Steady as she goes-Philippe Rocard

Adrian Ladbury: Now that you have had a good six months in the CEO chair at AXA Corporate Solutions what have you changed and what is planned? Philippe Rocard: I said when I arrived that I would not change the strategy just for the sake of it. I have stuck to that. The business was on a good track and provided an excellent base to work upon. But, obviously, our environment is a fast-moving one and we have to anticipate it. Thus, there have been some new developments which are more evolutionary than revolutionary, such as our entry into the space market three years ago. We now have achieved a significant level of premium in this market. New technologies are coming on to the stage such as green energies. We have decided to invest in this segment as there is considerable private investment in this area. A dedicated centre has been created to develop new solutions which already proved successful. As it is a very international market, we use our experts in different countries such as wind farm experts in Germany and solar experts in Spain who link up worldwide. We have started with projects in Europe where most of the development is occurring but we are also involved with emerging markets such as Asia. hideAL: There is a lot of talk about opportunities for growth in emerging markets currently especially as the mature insurance markets of Europe and the United States offer little chance for growth. What is your strategy and where are you focusing your efforts? PR: We have opened new branches in the Gulf of Arabia and in Asia, especially in markets like Singapore, mainland China and Hong Kong. A new branch is being opened in Mexico in partnership with AXA Seguros, the local AXA company, and we are already working with local brokers to develop industrial insurance business there. New territories can also be opened with new products that can be used via the internet such as our new cargo product ‘Instant Cargo’. This computer-based tool enables either the broker or a freight forwarder to submit and quote an offer to the client in one minute. This tool can be used in partnership with the banks to increase the efficency of a shipment. This approach is relevant for several lines of business, not only Marine. AL: What about growth by product line and territory? Where do you see the opportunities and how do you control your expenses as you grow in such a tough market? PR: AXA Corporate Solutions is growing steadily. We have seen in 2009 and the first half of 2010 a slight increase in turnover and rates and the combined ratio remains less than 100%. We are still cautious about natural catastrophe exposure and we remain focused on our accumulations. This focus will continue during this renewal. AL: Is this being driven by the solvency regulations and higher capital charges expected for such business under Solvency II? PR: QIS5 is still under calculation. But the QIS4 studies showed a higher price for volatility than generally expected, such as for natural catastrophe exposures in the property business. And the price of the volatility is still not completely taken into account by the market. For AXA Corporate Solutions, strategy is not driven by higher capital charges that may come under Solvency II because our capital is sufficient. AL: There has been much talk here in Monte Carlo this year about the biggest threat being posed to the balance sheets of insurers and reinsurers by the asset side of the business rather than liabilities. Would you agree with this? PR: Clearly the Solvency II process gives an opportunity to measure risks associated with assets compared to underwriting and reserves risks. For some P&C companies, the discounted level of risk is more or less half linked to assets and half linked to underwriting and reserves, so assets are a main area of risk. A lot of work has been done under Pillar II of Solvency II which is about the internal culture of risk management. A new framework has been built to manage this risk which involves an assessment of the changing asset position on a daily basis. AL: What about the state of the market looking forward to the year-end renewals? What messages have you picked up here in Monte Carlo? PR: The reinsurance market seems neutral apart from some more difficult niche areas such as Directors and Officers or some areas like Chile. Generally there is an appetite for risk among the reinsurers. Coming back to insurance, the insured values are currently growing very fast in emerging markets particularly. This is because when economic activity picks up, the impact on trade is amplified and businesses such as marine and aviation see a large development. Marine, aviation and transport business accounts for 40% of our premiums, so this will be rather good news for us. As an example, when there is an increase of 1% in gross domestic product, it has an amplified affect of 3% on trade. AL: And what do you expect from the reinsurers in terms of price and capacity? PR: The news from the reinsurance market is currently favourable but it is still only September and it can be very different by December. One big catastrophic event can change the market very quickly and also asset values can change dramatically following movements in the markets. Motor fleet is one area that has been discussed this year here in Monte Carlo because of legal changes and inflation and we would expect some increases. Overall I would say that this is a stable but sensitive market. Everyone is prepared and standing by the button. Everyone knows how close we are to the bottom of the cycle and it cannot continue to go down because there would be no profit if it did, only through luck. AL: Is there still plenty of primary insurance capacity for industrial insurance buyers in the foreseeable future? PR: There is still competition for property business though it is less obvious on some lines of business for example in motor on international programmes. The international programme market is a special ‘animal’ because it is more dependent upon service and to move such a programme is very complicated, this keeps the international programmes more stable. The risk manager still has to explain to his finance director the costs and care about insurers’ ratings. AL: During the DVS conference in Munich I talked to Günter Dröse, President of the European Captive Insurance and Reinsurance Owners’ Association [ECIROA] more about the initiative that he has started with the International Association of Insurance Supervisors [IAIS] to try and seek more clarity and consistency on global programmes on an international basis. Would you support this effort? PR: We would support such an effort even if it may not be very relevant to progress this with the regulators. This is a difficult and complex area because the rules are so different and not stable in local markets. We would be cautious about an attempt to find an agreement between the international companies and the governments. There are some important points that need to be tackled. First, you have the demand by some countries to leave cover in the country where the risk lies. It is sometimes very difficult to define and manage this as there are different ways to play it. Second, you have the question of wordings. This is because even with the same wording there can be large differences in their use in case of claims. Clearly some risk managers would like to have local polices that mirror their master policy but local standards could be very different. You need a compromise at the client level not at an international level. Third there is the question of claims handling and reporting, which can be complicated and take a long time to sort out. Often the best solution is to work in a very in-depth manner with the client, the master broker and the lead carrier to solve all the questions and this needs a long-term partnership to be achieved.

Steady as she goes-Philippe Rocard

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