Lloyd’s in strong position to continue German growth despite Brexit: Blumenthal

Lloyd’s refuses to shift into defensive mode in Germany and the rest of Europe as a result of uncertainty surrounding Brexit and the well-publicised central directive on syndicates to tighten their underwriting policies, not least when it comes to cyber risk. Indeed, the need to establish its direct EU presence via Lloyd’s Brussels appears to have breathed new life into the market’s German and wider European growth plans, according to Jan Blumenthal, country manager for Germany and Austria at Lloyd’s. Mr Blumenthal told Commercial Risk Europe that last year alone the Lloyd’s market covered more than €500m of German risks in premiums. He added that Lloyd’s premium in this market has risen by almost 3% on average since 2013. Today, Lloyd’s insures 90% of German Fortune 500 companies in one form or another. Lloyd’s now has 20 coverholders and a growing number of service companies in the country. Mr Blumenthal said it continues to see “rising interest” from German brokers in becoming Lloyd’s brokers. There are currently four German Lloyd’s-registered brokers, with “more in the pipeline”, he said. There are also eight Lloyd’s service companies in Germany – Axa XL, Beazley, Hiscox, Liberty, Markel, Starstone, Tokio Marine Kiln and, most recently, Newline, which set up shop in leading German insurance centre Cologne. Confidence about Lloyd’s’ position in Germany is partly based on pragmatic agreements made between the UK and German supervisory authorities to ensure that Brexit does not lead to a shutdown in (re)insurance business between the two countries, even if the UK does leave without an agreement. In April this year, the German insurance supervisor BaFin agreed a deal directly with its UK equivalent the Prudential Regulation Authority (PRA), which supplements the Multilateral Memorandum of Understanding made between the UK body and the other 27 EU member states. This should put policyholders’ and brokers’ minds at ease, according to BaFin’s chief executive director Dr Frank Grund. “The position of policyholders should not be worsened by Brexit. The agreement between BaFin and the PRA ensures that we will be able to cooperate with the UK authorities just as we did before,” said Dr Grund when the agreement was announced. So rather than shifting onto the back foot, Lloyd’s is keen to use its new Brussels base to expand further into Germany and the rest of Europe, according to Mr Blumenthal. “Lloyd’s continues to have a strong position in Germany. In fact, this year marks 30 years since we opened our first office in Germany, shortly before the fall of the Berlin wall. Since then, we’ve been committed to providing our German customers with specialist risk solutions and the expert leadership and insight needed to anticipate and understand risk,” he explained to CRE. A recent improvement in underwriting conditions in the German commercial and industrial insurance market also helps make things more appealing for insurers, said Mr Blumenthal. “The German market has stabilised and its future outlook is positive. We also see some classes improving rate-wise – especially in marine and property, particularly natural catastrophe where there is a growing need for active risk management in the public sector and where we see strong growth potential,” he said. One obvious question to ask is: why would a German risk manager choose Lloyd’s rather than a leading German international insurer such as AGCS or HDI Global? Mr Blumenthal said the answer is the market’s specialist skills, knowledge and financial security. “Lloyd’s is driven by the aim to provide the best (re)insurance products and services available anywhere. Risk managers appreciate Lloyd’s underwriters’ expertise within the various specialities and our highly sophisticated underwriting knowhow in highly complicated nat cat exposures. We are especially proud of our ability to write tailored products for complex risks such as cyber or natural disaster,” he said. “Not only are we a market with the expertise and a strong tradition in Germany, we also have a solid financial track record, with the ratings agency Standard & Poor’s (S&P) affirming a financial strength rating of A+, based on our strong capital position and recent focus on underwriting discipline. Lloyd’s Brussels has also been assigned the same strong financial ratings by AM Best, S&P and Fitch Ratings,” added Mr Blumenthal. Mr Blumenthal’s role, as the general representative for Lloyd’s in Germany, is to work with partners to develop a deeper understanding of the German market, grow the business and promote the Lloyd’s brand. More recently, he has also spent considerable time explaining to customers how they can continue to use Lloyd’s despite Brexit. Once the customers and brokers understand what Lloyd’s has to offer and how its position will not be threatened by Brexit, there is plenty of scope for expansion, said Mr Blumenthal. “Indeed, we are looking to expand in Germany with wider distribution to ensure that policyholders can access Lloyd’s’ innovative products locally, in the local language and with local services, with the security of Lloyd’s behind it. In addition, we’re also planning to expand in countries like Czechia or Slovakia, where we are seeing quite a lot of investment from other countries like the UK,” he said. One key question that Mr Blumenthal is clearly asked is: how does the creation of Lloyd’s Brussels make it easier for EU based customers and brokers to deal with the market? “The opening of Lloyd’s Brussels is an opportunity for us to bring the scale, expertise and capacity of the world’s specialist insurance market closer to our customers in Europe through a locally staffed and regulated insurer. Our new insurance company in the heart of Europe encompasses 19 European branches and a total of almost 100 staff, working with over 400 coverholders and 40 Lloyd’s brokers across the continent,” he explained. “It provides the certainty that our customers and partners need to thrive and combines unparalleled underwriting expertise and financial security in one place. It writes EEA risks, all non-life risks, as well as facultative and non-proportional excess-of-loss treaty reinsurance. The EEA is – and always has been – a key market for Lloyd’s. Lloyd’s Brussels will serve to strengthen our offer and facilitate our continued growth across Europe,” added Mr Blumenthal. But is Lloyd’s Brussels really a defensive move because of Brexit or does it actually mark a big statement about Lloyd’s’ strategy for Europe, regardless of Brexit? Mr Blumenthal said that it is definitely a positive move. “The opening of Lloyd’s Brussels is not purely defensive, not at all. We’ve always seen Germany, and the EEA as a whole, as a key market for us. We see Lloyd’s Brussels as part of our long-running commitment to our partners and customers in Germany and throughout Europe. Not only will it ensure that they will continue to benefit from the market’s specialist expertise and financial security post-Brexit, but Lloyd’s Brussels provides a launchpad for further growth. By establishing Lloyd’s Brussels, we are providing the certainty that our partners and customers need to grow today and tomorrow,” he said. Many German and other European risk managers tell Commercial Risk Europe that Lloyd’s is too expensive and complicated to deal with and claims can be difficult. So how can Lloyd’s overcome this perception, and what is it doing centrally to make it easier to deal with? ‘Future at Lloyd’s’ “To help our customers grow and prosper, we have launched a new vision for the future – the Future at Lloyd’s strategy. It features six transformational proposals designed to deliver higher-quality risk protection, but also to lower the cost of doing business at Lloyd’s and to simplify access to the global insurance market. As part of this move, we will look to launch a next-generation claims service to improve customer experience and increase trust in the market by speeding up claims payments. Today, we have already expanded electronic placement, which is already showing dividends, with 60% of all London placements going digital,” explained Mr Blumenthal. It seems that while BaFin, other national insurance supervisors and the European Insurance and Occupational Pensions Authority (Eiopa) appear happy to continue dealing with the UK insurance market on what is basically an equivalence basis, Lloyd’s’ current strategy remains sound. If relations between the UK and the rest of Europe worsen yet further as a result of Brexit, then EIOPA and its national members may be forced to rethink this pragmatic approach and demand a more substantial investment within the EU and much higher levels of retention in member states. At this point, Lloyd’s may have to consider which markets are most important and set up a different kind of European presence. As with all things Brexit, nothing is certain. But, for now, Lloyd’s looks well set in Germany. To access CRE’s 2019 GVNW conference newspaper please click here.

Lloyd’s in strong position to continue German growth despite Brexit: Blumenthal

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