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Peter Den Dekker, President of FERMA and Corporate Insurance Risk Manager at Stork B.V, the Dutch aerospace company, sees economic uncertainty, supply chain management and credit risk as key risk management issues for this year. “It is hoped that we have entered an economic revival but it is likely to be a slow one. One major factor that you can consider that risk and insurance managers are going to have to deal with is the question of how fast a company will recover. How long will it take—five or 10 years? And what strategy should be taken? The uncertainty about the recession and the pace of the recovery is a risk in itself. That is not to mention the effects of the downturn itself. Many companies are struggling to work out how to get out of trouble. hide“I am also still concerned about supply chain management in these economic circumstances. This is still a very, very important matter. All companies have to monitor their key suppliers this year and I think major changes will occur on this front. Likewise, credit risk is still an important risk and linked to supply chain management and the question of whether customers are secure. You have to ask your managers whether they are being too greedy to get orders on the books without formally investigating security. Companies will have to be careful not to underprice risk to keep people working. “I see soft insurance prices in general and really do not see any major issues for Europe’s insurance buyers in terms of supply of capacity or premium increases this year. The bottom of the market has been reached and it is stable. Also insurance companies are still trying to keep relationships with customers because cash is now more important. The year-end renewals were very relaxed. The main threat would come from external factors such as Sovlency II. We will see some insurance companies prepare for Solvency II, there is a consolidation going on.” Gerard Lancner, President of AMRAE in France and Corporate Risk Officer at Groupe Yves Rocher says that 2010 will be a tough year for all companies, that risk management has leapt up the corporate agenda in France and that insurance buyers with big companies can rest easy before renewals this year. “Unfortunately I still think that 2010 will be a tough year and we will face a few more difficulties in terms of insolvencies and unemployment. What we are seeing in the U.S. I think we will see in France. I think companies have taken a lot of measures in 2009 to face the difficulties. I would be happy if things began to pick up in the summer of 2010 but we have to be careful. The AMRAE conference in Deauville this week will focus on the theme of ‘New World, New Risks’ and will discuss this environment which I hope will be positive. “Following recent changes to French corporate governance law, the tool of risk management is being seen as an interesting opportunity for governance. There are many conferences being held on the topic, papers written and working groups created. I think this is putting risk management really onto the agenda and forcing more people to consider its integration. This is what we, as an association, have expected for a few years now. We have been trying to convince our stakeholders to anticipate it, prepare and train their colleagues and hopefully a lot have prepared for it but others need to become involved. “On insurance I received information during the last renewal negotiations with insurers that the cycle was beginning to reverse for the mid market but not yet for the big companies. But it does seem that most of the big insurers decided to take action to reverse the cycle. Here also we have been talking about this for a long time. Here we are again in 2010.” Stefan Sigulla, President of DVS, the German insurance buyers’ association, and Chief Executive Officer of Insurance at Siemens in Munich believes counterparty and emerging risk will remain high up the agenda for German risk and insurance managers. But he is also not overly worried about a harder insurance market. “Counterparty risk is still the most important matter for insurance managers in Germany and the question is how to deal with it adequately. This topic was brought up by the financial crisis and everyone is looking at appropriate ways to improve the way to assess and manage this risk. They are also looking at how the credit rating agencies performed and what service they offer. You also have to identify additional sources of information to ensure the financial security required. “In general terms we would say that the insurers do have problems when they try to work out how to cover non damage risks. Information Technology risks for example as well as emerging risks and risks that verge on being business risks such as reputational, energy supply and the like. For all these non material damage risks insurers need to be more innovative to meet buyers’ demands. “Our members are reasonably comfortable about the insurance market for corporate risks based upon the experience of last year and recent renewals. There is no certainty of course and catastrophic events can always have an impact but overall we do not see a hardening of prices and conditions in the market. We also do not expect prices to fall so it can be described as a flat market and outlook for 2010. “ Paul Howard, Chairman of AIRMIC in the United Kingdom and Head of Insurance and Risk Management at Sainsbury’s Supermarkets is concerned about the government budget deficit and its likely reaction and the potential impact of Solvency II. He also sees no knee-jerk reaction from the insurers on rates. “The U.K. government budget deficit is a big issue for this year because whatever happens there will probably be some kind of financial redress required and that will have consequences such