Changing times, changing behaviours

The impact of insurers’ behaviour during the past couple of years may well impact the tripartite relationship between insurer, broker and insured, but it is too early to draw any firm conclusions, say leading GVNW members. Speaking as part of Commercial Risk Europe’s Risk Frontiers Europe 2021 survey, they said the next set of renewals will test that relationship and it is likely that the full impact of any damage will be felt in 2022. “We hear insurers say they are working hard on relationships and that this year will be different to last year. But for me the jury is still out,” said one of the group. And as Christian Boehm, insurance risk manager at technology group Freudenberg, said: “From what we hear from our members more and more, insurers are tending to send their decisions upwards to special committees and sometimes finally to their headquarters around the world. As a result, the customers have less direct contact with the final decision-makers.” He said this is impacting relationships, simply because it is causing delays to decisions. He added that many decisions need to be discussed and terms negotiated face to face, but the pandemic has enabled insurers to step back and negotiate remotely. Covid-19 is also impacting claim settlements, the group agreed. As Alexandre Mahnke, president of German risk association GVNW and insurance risk managers at Siemens, spelt out: “If you can’t travel as extensively as you were able to before, and obviously we are representing companies of a certain size and reach, it can be quite difficult to settle the claim. “Having said that, when it comes to maybe implying that bad profits on the insurers’ side leads to hesitancy to settle claims that are valid, then I am a little careful. This can be the case. But those are insurers you would not choose to deal with in the beginning. I always find there is a degree of responsibility and you get what you deserve,” he added. “So I would be a little bit careful to suggest that a hard market leads to more difficulties with claims. When it comes to the business interruption (BI) claims that we have seen, then clearly we have a case of insurers that did not respond to the policy that they sold in the way that the client expected them,” Mr Mahnke continued. Even here, said Mr Boehm, it was not an across-the-board problem. Some insurers did pay out on their BI policies with event organisers, hotels and restaurant owners, he said. Co-insurance Turning to the subject of co-insurance and whether side letters are playing a bigger role in terms of wordings, Stefan Rosenowski, managing director at GVNW, said: “From the mid-market and smaller companies, the co-insurance problem is not quite such an issue but nevertheless the aim is to get a single wording for all the policy.” Jörg Henne, managing director at GVNW, stressed that co-insurance is well established in the German market. “But we have seen an increase in the use of co-insurance as capacity shrank, which has forced insureds to bring more insurers on board and have a wider panel of co-shares,” he said. He stressed that most risk managers are experienced enough to understand the importance of having one set of wordings that everyone follows, to avoid complications at the claims stage. And that should extend to the claims process being followed in a uniform manner, he added. In general it has been a case of so far, so good on claims, as GVNW is not hearing complaints from its members, said Mr Henne. “No-one really talks about claims until it goes horribly wrong, or something makes it into the press. But that is rare. There can be issues in complicated claims about the figures, particularly in cases where you have to do more analysis to identify the value of a claim. There is never a high interest, in our market at least, to settle in court. It takes money and it takes a lot of time and you are never 100% sure of the outcome,” he said. Alternative risk transfer As the hard market and pandemic continue to influence the risk and insurance landscape, increasing numbers of companies are investigating alternatives to traditional insurance programmes. This is also occurring among German firms. “After last year’s renewal there was increasing interest in, and appetite for, looking at other solutions, including captives, but they are only one of the alternatives. GVNW has done another survey about the use of captives and we can see through the numbers that there has been not only a number of feasibility studies, but I know of a number of captives that will be formed, or have been formed already,” said Mr Mahnke. Germany is not a traditional captive market for a number of reasons, including the fact that there are no tax advantages in setting up a captive in the country, he continued. There are also very few captive advisers or support specialists working in Germany, which means most people would probably have to run the captive by themselves, adding another layer of complexity to the decision about whether or not to launch one, added Mr Mahnke. “Having said that, we have had a number of captives operating successfully in Germany and there will be more to come,” he continued. Mr Boehm, a member of the GVNW captive group, agreed: “There are obviously a number of companies looking into alternatives and a captive is the most favoured one. Germany is not a very easy place to run a captive and there are other places in Europe that are more captive-friendly, such as Luxembourg, which is more business-friendly on the captive front. And if you look at France, we observe the trend of the government wanting to attract French companies to form captives in France. By contrast, there is no such development in Germany.”

Changing times, changing behaviours

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