Reward for risk management and LTAs back on the table, say French buyers

French insurance buyers have told Commercial Risk Europe that they are starting to be rewarded for risk management efforts as the market continues to stabilise, and are seeing insurers increasingly willing to offer long-term agreements (LTAs) to build partnerships. But the picture isn’t completely rosy. Those buyers we spoke to in and around the annual conference of risk management association Amrae say the insurance market is still falling short when it comes to helping companies improve risk prevention through efficient use of data. The prevalent view of French risk managers is that the current state of the insurance market is a far cry away from the overly restrictive, rigid and dialogue-free space that prevailed during the latest hard market. “Insurers have become a little more discerning, and they do not want to make the same mistakes in terms of better understanding the risks that they underwrite,” said Amrae president Oliver Wild. “But there has been more listening around the market and insurers are asking more questions about what organisations are doing in terms of good risk management and prevention investment.” “Companies now have the opportunity to demonstrate the quality of risk management, their action plans on prevention of property damage. Those that work on contractual prevention, showing what they can do on liability risks, can also benefit from the current stability,” he added. Camel Sekkai, group insurance director at the car rental firm Petit Forestier, noted that the return of proper dialogue and technical underwriting has enabled buyers to negotiate LTAs, which had disappeared from the French marketplace for several years. “We have managed to once again put in place long-term contracts with insurers. We have even found one that signed a three-year LTA with us,” he said. “Previously, we were usually successful in obtaining LTAs without much trouble with a number of insurers, but they had completely closed themselves to that idea in recent years.” “We are seeing long-term agreements come into play, which we had not seen for the last five years. LTAs mostly two years long, sometimes three, with potential gradual savings built in. So that is new and positive,” agreed Wild, who is also the chief risk, insurance and compliance officer of water and energy utility Veolia. “Carriers probably want to once again secure partnerships. In the time of volatility and price hikes, they were very abrupt. But they have come to realise that risk managers will favour those that did not run away, and really build on that partnership.” As they find themselves in a better position to negotiate, buyers have also started to press for better conditions from their insurers, and that does not necessarily mean lower rates. “Our second priority [in the January renewals] was to rework our capacities a little. We have gotten some interesting things in that sense,” Sekkai said. “To be honest, the price effect is quite marginal. There have not been astronomical price decreases for the moment, we are in a market that is stabilising. Insurers are more open to talk about revisions of deductible levels and limits. It is the time then to engage in negotiations about wordings and limits, rather than rates.” One important development in the French market has been the expansion of reinsurance captives, according to Wild. “The market has changed. Underwriting is no longer the same because now there are bigger captives and buyers take higher level of deductibles,” he said. “When a company looks at its tower now, it is very different to what it was in the past. Companies taking on a higher share of the risk, being more confident in that because they are the first ones who were able to appreciate the quality of their risk management systems – that has probably helped to stabilise the market.” Some renewals remain quite challenging, though. One example is motor insurance, especially for risks with US exposure, Sekkai noted. “There are insurers that are not even opening discussions for car risks in the US, and prices have become unreasonable,” he said. “We have talked to the US professional car rental federation and they told us it is a real problem. There are small companies that find themselves at risk of disappearing because they cannot get insurance. I hope US insurers will go back to a reasonable position in order to accompany companies.” He also said it is a struggle to find cover for supply chain business interruption risk. For his part, Wild noted that insurers are not shy of adding exclusions when they believe risk exposures are becoming too high. “Depending on the geography, insurers are adding exclusions to policies. For example, there is less risk appetite for China, especially when the relationship between China and Taiwan is in play. Geography, activity, the quality of risk management and the ability to demonstrate that are the key factors today,” he said. Sekkai also said that insurers are getting better at helping clients improve their prevention practices. However, there is a way to go, especially when it comes to making use of data that could help buyers mitigate risks more efficiently, said Michel Josset, the insurance director at Forvia and VP for ESG and climate at Amrae. “We need to reinforce technical partnerships with insurers to work on prevention and to find the right balance between insurance budgets, which have remained more or less stable, and the covers that we purchase. The only way to maintain our insurance programme is to cooperate with the market on prevention,” he said. “Claims information should be shared between insurers, loss adjusters, brokers and us, which is not happening today.” He added: “Insurers have data, they have example of losses from other customers that may impact us. They have engineers to advise us on risk prevention. I believe that partnership is key to maintaining our insurance programmes. They are not completely there, though. Take the example of physical damage associated to climate risks. Traditionally, insurance engineers are more focused on fire risks. Insurers should work to shift that focus to climate risks. Companies are not going to hire climate specialists – we rely on insurers to offer that as a service for us.”

Reward for risk management and LTAs back on the table, say French buyers

Insurers open to changing deductibles and limits

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