Local decision-making key in tough market

Global Risk Manager editorial director Adrian Ladbury spoke to Xavier Veyry, chief executive officer APAC and Europe at AXA XL, as part of our Risk Leaders interview series, in the run-up to the Ferma Forum 2022 in Copenhagen. Veyry said AXA XL has restructured and repositioned itself to ensure that it can meet the wants and needs of Europe’s risk managers as they navigate the tough macroeconomic environment and continued challenging insurance market conditions, whether through traditional or alternative solutions. Adrian Ladbury (AL): What is AXA XL’s strategy for Europe and where do you see the best opportunities for growth currently? Xavier Veyry (XV): We have experienced a hard market cycle for a few years now. At the same time, AXA XL went through a restructure bringing decision-making centres closer to the market, which was done to benefit our clients and brokers. Our vision is clear: we want to be the leader in commercial lines, which for us includes the upper middle market and the large corporate space. This is where we operate and add the most value to clients, brokers and to the market overall. We have a full suite of solutions that spans risk consulting, traditional risk transfer, alternative risk transfer and captive management, training and more – which we can deploy across more than 200 territories. Our core segment is multinational clients, and global programmes are therefore at the heart of our value proposition. We support our clients, in partnership with our broker partners, in property and casualty but also through valued specialty lines, including cyber which is increasingly important. We are among the very few insurance companies that can offer a complete set of products and services, and that is why we believe we can be our clients’ and brokers’ best partner in managing their risk. AL: What are the main challenges in the global programmes area, given the global economic outlook and supply chain? XV: We see several challenges for our clients in the current environment: inflation, supply chain disruption, the war in Ukraine and, of course, going into winter, we face up to the energy crisis. There are other crises that aren’t new, like climate change, which has had an impact on natural catastrophes in parts of the world. Unfortunately, we see an acceleration of these crises in 2022 and going into 2023. The political environment is also evolving quite significantly. Along with the macroeconomic outlook, this is at the centre of the discussions we have with our clients. We talk to them and to their brokers to understand how these challenges impact their operations and their need for covers. When it comes to global programmes specifically, the key remains the same: to make sure that whenever we set up a global programme there is a true understanding of the activity of our clients and the ability to deploy the appropriate level of covers wherever they are. It’s the classical discussion but with a stronger focus on those specific risks which are linked to the consequence of the crises, and more specifically the energy crisis and current conflicts. AL: What’s the outlook for coming renewals and which are going to be the most challenging lines? XV: We have been through a hardening of the market these last few years but we still have some headwinds ahead of us. The impact of some natural catastrophes keeps rising and there is a hardening to come, particularly from the reinsurers. We also still see further developments regarding social inflation when it comes to casualty, specifically for those clients with exposure in the US. This will keep on playing a significant role as a large portion of the European economy is exposed to the US. In addition, tensions in Europe and worldwide are creating increased political and credit risk due to the current political and economic climate. The area that remains constrained in terms of capacity is cyber, which we talk about a lot with our clients and brokers. There is significant demand but capacity isn’t yet at the level where that demand is met. In summary, the situation remains quite uncertain on various topics that are going to be at the centre of renewal discussions, and reinsurance renewals seem to be hardening. The market is in a better place today than it was but we are not yet out of the woods, since the challenges which have appeared now need to be taken into account. AL: Cyber is clearly a big challenge for everyone currently and, as you note, the insurance market is struggling to meet demand. Ferma backs the idea of a Europe-wide public-private partnership approach. Do you think that, given the scale of this risk, such cooperation and state-backing is required? XV: There is a growing consensus to say that cyber will become as big as property and casualty in the future. As such, it requires adjustments to the way we look at it. If we look at global cybercrime, the cost globally in 2021 is estimated at €5.5trn and some estimate that it could reach €10trn by 2025. We have two elements here. On one hand, the capacity deployed by the insurance market isn’t currently at the level of the overall costs that we are seeing. On the other, we collectively need to understand and better manage those risks. We also see governments now positioning themselves, and a legal framework that is evolving to tackle a level of global organised crime which is unprecedented and a significant exposure on the markets. At AXA, we need to play our role as a leading insurer and want to support companies on their journey. Solutions will come from prevention, coverage of risk and incident management. Given the magnitude of the need, we have to work very closely with the public sector to make sure that we find a solution that is sustainable for the future, for the demand, and that allows the market to absorb a risk that can be systemic. AL: It has been a tricky few years for risk managers as they tried to cope with the impact of Covid-19 during a rapidly hardening market when communication became challenging. This brought up questions about how the market works and how to make it work better. How are you making yourself more accessible and transparent to help achieve this critical goal, particularly in claims? XV: The last few years have been very difficult to navigate. We have spent a lot of time listening to our clients to understand their expectations in the hope that we can better answer their expectations and needs, and that of their brokers. This is what has led us to reshape the way we work: bringing back decision centres in-country, closer to our clients. We have developed a network of account managers to make sure that we have people in our company that have a complete view of our clients’ activities. They are the entry point for our clients and the conduit to access, shape and structure our approach internally to make sure we can deliver more efficiently. We are investing to make sure that these account managers operate at a wider scale. Claims are clearly a key element of our delivery and service, and we’re proud to say that surveys demonstrate that our claims service is top notch. Our claims professionals try to find the right solutions for our clients – which doesn’t necessarily mean that we always cover the outcome. But we have clear positions, we are transparent and we work collaboratively with clients to help them get back to business as quickly as possible. We also loop back to the rest of the organisation to make sure that we learn from claims, from an underwriting perspective. Claims are why we are here, which is why it’s an area where we invest significantly. Our approach is delivered in cooperation with our account managers, who drive the interaction between our organisation and our clients. AL: The tough market has led to a rise in demand for alternative solutions such as greater use of captives and solutions such as parametrics. Is this a short-term solution to a hardening market or here to stay as the market adapts to a new risk landscape? What are you focusing on to help your customers? XV: There is a shift, a better understanding and much stronger management of risk across organisations. We see clients who are investing more to better understand their risk, which sometimes leads to the creation of a captive, an area in which we are seeing a lot of activity, or the search for alternative solutions to cover specific risks. And with a multi-award-winning team made up of captive professionals who are recognised by the industry, we have the right knowledge and expertise to support our clients in designing and managing their captives. Setting up a captive should not be a short-term answer to a short-term problem, because it’s complex. It requires investment, mobilisation of capital and a specific learning curve. It’s a long-term positioning that follows a long-term vision of the way an organisation wants to manage its risk. We see increased interest for other forms of alternative solutions, such as parametric insurance, which responds to specific needs related to climate volatility. It is a full set of tools that is available to those companies with a sophisticated risk management approach, and we welcome their use.

Local decision-making key in tough market

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