Insurers still not touching key industries in France and Spain

Insurers in France and Spain continue to implement a veto on some industries by withdrawing capacity for property risks and forcing many companies to work without the insurance protection they need, intermediaries have told Commercial Risk Europe.

Even as the market has started to soften in the past year, underwriters remain committed to a broad-brush approach to companies like food producers, sawmills and waste recyclers, refusing to consider the merits of each individual risk, the sources say.

Charles Frenove, CEO of TCA Assurances, a Reims-based MGA, said that the conservative approach of local French insurers creates opportunities for companies like his, but on the other hand, makes it hard to convince buyers that they must pay the right price for their covers.

This is because before the hard market, domestic insurers provided capacity for companies like sawmills at very low prices and with little, if any, risk management demands. Once the market turned, these carriers simply excluded the industry from their portfolios.

“The sector became used to very low prices, and suddenly mainstream insurers went away,” said Frenove. “Specialists like us propose to replace the mainstream covers with our covers, where prices are higher. It is difficult for us to convince clients that we are not trying to make a fool of them.”

Frenove added that even when underwriters accept the idea of providing capacity for difficult-to-insure sectors via companies like TCA, which take a more granular approach to individual risks, they show no flexibility when it comes to underwriting criteria, bundling all companies in the same bag.

“Mainstream insurers have a biased view, and when we talk to them, they say that we have to follow their guidelines,” Frenove said. “It is hard for them to give us some leeway.”

A similar situation is endured by sectors like agribusiness, nightlife, waste recycling and chemicals, Frenove explained. As a result, TCA makes use of capacity from other European markets, offering up to €10m or €12m in limits to companies in those industries.

The one-fits-all approach is also found in Spain, where insurers have drawn red lines to exclude sectors such as food producing and chemicals from their portfolios, said Miguel Ángel Juliá, head of large manufacturing and services accounts at Madrid-based broker Concentra.

He said waste recycling is proving the most difficult for buyers currently, with virtually no capacity available for Spanish companies. Debate is under way in the market to try to find solutions for the industry, which is mostly composed of smaller firms.

Significant losses have taken place in the sector. The biggest of these was back in 2016 when 88 tons of tyres burned at a landfill close to Toledo. It took 24 days to put the fire out.

Juliá said that here too, market discussions are taking place to find solutions that would enable the provision of covers in the sector. The goal, he said, is to get to the slightly better situation that faces buyers in the food industry.

Spanish food producers are also on the wrong side of red lines drawn by local insurers, but companies that make significant investments in risk management and prevention have a chance of finding capacity in the local market.

“Insurers do not want to take exposures that are higher than 20% or 25% of the risk, and sometimes they do not go over 6% or 7%,” said Juliá. “And they make severe engineering demands that require lots of investments, with little flexibility to spread the cost over time.”

“[But] That does not mean they are going to offer better rates,” Juliá continued. “And they are imposing deductibles that are meant to share the risk, rather than remove frequency claims. The very concept of deductibles has changed.”