Protection and unity key as FM continues German and global growth
As the German risk and insurance management community gathers for the annual GVNW Symposium, Adrian Ladbury talked to Nigel Todd, vice-president client services at FM, about its recent rebrand, results, the challenges of inflation and supply chain risk, and plans for its German and worldwide business.
Adrian Ladbury (AL): Risk managers regularly identify supply chain and inflation as key concerns. What are you doing to help customers cope with these risks?
NT: Supply chain disruptions and inflation are critical challenges that businesses are grappling with today. Global supply chains have become increasingly vulnerable due to geopolitical tensions, such as the Russia-Ukraine conflict, trade wars, and economic volatility.
These factors lead to operational delays, resource scarcity, and increased costs, creating significant uncertainty for businesses.
Inflation compounds these issues by driving up the costs of materials, labour, and services, putting additional pressure on profit margins and financial stability. Companies must now navigate these rising costs while managing the inherent risks associated with complex global supply chains.
FM addresses these challenges by providing clients with a comprehensive approach to risk management. This includes tools such as the FM Resilience Index and the Supply Chain Impact Analysis, which help businesses assess their supply chain vulnerabilities and develop strategies to mitigate potential disruptions.
By combining data-driven insights with our engineering expertise, we assist clients in understanding how inflation impacts their operations and in adjusting their risk management strategies accordingly.
Additionally, products like the Contingent Time Element Extended (CTEE) coverage offer protection against business interruptions caused by supply chain disruptions, ensuring that companies can maintain continuity even in challenging times. By integrating these solutions into a cohesive risk management strategy, FM helps clients build resilience against both inflationary pressures and supply chain risks.
AL: What would you see as the major trends in claims in Germany in recent times and in which areas should loss prevention efforts be focused?
NT: The leading losses we have seen in the marketplace over the last years were caused by fire. This said, implementing fire prevention measures is always going to be a viable investment.
In the mid to long term, we expect to see increased losses caused by natural hazards, which will be further exacerbated by climate change.
AL: What is FM doing for customers in the increasingly challenging area of sustainability and ESG? What is your approach to the CSDDD and supply chain risks of your customers and yourself? Can this risk be underwritten and, if so, how?
NT: FM has taken a holistic and forward-looking position on sustainability, focusing on four key areas: strengthening communities, countering climate change, accelerating the renewables ecosystem, and empowering our employees.
Our sustainability approach is driven by science-based research and engineering to create long-term value and resilience for our clients.
FM supports its clients with AI-powered data analytics for CSRD and taxonomy reporting, utilising tools like the Climate Reporting Aid to help organisations report on climate-related financial disclosures. In addition, FM offers traditional insurance models to support clients in managing new ESG risks through risk transfer and complementary services.
Regarding the Corporate Sustainability Due Diligence Directive (CSDDD), FM helps clients understand and manage their supply chain risks with advanced risk assessment tools and tailored insurance solutions. These risks can indeed be underwritten, and FM is committed to providing coverage that reflects the complexities of modern supply chains while promoting sustainable practices.
AL: What about climate change risks? What is FM doing for customers in this key area?
NT: Climate change represents one of the most significant and complex risks facing businesses today. The increasing frequency and severity of extreme weather events, such as floods, wildfires, and hurricanes, pose substantial threats to property, operations, and supply chains.
These risks are compounded by regulatory pressures and the growing demand from stakeholders for businesses to demonstrate their commitment to sustainability and resilience.
FM’s approach to climate change risks is comprehensive and proactive, addressing both the immediate threats posed by extreme weather events and the longer-term implications and requirements of building a sustainable, resilient business.
We work closely with our clients to ensure they are not only prepared for today’s risks but also positioned to thrive in a future shaped by the changing climate.
One part is helping clients navigate challenges by providing a robust, science-based approach to managing climate risks. We recognise that the changing climate is not just a future concern but a present reality that requires immediate and sustained action.
Our approach begins with a thorough assessment of climate risks through tools like the Climate Risk Report and the Climate Change Impact Report. These reports provide clients with detailed insights into the specific climate-related risks they face, enabling them to prioritise actions that enhance their resilience.
In addition to risk assessment, we support clients with practical solutions designed to mitigate the impact of climate-related events.
For instance, we help businesses implement measures such as improving flood barriers, enhancing fire protection systems, and reinforcing structures against extreme weather conditions.
These proactive steps are critical in reducing the potential for significant losses and ensuring business continuity during and after a climate-related event.
