Date agreed for market meeting to kick-start global programmes solution
A number of the leading insurers including Zurich, Chartis, XL and ACE agreed in principle to join a meeting with FERMA hosted by Airmic in London during Commercial Risk Europe’s lively seminar on global programmes in London in April.
John Hurrell, Airmic CEO, offered to host a meeting jointly with FERMA and LIIBA. It was agreed that the meeting would be held after the Airmic conference in Bournemouth in early June. June 30th has been chosen as the meeting date.
Praveen Sharma, head of tax and compliance at Marsh was a co-sponsor of the CRE event along with Clyde & Co and was also keen to see a meeting arranged. He will certainly take part in the discussion and it is thought that other broker representatives will also be involved.
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Peter den Dekker, President of FERMA, has plenty on his plate currently as he leads the effort to make the federation’s conference in Stockholm in early October a big success and other initiatives such as its recent response to the European Commission on proposals for a pan-European collective legal redress system.
But he regards this as a critical matter for the fast-growing army of European risk managers who have cross border exposures and use global programmes to try and provide consistency and gain greater buying power through a collective approach.
Mr Den Dekker told CRE during the annual NARIM congress in Noordwijk, Netherlands last week that he would therefore be present to host the meeting and kick start what will be a lengthy, complex but very necessary discussion.
“This has been talked about for a long time and it is great news that we have finally managed to organise this initial meeting with the leading insurers and brokers. This is the first step towards a market solution that will be very positive for risk managers across Europe and possibly also worldwide,” said Mr Den Dekker.
Mr Den Dekker said that, in an ideal world, risk managers would be able to take their coverage to each relevant national insurance supervisor and tax authority and receive a formal stamp of approval to enable them to sleep well at night.
But this is simply not possible for political and practical reasons not least because revenue hungry governments the world over are able to interpret their own rules as strictly as possible the maximise revenue if they want to do so.
Risk managers must therefore ensure that they are as compliant with the rules as possible and have properly documented evidence to show that they tried as hard as possible to be compliant, as stressed by Mr Sharma during the recent CRE seminar.
Mr Den Dekker said that, in the absence of the ‘nirvana’ of formal regulatory approval of all programmes, the next best solution is for the market to at least agree a common approach to compliance. That would help save time, effort and money and prove that best efforts at compliance had been made, he told CRE last week.
“During the discussion we will be asking what are the best solutions. This is something that we as risk managers have to decide. We have to decide what are the best solutions and it certainly does not help us if the leading insurers comes up with different solutions. We want a common approach from the insurers. It will be hard but we have to take the first steps and start to pick the low hanging fruit,” said the Dutchman.
According to Mr Den Dekker, and as was agreed during the CRE seminar by John Hurrell of Airmic, the first step is to work out what basic information that risk managers need and how it can be shared throughout the market in a non-competitive way to everyone’s benefit.
A market-wide database of the rules and regulations on a national basis that could even be updated by the supervisors themselves was mooted during the seminar by Mr Hurrell.
“This is both simple and difficult at the same time,” explained Mr Den Dekker. All the big insurers are using local experts such a lawyers, accountants and the like to find out what the local rules mean, how they change and what the changes will mean. What we would ideally work out is how that work can be done more efficiently so that there are not armies of lawyers and accountants all doing the same thing on behalf of the insurers and ultimately paid for by the customers, the members of FERMA,” he continued.
Mr Den Dekker conceded that the insurers would have to be careful to ensure that they do not fall foul of national or EC competition authorities through such a collaborative effort.
But the recent EC inquiry into and revision of the rules that govern competition in the insurance sector did not suggest that Brussels would automatically have a problem with such a collaborative effort. This would be because any information sharing initiative would have no impact on pricing other than to reduce frictional costs overall and it would not necessarily lead to the standardisation of service or products that would not be in customers’ interests.
Insurers would still need to compete fiercely on how they market, package and service their programmes for their global customers and of course how quickly and well they pay and manage the claims.
Improved clarity on the rules that govern the way insurance business is carried out in all national territories would hardly represent some kind of price-fixing effort, especially if the process is driven by the customers.
“There should not be a problem with the competition authorities because we seek to find a consistent approach on global compliance. It would take a very aggressive supervisor indeed to challenge that.
“If we can use such an effort to be as compliant as possible and this is written down and documented in a standard approach by the market then it becomes quite simple and the regulators should agree with this,” said Mr Den Dekker.
During the meeting of the European Captive Insurance and Reinsurance Owners’ Association (ECIROA) last October in Luxemburg, Günter Dröse, head of ECIROA and insurance management at Deutsche Bank suggested that risk managers could approach the International Association of Insurance Supervisors (IAIS) to also push for a top down effort to deliver more consistency and clarity.
The IAIS has not, however, responded to this call and clearly has a lot on its plate currently as the supervisors try to work out how to implement Solvency II and deal with national responses outside of the European Union such as in the United States, Switzerland and Bermuda.
Mr Den Dekker said that he does not think that Europe’s risks managers can expect the IAIS to rapidly take the initiative and force national supervisors to change their rules to help risk managers with cross border exposures and global programmes. But he did say that he would expect the IAIS to welcome a market initiative that is designed to ensure compliance.
The benefit of any market-wide agreement for the leading insurers is not so clear. Big insurers such as Zurich, Chartis, Allianz, AXA, ACE and XL have all invested heavily in the market for global programmes in recent times to help compete for the insurance budgets of the big companies that tend to use them.
Any effort driven by the customers to deliver more consistency that the insurers may believe could limit their ability to differentiate what they have to offer may well be resisted.
But the fact that the insurers have agreed to meet in London shows that they are willing to enter a dialogue at least. And, Mr Den Dekker believes the insurers do not have really have an option.
“It is certainly in the best interests of the insurers to be compliant. It also reduces their own risks,” he explained. “We are all in this together. We all run different types of risks if we are not compliant. We may be fined or the insurers could even lose their license which is a bigger risk for them in some respects. If we can base our decisions on a common information platform then this will help,” concluded Mr Den Dekker.