as further increases in Insurance Premium Tax and many other things. This underlines the benefits of member organisations because we can play an important role in gathering views, lobbying and making sure that members’ views are taken. “Solvency II will be a big issue in 2010 and will take up a lot of time. We are working with FERMA and others to make sure that we have a say in the process. I think some people are just waking up to the potential impact it could have upon captives and the jurisdiction that they are within. This could have important implications for financing costs and prices charged generally. AIRMIC recently had a discussion with the Confederation of British Industry to make sure that they are aware of the situation and can hopefully help with the lobbying effort. “There seems to be a bit of a reaction from the insurance market. But we are still seeing people with poor histories gain price reductions and that is not right. Prices should be linked to investments made in risk management. Overall I think costs of insurance will depend again on outside factors such as increases in taxes and things that could have an impact on the insurance company balance sheets such as Solvency II. There are interesting developments in the environmental insurance market which does appear to be opening up and this could be significant for companies especially if they make acquisitions.” Jorge Luzzi, President of the International Federation of Risk and Insurance Associations and Director of Risk Management for the Italian group Pirelli sees a variety of big risks that will need to be faced in 2010 that range from rising product liability problems to climate change. Like his colleagues on the board of FERMA, however, he is less worried about trends in the insurance market. “Product liability is a big risk for this year. It seemed to be an American problem but now is becoming, every year, a more important issue in Europe. “Some members of the boards of directors of corporations will not remain on boards if good D&O coverage cannot be assured. Terrorism remains a latent threat. Climate change and its consequences are already a fact and not only a prediction. The lack of credit and credit insurance is a worry for all risk managers. These and other subjects will keep us busy in 2010. “In the insurance market, credit insurance is an issue and it will be necessary to work on loss prevention in this field. But, with the exception of credit insurance, I believe that as opposed to what was expected, the market will not be hard for good risks. Those companies that take care and work hard on the mitigation of their risks will benefit. “On security I would say that the situation is much better than in the immediate past. But the sudden crisis in 2008 showed that nobody could underestimate the possibility of a new potential situation. Despite this, the insurers and reinsurers and their shareholders have reacted well since the beginning of the credit crunch.” Daniel San Millan, President of new Spanish risk and insurance management association IGREA and Corporate Risk Manager at Madrid construction company Ferrovial Group is not too bothered about upcoming insurance renewals. But he is concerned about capacity in the aviation market and implementation of environmental legislation in Spain. “I expect another tough year for everyone because the economic environment is not as good as we would like. Having said that, I cannot see the insurance market becoming harder. It think it will be stable. I can see enough capacity in the market to maintain prices. But we are all worried about the financial scenario. “I am worried about bond insurance because there are real problems in that area. I am also worried about the aviation market because it works as a very close community and a lot of capacity is needed. The underwriters talk to each other and it makes it difficult for the buyer to find real competition in such a market. “I am also worried about how the Environmental Liability Directive is going to be enacted in Spain, how it is going to develop and be implemented. The new law is very ambitious and there are a lot of grey areas. We must wait to see how the judges decide to implement it though we probably will not see much in 2010.” Carl Leeman, board member at Belrim, the Belgian risk and insurance management association, and Chief Risk Officer of Katoen Natie in Antwerp, warned against overconfidence in the economic recovery and about the passing of the risk presented by the H1N1 virus. He, however, is also not so worried about insurance costs. “We did well in 2009 and increased cash-flow over 2008 but this was mainly because we have a good spread of risk by business line and geography. But many companies are not in great shape currently and we will see some run out of reserves in 2010. Generally I believe things will get better, but they will not take off. There will be a lot of redundancies and this will lead to political pressure because people have to eat. “The pandemic is still around. The fact is all pandemics come in waves and the first is not usually the worst, it is usually the second wave that does the real damage, particularly if little is done to try and kill the virus before the second wave arrives by vaccination. But a lot of countries and individuals have not accepted the vaccinations on offer and this may lead to a problem. “I have not seen any problems in the insurance market or increases coming generally. The industry had a year to prepare itself because they knew it would cost a year later. “But, I think that the pain will only be felt this year and premium volumes could be 15% down. But, I do not expect rates to increase this year and there will be less risk to underwrite because activity will be down.”

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