Lack of legacy and commitment to claims key for BHSI growth in Germany: Krause

Berkshire Hathaway Specialty Insurance (BHSI) launched into Germany in 2016 and is well on track to establishing itself as a serious lead multi-line carrier for corporate insurance managers in the country, despite the many challenges posed by the currently tough market, believes Andreas Krause, country manager in Germany for the US-based group. Mr Krause told Commercial Risk that BHSI Germany has continued to invest in the core resources and people needed to attract, win and retain quality business, notably in the areas of claims and the multinational space with the recent addition of a global programme coordinator. In today’s market, insurance managers are not just looking for cheap capacity to compete with their more established players, despite the intense pressures exerted by the severely hardening market in recent times and the onset of Covid-19. This capacity has to be complemented by proper service levels, not least in claims, and a long-term commitment. Mr Krause said this is exactly what BHSI is offering. The tough market, particularly in financial lines and cyber – the focus of GVNW’s conference last week – is also a good opportunity for a quality ‘young’ player that has the backing of the huge Berkshire Hathaway parent group and of course no legacy, added the man who took charge of BHSI Germany in Cologne from former GVNW committee member and head of insurance at Bayer, Gregor Köhler, back in July 2019. The key for the coming renewals for German insurance managers will be transparency and quality risk dialogue, advised Mr Krause, who like everybody else in the market does not expect a sudden softening this year. Mr Krause explained that since launch in 2016, BHSI in Germany has seen “accelerated” growth, particularly in the past two years. The team has doubled in number, moved from Düsseldorf to Cologne in 2019 and established a new office in Munich. Another office will be opened in Frankfurt as Covid-19 conditions permit. “At BHSI, we do not write business plans with specific top-line targets or aims to win market share. We did, however, set out with the goal of quickly becoming a trusted, reliable carrier for commercial lines customers and brokers – and we are all quite pleased and proud with the progress we have made in that regard. While our initial focus was on large corporate customers via in-house brokers, we have also expanded our footprint in the German Mittelstand (mid-market),” he said. Importantly for the customer, BHSI has also been expanding its product range to become what Mr Krause described as a “true multi-line carrier” in Germany, offering general property, construction, executive and professional, general liability, healthcare and marine insurance. The group is also significantly shifting towards becoming a lead primary player, adding the people and resources needed to back that up. “While we initially have been following in most lines, we intend to increasingly be a primary lead carrier over time. To that end, we have been investing in our local claims capabilities – very much in line with BHSI’s philosophy that ‘Claims is our Product’. We also now have a multinational programme coordinator, and we continue to build out our risk engineering capabilities,” explained Mr Krause. “Our goal, and our plan, which is shared by all our BHSI teammates around the globe, is to build the finest commercial property, casualty and specialty lines insurer in the world. Central to achieving this ambition is, of course, people, which is why BHSI takes great care in building our team with individuals who have both excellent capabilities and strong character. We are very pleased with the team we have assembled and yes, we are continuing to grow our team,” continued Mr Krause. “In terms of product-line growth, over the last five years we have really seen our growth develop equally across our lines of business – and we believe that will continue to be the case in both the short and medium term. One area we do expect to see especially significant growth over the next year is in the multinational space, with our main focus there on casualty, D&O and marine insurance,” he added. BHSI Germany’s distribution strategy matches the specific conditions of the German market, in which in-house brokers continue to play a significant role. Managing general agents (MGAs) – long established in the London market and North America, and growing in Europe – are also partners as long as the business case is “compelling”, explained Mr Krause. “The brokers-to-direct ratio of our business is quite balanced. On the one hand, we have established direct relationships with in-house brokers in Germany and we look forward to expanding those. At the same time, we have seen substantial growth in the distribution channel of technical brokers in Germany. We do have some MGA business in our portfolio, however we generally engage with MGAs that have very compelling business models in place, because we prefer to be close to our customers and to the business we underwrite,” he said. Not surprisingly Mr Krause sees the hardening market of the last couple of years and tough stances taken by established players such as HDI and AGCS as an opportunity for a relative newcomer. “In lines of business where market capacity is being reduced, there is an obvious need for new players. The fact that BHSI is a ‘young’ carrier, with no legacy issues, makes us an attractive option for customers and brokers,” he told Commercial Risk as the German corporate insurance management community gathered for GVNW’s virtual conference. “For BHSI, this is an excellent opportunity to demonstrate to our customers and brokers the values of working with BHSI – financial stability, our long-term view, technical expertise and the continuity we aim to provide for our customers and brokers,” added Mr Krause. The accusations of brutality fired at the established market in recent renewals by leading members of the GVNW also provide an opportunity for a relative newcomer, as long as they can assure potential customers that they are a committed, long-term player, said Mr Krause. “If customers are raising concerns, if this is their perception, we as an industry need to take that very seriously. It is an unfortunate situation that we´re observing the need for abrupt market corrections in several areas,” he said. “Our focus is building long-term relationships and enabling our customers to avoid the abrupt market corrections the industry is now seeing in several areas. In order to do that, to provide stability for our customers and brokers, we need to ensure accurate pricing and terms for our capacity and service,” continued Mr Krause. “Now is an opportunity for BHSI to provide that long-term reliability – and we will win our customers’ confidence with our actions over time – by walking the talk of being a stable, reliable market. So far, the feedback we have received has been very positive – underscoring to me that BHSI is not only needed in the market right now, but wanted by our customers and brokers. We are quite proud of and humbled by that,” he added. BHSI may have a number of advantages in this tough market as a young entrant with the pedigree and unrivalled financial backing of the group. But chairman Warren Buffett and Ajit Jain, director and vice-chairman of insurance operations, would not be impressed if BHSI undercut the competition to win business at the expense of profitability. This is why a real “risk dialogue” is critical for BHSI Germany in this challenging market for all, said Mr Krause. “Tackling any risk issues, especially the more challenging ones, requires transparency and active dialogue. At BHSI, properly understanding our customer and their exposure is an essential pre-condition for a long-term relationship. That’s why we always make real ‘risk dialogue’ with our partners a priority. The better we understand the exposure of our customers, the better positioned we are to provide solutions – and to develop risk transfer solutions that our customers and brokers want and value,” he concluded.

Lack of legacy and commitment to claims key for BHSI growth in Germany: Krause

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