.

This has helped to keep the relationship between insured, broker and insurer fairly intact despite a challenging couple of years, according to Mr Lackner, which all helps build long-term relationships.

Covid-19 has increased home working, raising questions around company culture and the challenges employers face in maintaining a cohesive approach to customers, he continued.

It also raises the spectre of more cyber claims, courtesy of human error or ransomware, for companies and insurers. “There is definitely more demand for cyber products but it is one of the lines under pressure and it has created a mismatch between demand and supply,” said Lackner.

Talking of a mismatch between supply and demand, Austria is sharing the rest of Europe’s pain when it comes to supply chain issues. “Our customers are worried and are questioning what they need to do to guarantee a better supply line in the future – and are wondering if that means taking a more regional approach,” said Lackner.

This summer’s flooding in Austria has focused customer minds on nat cat risk and exposure along their supply chains. This is another factor that might encourage a more regional approach to production, suggested Lackner.

“It impacts all property lines – this summer we had tremendous hailstorms and in the neighbouring Czech Republic they had a massive tornado, which is something we traditionally would not expect to see in the middle of a European summer but which, worryingly, could be a sign of things to come,” he said.