French buyers remain concerned over market conditions and commitment from carriers

French risk managers have told Commercial Risk Europe that the commercial insurance market remains tricky for buyers and voiced concern over the longer-term commitment from carriers.

Speaking as part of our Risk Frontiers Europe survey of leading risk and insurance managers across Europe, the AMRAE members added that new captive rules in France are therefore vital to help companies come through this difficult period.

Sophie Mageur, head of risk and insurance at Tereos, stressed how challenging renewals have been over the last few years and how difficult they remain.

“The renewals of the last three years have been very difficult, with capacity reductions, restrictive policy wordings, premium and deductible increases, and strong requirements in terms of risk quality. It seems that the 2023 market is still complicated, especially in certain sectors such as cyber, contamination, general liability, natural events and supply chain risks,” she said.

Francois Malan, head of internal control and director of risk at Eiffage, echoed many of his peers at AMRAE when he said: “This was a tough renewal. Not necessarily worse than last year but still tough and I don’t expect it to change soon.”

Malan is worried about the recent failure of insurers to recognise risk management investments and loss records. He is also concerned about the churn of talent in the underwriting community.

“If claims have increased then perhaps it is fair, but some insurers just imposed 10% increases with no reference to risk management or loss record,” he said.

On loss of talent, Malan added: “There is a problem of turnover because a lot of people move from one insurer to another, so you can lose a lot of skills and knowledge of your risk and have to explain it all over again with the new person. It is the same with the brokers. This is a real challenge.”

“Also, the new people do not necessarily have the tough market experience and do not know how to deal with such a market. It seems as if the brokers are trying to deal with too many issues with too few people and this affects service levels, which is particularly important when dealing with claims,” added Malan.

Anne-Marie Fournier, risk manager for luxury goods group Kering, said that a big problem in negotiations with insurers has been the apparent loss of local decision-making at underwriters.

“There is a disengagement leading to less professional answers and less margin for action at individual country level when all decisions have to be referred to foreign authorities, and all this process leads to a reduced risk taking mentality. On the other hand, there are more adapted tools that have been recently developed to better assess risks and quantification of consequences,” she said.

But Fournier is optimistic that these tools will help deliver a more positive market this year and beyond. “When these tools are well used, we receive more feedback and the ability to explain internally where we come from. I see a softer market in 2023, and more understanding insurers with more individual empowerment showing the end of the fear to underwrite corporate risks that was visible during the last three years. Back to core business with the hope that we will together monitor the extreme exposures!” she said.

Philippe Cotelle, AMRAE board member and vice president of Ferma, is concerned about the longer-term commitment of the commercial insurance market.

“Property was traditionally less of a tension but this has really changed and become a lot more challenging, basically because of climate change. If you look at the trend, 15-20 years ago corporate insurance was a really important line for the insurers. But now I think it is regarded as more volatile and we have seen a push back from the insurers in recent times as they seek to allocate more capital to less volatile lines. This is a big concern for the corporates,” he explained.

Of course, insurers risk losing significant levels of premiums over time as insurance managers are forced to bear more and more of the lower risk layers. This would mean the market has less premium to meet claims, creating a vicious circle that could potentially lead to a dramatic loss of relevance for the commercial insurance sector, suggested Cotelle.

“The insurers need to be careful. In the short term, moving away from the lower layers may reduce volatility for insurers but they will also have fewer funds to deal with large losses and thus in the longer term become more exposed to volatility higher up the tower. Therefore, we need to work together more effectively,” he said.

France has recently introduced a new regime to help create captives in the country. AMRAE president Oliver Wild said the push for more attractive captive rules in France was needed because the insurance market has become more risk averse. This challenge needs to be tackled using the captives as a tool, he added.

“The captive does not replace insurance but it is a way to catch up with insurance and meet again. I call it a rocket. At the base of the rocket is risk management – identifying and understanding risk. Then the next layer is self-insurance, and then you use insurance. When that is all soaked up then you may go to the state,” explained Wild, who is also risk manager at Veolia.

Maguer said greater use of captives will help buyers get the best out of the difficult insurance market. “The creation of a captive will make it possible to overcome certain market deficiencies, but it will have to be associated with strong internal risk management, with the implementation of appropriate prevention and protection plans,” she said.

AMRAE treasurer Alain Ronot stressed that proving your commitment to risk management to insurers is a key advantage of captives, and should help secure the best possible results in the current market.

“Firms that use a captive are able to better manage their proper risk exposures in the mid and long term. Having a captive enables you to show to the insurance market that you have confidence in your risk so that during the hard market it enables small, middle-size and multinational groups to find insurance solutions when the market is not prepared to complete insurance programmes. The new law in France supporting reinsurance captive set-up is undoubtedly going to increase the creation of captives in France, especially with the hardening insurance and reinsurance market,” he said.