Europe’s risk managers must be clear on strategy and transparent to secure best terms: Wegener

Ferma president Dirk Wegener has advised Europe’s risk and insurance management community to focus on transparency and clarity when it comes to their risk profile and make sure that total insured values (TIVs) are regularly updated to reflect inflation, as they prepare for renewals in what remains a tough market.

Wegener told Commercial Risk that European risk and insurance managers should continue to invest in risk mitigation and retention strategies and keep a close eye on developments in the captive sphere.

He noted the recent positive developments in France on captives where the French Treasury has taken steps to make their use more attractive for French firms. Other national risk management associations such as Igrea in Spain and Anra in Italy have made clear that they would like to see their authorities follow suit.

Wegener said that Ferma has been “actively involved” in facilitating dialogue with relevant captive parties in Spain and Italy, as well as France. He added that the federation would be “very open” to working directly with the European Insurance and Occupational Pensions Authority (Eiopa) to promote the development of a more captive-friendly environment across Europe.

Ferma’s president said that Europe’s insurance managers currently face a very complex marketplace and need to be on top of their game to ensure they secure the best possible terms and conditions.

“There are multiple factors currently influencing market dynamics in the commercial insurance sector, ranging from geopolitical issues and the continuing fallout from the pandemic, through to supply chain disruption and the increasing frequency and severity of natural catastrophes. Add to this the continuing economic inflation challenges, which are having a significant impact on total insured values (TIVs), and it is clearly a very complex marketplace,” he said.

“To address that complexity, risk managers must ensure transparency and clarity around their risk profile. It is important to review and update TIVs to reflect the impact of inflation on assets. Given the continued increase in rates, risk managers must be monitoring the entire insurance market to try to secure rates and coverage terms commensurate with their risk strategy,” added the Ferma president, who is also head of corporate insurance at Deutsche Bank.

Wegener advised Europe’s risk and insurance managers to constantly assess their retention strategies, and where possible look to invest more in risk mitigation and loss prevention measures. They should also enhance security practices, particularly around cyber-related risk, to reduce potential exposures, he said.

“The aim is to make the risk profile as insurable as possible, or alternatively bolster risk resilience to increase corporate confidence in retaining more of the risk,” said Wegener.

The experienced insurance manager was asked what advice he has for younger risk managers who have not experienced such a tough market before. Start early and be clear about strategy, he said.

“In terms of advice to those risk managers early in their careers, my advice would be to start the renewals process as early as possible. Conduct detailed assessments of your exposures, reassess your TIVs, provide the highest possible clarity around your risk profile, and review the widest possible range of potential carriers. Also, work with the finance department to establish a clear understanding of your risk retention strategy,” said Wegener.

“I would also encourage them to learn from their market peers and take advantage of opportunities through associations such as Ferma to network with risk practitioners, and to build their relationships with the insurance sector,” he added.

Wegener said that the increased interest shown in captives during the recent tough market should really not come as a surprise. He believes the action taken in France is a really positive development that could be followed elsewhere in Europe.

“Captives provide a highly efficient risk management and financing mechanism for a growing number of companies, and it is not surprising that more countries are looking to broaden their appeal as a domicile for such vehicles,” he said.

“In the case of France, the country has introduced a series of fiscal measures that are beneficial to captives and has not directly amended its insurance regulations. We see this as a positive development and believe that, from a general standpoint, there is a strong argument for adjusting fiscal policies to facilitate the establishment of captives across the EU marketplace,” added Wegener.

The Ferma president pointed out that the federation has long advocated for regulatory changes conducive to captives, and plays an active role in supporting its members in this important area.

“Most recently, for example, we pushed for the fair tax treatment of captives, and Ferma is also actively involved in facilitating dialogue with relevant captive parties in France, Spain and Italy. We would be very open to working directly with Eiopa to promote the development of a more captive-friendly environment across Europe,” said Wegener.