Bright spots in a gloomy renewal picture for Swiss buyers

Many risk managers in Switzerland are enduring the same hard market as colleagues across Europe, but the picture is by no means even. Speaking to Commercial Risk Europe as part of the Risk Frontier Europe 2021 survey, several of the risk managers said rates continue to rise, while terms and conditions toughen and deductibles increase. Capacity is another challenge as buyers struggle to find the right amount of cover from the international markets. However, the pattern is not uniform. Evelyn Lämmli, head of corporate risk and insurance management at Rieter Group, was one who has experienced reasonable rate increases compared to general market conditions. She explained that this was the result of good loss ratios, good geographical locations and very well implemented risk management processes, with regular internal risk control audits. Generally, the group of risk managers acknowledged that they had enjoyed 15 years of soft markets and that it was inevitable prices would rise at some point. But most are experiencing multi-digit percentage increases again this year – in some cases four years after rates started to rise. Patrick Thomazeau, senior manager of risk and insurance in Europe and Latin America at Mondelēz International, was among those who reported continuing price increases with little sign of the market levelling off, let alone falling back. He has heard talk of increases up to 60% in some lines. Finding two- or three-year agreements is another challenge this year, and a major change from the softer market when such deals were readily available, he said. “Now everything is going up, except capacity,” said the insurance buyer. “The insurers are very reluctant to give big layers. If we have to place Ä100m or Ä200m of cover, we will need to find many more insurers willing to become involved. And to get those risks placed, insurers are asking many more questions than before.” Luckily for Mr Thomazeau, his company already had a captive in place. The only option now is to increase risk retention and carry more risk in-house, he said. Mondelēz International is using its captive to take on much more of that risk. “We have considered our appetite for risk and decided to put more risk into the captive. We have found sufficient coverage but we have found that overall we have needed to include more insurers in our panel to get the job done,” Mr Thomazeau explained. Steffen Bergholz, managing director at Nacora International Insurance Brokers Group, said it has simply not been possible to find coverage for some global risks. “Even in the reinsurance market, we have seen major challenges, with insurers simply walking away for strategic reasons,” he said. Mr Bergholz said mergers and acquisitions within the insurance market during the past few years mean fewer choices for risk managers, adding to the challenge of finding large capacities or insurers with the required global presence. “The choice among global insurance programme carriers is getting less and less,” he said. With many high-value transport and marine risks to cover, Mr Bergholz said exclusions have become more numerous. The Communicable Disease Exclusion LMA5397 and the Cyber Endorsement LMA5403 have become new standards as insurers try to avoid systemic risk, he explained. “We are far more concerned about where this journey goes – it is not only pricing but also the risk appetite. It is currently a challenge to work with insurers and to get them to understand the core of our business, in order to design specific solutions for emerging risks across various insurance lines,” said Mr Bergholz. Pascal Carrer, head of corporate risk and insurance management at HOERBIGER Holding AG, agreed it can be a challenge to persuade insurers to look at individual organisations, consider their structure and provide sufficient cover at a reasonable rate. He pointed to one insurer that provided Ä100m of cover in 2020 but has cut that back to just Ä25m this year for the same risk. Mr Carrer reported that deductibles and wordings have remained much the same for his firm, but he has had to answer many more questions about the programme and the whole process has become longer. “The work for us is increasing; we need much more of a risk dialogue and it is varied. For example, on liabilities we can find cover, but not if we want specialist support in key areas and cyber,” said Mr Carrer. Another real challenge, the Swiss risk managers agreed, is getting quotes when they want them, early in the renewal process. Mr Carrer explained that HOERBIGER Holding uses a US-based insurer, which simply will not provide quotes until just a few weeks before inception. This, he said, is a real challenge because it does not give him enough time to find an alternative if capacity is withdrawn or provided on unacceptable terms and conditions. “They do not provide their quotes until November, but I have to finalise my plans in September to present to the board in October. It is a new challenge. They keep everything back until very close to the renewals and we don’t have the option of renegotiating,” he added. This trend was echoed by other members of the group, who agreed this is particularly tough in an environment where prices are rising, capacity is shrinking and terms are deteriorating. And even though Ms Lämmli reported a better experience than some others, she said things aren’t entirely plain sailing. For example, Rieter Group has seen wordings change for pandemic risks. Ms Lämmli’s colleague Michael Otto Schier, risk and insurance manager at Rieter Group, said the firm has also had to introduce more insurers onto its panel to secure the full cover needed, and replace a couple of carriers that were less flexible this year. Overall, however, the pair from Rieter Group reported that they are happy with their renewals – a bright spot in any otherwise more gloomy market for the Switzerland-based risk managers.

Bright spots in a gloomy renewal picture for Swiss buyers

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