Moreover, FM’s commitment to climate resilience extends beyond immediate risk mitigation. We also focus on supporting long-term sustainability initiatives. Through the FM Resilience Credit, clients can proactively invest in climate resilience measures by receiving credits that can be used to offset their insurance premiums.
In 2023, this program was expanded, with $357m in resilience credit issued to help businesses strengthen their defences against climate risks.
FM also plays an active role in advancing industry standards and practices related to climate resilience. By investing in research and development, we continuously improve our understanding of how climate change impacts different industries and geographies.
This research informs our recommendations and enables us to provide clients with cutting-edge solutions that are both effective and support long-term resilience.
AL: You reported excellent 2023 results and record membership credit. How was this result achieved and how are you faring so far in 2024?
Nigel Todd (NT): FM’s excellent 2023 results were achieved through a combination of factors, including our ongoing focus on proactive loss prevention and robust risk management strategies. This approach directly contributed to a significant reduction in claims, which in turn strengthened our financial health. As a mutual insurance company, we share our financial success with our policyholders and client owners.
In May 2024, FM announced its largest-ever membership credit of approximately $1.4bn, driven by strong financial performance in 2023. This record membership credit underscores the effectiveness of our risk mitigation efforts and the strong partnerships we have with our clients.
The 2023 results included our clients reducing loss expectancies associated with property risk by an estimated $855bn, a vital component of our mutual financial success. Over the last two years, FM has returned more than $2.2bn to our client owners, with $6.5bn returned since 2001.
Additionally, in recognition of our 25th anniversary as a merged company, we introduced special one-off enhancements to the membership credit program. Clients with 25 or more years of tenure were eligible for a 25% credit, and all other eligible clients saw at least a 25% increase in their credit percentage.
As we progress through 2024, we remain satisfied with our current performance, having met our targets for both existing and new client engagement. We continue to build on this momentum by maintaining strong partnerships, leveraging innovative risk management solutions, and adapting to the evolving risk landscape. Our ongoing commitment to risk management, combined with our engineer-led philosophy and proactive loss prevention measures, positions us well to navigate ongoing challenges such as inflation and supply chain disruptions, ensuring sustained profitability and enhanced value delivery to our clients.
AL: What is the make-up of your German business? In which areas are you growing and which are less attractive currently?
NT: FM’s German business is centred on providing comprehensive commercial property insurance, underpinned by our commitment to loss prevention and risk management.
Our market presence is characterised by a focus on industries that require high levels of risk mitigation and share our loss-prevention philosophy and resilience-building mindset.
We are growing in all different sectors, serving clients across a wide range of industries such as manufacturing, pharmaceuticals, technology and the automobile supplier industry, to name just a few.
Growth areas within our German portfolio include sectors that are increasingly concerned with climate resilience and sustainability, reflecting the broader global trend towards these priorities.
Our emphasis on engineering-driven risk assessment and climate resilience solutions positions us as a valuable partner for businesses facing these challenges.
While certain sectors may face pressures due to economic volatility or regulatory changes, FM continues to be an engaged risk management partner for all sectors by offering tailored solutions that meet the specific needs of our clients.
AL: Finally, why did you decide to rebrand? What was the reason for the rebrand and what does it mean for customers in Germany and worldwide?
NT: As a commercial property insurer, our brand evolution builds on nearly 200 years of experience partnering with clients to build resilience, mitigate risk and prevent losses before they happen.
The decision to update our brand was driven by the tremendous growth and evolution of our business over the last 25 years. Since becoming FM Global in 1999, we have grown from $2bn in capital and $1bn in premium to nearly $25bn in capital and $11bn in premium.
This change in visual and verbal identity also clarifies what we stand for, unites us under one parent brand and modernises our look and feel, so that our brand reflects the success of our business going forward.
FM will serve as the parent brand for all the company’s offerings, including its flagship mutual insurance company, commercial property insurer AFM – now known as FM Affiliated – a new renewable energy unit, cargo insurance business, and boiler and machinery reinsurance business.
FM’s new, bold ‘titanium’ logo with precise facets represents engineering innovation, stability and the company’s roots as Factory Mutual Insurance Company. It also resonates with a new tagline – ‘Protect Your Purpose’. In addition, the design suggests protection and unity, supporting our commitment to client and broker partnerships.
For our clients and partners in Germany and worldwide, the rebrand brings a more unified and streamlined experience. It also helps us to better communicate FM’s core values: protection, partnership, and progress.
While we have created a compelling, innovative and forward-looking identity, our leadership, business organisation and market strategy remain the same as always. Our clients and partners can continue to expect the same high level of service, innovative solutions and relentless commitment to risk management and loss prevention.
