Insurers failing to keep pace with customers risk landscape warns Munich Re

It is a view shared by many insurance buyers and has been clearly expressed so far during the series of roundtables with leading European risk managers that CRE has held in Portugal, Spain and Germany as part of its annual Risk Frontiers survey of European risk managers (see coming June issue for Spanish and German roundtables). Ms Trilovszky has called on insurers, brokers and insurance buyers to work together with increased transparency to help address the growing imbalance. A key factor for the lack of cover is the nature of today’s losses. About 30 years ago the values of big industrial enterprises tended to be based on purely tangible assets. Nowadays less tangible values, such as damage to reputation and data losses, are at risk. “The insurance industry has not kept pace with these developments. Thus the insurers compete more in existing market segments than fighting for customers with new products,” said Ms Trilovszky.hideMs Trilovszky has not been shy in her criticism of the primary market. This is remarkable because Munich Re used to be extremely cautious in making remarks that could be deemed critical of its primary customers. But the reinsurer, along with Swiss Re, has over last few years waded heavily into the primary market. It has bought a number of companies, such as Hartford Steam Boiler, set up fresh industrial insurance ventures, including marine underwriter Koeln Assekuranz, and reorganised other parts of its industrial primary business, including rebranding Munich American Risk Partners as simply Munich Re. All of these companies are not run by Munich Re's primary division Ergo in Düsseldorf, but by the reinsurance people headed by board member Torsten Jeworrek (see Hot Seat interview with August Proebstl, head of Munich Re’s Corproate Insurance Partner division in May issue of CRE). The same is true for the Watkins Syndicate. Their results are not counted under primary insurance, but under reinsurance. Munich Re's expansion into this market reflects the fact that its core reinsurance business is facing a saturated market and is thus looking for ways to expand, according to some market commentators. In her criticism of insurers, Ms Trilovszky struck a chord with prominent German risk managers, including E.ON’s Klaus Greimel (see profile in coming June issue of CRE and news from the DVS AGM in last week’s newsletter). Mr Greimel is also president of the German risk managers’ association DVS, and is using this platform role to air the views that many of his members share. He demands more innovation from the insurance industry and has criticised the lack of suitable policies to cover business interruptions that occurs without a preceding property loss. Demand for such cover grew when volcanic ash from the Icelandic volcano Eyjafjallajökull grounded aircraft last year. European risk managers are currently witnessing another eruption from neighbouring volcano Grímsvötn. This is a worry to many companies, and it is arguable that no viable solution has been found. Zurich and Allianz would disagree. They said earlier this year that they have developed cover, but found little interest from buyers. From Ms Trilovszky’s point of view the lack of innovation is not only the insurers’ fault. “It is not easy to find insurance solutions for new and increasingly complex risks,” she said. Before insurers can offer cover they have to understand the business and the risks connected to that business. “To do that, considerably more transparency is needed than actually exists between companies, brokers and insurers. The co-operation between company and insurance experts has to be intensified to develop custom-built solutions,” said Ms Trilovszky. As regards premiums for earthquake cover, Ms Trilovszky has observed significant price hikes because of the events in Japan. “We expect that this trend will continue during the course of the year and extend to other natural catastrophe risks,” she said. In the July 1 renewals, when contracts for part of the US market, Australia and Latin America will be renegotiated, the recent big losses will lead to a harder market for globally-orientated and capacity-intensive business lines such as natural catastrophe and industrial insurance, she said. “In regions like Australia and New Zealand, which have been most affected by losses, prices will rise considerably,” Ms Trilovszky believes. • The Risk Frontiers project, sponsored by XL, is based upon roundtable discussions with leading risk managers in some 10 European countries and a series of one to one interviews with risk managers. Individual risk managers who would like to take part in CRE’s annual Risk Frontiers survey please contact Editor Adrian Ladbury (aladury@commercialriskeurope.com) to arrange a 15 minute interview. Your contribution is appreciated.

Insurers failing to keep pace with customers risk landscape warns Munich Re

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