In a difficult market, only dialogue will help find the answers

Commercial Risk Europe spoke to Bruno Mostermans, head of France, Swiss Re Corporate Solutions, about developments in the French commercial insurance market. In February, the French risk management association AMRAE held the 30th edition of its annual conference. The event saw a welcome return to full in-person participation after the pandemic. For Bruno Mostermans, head of France, Swiss Re Corporate Solutions, the event provided a valuable opportunity to continue the dialogue between insurers, brokers and risk managers at a critical time for the French insurance industry. According to Mostermans, there are four key themes at the beginning of 2023 – retention and captives; natural catastrophe exposure and its consequences; cyber; and use of data to mitigate risk. Key risk management concerns in France The hardening market and reduction in capacity have led more companies to increase their risk retention and to look at setting up a captive. “A recent change in French law concerning captives means that more companies will have the opportunity to set up reinsurance captives domiciled in France, and this will provide an additional tool in risk management,” says Mostermans. And while the captives capability and the capacity both exist in the French market, it will still take some time for this market to mature. “By the end of the year we will see a greater impact,” says Mostermans. Like everywhere else in the world, exposure to natural disasters is another hot topic for the sector. According to the Swiss Re Institute, the insurance and reinsurance sector was impacted to the tune of $115bn in 2022 worldwide. In France, due to hail and drought, French companies suffered more than $8bn in losses in 2022, by far the largest amount in recent years. These events underscore the need for a realistic cost of insurance. “Natural catastrophes remain insurable, but if we want to continue to cover them we need an adequate premium,” says Mostermans. Cyber also remains a major issue. Despite technological advancements in cybersecurity, the insurance industry is still struggling to strike the right balance when it comes to delivering capabilities. Allied to this are risk managers’ concerns about the global economic uncertainty. “Inflation is a key concern, as is supply chain disruption. For example, many clients have been impacted by the ability to ship and receive products or source raw materials. We see this in China due to the restrictions imposed as a result of Covid as well as the war in Ukraine,” says Mostermans. There are also insurance industry-specific challenges for clients in France, says Mostermans. “The main concern is to get the coverage placed on the insurance market and the ability of insurers to handle more complex risks of large corporates. “They are also worried about the operational efficiency of insurers and their back-office, especially when it comes to the management of international programmes. This is becoming a more important factor in their choice of insurers,” adds Mostermans. Underwriting discussions focus on anticipating risk So how is Swiss Re Corporate Solutions reacting to those challenges of the clients? “On the underwriting side, we have had close discussions with clients and brokers to understand various risks, their pain points, and to explain our approach to pricing and to help clients structure their insurance programmes.” This dialogue is critical in enhancing the relationship between insurers, brokers and risk managers, says Mostermans. It has also been helped by the return to physical meetings. “These debates are easier to have face to face. You can get more detail and have better-quality discussions with more experts involved,” says Mostermans. Swiss Re Corporate Solutions has also continued to provide innovative insurance solutions beyond traditional coverages such as parametric natural catastrophe coverage, captive arrangements and fronting, international programmes for large corporates, and virtual captives to help clients build their retention strategies for the future. Mostermans also expected to get feedback at the AMRAE conference on recent renewals that took place at the end of last year. “Overall, the discussions were much more technical and focused on risk than in previous years,” says Mostermans. The strong demand for renewals among risk managers meant that discussions to renew certain programmes began much earlier than in the past. For example, some discussions took place as early as February 2022 for renewing programmes in January 2023. While the renewal season has gone relatively smoothly given that we seem to have reached the peak of a hard market, one complexity has emerged and that is the difficulty of alignment within layered insurance programmes. “The general reduction in capacity has meant large corporates have had to turn to an increasing number of insurers to get the coverage they need for specific lines, such as D&O, property, cyber and liability,” says Mostermans. “When there are as many as ten insurers for one exposure, it takes time to get agreement on wording or sanctions clauses, war exclusions, duration agreements.” Currently, most large French companies are able to rely on French capacity rather than look outside. However, should this change and risk managers require to combine French and non-French insurers, there may be a potential issue around consistency. “Sometimes in France, the wordings can be more sophisticated than elsewhere and this can cause problems in terms of standardisation, especially for more complex risks and where layering is involved,” says Mostermans. The consistency of wordings is also a factor in international programmes, something that has been a key focus for Mostermans and Swiss Re Corporate Solutions. “At an international level, in 2015 we took the strategic decision to provide international programmes to large corporates in order to offer a global approach to our customers,” he says. Digitalisation and data impacting everything As part of its strategy focused on international programs, Swiss Re Corporate Solutions has developed the PULSE platform – initially used internally and for its customers, it is now deployed with third-party insurers and brokers. Mostermans considers the development potential of the platform on the French market to be significant, in particular due to the number of French companies with international assets. “PULSE provides the IT infrastructure and operational foundation that businesses need to manage these large programs,” he says. More recently, Swiss Re Corporate Solutions also launched the digital platform Risk Data Services (RDS), intended to offer companies a better visualisation of the risks related to natural events, climate change or others factors that can impact their physical assets, especially the accumulation of risks, or their supply chains anywhere in the world. RDS also assists companies to meet their obligations in terms of sustainability regulations and disclosures such as the EU’s taxonomy, and the Task Force on Climate-related Financial Disclosures (TCFD), etc. This is a brand new approach allowing companies to understand their exposures versus their portfolio of assets through a single digital platform (digital twin) unifying their own data with third-party data and Swiss Re data. “We brought a large delegation to AMRAE to discuss all options that brokers and risk managers can have, but more importantly, we were there to listen to risk managers’ concerns,” says Mostermans. “It is important to learn from others to see how we can evolve and adapt our services accordingly.”

In a difficult market, only dialogue will help find the answers

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